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The central government of China has long included energy transition in its five-year plans, but the momentum has picked up since September 2020, when President Xi Jinping pledged to lead the country to carbon neutrality – meaning its net carbon emissions will reach zero – by 2060.

He reiterated his vision in a pre-recorded address to the United Nation this year, saying: “China will strive to [reach] peak carbon dioxide emissions before 2030 and achieve carbon neutrality before 2060.”

China remains the world’s biggest producer of carbon dioxide – releasing 27 per cent of all global greenhouse gas emissions in 2019, the research institute Rhodium Group reported. Most of the emissions were generated from burning coal, which is used to produce about 60 per cent of the country’s total energy supply.

The nation faced a major power shortage last September – caused by a combination of coal supply shortages and high demand for electricity from manufacturers, businesses and households – which highlighted the urgent need for China to make its transition to renewable energy supplies.

However, the country is making significant progress. The International Energy Agency forecast that between 2019 and 2024, China will account for 40 per cent of global renewable energy capacity expansion.

The nation plans to build a major production base for renewable energy, such as solar- and wind-generated power, in western China.

Jing Liu, HSBC’s senior economist and China watcher, offers her views on what to expect during China’s green transition in conversation with Khoa Tran, assistant producer of Sustainable Asia, a non-governmental organisation producing multimedia content about environmental issues.

“China is at the [stage] where it is aiming to cultivate new growth drivers to change the growth from construction-led to capex [capital expenditure] and consumption,” Liu says during the podcast, titled “China’s Green Transition: an economist’s perspective”, hosted by South China Morning Post.

Capex refers to funds spent to acquire, maintain or upgrade physical assets such as offices and residential developments, factories, equipment, and technology.

Liu also explains the three important new growth drivers for the country – namely green investment, advanced manufacturing and consumption.

She says that even the most conservative estimate by the International Energy Agency predicts that over the next 40 years, China will need to spend at least 200 trillion yuan (US$30 trillion) to drive the green transformation.

The podcast discussion also covers the latest policies outlined by China’s central planner, the National Development and Reform Commission, and the recently announced “1+N” green transition framework.

“1” refers to the country’s long-term approach to combating climate change, while the “N” denotes the solutions it will introduce in future in important areas such as energy, industry, construction and transport to ensure carbon emissions reach a peak in key sectors by 2030. 

“In order to achieve this 30/60 goal, I would say it’s a formidable task, but not mission impossible,” Liu says.

“For example, for the power sector, they have a very clear target. Currently, the installed capacity for wind and solar in China altogether is a little bit over 500 gigawatts, but by 2030 the government says that that has to increase to at least 1200 gigawatts.”

Click into the podcast to listen to more insights from Liu.