Economic growth in China has brought with it a significant increase in the country’s domestic demand for energy and an intensification of economic – particularly industrial – activity. This has put increasing strain on the environment, with the country becoming one of the world’s biggest consumers of fossil fuels and the leading emitter of CO₂ (figure below).

Influenced by rising global awareness of climate change, a keen understanding of its financial impact on states, and heavy diplomatic pressure, China has undertaken a number of environmental and energy reforms. While the country has positioned itself as an ambitious and proactive climate actor, its record to date remains mixed, chiefly due to its international industrial strategy and a strong attachment to economic growth.

Weaning off coal

Since the 1970s, China’s demand for energy has shot up in order to power accelerated economic and demographic growth. With its abundant domestic coal resources, China has enjoyed cheap but highly polluting energy. This allowed the country’s industrial and manufacturing sector to develop extremely rapidly until the 2010s, when a political shift was made towards an ambitious energy transition. This shift was seen most notably at the COP21 summit in 2015, when China showed itself to be one of the most proactive participants in international climate negotiations.

Yet today the country remains largely dependent on fossil fuels to meet its energy demands, and especially on coal, which is used for around 60 per cent of domestic energy production. Furthermore, with fast growing car ownership, recent urbanisation, and an expanding middle class, China has become the world’s leading oil importer. In 2018, Chinese demand for crude oil was 10 million barrels a day, or almost 10 per cent of global demand. As a result, China is now a key player in the international oil market, a fact illustrated by the influence of its economic performance on the price of oil. 

China is also the world’s second largest importer of natural gas, after Japan. Natural gas is central to the Chinese energy transition strategy: it emits half as much CO₂ as coal whilst producing large amounts of electricity and heat to supply fast growing cities. In recent years, concerns about air quality have led China to embark upon a massive programme to replace its coal-fired power stations with combined-cycle gas power plants. In winter 2017, in an effort to reduce air pollution by 15 per cent, Chinese authorities hastily banned numerous factories and power stations from burning coal and replaced them with gas-fired power stations, sometimes causing disruption to heating and industrial production. Chinese demand for natural gas then rose sharply, sometimes to the point where supplies were insufficient to fuel every district that had converted to gas.

Natural gas therefore plays a key role in China’s environmental and energy policy. To safeguard its provision, the government and strategic companies have increased investment in gas transport infrastructure, such as pipelines and regasification terminals for liquefied natural gas. Despite significant growth in the gas market (historically a regional market due to the physical constraints of transporting gas) and due to high demand for liquefied natural gas around the world, the economic structure and regulations of this market are not yet mature. China, given the scale of its demand for gas, has the opportunity to shape what the gas market will look like and how it operates. Consequently, Beijing may now exert greater control over fluctuations in the international price of natural gas, thus be able to ensure the financial security of gas imports and better guarantee its energy security.

Strategic and geopolitical infrastructure

The growing demand for gas requires major changes to the country’s domestic and international infrastructure. Pipelines cross different border areas of the country, both to avoid dependence on any single supply route and to spread the income that pipelines bring to the regions they traverse. The pipelines coming from Russia and Central Asia have four entry points in Manchuria in north-eastern China and Xinjiang in the north-west. Diversifying the entry points for gas was an important objective during China’s negotiations with Russia. The pipelines are designed to integrate these marginalised regions with the more dynamic economic centres in the east of China. The pipelines crossing Xinjiang end in the port area around Shanghai, and should boost the development of some of the poorest regions of China, such as Xinjiang, but also Gansu and Ningxia, as well as Shaanxi and Shanxi,  two regions whose economic development has been historically dependent on coal mining. The pipelines running from Manchuria to the far south of the country were built following to the same rationale.

From a geopolitical perspective, these gas pipelines serve to strengthen ties with Central Asia and Russia. Just like China’s strategy for diversifying supply networks within its borders, the gas pipelines running through Central Asia to China along three different routes have been deliberately designed to integrate the five countries they pass through. Hence, although resources are concentrated in Turkmenistan, Uzbekistan, and Kazakhstan, the pipelines also cross Kirghizstan and Tajikistan.

Solar power in China’s energy maelstrom

As well as natural gas, China has invested heavily in renewable energy since the early 2000s, both as a strategic industry and to support its energy transition. When it comes to solar energy, China has until recently encouraged the unfettered development of photovoltaics, becoming the world leader in terms of both annual installation and production. Indeed, there has been such a solar power boom in China (with 35 gigawatts installed in 2017 alone) that the cost of the feed-in tariffs (i.e. the price at which the National Energy Administration purchases solar electricity from producers) has reached record levels of around 15 billion dollars, far exceeding initial estimates. The sector saw such spectacular growth partly because China chose to invest in high-capacity solar farms covering large surface areas in sparsely populated regions, which deliver considerable economies of scale.

