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9 Hot Topics in Carbon Reduction and the Energy Industry in China in 2017, Part 1

The year 2017 was an impressive one for China in its effort to achieve economic growth while reducing carbon emissions. Based on scenario analysis in the Reinventing Fire: China report launched by Rocky Mountain Institute in 2016, China can do this by decreasing primary energy demand and increasing the use of nonfossil fuel energy on its pathway to 2050. RMI’s China program is helping China reach this goal by improving efficiency on the demand side and optimizing energy structure on the supply side. In this two-part blog series, we highlight key progress that China has made in carbon emission reduction and energy reform in 2017. 

Low-Carbon Development: Low-Carbon City Pilots

In order to mitigate climate change and decrease carbon intensity, China has a goal to peak its carbon emissions by around 2030. Cities contribute over 60 percent of China’s national GDP and carbon emissions, so cities’ efforts and early peaking will play a critical role in reaching the national target. In 2010, China initiated a low-carbon city pilot program, and in January 2017, the National Development and Reform Commission (NDRC) announced 45 cities as the third batch of low-carbon pilots, increasing the total number to 87. The carbon emissions peaking targets of the 87 cities range from 2018 to 2028, several years prior to the national target.

Furthermore, some leading cities have already started researching and developing their peaking action plans. For example, the city of Lanzhou issued the Lanzhou 2025 Carbon Emission Peaking Implementation Plan in July 2017, and Wuhan released the Wuhan Carbon Emission Peaking Action Plan at the beginning of 2018. These are the first two city peaking plans announced so far, and they clearly define quantified carbon emission intensity, planned targets for each major industry of the cities, advocated measures, and implementation plans. They will provide important knowledge and lessons for other cities with planning processes currently underway. As more cities announce their carbon emission peaking targets, the Alliance of Peaking Pioneer Cities of China (APPC)—a network convened by the NDRC and designed to share best practices—will provide more technical support for member cities and assist them in developing and implementing peaking action plans.

Transportation: New Energy Vehicles and Fossil-Fueled Vehicles Ban Timetable

The new energy vehicles (NEV) market continued to bloom and grow steadily in China in 2017. According to the China Association of Automobile Manufacturers (CAAM), the production and sales of NEV in China ranked number one in the world for the ninth consecutive year, reaching 794,000 and 777,000, respectively, in volume in 2017. The Ministry of Industry and Information Technology (MIIT) and four other ministries jointly announced the Parallel Administrative Measures for Passenger Vehicle Corporate Average Fuel Consumption (CAFC) and New Energy Vehicle (NEV) Credits (“dual credit”) on September 28, 2017. According to the dual credit policy, the requirement on NEV credit percentage will come into force in 2019 and apply to traditional passenger vehicle manufacturers with more than 30,000 units of annual production or import volume in China. The policy requires manufacturers to generate NEV credit equivalent to 10 percent of sales by 2019 and 12 percent by 2020. The MIIT will announce the NEV credit requirements for 2021 and on separately. China’s subsidies for electric vehicles have gradually declined since 2016 and will likely be canceled by 2020, which means the dual credit policy will likely become the new driving force to develop the industry. With subsidy decline, auto manufacturers will likely focus more on quality than quantity, and improve battery performance and EV range to increase their competitiveness in the NEV market.

In 2016, Germany, the Netherlands, the UK, and France announced that they would stop selling gas-fueled vehicles by 2025 to 2040. In 2017, Mercedes-Benz announced that all its product lines would be electrified by 2022. A new wave of explosive growth is also expected in the NEV market. During the 2017 International Forum on Chinese Automotive Industry Development, one MIIT vice minister noted that the MIIT has started research on a timetable for banning traditional fossil-fueled automobiles sales. It points to China’s positive attitude and determination to decarbonize the transportation sector, although no further specific timetable or commitment has been made.

Buildings: Standards and Subsidies for Ultra-Low Energy Consumption

As a critical step for reducing carbon emissions in the buildings sector, China implemented the Standard for Energy Consumption of Residential Buildings at the end of 2016. The standard indicates constraint values and guiding values for actual energy consumption of different types of residential buildings in different climate regions with a general target of approximately 50 percent overall improvement based on existing building energy consumption. Unlike other existing building design standards for energy efficiency that stipulate each technical measurement, this is the first performance-oriented building energy consumption standard to be released at a national level, marking a key milestone in the development of building energy conservation in China. Currently no other countries with building stock volume similar to China’s have released a similar national standard. In a previous blog, RMI analyzed what the US could learn from this standard to reduce carbon emissions in the buildings sector. This standard is only a referential standard so far, and further research is needed on utilization by governments, real estate developers, and building energy efficiency consulting companies. Promotion and implementation documentations of the standard are expected to be released in 2018 to provide guidance on how to implement specific items.

The Interim Procedures on Ultra-Low-Energy-Consuming Building Demonstration Project and Subsidy Management, released by Beijing in June 2017, states that a subsidy will be given to ultra-low-energy-consumption building demonstration projects invested in by the private sector. No more than 50 percent of the subsidy will be granted once a project is acknowledged as a demonstration project in Beijing, with the rest being granted after the project is verified. The subsidy is significant enough to cover almost all incremental costs, unlike most other government subsidies around the world. It will largely overcome developers’ concerns about cost, and encourage more developers to invest in development and construction of ultra-low-energy-consumption buildings. In fact, nine ultra-low-energy-consumption building projects were approved in 2017.

These advancements in early peaking cities, transportation, and buildings are helping China reduce carbon emissions while continuing its economic growth. In part two, we will discuss China’s work in air pollution control, renewable energy promotion, power market reform, and distributed power.

Image courtesy of iStock.