China
Economic giant, environmental disaster?
China is a land of contradictions. It is the world’s largest emitter of greenhouse gases, but is also home to the planet’s largest (and still growing) carbon market. It has nearly half the world’s coal power stations, but also more installed renewable energy than any other country.1 And although it was home to the original outbreak of COVID-19, China was able to control the disease rapidly and effectively.2
These contrasts are the result of China’s remarkable economic rise. Inside a single generation, China has built world-leading manufacturing industries virtually from scratch; reduced the number of Chinese citizens living on less than $1.90 a day from almost 90% to less than 1%, lifting millions out of extreme poverty; and grown to become the world’s second-largest economy – poised to overtake the US inside the next few decades.3 And with the ‘Belt and Road Initiative’ driving infrastructure and investment across Eurasia and around the world, China is rapidly expanding its impact as a truly global power.
Yet rapid industrialisation has exacted a heavy environmental cost. More than half of China’s groundwater is unsafe for human contact. Air pollution kills 1.5 million Chinese every year, or 4400 people every day. And dangerous chemicals dumped into rivers have creating thousands of “cancer villages” across the countryside.4
But China’s one-party governance offers few release valves for civil complaint, and democratic institutions such as free speech, a free press, an independent judiciary and government accountability are all lacking. Minority groups and political movements are suppressed, sometimes violently; an estimated one million Uighur Muslims are currently being held without trial in detention camps.5 Corruption is endemic; state surveillance of citizens pervasive.6
The despoiling of China’s environment, and the human devastation that follows, has fuelled mounting popular unrest. Recognising growing public anger over environmental issues as a genuine threat to its long-term survival, the Chinese Communist Party has made “ecological civilisation” a national strategic priority, guiding the machinery of state towards greener ends.
China's heavily centralised government system made possible a swift and comprehensive lockdown to contain COVID-19. The economic response has been equally wide-ranging, with well over USD $2 trillion announced in stimulus spending and infrastructure investment. Although this package does include specific green initiatives including electric vehicle subsidies, environmental restoration and pollution control, most of the support is earmarked for intensive heavy industries like coal, aviation and automotives.
But even here we see the complexity and contrasts of China. Much of the support for brown industry is happening at the level of individual provinces, in contrast to new national commitments to net zero emissions. China's next Five Year Plan - the comprehensive national strategy that guides almost all policymaking - is due in March 2021, and will be critical in driving China's ecological vision. The success or failure of China’s transformation from coal-powered catastrophe to eco-civilisation will have profound global consequences.
Policy Scores
Last updated 14 Feb 2022
Green COVID-19 Recovery
China has announced a substantial COVID rescue package and infrastructure investment plan, worth USD$644 billion and USD$1.4-2.5 trillion respectively (totalling approximately 4.7% of GDP) - though it’s unclear the extent to which this is truly new funding, or merely the repackaging and acceleration of existing policies.
Specific green measures include some support for electric vehicles (subsidies, tax exemptions and investment in charging infrastructure) and railway development, contributing USD$4 billion to the National Green Development Fund (which will provide direct investment in pollution control, ecological restoration, energy conservation and green transport projects) and introducing a permanent ban on wildlife trade. However, the majority of stimulus has been directed at supporting existing environmentally-intensive industries - providing unconditional bailouts to the airline and automotive industries, introducing tax breaks for second-hand vehicles without efficiency requirements, substantially increasing coal-fired generation capacity, and dropping commitments to emissions intensity and energy targets for 2020.
The blunting of greener measures appears to be driven by individual provinces, and contrasts with Xi Jinping's recent announcement of national targets for carbon-peaking and net zero emissions pledge by 2060. The policy gap for delivering a greener recovery in the long term will need to be bridged by the 14th Five Year Plan.
China has announced a substantial COVID rescue package and infrastructure investment plan, worth USD$644 billion and USD$1.4-2.5 trillion respectively (totalling approximately 4.7% of GDP) - though it’s unclear the extent to which this is truly new funding, or merely the repackaging and acceleration of existing policies.
