Issue # 9: Twenty Futuristic Predictions on China's Decarbonisation
Happy Lunar New Year, everyone! 🧨🧧🐲
In Chinese, we love to say “new year, new outlook.” For me, there’s no better way to kick off the new year of Dragon than with a cheerful announcement: In April 2024, Shuang Tan will resume regular publication, starting with a special series on climate finance. More details to come!
Last summer, I invited a few dozen leading experts working on the intersection of China and climate change to join me on a thought experiment. Together, we look for out-of-the-box thinking transcending short-term news cycles and our usual research, campaigning, and reporting routines about China and its decarbonisation.
The first part of the series was published in September 2023, outlining 100+ big questions on the outlook of China’s energy and climate action.
Today, I present the most interesting part of the exercise: twenty futuristic predictions on China’s decarbonisation journey. Ten is for the near term (1-3 years), and another ten is for the decade to come.
Please note that the experts were only prompted to share statements about the "possible future" based on their best knowledge. None of the individual participants should be held accountable for any of the synthesised predictions presented in this article.
In Three Years…
PEAKING CARBON EARLY. China's carbon emissions will peak within 1-3 years, if not already. Emissions will linger at a plateau for a prolonged period, possibly over the next 3–5 years or even the next decade. However, pressured by economic recovery and energy security, high-emitting, harder-to-abate industries are likely to delay or increase their peak emission levels and postpone sector-wide carbon peaking.
EMISSION PATH DIVIDED The prediction of China’s emission trajectory following the carbon peak varies greatly, largely due to the divided assessment of the main drivers of the early peaking: economic downturns or systemic reforms. This raises questions about the future decarbonisation trajectory: Would China’s carbon peak be permanent or easily reversed over the next business cycle?
INTENSIFIED CATASTROPHES. Extreme weather events will become more frequent, amplify, and spread out of China, causing catastrophic consequences, including regular seasonal power rationing in megacities – a “new normal” – and rising death rolls resulting from ill-prepared climate adaptation and rigid urban planning and management.
RISING AWARENESS. Despite the de-emphasis on state propaganda, climate consciousness will rise among ordinary Chinese people as climate consequences intensify. But what's going to happen next? Some anticipate climate-driven public demands on the government and even motivate political activism, mirroring global trends.
FINANCIAL SHAKEUP. As China goes through a slow-burn financial shakeup, there will be scarcer capital for clean energy installations and manufacturing investments. The ripple effects may include a wave of closures and consolidations in clean energy industries, a weaker business case for clean energy investment, and even a reset in long-term growth expectations.
A MORE COSTLY REFORM. The national power market reform blueprint leaves many details to provincial authorities. This approach may result in increased storage and local backup (coal power) generation, impeding the efficient dispatch of variable renewables across broader geographic regions and leading to a more costly energy transition.
ETS EXPANSION. The world's largest carbon market by emission coverage, China's national carbon market, will eventually spread to other key emitting industries outside of power generation and soon integrate with the regional carbon markets. Nevertheless, not everyone shares the same belief in the effectiveness and efficiency of carbon pricing, particularly in the Chinese market, and more worry that the recently relaunched voluntary emission trading scheme will nourish corporate greenwashing due to “methodological flaws,” notably "factually dubious projects" in the ecosystem carbon sinks and incineration.
ACTIVATING PRIVATE FINANCE. China’s net-zero transition presents a trillion-dollar investment opportunity, and private finance will be a defining factor in the nation's pace of low-carbon transition. The obvious answers are better connections with regional and global financial markets and encouraging cross-border investment. But the extent of such financial endeavours hinges on Beijing's political choices, particularly on regulatory alignment and data transparency.
VOLUNTARY CLIMATE FINANCE. Hoping to stay in the developing country club and maintain its climate leadership, China is likely to pledge voluntary climate finance to support energy transition and climate adaptation in developing countries as part of Xi's climate pledge and in an effort to strengthen ties with the Global South.
GEOENGINEERING HOPE. Not a mainstream voice, but one expert predicts that China will launch another national research project on solar radiation modification (SRM, or solar geoengineering) and engage more actively with key players in global governance systems on geoengineering solutions. The rationale is that China, like any other country, must start to think about additional emergency options to manage climate risks.
In Ten Years…
CHALLENGED SUPERPOWER. The climate crisis will evolve into the paramount international security issue of the next decade, and China will inevitably be drawn into the global food crisis and prolonged resource war. In the meantime, slower economic growth will undermine China's perceived global superpower status, affecting its geopolitical influence and introducing further ambiguities regarding China’s approach to international climate diplomacy.
NEW ENERGY SYSTEM. The energy system reform will start to yield some low-hanging fruit in the next 3-5 years, but more profound changes are only anticipated in the second half of the next decade, including reduced coal power usage (with average utilisation drops to <2500hrs), a substantially larger contribution of renewable energy to the energy supply, widespread adoption of vehicle-to-grid technology, and the maturation of long-duration battery storage infrastructure.
GREEN HYDROGEN PUZZLE. Green hydrogen will ultimately find its place as a clean fuel substitute in harder-to-abate industries and long-distance heavy-duty vehicles. The fear, however, is that the most polluting industries, including steel and cement, could use it to postpone vital low-carbon expenditures over the course of the next ten years.
INDUSTRY DECARB COMPLEX. China's industrial decarbonisation is possibly driven more by structural changes in China's economy than specific climate policies. After a decade of catch-up, the harder-to-abate industries will start to meet current international best practices in clean production, such as incorporating alternative fuels in cement production.
DE-RISK TRADE-OFFS. As the US and EU’s efforts to reduce dependency on China intensify, supply chain diversification will bolster global market resilience and alleviate the risks of bottlenecks while bringing new environmental challenges. New mines will be opened, and new production lines will be installed outside of China, likely in nations with poor environmental governance.
DIGGING GREEN GOLD. China will continue evolving into an international green financing powerhouse, leading global innovation. However, this optimistic outlook is not without its challenges, including a progressively complex risk environment for investors and lingering interests in fossil fuels.
CARBON PRICING PUSH. The market mechanisms introduced in the 2020s will slowly mature over the next decade. The faith in China's carbon pricing initiatives is mixed: some hold scepticism about its nature as a “market mechanism,” while others bear modest optimism about carbon credits, notably in areas such as methane emission mitigation and carbon sequestration. It is worth noting that the lack of transparency and accountability will open new doors for greenwashing.
CCUS IN CROSSROAD. China will continue its investments in carbon removal technologies and may even take the lead in specific methods like DACCS and ocean-based removals. Nevertheless, the low carbon price is unlikely to drive significant adoption of CCUS in China's harder-to-abate industries, nor will CCUS grow into a major industry comparable to wind and solar due to limited domestic demand and near-zero export potential.
EVERYDAY SUSTAINABILITY. The next decade will witness “radical behaviour changes” in everyday Chinese citizens, spurred by a surge in the sustainable food movement. The hope is that such revolutionary changes will also catalyse a growing sense of solidarity in climate action in and outside China.
(IN)JUST TRANSITION. Unless China undergoes profound socioeconomic transformation, it will likely witness a surge in inequality across various strata, particularly the underprivileged groups and less developed regions, as it contends with compounded domestic and international challenges. The aggravated social divisions naturally heighten concerns about possible domestic upheavals.
Special thanks go to...
…and anonymous participants:
Political Economist (US/China)
Climate Tech Investor (China)
Climate Philanthropist (China)
Veteran Climate Activist (China/ASEAN)
Senior Expert on ESG (China)
Senior Consultant on Climate Governance (China/EU)
Senior Consultant on Circular Economy (China/EU)
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