Report: China's carbon neutrality goal only achievable with major coal phase-out
If China is to meet its 2060 ambition of carbon neutrality, announced last year, it must shut hundreds of gigawatts of coal generation and reform emissions trading as a priority, a new report has revealed.
Entitled ‘Turning the Supertanker’, the analysis from TransitionZero outlines how the Chinese energy sector, dominated by fossil fuels at present, must transition to deliver the new long-term targets.
It states that some 364GW of coal-fired power generation will need to be closed – either permanently or on a reserve basis. Alternatively, plants could be retrofitted to include carbon capture technologies and improve efficiency, but this is not the preferred option.
Coal notably accounted for 57.7% of China’s energy consumption in 2019. Coal plants provide more than half (52%) of the nation’s electricity and heat generation capacity and 66% of its annual electricity output.
The Chinese government does not publish data on the collective capacity of its coal-fired power plants. However, a CarbonBrief report revealed that 40GW was added between 2017 and 2019 and that additions could continue to grow through to 2025. Future growth in the short-term has been partly attributed to China’s 14th Five-Year Plan on climate and energy.
According to the TransitionZero report, the coal sector can be downsized in a way that generates economic benefits in the short term. It outlines how most coal plants are already loss-making and running at 50% of their capacity or less, due to a saturated market supported by subsidies. Replacing plants with cleaner alternatives at scale could generate savings of $1.6trn, the report states.
TransitionZero’s co-chief executive Sriya Sundaresan said: “China’s net-zero pledge has significant implications on the global economy and the world’s ability to meet the Paris Agreement.
“Our report shows that at the heart of this, China must phase out coal power. In order to meet their net-zero pledge, we recommend China cancels all new coal immediately, issues guidance on a net-zero aligned phase-out and provide incentives for early closures. Our findings show it makes sense for China to do so from an economic standpoint as well.”
Emissions Trading Scheme
The report also assesses the compatibility of China’s first Emssions Trading Scheme (ETS) with its long-term climate goals. The proposed ETS has not yet formally been adopted.
TransitionZero estimates that the Scheme, if launched this year, would already be 1.56 billion tonnes oversubscribed. This is mainly due to the sheer level of coal generation online. The proposed ETS would apply to power firms emitting at least 26,000 tonnes of greenhouse gases annually.
Without “fair reform” and better data collection and disclosure, the report argues, the ETS will not be effective in line with carbon neutrality by 2060.
“We recommend the Chinese Government looks to reform the ETS urgently by creating an emissions cap, allowing banking of allowances to drive long-term abatement and further deregulating the power sector,” TransitionZero’s other co-chief executive Matthew Gray said.
“Finally, to improve ETS data quality and reduce the chances of misreporting, we recommend the Government introduces an anomaly detection system based on data from onsite and offsite continuous emission monitoring systems."
China’s ETS is set to be the biggest in the world, eclipsing the second-largest, the EU’s, by a wide margin.