Through strategic investment and a long-term vision for its industry, China has successfully positioned itself as a willing model student for the global energy transition.

Subsequently, the Chinese government lowered its annual installation target for solar power stations, with the government subsidising only 22.8 gigawatts of additional solar power capacity in 2019. This inconsistency in the subsidy of photovoltaics led to a collapse in the installation rate of new renewable capacity in 2019. The belated publication, in June 2019, of the new national subsidy framework plunged many firms in the sector into uncertainty surrounding their domestic markets. In the year’s first 9 months, only 16 gigawatts of additional capacity came online, compared to the 35-45 gigawatts expected by the China Photovoltaic Industry Association. 

Chinese photovoltaic systems used to have a reputation for low-quality products, poor working conditions, and a large carbon footprint. But standards for solar panel manufacturing have been tightened around the world, encouraging China to align its standards with those of growing markets like the EU’s, and it remains a pioneer in the field. The spectacular growth of photovoltaics in China – driven by global demand – led to a reduction in solar power production costs worldwide of almost 80 per cent between 2008 and 2013. This has consolidated the country’s now undisputed leadership in solar panel manufacturing, at the expense of North American and European manufacturers.

Through strategic investment and a long-term vision for its industry, China has successfully positioned itself as a willing model student for the global energy transition. The country is treading a similar, and equally paradoxical, path when it comes to the environment.

The “ecological civilisation”

China’s interest in environmental protection is not new. Indeed, it is intrinsically linked to the rapid growth of its economy. Since the economic reforms of the 1970s, China’s growth has skyrocketed, and with it the country’s environmental footprint. Almost 60 per cent of water supplies in China today are thought to be contaminated with carcinogenic substances. Pollution causes at least 1 million deaths a year, and only five of the 500 largest Chinese cities meet the air quality thresholds recommended by the World Health Organization. Seven of the largest Chinese cities rank among the most polluted worldwide. Air pollution alone is estimated to cost the country almost 33 billion euros a year.

Well aware of the issue, Chinese authorities have been involved in international climate negotiations from early on, such as the 1992 Earth Summit in Rio and, more recently, the 2015 COP21 in Paris. But in practice, control of pollution caused by businesses has been piecemeal and insufficient, with efforts focused on decontaminating the environment after the damage is done. The paradigm shifted during the 1990s and 2000s, when the idea of reconciling economic growth, human development, and natural conservation emerged as part of a vision to build a “harmonious” economy. It was in 2007, and in particular at the 17th National Congress of the Communist Party of China, that the concept of “ecological civilisation” was put forward by President Hu Jintao, marking a significant turning point.

With its enshrinement in the Chinese constitution in 2018, environmental protection obtained significant legal recognition and status. With this move, the Chinese government not only highlighted how seriously it was taking the growing public outcry about pollution, but also took on responsibility for improving environmental protection.

This has been reflected in measures geared towards greening the economy. Since 2008, the government’s successive five-year plans have contained whole chapters on renewable energy, climate change, resource efficiency, the circular economy, pollution control, environmental conservation, and natural disaster prevention. Following the financial crisis, China put in place a massive investment plan, of which around 140 billion dollars were dedicated to green investments. In 2013 alone, China invested 56 billion dollars in renewable energy, outstripping the EU’s investment at the time. Furthermore, authorities set up an environmental planning system, creating “red lines” around vital ecosystems (see figure below) and defining environmental “good health”.

Economic pragmatism first

Nevertheless, while China is demonstrating the political will to protect its environment and fight climate change alongside other nations, it still places economic growth above environmental protection. It is a matter of political survival for a government whose only legitimacy today lies in its promise to sustain the economic flourishing of its sizeable population. With this in mind, China could be the champion of “decoupling”, a concept claiming that growth and sustainable development are compatible, and that the energy transition brings with it the promise of lasting and environmentally friendly economic growth ­— a theory challenged by many economists. The amendment of the Environmental Protection Law in 2014 is a striking example: it makes protecting the environment one of the country’s priorities, alongside economic and social development, but also stipulates that environmental protection should not be detrimental to economic growth. Furthermore, all five-year plans combine growth goals with climate goals. For the Communist Party of China, this is not a contradiction in terms. 

This ambivalence can also be found in China’s foreign policy. Its investments in Sub-Saharan Africa and the Belt and Road Initiative (BRI) continue to be based on the country’s strategic and industrial interests. Clearly, the main objective of this latter project (also known as the New Silk Road, and which involves infrastructure investment to link countries in Europe, Asia and Africa) is not sustainable development, but economic gain.

