China, industrialisation and climate change: Do as we say, not as we did

Will China succeed with its plans to transition to carbon neutrality by 2060?
October 2021
  • Increased energy security – self-reliance is high on the agenda; most of China’s energy comes from fossil fuels, and in recent years imports have been rising.
  • Maintain top spot as a leader in clean technology – it is unlikely that China wants to give up its position as the world’s top manufacturer of electric cars, wind turbines and solar modules.
  • Improve air quality – this is a key concern for China’s citizens, with air pollution causing an estimated 500,000 premature deaths in China each year.
  • Diplomacy – the Chinese government is likely to see the potential value of demonstrating leadership on the global stage.

China’s CO2 intensity reduction targets vs. actual

A Fine Balancing Act

While there are benefits to carbon neutrality other than environmental, careful management is needed to minimise the economic pain. Despite the huge rise in average annual income, millions in China still earn less than $5.50 a day; attempts to tackle income inequality will need to be balanced with emissions reductions. China is a vast country with a variety of regional differences to do with development, economic policy and climate change; decarbonisation, for example, will be harder in regions reliant on heavy industry and coal power.

The most recent Five-Year Plan directly emphasises the importance of climate change. Where the Chinese government leads, the rest of the country will follow; in a survey by Danish green-energy company Ørsted, over 90% of Chinese respondents agreed that it is important to create a world powered by renewable energy. And the Chinese government appears to be well attuned to popular opinion when addressing climate change: the recent Chair’s Summary of the 5th Ministerial on Climate Action – an official government source – said, “citizens and especially youth are demanding greater urgency.”vii

As the largest CO2 emitter, becoming carbon neutral is a huge undertaking for China, but necessary if the world is to successfully tackle climate change. Thankfully, China has tended to deliver on previous energy efficiency and emissions reduction targets, indicating a longstanding commitment to sustainable growth.

In the second part of this two-part series, we look at how China might achieve its net zero ambitions and what the emissions and energy targets mean for our portfolios.

ii Carbontracker.org – Reach for the sun

vi China’s Ministry of Ecology and Environment

vii China’s Ministry of Ecology and Environment

Risk warnings

The value of investments and any income derived from them can go down as well as up and investors may not get back the original amount invested.

The information, opinions, estimates or forecasts contained in this document were obtained from sources reasonably believed to be reliable and are subject to change at any time.

Views and opinions have been arrived at by BMO Global Asset Management and should not be considered to be a recommendation or solicitation to buy or sell any companies that may be mentioned.
BMO Global Asset Management’s voting, engagement and public policy work is conducted independently of the wider BMO Financial Group. Positions taken by BMO Global Asset Management may not be representative of the views of the BMO Financial Group as a whole or of the other lines of business.
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