JING ZHANG AND CHRISTOPH NEDOPIL  |

China’s annual Two Sessions[i] opened on 4 March 2024 and lasted for seven days (typically, the two sessions last about ten days). Much attention was given to China’s 2024 economic growth target of “around 5 per cent” and the lack of a traditional press conference by China’s Premier. The 2024 Government Work Report (GWR 2024) delivered by China’s Premier Li Qiang together with the broader events of the Two Sessions, however, provide important insights into China’s approach to economic, social, political, and foreign policy agendas and the development path ahead.

Much has already been written about the implications of the two sessions on the general economy, domestic and international security. The focus of this commentary will be on interpreting and contextualising the Two Session’ ambition (or lacking ambition) for green development, which is also encompassed by China’s ambition to strengthen high-quality development (高质量发展) and new productive forces (新质生产力).

Key takeaways from the Two Sessions on China’s green development:

• 2024 GWR urges greater focus on green industry through new productive forces and the three new, such as solar, battery and electric vehicles
• Coal is seen as the peak load rather than baseline for energy security, possibly paving the way to a stronger role of green energy including energy trading
• Focus on innovation, including on hydrogen with a 10 per cent growth in the annual budget for science and technology to 370.8 billion yuan (USD 51.6 billion)
• Possible gains in energy efficiency (and consumption growth) through equipment renewal and goods trade-in worth 5 trillion yuan (USD 695.1 billion)
• Carbon markets to expand with new sectors
• No strong new signals for Belt and Road Initiative (BRI)
• No strong signals for green finance.

2024 GWR urges greater focus on green industrial growth

In the run-up of the Two Sessions, several important documents and meetings were held to define China’s green development. In January, during the 11th collective study session of the Political Bureau of the CPC Central Committee on “Promoting High-quality Development Securely”, China’s President Xi Jinping called for continued emphasis on green development. He stated that ‘green is the underlying colour of high-quality development, and new quality productivity force is green force’; China must ‘unswervingly take the road of prioritising the environment’.

In February, the China Ministry of Industry and Information Technology (MIIT) together with six other ministries released the “Guiding Opinions on Accelerating Green Development of the Manufacturing Industry”. The Opinions lay out the need to increase the share of green factories in the manufacturing sector to 40 per cent of the sector’s total output by 2030. The opinions also reiterate China’s “30/60” targets of peaking emissions by 2030, while it states that by 2035, the industry’s carbon emissions will decrease steadily.

In February, China’s National Development and Reform Commission (NDRC) together nine other departments issued the Industry Guidance Catalogue of Green and Low-carbon Transition (2024 Edition), defining industries that are considered to be part of China’s energy transition. Similar to the years before and undermining the catalogue’s credibility is the continued inclusion of clean coal production, clean and highly efficient use of coal, and extraction and use of coalbed methane.

During the Two Sessions, the 2024 GWR emphasises the promotion of a green and low-carbon economy through various measures, including green transitions in industry, energy, transportation, and urban and rural development. Specifically, the 2024 GWR provided some more guidance on green manufacturing such as consolidating the industry of new-energy vehicles and developing hydrogen power, while emphasising the imperative for traditional industries to enhance productivity and efficiency to maintain competitiveness. This includes a boost to China’s annual budget for science and technology by 10 per cent to an unprecedented 370.8 billion yuan (USD 51.6 billion), along with an estimated equipment renewal plan totalling 5 trillion yuan (USD 695.1 billion).

The GWR also emphasised the need for coordinated planning and investment guidance in key sectors, highlighting the challenges of overcapacity and low-level redundant construction. Leading players in sectors like solar photovoltaics (PV) and new-energy vehicles (NEVs) had aggressively expanded production capacity, surpassing global demand projections.

Equipment renewal and goods trade-in expected to accelerate green growth and energy efficiency

The 2024 GWR set a target of reducing energy intensity by approximately 2.5 per cent for 2024. This is slightly higher than the 2 per cent target in 2023 (which was not met, as the energy intensity in 2023 increased), but lower than the annual reduction of 3.3 per cent¹ 2009 to 2019. In order to meet the target set in the 14th five-year plan of 13.5 per cent energy intensity reduction between 2020 levels by 2025, China would need an average of 2.9 per cent energy intensity reduction per year.

To boost energy efficiency (and overall consumption growth), Minister of Commerce Wang Wentao shared the trade-in list of durable goods to boost private consumption to include cars, home appliances, home décor, kitchen and bathroom items, etc. which all could reduce energy consumption in private households. Shanghai rolled out green appliance subsidies from March 30 to December 31, 2024, offering up to 10 per cent or a maximum of 1,000 yuan.

Possibly more important, extensive equipment renewals will be promoted in key industries such as construction, municipal infrastructure, transportation, agriculture, education, and healthcare sectors. According to the “Action Plan for Promoting Large-Scale Equipment Updates and Trade-in of Consumer Goods” equipment investment in the above-mentioned sectors will increase by over 25 per cent by 2027 compared to 2023. The plan specifies that equipment updates will prioritise two key objectives: reducing energy consumption and enhancing efficiency, with emphasis placed on adopting high-end, intelligent, green, and digital technologies, which are crucial for fostering new quality productivity.

Zheng Shanjie, Director of the NDRC – China’s powerful equivalent to an economics ministry, projected a one-trillion-yuan market from trade-ins of cars and home appliances, with an annual scale exceeding five-trillion-yuan from manufacturing equipment renewals.

