According to a World Bank Group report, China needs $17 trillion in investment to reach its net zero goal and transition to a low-carbon economy.
The impacts of climate change threaten China’s densely populated and economically important low-lying coastal cities. The country experiences coastal erosion, saltwater intrusion, storm surges, and coastal flooding.
Without mitigating these impacts, the World Bank report says China could experience GDP losses. 0.5% to 2.3% as early as 2030.
The report, titled Country Climate and Development Report (CCDR) for China, outlines the significant changes across sectors that the country needs to meet its national commitments and achieve net zero emissions by 2060. is detailed.
It underscores the urgency of the issue for three reasons.
- China’s massive greenhouse gas emissions
- China’s population and economic infrastructure are highly exposed to climate risks
- China’s Key Role in Global Efforts to Combat Climate Change
Why China Must Move to a Low-Carbon Economy
China accounts for one-third of the world’s GHG and 27% of the world’s CO2.
Unless China transitions to a low-carbon economy, it will be impossible to reach global climate goals. This requires significant changes in the country’s resources and technologies to increase energy efficiency and productivity.
However, the country’s advanced technological strengths may open up new development opportunities in China’s journey to net zero.
- According to the report, China needs as much as US$17 trillion in investment in green infrastructure and technology in the power and transport sectors alone.
Ruth Horowitz, IFC’s Asia Pacific Vice President, said:
“Given the enormous costs, public investment will not be enough to meet these needs … Therefore, China will spur the private sector on policies to fully exploit the investment and innovation potential. and regulatory reform.”
Private sector participation is certainly essential to China’s net-zero goal. CCDR also emphasizes the importance of public and private sectors working together to address this issue.
The World Bank also outlines some benefits that will enable the most populous countries to turn climate change into an opportunity. These include:
- Increased profits from the production and development of low-carbon technologies (such as wind power and electricity storage).
- High domestic savings rate and leadership position in green finance.When
- Ability to create highly skilled jobs in productive industries.
Modeling carried out for the report shows that China’s transition will be difficult. With a faster pace and lower income levels than developed countries, economic growth and emissions need to be decoupled.
It will also bring about major structural changes to the Chinese economy. Energy, industrial and transport systems, cities, and land-use patterns must undergo dramatic transformation.
However, the long-term economic costs are still manageable.
To this end, CCDR presents comprehensive policy recommendations to help China successfully transition. Sectors covered include energy, industrial, building, agriculture, transportation and other sectors.
Below is what China’s path to net zero or carbon neutral looks like for these sectors, according to the report’s simulations.
World Bank recommendations
1: Accelerate the power sector transition through market reforms and investments in renewable energy
Under this policy package is a range of climate change measures. The most important action is to implement the scaling up of solar and wind power. 1,700 GW by 2030.
This will require China to sum up 120GW annual solar and wind capacity by 2030 1.5 times 2016-20 annual average and 20% Exceeded capacity for 2021.
The recommendation also calls for greater integration of renewable energy by investing in energy storage.
2: Decarbonization of key energy demand sectors — industry and transport
This includes advancing electrification beyond public transport to include private and commercial vehicles. It also calls for expansion of charging infrastructure through private investment.
Currently, electric vehicles in China are 2% Of all the fleets, they are concentrated in the largest urban areas. Electrification of all types of vehicles is therefore essential for the decarbonization of the transport sector.
CCDR also recommends promoting technological development of alternative low-carbon fuels for hard-to-reduce sectors. Possible alternatives, though not yet commercially viable, are green hydrogen and ammonia.
To decarbonize its industrial sector, China needs to pay more attention to circular economy opportunities. They help reduce emissions and overcome material supply bottlenecks.
3: Enhancing climate resilience and low-carbon development in rural landscapes and urban areas
China’s cities play a key role in achieving net zero and development goals. Creating conditions for denser, more connected, people-centered cities is good for the climate.
In addition, urban nature-based solutions (NbS) can make cities more livable and more climate resilient. Examples of NbS include using wind cooling to combat urban heat traps and creating integrated green urban spaces to preserve biodiversity.
In China, it is estimated that NbS could remove at least 768 million tons of CO2e annually by 2030.
4: Harness the market to drive cost-effective economy-wide reductions and innovation
This policy recommendation proposes expanding the role of carbon pricing.
- Simulations suggest that higher carbon prices USD 50-75 per ton Reducing carbon by 2030 will reduce China’s emissions by about 15% – 20%.
To get there, China needs to strengthen the design of its emissions trading system and reduce its pre-announced annual emissions cap. This allows investors to factor future carbon price increases into their investment decisions today.
It is also important to extend the current ETS in the power sector to other high-carbon sectors such as steel, iron and cement, gradually moving towards absolute emissions caps.
5: Manage transition risk to ensure a fair transition
Risk management includes labor market flexibility and stronger social safety nets. This will also ensure seamless labor market adjustment in China.
Some actions that can help reduce reconciliation costs are:
- reduce barriers to labor mobility,
- Reform of the Family Register System
- Ensuring the portability of social security
6: Promote global climate action
China is the largest source of infrastructure financing in low-income countries, so adopting climate-friendly investment practices will amplify the global impact.
This includes encouraging Chinese lenders (such as China Development Bank and China Exim Bank) to adopt the “Equator Principles”, which are the principles of clean financing. We also need to phase out financing for coal and other carbon-intensive infrastructure.
These measures form an important step for China to chart a path to net zero emissions by 2060.
However, given the uncertainties involved, policies and their implications require monitoring and adaptation over time.
