China Briefing, 10 June 2021: Energy ‘pre-warning’ system; Chinese banks ‘fund’ deforestation; Coal price cap

Welcome to Carbon Brief’s China weekly digest. 
We handpick and explain the most important climate and energy stories from China over the past seven days.

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Snapshot

China has launched a so-called “pre-warning” system to call out the regions that have failed to curb their energy use. Beijing’s state planner has used traffic-light colours to grade local governments’ energy-control performance this year. Experts say that the move shows China’s “determination” to implement those targets.

Global Witness, a campaign group, has urged Chinese banks to stop investing in overseas agribusinesses – economic activities related to farming and farm products – that could drive deforestation. The campaigners said that Chinese financial institutions are “funnelling billions” into “harmful production” of some food products, the Guardian reported. 

Meanwhile, China is reportedly considering using price caps to control the surging costs of coal. The news comes as the nation is set to experience its hottest months of the year when demand for electricity reaches its peak. At last two southern provinces had to ration their electricity from late May, state media said. And now, one report said, more provinces, such as Guizhou and Shaanxi, might need to follow suit. 

Key developments

China calls out energy-use ‘offenders’ 

WHAT: China’s state planner has used a new three-tiered rating system to evaluate and “pre-warn” regions about their energy-use performance. According to an official government notice, the mechanism aims to instruct local governments to hit this year’s “dual-control” targets – objectives for energy consumption and energy intensity (the energy use per unit of GDP). Two-thirds of the regions fell short of at least some of their goals in the first quarter of 2021, Reuters said.

WHERE: The worst offenders were judged to be the provinces of Zhejiang, Yunnan and Guangdong, plus the autonomous region of Guangxi Zhuang, Reuters added. They failed both targets between January and March, according to the authorities. The surge of energy use was propelled by increased factory activity, an economic rebound and a “boom” in raw materials, reported Caixin, a Chinese financial publication. Caixin named three other regions – the province of Qinghai and the autonomous regions of Ningxia Hui and Xinjiang Uighur – where energy intensity “had gone up instead of dropping”.  

WHO: The system has been introduced by the National Development and Reform Commission (NDRC), China’s state macroeconomic planner. More specifically, the notice was released by NDRC’s Environmental Resources Division, which oversees environmental-related development and reform. It was produced on 24 May and published on NDRC’s website on 3 June.

HOW: NDRC used three colours corresponding to traffic lights to rate each regions’ performance. According to Caixin, red – or “first-level pre-warning” – indicates that a region’s actual energy consumption was more than 10% higher than its target. Orange – or “second-level pre-warning” – signifies a less than 10% difference between a region’s actual and target volume. Green – or “third-level pre-warning” – means the target was achieved. 

WHY IT MATTERS: The move shows Beijing’s “determination” to ensure that its “dual-control” targets are met, two experts have told Carbon Brief. Dr Ryna Yiyun Cui, an expert on China’s climate policies based at the University of Maryland, says that the central government “becomes serious” when it links performance evaluation with warnings for individual provinces. But she notes that the system fails to address the “key” to emission reduction: the decarbonisation of electricity generation. Dr Xie Chunping, an energy economist at the London School of Economics, states that this official order has urged all regions to “adopt forceful measures” to guarantee the realisation of the targets, “especially the energy intensity goals”. She says this “sends a strong signal that China is determined to force structural change in regional economies and promote the decoupling of economic growth from energy use”.

Chinese banks ‘must act against’ deforestation

WHAT: Global Witness, an environmental campaign group, has called for Chinese banks to stop financing overseas agribusinesses that may be linked to deforestation, biodiversity loss and climate change, according to the Guardian. The publication said the group had called on Chinese financiers to undertake “more rigorous checks” on their foreign business partners. 

HOW: Between January 2013 and April 2020, Chinese banks and investors funded more than $22.5bn (£16bn) to companies producing and trading agricultural commodities “at high risk” of driving deforestation, the Guardian wrote, citing analysis from Global Witness. The products in question included pulp and paper, rubber, timber, palm oil, soy and beef, the group said. It also found that $10.25bn (£7.25bn), or 45%, of the aforementioned funds had come from five of China’s biggest commercial banks. 

WHERE: In particular, the campaigners called attention to Chinese banks’ links to the deforestation of Brazil, according to Mongabay, a nonprofit environmental science and conservation news outlet. The analysis found that five of the Brazilian companies that had received the most financing from Chinese banks for their soy and beef operations were all exposed to deforestation, said Mongabay.

WHEN: Global Witness released its report on Monday – roughly a month after another report found Chinese banks to be “the second largest financiers of deforestation-linked commodities”. The Financial Times covered the previous research from Forests & Finance, a global coalition of non-governmental organisations. Global Witness said its latest report was also based on data from Forests & Finance.

WHY IT MATTERS: Campaigners have been urging Chinese policymakers to prevent commercial banks from making investments that may cause environmental and social damage. A Chinese lawyer previously told the China Environment News – a newspaper affiliated to the Ministry of Ecology and Environment – that authorities must incorporate commercial banks’ “environmental responsibilities” into the sector’s laws, which are set to be revised this year. From a climate change perspective, the investment choices made by Chinese commercial banks – the world’s largest group of banks by total assets – have “major global ramification”, according to Yin Beibei, Global Witness’s senior advisor. She tells Carbon Brief: “To put it simply, China cannot meet its carbon neutrality goals if its banks keep bankrolling businesses that are destroying forests and wrecking our climate.”

