China’s policies for Carbon peak and carbon neutrality

Working Guidance for Carbon Peak and Carbon Neutrality

China released its working guidance for carbon peak and carbon neutrality in 2021. It focuses mainly on establishing a green, low-carbon and circular economy by strictly controlling industries with high energy consumption and CO2 emission, promoting green and low-carbon industries, strengthening research on green and low-carbon technologies, developing a green trade system, refining standard and measurement systems, developing green finance as well as improving fiscal, tax and pricing policies. Especially, the market-based mechanism for trading and pricing is promoted. The link for the whole text is http://english.www.gov.cn/atts/stream/files/6175ff03c6d0cc300eea781d.

According to the working guidance, carbon peak and carbon neutrality will be achieved by 2030 and 2060 respectively. The corresponding objectives for each phase are illustrated in Figure 1.

Figure 1 Main objectives

I will address two principles, IV In-depth industrial restructure and V. Accelerate the development of a clean, low-carbon, safe and efficient energy system which I think are the most important.

IV In-depth industrial restructure

•        Promote green agricultural development and improve sequestration and efficiency in agriculture

•        Create Implementation plans for industries, which are guided by the goals of energy conservation and carbon reduction.

•        Firmly curb irrational expansion of energy-intensive and high-emission projects.

•        Vigorously develop green and low-carbon industries such as next-generation information technology, biotechnology, new energy, new materials, high-end equipment, new energy vehicles, environmental protection, aerospace, marine equipment as well as establish a green manufacturing system which consists of internet, big data, AI, 5G and other emerging technologies into green and low-carbon industries.

It is the guidance for the industry transition for the next 40 years. The green and digital industry will be promoted. In the later chapter, I will address the specific fiscal support from the Ministry of Finance.

 V. Accelerate the development of a clean, low-carbon, safe and efficient energy system

•         Deepening reforms of energy systems and mechanism.

Ø  Accelerate the development of independent market entities in the distribution and sales fields

Ø  Improve the linking mechanisms for medium- and long-term markets, spot markets and ancillary services markets.

Ø  Advance reform of the power grid system and clarify the market entity positions of incremental distribution network, microgrids, and distributed power sources that mostly operate on renewable energy.

Ø  Improve market pricing mechanisms for electricity and other energy types and carry out electricity price reforms with a view to promoting energy conservation, overhauling pricing structures for transmission and distribution, and lifting all pricing controls in competitive areas.

Ø  Market reforms will be advanced in areas like coal, oil, and gas, and faster steps will be taken to improve the national unified energy market.

The market mechanism is boosted in the development of green energy system. It encourages private companies join the green field which will create a lot of investment opportunity. 

Responses from The Ministry of Finance regarding the working guidance

Actions taken by The Ministry of Finance

·     In 2021, the national government finance arranged RMB 350 billion to support the green and low-carbon development.

·     Imposed preferential tax policies for environmental protection and green development.

·     Applied zero/Lower tariff to environmental products such as diesel engine filters, resource-based products and primary steel products. 

·     Established a national green development fund.

·     Adopted government procurement policy. The qualified products for energy conservation and environment protection are forced or prioritized to purchase.

 

Next steps for supporting clean energy development considered by The Ministry of Finance

·       Financial subsidies policy for promoting new energy vehicles

            Continuously increase the standards of subsides and gradually lower the subside.

            In 2021, the sales of new energy vehicles reached 3.5 million ranked as nr. 1 for the 7                            consecutive year. At the end of 2021, the Ministry of Finance determined to end subsidies for                new energy vehicles at 31^st December 2022.

 ·       Subsidies for renewable energy generation

            In 2006, the national government finance implemented subsidies for renewable energy                             generation.

            At the end of 2021, the renewable energy power generation capacity reached over 1 billion                     kilowatts which consists of

328 million kilowatts from Wind power capacity

306 million kilowatts from Photovoltaic power capacity

37.98 million kilowatts from biomass power

 

·       Encourage the exploitation and utilization of unconventional natural gas

Ø    Shale gas has been included in the subsidy scope since 2012.

Ø    Since 2019, unconventional natural gas has been included in the subsidy system. It compasses shale gas, coalbed methane, tight gas and other types of gas. The subsidy principle is reinforced by the principle, the more produced, the more subsided and more subsidies in winter.

Ø    In 2021, the consumption of unconventional natural gas accounted for above 1/3 of the national production of natural gas.

Current tax policies for supporting green and low-carbon development

1.     Impose consumption tax on refined oil which was initiated in 2009.

2.    Set different consumption tax rates and reduce or exempt vehicle and vessel purchase tax to encourage green and low-carbon travel.

        Vehicle purchase tax exemption for new energy vehicles and ships.

        Tax reduction for energy efficient vehicles and ships.

3.     Impose environmental protection tax since 2018.

4.     The ad valorem reform of mineral resources tax has been fully conducted since July 2016.

5.    Implement environmental protection and energy and water conservation beneficial tax policies for companies.