Executive Summary
China is the world’s largest emitter of CO2 emissions, by far. It represents nearly a third of all emissions by itself – more than double the U.S. and the next seven nations combined[1]. As a result, China is under intense pressure to meet its emission targets set out in Glasgow at COP26. Achieving these targets will hinge on the ability for the central government in Beijing to influence a sprawling network of provincial and sub-provincial governments to make emission reductions in their local areas.
China’s emissions come from three primary sources: industrial production (50%), the power sector (40%), and the transportation sector (8%)[2]. Here, we lay out a roadmap to inform diplomatic negotiations on how the Chinese government can reduce emissions from these sectors through center-local coordination on policy reforms in energy investment, production, and consumption. These reforms include stronger permitting rules against coal plants, synchronization of their national emissions trading system, and incentives for electric vehicles (EVs).
Background
By some fiscal measures, China is the most decentralized country in the world[3]. Its “quasi-federal” system was born out of decentralization reforms in the late 1970s which have created a constellation of central and local institutions with varying, sometimes conflicting, responsibilities and mandates for energy and climate decisions[4]. The strength of these mandates largely depend on which agency is issuing and enforcing them.
Historically, regulating GHG emissions originates with China’s most salient environmental concern – air pollution. This fell under the purview of the National Development and Reform Commission (NDRC) until 2018 when the government transferred its climate related responsibilities to the Ministry of Ecology and Environment (MEE)[5]. In July 2021, China reinstated the NRDC as the primary planning body on climate change and has tasked it with creating a roadmap for how China can meet its emission targets.
Since 2007, China had established energy intensity reduction targets whose enforcement has been handed down to local governments and are factored in their performance evaluation[6]. There has been significant geographic variation in local enforcement due to competing incentives for economic growth and development.
Reform Recommendations
In its roadmap, the NRDC should recommend that the central government:
Reclaim authority on permitting rules for new coal-fired power plants. Authority to permit new coal plants was decentralized to the provinces in 2014 which resulted in a rapid increase in coal permits across the country[7]. China is now the world’s largest consumer and producer of coal[8]. By reclaiming permitting authority, Beijing can restrict new plants and set capacity reduction plans in line with the global pledge to “phase down” coal[9]. China can expect resistance from coal mine owners and provinces with coal dependent economies as they are highly dispersed and enjoy autonomous control – the central government will face substantial difficulty without credible punishments for permitting violations.
Harmonize local emissions trading system (ETS) pilots to transition into the new national carbon market. In 2013, China launched seven provincial/municipal ETS pilots in preparation for the rollout of their national carbon market in 2020 which is to be run by the national MEE department. In these pilots, local governments found ways to bypass fees and lessen the impact of carbon prices on their preferred investments like coal. Thus, in rolling out the national market, MEE will need to contend with those local governments skirting the rules by standardizing and closing loopholes around carbon allowance allocations, compliance, and data measuring, reporting, and verification (MRV) systems.
Require local governments to expand license plate quotas to encourage uptake of electric vehicles. Local governments have broad control over the transportation sector which they have used to limit emissions by forbidding certain types of cars from entering city centers each day through license plate requirements[10]. The central government can require provinces to expand the scope of these requirements in two ways – (1) only allowing cars with EV license plates at certain times, days, and lanes and (2) allowing cities to waive license plate restrictions all together for EVs so they’re not subject to any driving restrictions compared to gas-powered cars[11]. Beijing could complement these regulations with expanded central tax incentives to further increase uptake of EVs on China’s roads.
Taken together, these reforms give China a significant boost in their efforts to slow climate change as they directly take on local resistance to cutting major sources of emissions. At Glasgow, China pledged to peak its CO2 emissions before 2030[12], thus it has roughly eight years to course correct the diverging local interests of the world’s largest population. Failure to do so will likely sink global efforts to avoid a 2°C rise which will precipitate severe environmental deterioration.
[1] BBC, “Report: China emissions exceed all developed nations combined,” May 7th, 2021, https://www.bbc.com/news/world-asia-57018837.
[2] Columbia University In The City Of New York, “Guide to Chinese Climate Policy: Emissions by Sector and Sources,” https://chineseclimatepolicy.energypolicy.columbia.edu/en/emissions-sector-and-source.
[3] Michael Davidson, “Creating Subnational Climate Institutions in China,” Harvard Project on Climate Agreements, December 2019, https://www.belfercenter.org/sites/default/files/files/publication/davidson-china-paper%20designed-version-3.pdf.
[4] Ibid. Davidson
[5] David Stanway, “China shake-up gives climate change responsibility to environment ministry,” Reuters, March 13th, 2018, https://www.reuters.com/article/china-parliament-environment/china-shake-up-gives-climate-change-responsibility-to-environment-ministry-idUSL3N1QV23P.
[6] Ibid. Davidson.
[7] Ibid. Davidson.
[8] Sara Schonhardt, “Energy crunch raises questions about China’s devotion to coal,” E&E News, October 13th, 2021, https://www.eenews.net/articles/energy-crunch-raises-questions-about-chinas-devotion-to-coal/.
[9] Connor Perrett, “World leaders at COP26 strike agreement to ‘phase down’ unabated coal and call on wealthy nations to double funding to vulnerable nations,” November 13th, 2021, https://www.businessinsider.com/cop26-concludes-with-agreement-to-phase-down-coal-2021-11.
[10] Wang, Rui, “Shaping Urban Transport Policies in China: Will Copying Foreign Policies Work?” Transport Policy, 17(3), 147–152, 2010, https://doi.org/10.1016/j.tranpol.2010.01.001.
[11] Sandalow, David, “Guide to Chinese Climate Policy,” Columbia University Center on Global Energy Policy, 2018, https://energypolicy.columbia.edu/sites/default/files/pictures/Guide%20to%20Chinese%20Climate%20Policy%207-27-18.pdf.
[12] Climate Action Tracker, “China,” November 3rd, 2021, https://climateactiontracker.org/countries/china/targets/.
About The Author
Chetan Hebbale is currently a graduate student at the Johns Hopkins School of Advanced International Studies (SAIS) in Washington, D.C. focused on international economics, climate change, and sustainability.
Prior to this, he spent over 4 years at Deloitte Consulting working on technology and strategy projects at the CDC and U.S. Treasury Department.
He is a native of Atlanta, GA and attended the University of Georgia.
Chetan Hebbale 