Specific green measures include some support for electric vehicles (subsidies, tax exemptions and investment in charging infrastructure) and railway development, contributing USD$4 billion to the National Green Development Fund (which will provide direct investment in pollution control, ecological restoration, energy conservation and green transport projects) and introducing a permanent ban on wildlife trade. However, the majority of stimulus has been directed at supporting existing environmentally-intensive industries - providing unconditional bailouts to the airline and automotive industries, introducing tax breaks for second-hand vehicles without efficiency requirements, substantially increasing coal-fired generation capacity, and dropping commitments to emissions intensity and energy targets for 2020.
The blunting of greener measures appears to be driven by individual provinces, and contrasts with Xi Jinping's recent announcement of national targets for carbon-peaking and net zero emissions pledge by 2060. The policy gap for delivering a greener recovery in the long term will need to be bridged by the 14th Five Year Plan.
Governance
National green economy plan
The 13th Five-Year Plan (2016-20) set green development and the achievement of ecological civilisation as a key principle guiding Chinese domestic policy, targeting innovative, coordinated, green, open, and shared development. It also introduced a green indicators system, including monitoring of resource efficiency, pollution, and green investment, and made reporting against the indicators mandatory for all provinces. The 14th FYP (2021-25) was anticipated to bring further ambition and institutionalisation of progress, but has disappointed in failing to move beyond the high-level commitments to mid-century net-zero and 2030 carbon-peaking.
The 13th Five-Year Plan (2016-20) set green development and the achievement of ecological civilisation as a key principle guiding Chinese domestic policy, targeting innovative, coordinated, green, open, and shared development. It also introduced a green indicators system, including monitoring of resource efficiency, pollution, and green investment, and made reporting against the indicators mandatory for all provinces. The 14th FYP (2021-25) was anticipated to bring further ambition and institutionalisation of progress, but has disappointed in failing to move beyond the high-level commitments to mid-century net-zero and 2030 carbon-peaking.
Inclusive governance
On paper, public consultation is mandatory under Chinese environmental law, and gender-sensitive policymaking monitored by the National Working Committee on Children and Women. However, inclusive consultation is rare in practice; top down, centralised policymaking is the norm. Corporate governance has seen substantial changes as China has embraced private enterprise, with listed companies formally requiring employee representatives to compose a third of supervisory boards. Supervision of directors is broadly weak and state influence on firms is substantial.
On paper, public consultation is mandatory under Chinese environmental law, and gender-sensitive policymaking monitored by the National Working Committee on Children and Women. However, inclusive consultation is rare in practice; top down, centralised policymaking is the norm. Corporate governance has seen substantial changes as China has embraced private enterprise, with listed companies formally requiring employee representatives to compose a third of supervisory boards. Supervision of directors is broadly weak and state influence on firms is substantial.
SDG business strategy
China’s SDG implementation strategy makes no specific mention of business reporting or monitoring, but the “Made In China 2025” program is designed to “roll out green manufacturing, increase industrial energy efficiency… and encourage clean production”. An environmental business platform is available. Chinese multinationals are collaborating with the UNDP in assessing how they can help implement the SDGs in countries hosting Belt and Road projects.
China’s SDG implementation strategy makes no specific mention of business reporting or monitoring, but the “Made In China 2025” program is designed to “roll out green manufacturing, increase industrial energy efficiency… and encourage clean production”. An environmental business platform is available. Chinese multinationals are collaborating with the UNDP in assessing how they can help implement the SDGs in countries hosting Belt and Road projects.
Wealth accounting
National wealth accounts do exist at the pilot stage, covering green GDP and natural capitals for land, forestry and water resources. The Pilot Program for Preparing Natural Resource Balance Sheets is currently assessing “the ecological civilization performance of resource consumption, environmental damage and ecological benefits,” and establishing a knowledge base for low-carbon development.
