At the heart of the uncertainty is China’s commitment to carbon neutrality by 2060. President Xi Jinping has repeatedly used the slogan “clear waters and lush mountains are invaluable assets”, highlighting an intimate relationship between China’s decarbonisation policy and underlying economic benefits.
"Changing China’s energy mix is the most feasible way to reshape its carbon emissions path, as the energy sector is the largest carbon emitter.”
The hurdles China faces in cutting carbon emissions are high. It is the world’s largest contributing country to carbon dioxide (CO2) emissions. International experience suggests developed economies usually take an average of 50–60 years to achieve carbon neutrality after they reached peak emissions.
Even so, the impact will be felt almost immediately. China’s 14th Five-Year Plan has set a binding target of reducing carbon emissions per unit of gross domestic product (GDP) by 18 per cent between 2021 and 2025, the same as that over the past five years.
Changing China’s energy mix is the most feasible way to reshape its carbon emissions path as the energy sector is the largest carbon emitter. However, the associated policies will have wider impact for the commodity complex.
China’s energy imports have skyrocketed in recent years. Coal and oil imports surged to 304 million tonnes (mt) and 542mt in 2020, compared with 2mt and 70mt, respectively, in 2000. ANZ Research’s analysis shows under the 1.5oC scenario, China will likely reduce its overall energy imports by 95 per cent in 30 years.
Coal, which accounts for 63 per cent of power generation and 57 per cent of China’s primary energy mix, contributed 7.5 billion tonnes (bnt). However, clean energy, especially natural gas, only accounted for 7.8 per cent of its total energy mix, compared with the global average of 24.2 per cent.