Coal as a peak load energy source rather than baseload, signalling stronger trust in renewable energies

The expansion of green and low-carbon energy sources is poised to continue in 2024, with adjustments in the energy structure emphasising the construction of large bases and external transmission channels, as well as the development of distributed energy and energy storage. China’s “14th Five-Year Plan” prioritised the swift development of large-scale wind and photovoltaic bases, for example in the Gobi Desert. These bases are projected to reach a combined installed capacity of 455 million kilowatts by 2030, with the first batch of around 100 million kilowatts currently in progress for grid integration, as per data from the 2024 National Energy Work Conference. Notably, projects like the China General Nuclear Power Group Xing’an League 3-million-kilowatt wind power project have connected to the grid at full capacity on December 10, 2023. Approvals for the further batches, exceeding 50 million kilowatts signify a significant reinforcement of the large-scale bases in wind and photovoltaic power sector in 2024.

At the same time, the 2024 GWR reiterated the significance of energy security. It urged for the expedited exploration and development of oil, gas, and strategic mineral resources, but also advocates for gradually shifting thermal power, mainly coal power.

An important aspect is the notion that coal was referred to as peaking power supply rather than base load supply (发挥煤炭、煤电兜底作用). Major coal-producing provinces like Shanxi are shifting their production priorities from growth to stability in their 2024 energy work conference. Since January 2024, China has reinstated coal import tariffs ranging from 3 to 6 per cent. This move could indicate an effort to decrease coal imports as part of the country’s environmental initiatives. Additionally, the tariffs may help increase government revenue as risk to supply chains have been reduced with more diverse coal import sources, including from Indonesia, Mongolia, Russia, and Australia.

Carbon markets posed for expansion

The 2024 GWR’s confirmation of the inclusion of new industries responds to long-standing calls for expanding the national carbon market, although the specific industries to be added remain unclear. Notably, the cement and electrolytic aluminium sectors are prime candidates for inclusion, owing to their straightforward process flow, readily accessible data, and high accuracy. Another piece of evidence is the “Notice on Verification of Greenhouse Gas Emission Reports of Enterprises in Certain Key Industries from 2023 to 2025” issued by the Ministry of Ecology and Environment (MEE) in October 2023, emphasises the need for advanced completion by the cement, electrolytic aluminium, and steel sectors, updating their carbon emissions accounting guides.

Furthermore, a strong focus was put on a strengthening of the carbon footprint and verification system.  The draft of the national standard “Carbon footprint of products — Requirements and guidelines for quantification” is open for public comments, while the “Accreditation Scheme for Product Carbon Footprint Validation and Verification Bodies” is publicly solicited as well. Tao Qing, spokesperson of the MIIT, announced that the MIIT intends to develop carbon footprint rules and standards for around 100 key products in 2024.

“Small and green” benchmarks take precedence in the Belt and Road Initiative (BRI)

The 2024 GWR re-emphasised that China will implement both signature projects and “small yet beautiful” projects in the BRI. One driver of the shift towards smaller yet beautiful project is risk aversion as larger projects face financial challenges under international scrutiny, and the imperative to address global scepticisms regarding the benefits of previous large infrastructure and energy projects

The Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting the Development and Growth of the Private Economy strongly advocate for private enterprises to broaden their overseas ventures and actively engage in the collaborative efforts of the BRI. Xu Shilong, Chairman of Shanghai Port Group, proposed private enterprises collaborate technologically to bolster international competitiveness and minimise internal friction. Wang Tongzhou, Chairman at China Communications Construction Co. Ltd., suggested expediting alignment with international green standards and facilitating Chinese regulation globalisation.

Green finance persists to support green growth and energy transition

While China leads as the world’s largest green loans market, it continues to face challenges such as inconsistent standards, incomplete disclosure, and inadequate instruments for a broad and internationally aligned green finance system. Huo Yingli, Secretary of the Party Committee of China Foreign Exchange Trading Centre,  proposes in Two Sessions on unified green loan standards, expanded Equator Principles adoption, and China-EU “Common Ground Taxonomy (CGT) ” standards implementation to attract foreign investment. Thus, the construction of the green finance system, especially transition finance, will persist in 2024.

The 2024 GWR, however, did not really focus on green finance innovation. However, it hinted at the role finance can play at supporting importing technologies and knowledge to facilitate China’s “high-quality development” and “new quality productive forces”, particularly in areas where China is seeking greater involvement from private and foreign investors.

Summary

The 2024 GWR and the Two sessions had more highlights for green growth than met the eye. While there was little new for greening the BRI or greening finance, three developments  stand out: first is that coal might be on the way to become a peak load rather than a base load source of energy opening doors for stronger green energy growth and thus emission reduction; second is the expansion of the carbon markets to include more sectors and have stronger carbon accounting standards across the industry; and third, is a new ‘high quality’ growth model that might accelerate energy efficiency through industry upgrading and equipment renewal programs. These initiatives continue China’s push and investment in new green industries, which have become strategic to China’s economic and national security.

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[i] China’s “two sessions” refer to the annual meetings of the National People’s Congress (NPC) and the Chinese People’s Political Consultative Conference (CPPCC), which are significant events in the country’s political calendar. The NPC is China’s top legislative body, and the CPPCC serves as a political advisory group. These sessions involve thousands of delegates from various sectors, including government, business, and the arts, who gather to discuss and ratify legislation, government appointments, and the national budget.

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AUTHORS

Dr Jing Zhang is a Griffith Asia Institute Research Fellow and Professor Christoph Nedopil is the Director of the Griffith Asia Institute.