National wealth accounts do exist at the pilot stage, covering green GDP and natural capitals for land, forestry and water resources. The Pilot Program for Preparing Natural Resource Balance Sheets is currently assessing “the ecological civilization performance of resource consumption, environmental damage and ecological benefits,” and establishing a knowledge base for low-carbon development.
Finance
Green finance plan
The People's Bank of China, the Ministry of Finance and five other ministries jointly issued a policy paper on the need to establish and grow green financial markets in 2016, but the document is not legally binding. Green finance is seen as a priority by government, but concrete measures are yet to be announced.
The People's Bank of China, the Ministry of Finance and five other ministries jointly issued a policy paper on the need to establish and grow green financial markets in 2016, but the document is not legally binding. Green finance is seen as a priority by government, but concrete measures are yet to be announced.
Green fiscal & monetary policy
Under the main national budget, China has run independent sustainable development budgets and a green procurement system since 2006, financing investment in clean energy, efficiency and environmental protection. The budgeting process is opaque, however, and the process by which departmental budgets and fiscal policies are assessed remains unclear.
Under the main national budget, China has run independent sustainable development budgets and a green procurement system since 2006, financing investment in clean energy, efficiency and environmental protection. The budgeting process is opaque, however, and the process by which departmental budgets and fiscal policies are assessed remains unclear.
Safe & accountable banks
Stress tests are in place as part of the People’s Bank of China risk management strategy, but these focus on financial risk. While current stress tests do include a few environmental indicators, and the Bank’s credit sensitivity stress test does measure "loans to high pollution, high energy consumption and overcapacity industries" as a risk factor, these remain marginal. Formal climate change stress testing of financial institutions has not been announced.
Stress tests are in place as part of the People’s Bank of China risk management strategy, but these focus on financial risk. While current stress tests do include a few environmental indicators, and the Bank’s credit sensitivity stress test does measure "loans to high pollution, high energy consumption and overcapacity industries" as a risk factor, these remain marginal. Formal climate change stress testing of financial institutions has not been announced.
Pricing carbon
After more than a decade in planning, China launched the first implementation cycle of it’s national emissions trading scheme (ETS) in January 2021. Despite only covering its power sector (2,225 coal and gas plants), the ETS is now the world’s largest carbon market (eclipsing the EU’s), and nearly doubling the share of global emissions covered by trading (from 9 to 17%).
The design of the scheme prioritises businesses and industry, aiming to encourage buy-in and engagement during what can be considered its early operational phase. Analysts suggest it will be another 3-5 years before the ETS is fully up and running, during which continued high-level political support will be needed to foster its adoption and resolve cross-ministry challenges. While Chinese leadership propose the scheme will aid in reaching the country’s climate goals - including President Xi Jinping’s pledge to reach “carbon neutrality” by 2060 - commentators note significant shortcomings in terms of its oversupply of allowances (oversaturation), limited coverage and “flexible" emissions cap, leaving it currently lacking regulatory bite. A weak penalty for non-compliance also effectively provides an opt-out option and implicit upper limit on the cost of carbon. Much rests on whether China's ETS is tightened going forward - by adjusting the allowance plan, introducing a (declining) hard emissions cap and expanding its scope to cover other sectors – though there are no indications from the Ministry of Environmnt and Ecology of intent to do so at present.
After more than a decade in planning, China launched the first implementation cycle of it’s national emissions trading scheme (ETS) in January 2021. Despite only covering its power sector (2,225 coal and gas plants), the ETS is now the world’s largest carbon market (eclipsing the EU’s), and nearly doubling the share of global emissions covered by trading (from 9 to 17%).
