On the road to becoming carbon neutral, China must navigate the impacts of transitioning to a low-carbon economy, including the fall-out from inevitable job losses and potential social instability. Dr Wei Shen examines the unique equity issues the world’s global production center faces when tackling climate change and why it matters not only for China but for the rest of the world too.
China’s surprise announcement in September 2020 to become carbon neutral by 2060 was welcomed by the world and viewed as a crucial milestone in the global efforts of combating climate change. Yet, during the virtual climate summit hosted by US president Biden last month, China basically deterred the pressure from the West to take its climate pledge any further. Whether China’s current commitment level is ambitious enough to uphold 1.5C° is debatable, but its attitude is clear – China is determined and serious in decarbonisation, yet it will retain absolute control of its own climate strategy and will resist outside pressure and influence from international politics.
Hence, the most relevant question now is not how to make China commit to more ambitious targets but how to make sure China can successfully implement its current climate pledge, and in a way that is fair and just.
Phasing out of ‘sun-setting’ industries
The good news is that to date, China has largely fulfilled its climate related promises. Between 2015 and 2020, China decommissioned over 170 million tons of steel production and one billion tons of coal production. Massive coal power capacities are still being added into the grid but most of these coal power plants are running at historically low utilisation hours and are generating much less electricity than their designed capacity. Consequently, the share of coal power in energy consumption mix decreased in the past five years by 7.2 percent.
By 2020, China exceeded its policy goal on reducing carbon intensity by 45% on the 2005 level by quite a margin. In addition, largely due to a highly efficient centralised regulatory system, China is also dedicated to promoting key ‘sun-rising’ sectors, such as renewable energy and electric vehicles, along with the gradual phase out of ‘sun-setting’ industries in different localities.
To achieve carbon neutrality by 2060 though will be a much graver challenge for China. Its success will depend on not just meeting various centrally crafted climate related targets effectively or efficiently but dealing with some deep-rooted structural imbalances in the economy and preventing potential social trauma as a result of the low carbon transition.
For the world’s largest manufacturing hub and trading nation in the world to reach net-zero emission, China must achieve a just transition. It needs to make sure that the cost and pain of transition will be fairly distributed among different sectors, localities, and social groups within the country, and avoid inflicting any negative impacts caused by the rapid transition upon other countries.
Managing job losses and social stability
From the outset is the pressure on employment and social stability, which the Chinese central government and communist party of China have always viewed as of paramount importance for development. The massive unemployment due to the low-carbon transition can be an unprecedented challenge for the country, even compared to the massive laid-off workforce from inefficient state-owned enterprises in the late 1990s.
China currently hosts the worlds’ largest high carbon industries including coal, steel, cement, glass production, which are expected to be essentially transformed in the coming decades. It is hard to estimate how many jobs will be affected but the coal industry alone employed around 2.6 million people in 2019, which can be reduced to 0.2 million by 2050. Yet the real problem is not only the scale of unemployment but its distribution. Due to China’s unique ‘hybrid’ economic system, it is almost certain that small and private businesses will be hit much harder compared to large state-owned enterprises. Many rural migrant workers employed informally or temporarily within small mines and factories will be particularly vulnerable in the coming decades.
In the past few years, the Chinese government has established massive state funding programmes for re-training the laid off workers in these sectors, yet whether it could provide sustained support to the growing ‘green unemployment’, particularly considering the corruption among local officials often observed in distributing these central funding resources, puts in doubt the success of these state-led programmes.
Disparity between urban wealth and poorer provinces
The other unique equity issue related to low carbon transformation in China is due to the high disparity among different localities within the country. The wealthiest cities like Shenzhen or Shanghai can have a GDP per capita nearly 10 times higher than the poorest areas in the inner provinces like Gansu or Guizhou. Recent studies illustrate that the burden and cost transition are being unfairly shouldered by those least developed inner western provinces that provide large amounts of energy-intensive products and services for the most developed provinces in the eastern and southern coast, exacerbating the existing wealth gap between them.
For example, Chen et al (2020) raised the concern inter-provincial carbon inequality based on its MRIO model and illustrated that the inequality of spatial distribution of carbon emissions among provinces in China has been increased. It is therefore unfair to ask under-developed provinces to reach carbon neutral targets around same timeline with coastal provinces. A climate-just spatial distribution of emission reduction obligations will be both necessary and crucial to achieve long-term success. The principle of ‘common but differentiated responsibilities’ should be applied among Chinese localities, just like between developed and developing countries at the international level, to achieve a just low carbon transition.
Pressure on China as a global production hub
China’s domestic strategy and efforts for decarbonisation will inevitably create international impacts. At the outset, China is not likely to pursue the same decarbonisation pathways of major developed countries, by relocating many high carbon industrial or manufacturing capacities overseas. In this regard, the pressure and challenge of decarbonisation faced by China (and other fast industrialising countries or emerging economies) can be even higher if it wishes to maintain its ascendency in global trade. And the battle to decarbonise China is of utmost global importance simply because it is essentially the battle to decarbonise the most carbon intensive segments of the current globalised production system.
Despite on-going political stalemate or struggles multilateral or international collaboration on low carbon technology and climate governance must continue to make sure that China receives sufficient support in meeting this unprecedented challenge and achieve its climate pledges, without passing the high carbon parcel (or a climate time bomb) to the next country.
Investing in coal in the Global South
There are growing concerns regarding China’s fast-growing fossil fuel investment, particularly coal-fired power stations in the Global South and its incompatibility with China’s recent commitment to invest responsibly and sustainably overseas. Yet many studies, including Kong, B., & Gallagher, K. P. (2021) and my own on China’s Role in Africa’s Energy Transition, indicate that a large amount of these coal power investments are actually demand-driven, or mainly sought after by the governments of developing countries to address massive shortages of energy supply. For many of these countries, even though wind and solar energy generation are getting cheaper, lacking proper transmission and storage infrastructure makes a massive investment in wind and solar capacity unrealistic at least at the current stage.
As a result, investment in traditional baseload energy sources, such as hydro, geothermal, or coal, is still viewed as the most cost-effective pathway to reduce energy poverty. Eventually, the real solution of reducing Chinese (or other countries’) coal power investment overseas depends on the scaling up and acceleration of much-needed climate and development finance for improving grid infrastructure and energy services. Until then, accommodating a large amount of wind or solar generation capacities can be still challenging, driving many developing countries to keep coming back to fossil fuel solutions to power their nation.
Blaming China will not solve this decades-long dilemma between no energy and dirty energy in the global South. It is yet another layer of climate justice – an issue that lies at the heart of low-carbon transitions both between countries and within countries and must be front and centre on the agenda for both China and all other international leaders ahead of COP26.
Climate justice an area of focus for the IDS China Centre’s thematic working group on China’s impact on green energy transition in Africa, led by Wei Shen. The group works with research, policy and practice partners to better understand how Chinese-funded, large-scale, on-grid wind and solar energy infrastructure projects in Africa are governed, and the social, environmental and economic impacts they generate for host countries.