How Policy Can Help China Peak Its Emissions While Saving $560 Billion 2

How Policy Can Help China Peak Its Emissions While Saving $560 Billion


New research shows China—the world’s largest greenhouse gas (GHG) emitter—could peak its emissions by 2030 while creating more than $560 billion in net benefits by 2050. The package of specific policies identified in the research could allow the country to meet its decarbonization goals under the Paris Agreement.

China contributes 28% of global carbon dioxide (CO2) and its emissions are expected to rise even further in a business-as-usual future. While it has recently enacted decarbonization policies and leads the world in wind and solar power deployment, this new research finds that without additional policies, China is unlikely to meets its goal of peaking emissions around 2030.

However the analysis, released by Energy Innovation and China’s National Center for Climate Change Strategy and International Cooperation, identifies climate and energy policies capable of putting the country on track toward its climate goals and tapping economic growth opportunities from clean energy.

These recommendations are timely: In December, countries at UN climate meetings in Chile will be encouraged to strengthen their Paris Agreement contributions and detail how they will meet existing targets. China is also in the process of finalizing its 14th Five Year Plan, which will set the country’s development goals for 2021-2025 and have enormous climate and sustainability implications.

Designing a low-carbon scenario for China

Policy-driven emissions reductions shake out across four of China’s economic sectors: industry, power, buildings, and transportation. About a third of the reductions come from cross-sector policies, mainly carbon pricing (which covers all four sectors) and carbon capture, utilization, and storage (CCUS, which applies to power and industry).

The analysis was conducted using the China Energy Policy Simulator, a peer-reviewed computer model that uses objective data from government sources to project the effects of policy changes on pollution, financial costs and savings, premature deaths, and more.

The model first simulates a reference scenario, which continues China’s existing policies and trends but does not incorporate any additional policy interventions. Energy-related CO2 emissions in the reference scenario peak around 2040 at 13.5 gigatons (Gt), before falling to 12.3 Gt CO2 by 2050.

The authors then designed a low-carbon policy scenario to meet the main goals of China’s Nationally Determined Contribution (NDC) to the Paris Agreement. China’s NDC aims to peak emissions around 2030, lower CO2 emissions per unit of GDP in 2030 by 60% to 65% from 2005 levels, and increase the share of non-fossil fuels in primary energy consumption to around 20% by 2030, among other targets.

Policy can peak China’s emissions in line with its NDC

Without additional policy, the research projects China will miss its emissions peaking goal by a decade, with emissions peaking in 2040. The low-carbon scenario, by contrast, puts the country back on track, peaking emissions at 11.8 Gt CO2 by around 2030 before falling to 8.1 Gt CO2 in 2050.

Total GHG emissions follow the same pattern, peaking at about 2030 in the low-carbon scenario. The scenario also hits another key metric: China’s 2030 CO2 emissions per unit GDP drop to levels about 65% lower than 2005 levels.

Top policies for China decarbonization

The low-carbon scenario incorporates or enhances 25 climate and energy policies beyond what China has in place today, with many of them being low cost or even cost-saving. Policies with values below the zero line in the figure below save money while also lowering emissions.

Five policies in particular jump out as particularly having high GHG abatement potential:

  • Fluorinated gas (F-gas) substitution. Found in air conditioners and refrigerators, F-gases warm the atmosphere thousands of times more per molecule than CO2. Curbing F-gas use would contribute nearly a quarter of the additional GHG abatement from the low-carbon scenario. By implementing the Kigali Amendment to the Montreal Protocol, an agreement ratified by more than 60 countries to phase down F-gases and replace them with less harmful chemicals, China would avoid 1.7 Gt carbon dioxide equivalent (CO2e) by 2050. China produces the vast majority of the world’s air conditioners, and a strong commitment to replacement chemicals could create economic benefits by propelling Chinese companies ahead in the global market. The F-gas transition also presents a great opportunity to increase the energy efficiency of equipment, like air conditioners and refrigerators, that use the chemicals.
  • A renewable portfolio standard. Establishing a renewable portfolio standard with binding targets for renewable energy generation would contribute another fifth of the low-carbon scenario’s additional emissions reductions. Requiring 22% more clean (non-fossil fuel) energy by 2050, in addition to an interim 2030 target, would account for the lion’s share of emissions reductions from the power sector.
  • Carbon pricing. China is already launching a national carbon market covering the power sector, and the low-carbon scenario sets a carbon price of 80 RMB ($11) per ton CO2e in the power generation and industry sectors, along with a lower price of 65 RMB ($9) per ton for buildings and transportation. This prioritizes the sectors with the most potential, providing an additional 13% of the scenario’s emissions reductions.
  • CCUS. CCUS captures emissions from burning fossil fuels and stores that carbon instead of releasing it into the atmosphere. With many coal plants still in operation today along with rising industrial fuel use, carbon capture could contribute 10% of the additional emissions reductions. The scenario assumes nearly 1 Gt captured per year by 2050, about 2.5 times the business-as-usual amount projected for China by the International Energy Agency.
  • A fuel economy standard for heavy duty vehicles. Strengthening fuel economy standards for light- and heavy-duty vehicles will be important to curb China’s transportation emissions, but modeling shows more abatement potential in the heavy-duty category, given existing strong standards for passenger cars. Fuel economy for both light- and heavy-duty vehicles improves 40% by 2050 in the low-carbon scenario, with heavy-duty vehicles contributing 5% of the additional emissions reductions.

Costs and benefits

Not only does the low-carbon scenario slash China’s emissions – it generates enormous economic benefits, saving billions of dollars and 300,000 lives annually by 2050. That’s because, in addition to cutting the air pollution that causes premature deaths, many of these measures save money in the long term by reducing fuel costs. While the scenario results in $170 billion more in capital costs in 2050, it also saves $240 billion in avoided fuel expenditures – meaning the policies save roughly $70 billion in 2050 alone.

Monetizing the health benefits equates to $34 billion (converted from RMB to U.S. dollars) saved annually. The monetized climate benefits, such as minimized impacts on water supply and agriculture, are even higher – reaching $450 billion by 2050. In all, benefits begin to outweigh up-front investments around 2030 and become increasingly positive through 2050. In 2030, 2035, and 2050, net benefits reach $18 billion, $120 billion, and $565 billion, respectively (0.09, 0.47, and 1.44% of GDP).

Getting China on track

This new research shows how a collection of smart policies could help China achieve its NDC while accruing staggering economic benefits.

Some of the most effective policies, such as the replacing F- gases (by ratifying and implementing the Kigali Amendment) and a renewable portfolio standard, could be implemented in the near term. Others, such as CCUS, would require extra policy support to help make the technology available and bring down some of the up-front investment or higher interim costs involved.

While the task ahead is formidable, the payoff goes far beyond any emissions target—in terms of economic benefits and lives saved, China has everything to gain.


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