The design of the scheme prioritises businesses and industry, aiming to encourage buy-in and engagement during what can be considered its early operational phase. Analysts suggest it will be another 3-5 years before the ETS is fully up and running, during which continued high-level political support will be needed to foster its adoption and resolve cross-ministry challenges. While Chinese leadership propose the scheme will aid in reaching the country’s climate goals - including President Xi Jinping’s pledge to reach “carbon neutrality” by 2060 - commentators note significant shortcomings in terms of its oversupply of allowances (oversaturation), limited coverage and “flexible" emissions cap, leaving it currently lacking regulatory bite. A weak penalty for non-compliance also effectively provides an opt-out option and implicit upper limit on the cost of carbon. Much rests on whether China's ETS is tightened going forward - by adjusting the allowance plan, introducing a (declining) hard emissions cap and expanding its scope to cover other sectors – though there are no indications from the Ministry of Environmnt and Ecology of intent to do so at present.
Sectors
Green sectoral policy plan
China’s economy is highly centralised, with sectoral policy managed by the National Development and Reform Commission (NDRC) of the central government. The NDRC is responsible for issuing and implementing each 5 Year Plan; the current 5YP includes specific strategies for all high-impact sectors to achieve “ecological civilisation”.
China’s economy is highly centralised, with sectoral policy managed by the National Development and Reform Commission (NDRC) of the central government. The NDRC is responsible for issuing and implementing each 5 Year Plan; the current 5YP includes specific strategies for all high-impact sectors to achieve “ecological civilisation”.
Small business support
Social enterprises have no separate legal status or formal government recognition. The Ministry of Civil Affairs and some local governments have suggested that new financial and regulatory support might be implemented, but existing registration and documentation procedures are slow, complex and capricious.
Social enterprises have no separate legal status or formal government recognition. The Ministry of Civil Affairs and some local governments have suggested that new financial and regulatory support might be implemented, but existing registration and documentation procedures are slow, complex and capricious.
Carbon budgeting
China’s 13th Five Year Plan includes carbon budgeting, although measured as emission reductions per unit of GDP rather than cumulative total emissions. The plan includes a compulsory reduction target of 18.5% by 2020 and measures to achieve this, however no official long-term pathway for carbon reductions has been established.
China’s 13th Five Year Plan includes carbon budgeting, although measured as emission reductions per unit of GDP rather than cumulative total emissions. The plan includes a compulsory reduction target of 18.5% by 2020 and measures to achieve this, however no official long-term pathway for carbon reductions has been established.
Clean energy policy
With energy demand growing rapidly – and air pollution following suit – the Chinese govt has made clean energy a national strategic priority, and the country now leads the world on deployment and manufacturing of RE. The current 5YP targets 210GW wind and 110GW of solar by 2020, more than the current total electricity output of India; the next 5YP, due to be announced in 2020, may include longer-term targets.
With energy demand growing rapidly – and air pollution following suit – the Chinese govt has made clean energy a national strategic priority, and the country now leads the world on deployment and manufacturing of RE. The current 5YP targets 210GW wind and 110GW of solar by 2020, more than the current total electricity output of India; the next 5YP, due to be announced in 2020, may include longer-term targets.
People
Green jobs
The current 5YP makes some mention of expanding access to public services and strengthening income taxation to bridge income gaps, and states that "…public services should be inclusive, equitable, and sustainable and should guarantee the basic needs of the people.” However, no targeted green job strategy is currently in effect.
The current 5YP makes some mention of expanding access to public services and strengthening income taxation to bridge income gaps, and states that "…public services should be inclusive, equitable, and sustainable and should guarantee the basic needs of the people.” However, no targeted green job strategy is currently in effect.
Pro-poor policy
A new poverty alleviation plan was issued in 2018, with the goal of lifting 30 million above the poverty line inside 3 years; some connections made between poverty alleviation and environmental protection – though eco-civilisation is still seen mainly as an industrial and technological vision. Many examples of pro-poor green policies, but most remain at the local level.
A new poverty alleviation plan was issued in 2018, with the goal of lifting 30 million above the poverty line inside 3 years; some connections made between poverty alleviation and environmental protection – though eco-civilisation is still seen mainly as an industrial and technological vision. Many examples of pro-poor green policies, but most remain at the local level.