According to the World Resource Institute and the Global Development Policy Center, investments by large Chinese banks outside of China as part of the BRI underline this: between 2014 and 2017, 66 per cent of BRI energy investments were directed towards coal, compared to just 24 per cent for renewables. This figure stands in sharp contrast to the significant efforts made to deploy clean energy in China itself. Moreover, during the first phase of the BRI, investments in the energy sector were mainly in fossil fuels (between 60-90 per cent) in countries that already have significant catching up to do to meet the objectives set out in the Paris Agreement. Chinese investments in Africa also often threaten local ecosystems and regional economic autonomy, particularly when it comes to agriculture.

Whether their money goes into oil, coal, or wood, Chinese investors have little concern for environmental impact, and in fact promote the growing dependence of their African partners on fossil fuels. Kenya is a prime example: in 2017 alone, China invested over 2 billion dollars in a coal power station project. Indeed, China has more than 200 coal power projects in 34 countries around the world. This policy has been criticised by Western countries who see in it, beyond the environmental impact, a new diplomacy that traps China’s partner countries in harmful investments involving high levels of public debt that they cannot repay, forcing them to then sell off public stakes in critical infrastructure like commercial ports, essential links in the BRI chain. The exploitation by Chinese investors of clauses allowing them to follow environmental standards of host countries lower than their own casts doubt on the sincerity of a country that presents itself as the climate leader of the Global South.

The COP21 turning point

The EU and China have been climate policy for more than a decade. From 2003 onwards, partnerships have been established regarding water, air, and soil pollution. Since then, various projects have been set up. One of the most advanced is the EU-China Environment and Green Economy Programme, whose goal is to share knowledge about public policy tools and to support technological innovation. More broadly, the dialogue initiated between the European Commission’s Department of Environment and China’s Ministry of Ecology and Environment has three objectives: to establish a mechanism for regular and effective coordination on environmental issues; to share regulatory good practice between the EU and China; and to carry out general policy studies and organise workshops and seminars to share knowledge on climate issues.

The decision to regulate emissions through the market, which remains the key instrument for fighting climate change in the EU and China alike, is closely tied to their trade ambitions.

Since COP21, Chinese and European authorities have worked closely together under the auspices of the UN Framework Convention on Climate Change. In 2017, when Donald Trump announced the US’s withdrawal from the Paris Agreement, the EU naturally looked to Beijing as a new key partner in the global fight against climate change. After a rocky start due mainly to trade issues – the EU having historically refused to grant China market economy status – tensions eased enough to allow three important texts to be signed in 2018: a statement on climate change and clean energy, a partnership on ocean protection, and a partnership for closer cooperation between European and Chinese carbon trading markets.

As part of the EU-China Connectivity Platform, a long-term European vision to develop links between Europe and Asia at all levels (transport and energy infrastructure, digital networks, trade partnerships), the EU and China plan to  cooperate more on setting new environmental standards for trans-continental transport, particularly the rail network development. But this objective remains subordinated to both parties’ strategic interests. Thus, the creation of an Antarctic marine conservation park, advocated by the EU since 2018, has been blocked by China due to its frequent use of Antarctic sea routes for commercial shipping.

An end to ambivalence?

In the face of an increasingly assertive China, the European response has always been to seek partnerships and collaboration around specific projects. European influence can also be seen in the environmental public policy tools adopted by China, like the emissions trading scheme unveiled at the end of 2017. However, the decision to regulate emissions through the market, which remains the key instrument for fighting climate change in the EU and China alike, is closely tied to their trade ambitions. Neither party has resolved the contradictions between their trade and environmental policies, nor are they willing to implement sufficiently strict rules to reduce the CO₂ emissions from their economic activities. Besides, be it in China or Europe, emission trading schemes have not yet effectively slowed greenhouse gas emissions.

As for China, its global positioning makes its climate diplomacy hard to read. Both the leader of the Global South in climate negotiations and a key partner of the Global North in the fight against climate change, China seems to want to have it both ways. On the one hand, to enjoy loose goals and targets, and to not shoulder too much of the burden of tackling global warming, which may hamper economic development. And on the other hand, to do everything it can to position itself as a leader in the fight against climate change on the world stage. The forthcoming Chinese presidency of the 2020 COP15 on Biological Diversity in Kunming (now postponed) is therefore keenly awaited, as well as the country’s stance at the next UN climate summits. The COP15 presidency is a great responsibility, and could shed light on the future direction of Chinese climate diplomacy. But as time passes, the tensions between economic objectives and environmental ambitions can only increase, forcing Beijing to come down more decisively on one side or another.

This article was published on Le Grand Continent.