Other news

COAL PRICE: China may impose price caps on coal after the commodity’s costs became “stubbornly high”, Bloomberg reported, citing “people familiar with the plan”. The newswire said authorities were considering controlling miners’ selling price or the benchmark price at Qinhuangdao port, the nation’s largest coal hub, but no decisions had been made. The move came as hot weather and a ban on Australian coal were driving up coal prices and causing blackouts, reported South China Morning Post. According to Argus Media, China’s coal supply shortage may force more provinces to resort to power rationing.  

EMISSIONS CONTROL: China’s National Government Offices Administration has demanded that the total carbon dioxide (CO2) emissions of public institutions should not exceed 400m tonnes a year by 2025, reported Xinhua. Their total annual energy consumption should stay within 189m tonnes of standard coal (tce) – compared to 164m tce in 2020 – under the same timeframe, the authority instructed in a notice released last Friday. 

US-CHINA RELATION: The US has urged China to bring forward its 2030 emissions peaking timeline, but the latter has rejected the call. The news was reported by Japan-based Kyodo News, citing “sources familiar with bilateral ties”. John Kerry, the US presidential envoy for climate, was said to have made the request to his Chinese counterpart, Xie Zhenhua, during their climate talks in Shanghai in April, the outlet said. Xie said China could not accept the demand as it is still a developing nation, it added. 

GREEN FINANCE: China’s central bank, the People’s Bank of China (PBOC), yesterday announced a new programme to evaluate the banking sector’s “green” services, reported Xinhua. The authority will assess the “green” financial products from 24 Chinese banks and institutions – including their domestic “green” loans and “green” bonds – from 1 July, according to a notice. In particular, PBOC said it would put into consideration banks and institutions’ “green” investments overseas. Hongqiao Liu, Carbon Brief’s China specialist, has explained the significance of the announcement in this Twitter thread.

NATIONAL ETS: China’s climate envoy, Xie Zhenhua, has called on entrepreneurs to “actively” prepare to enter the national emissions trading scheme (ETS) – which is set to go online this month – reported China’s National Business Daily. This is one of the five pieces of advice Xie gave to businesses during a forum in Beijing on Saturday, the outlet said. He also urged companies to enhance “low-carbon” technologies and natural conservation, among other things. Look out later this month for Carbon Brief’s in-depth analysis of the national ETS.

RENEWABLE ENERGY: Shanghai aims to have nearly 10,000 hydrogen-powered vehicles on the road by 2023 as it strives to bolster its “fuel cell” automobile industry, reported Shanghai Securities News. The city also pledges to plan nearly 100 hydrogen fuelling stations and put 30 of them into use within two years, the state-run outlet said. Shanghai expects its hydrogen transport industry to grow to nearly 100bn yuan ($11bn) in its output value by then. Carbon Brief has examined how hydrogen might help the world solve climate change in this in-depth Q&A.

Extra reading

• Some way to go before China can become carbon neutral by 2060 – Asit K Biswas and Cecilia Tortajada, The Business Times
• China’s Big 5 power producers face uphill battle in meeting peak emissions targets – Ivy Yin and Eric Yep, S&P Global
• China and climate change loom large among Biden’s priorities – Michael D Shear and David E Sanger, The New York Times
• Biden’s inconvenient truth: China is the world’s biggest renewable energy enabler – Dr Shirley Yu, The National

New science

Summer heat sources changes over the Tibetan Plateau in CMIP6 models
Environmental Research Letters

A new study has found that latent heat – energy discharged or absorbed in the physical change of a substance – released in precipitation is the primary heat source over the Tibetan Plateau. It also finds that the region’s precipitation is projected to increase about 2.7% for every 1C of global warming. The researchers assessed projections from 20 state-of-the-art global climate models (CMIP6) under a medium greenhouse gas emission scenario. Prof Wang Bin, a meteorologist and co-author of the paper, tells Carbon Brief that summer heat sources over the Tibetan Plateau have “profound influences” on Asian summer monsoon and global atmospheric circulation. The area’s precipitation is the headwater for major rivers in Asia, he notes. Prof Wang adds that the study has “critical implications for predicting the future shift in water supplies in heavily populated south and east Asian countries under global warming”.

Skillful prediction of summer rainfall in the Tibetan Plateau on multi-year time scales
Science Advances

According to new research, summer rainfall on the Tibetan Plateau is highly predictable on multi-year timescales in large ensemble predictions. The study is led by Dr Zhou Tianjun from the Institute of Atmospheric Physics of the Chinese Academy of Sciences. It shows evidence that the predictable signal of summer rainfall across the hinterland of the Tibetan Plateau is “substantially underestimated” in current decadal climate prediction models. The researchers forecast that inner Tibetan Plateau rainfall will be 13% higher during 2020-27, relative to 1986-2005. Dr Zhou tells Carbon Brief: “The study provides an important reference for water resources management in surrounding areas and adaptation response to the risks of climate change on the Tibet Plateau.”

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