Participatory policymaking
Some mention of inequalities and vulnerability in the 5YP, together with impact assessments for major economic and social policies. Gender policy falls under the Plan for Women’s Development in China (2011–2020), targeting “equal rights and opportunities with respect to education, employment, marital property, and participation in social affairs.” However, China’s repressive policies towards some minority and marginalised groups – most recently the Uyghurs – have been well documented.
Some mention of inequalities and vulnerability in the 5YP, together with impact assessments for major economic and social policies. Gender policy falls under the Plan for Women’s Development in China (2011–2020), targeting “equal rights and opportunities with respect to education, employment, marital property, and participation in social affairs.” However, China’s repressive policies towards some minority and marginalised groups – most recently the Uyghurs – have been well documented.
Innovative social protection
The Chinese system favours centrally planned, large-scale initiatives rather than experimental pilot projects. Social policies remain tightly controlled by the government. A nation-wide minimum income guarantee, the dibao, has been operating since 2007, but is plagued by poor data collection and corruption.
The Chinese system favours centrally planned, large-scale initiatives rather than experimental pilot projects. Social policies remain tightly controlled by the government. A nation-wide minimum income guarantee, the dibao, has been operating since 2007, but is plagued by poor data collection and corruption.
Nature
Ocean & land conservation
The SDGs are not mentioned in China’s current 5 Year Plan, and there is no official implementation strategy for goals 14 and 15. China has made a diplomatic commitment to “shoulder the responsibility of implementing the 2030 development agenda, and seek solidarity and cooperation to constantly push the cause of global development," but lacks concrete policies.
The SDGs are not mentioned in China’s current 5 Year Plan, and there is no official implementation strategy for goals 14 and 15. China has made a diplomatic commitment to “shoulder the responsibility of implementing the 2030 development agenda, and seek solidarity and cooperation to constantly push the cause of global development," but lacks concrete policies.
Natural capital accounts
China is receptive to natural capital policies although these remain in the early stages. Following a pilot effort in eight provinces, balance sheets for water, land, timber, and mineral resources at a national level are under development at the National Audit Office. Pilot programmes are also underway at the State Statistics Bureau and the Ministry of Ecology and Environment.
China is receptive to natural capital policies although these remain in the early stages. Following a pilot effort in eight provinces, balance sheets for water, land, timber, and mineral resources at a national level are under development at the National Audit Office. Pilot programmes are also underway at the State Statistics Bureau and the Ministry of Ecology and Environment.
Natural capital committee
No separate natural capital advisory or expert biodiversity governance body exists currently.
No separate natural capital advisory or expert biodiversity governance body exists currently.
Nature-based fiscal reform
New policies on conservation and restoration, and environmental taxes aimed at greening the financial system and controlling pollutants, have been introduced under the 13th Five Year Plan, which affords “high priority to environmental protection and letting nature restore itself.” Enforcement remains a major issue.
New policies on conservation and restoration, and environmental taxes aimed at greening the financial system and controlling pollutants, have been introduced under the 13th Five Year Plan, which affords “high priority to environmental protection and letting nature restore itself.” Enforcement remains a major issue.
References
- Carbon Brief, "Mapped: The World's Coal Power Plants", Oct 2019; IRENA, "Renewable Energy Capacity Statistics Report, March 2018"
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The Lancet, "China's successful control of COVID-19", October 2020
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1981-2015. World Bank, “Poverty headcount ratio at $1.90 a day (2011 PPP)”, August 2018
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World Economic Forum, "Most of China's water is unfit for human touch", June 2017; Huffington Post, "Air pollution in China causes 4400 deaths every single day"
- Guardian, "Leak exposes reality of China's vast prison camp network", November 2019
- Human Rights Watch, "Country Report: China", 2019; The Guardian: "Leaked documents reveal details of China's mass Xinjiang detentions", Nov 2019; Carnegie Endowment, "Corruption threatens China's future"