To have any hope of meeting the Paris climate goals we need a competitive race between the world’s superpowers for low-carbon supremacy. While the Biden administration has necessarily started playing catch-up with the USA’s climate ambitions, what China achieves with its transition to a zero-carbon economy is particularly important.
China is the world’s largest greenhouse gas emitter, with double the emissions of the USA in second place. So, what China does during the energy transition will have a huge impact on whether the world achieves the Paris climate goals. America playing catch-up Since day one in office, Joe Biden has been rushing to repair the reputational damage caused by four years of climate backtracking by the previous administration. Biden has moved to re-position the USA as a leader on climate change. Not only to bring the USA back to where many feel it belongs, but also as a way to pressure other countries to follow suit, especially those with less-than-impressive climate targets At the Leader’s Summit on Climate hosted by President Biden at the end of April, the USA committed to a new mid-term emissions target to reduce greenhouse gas (GHG) emissions by 50-52% by 2030 from a 2005 baseline. While some observers were pleased with the target, others had expected more. The USA’s pledge is broadly in line with those of other developed countries. MOSCOW, RUSSIA – APRIL 22, 2021: US President Joe Biden addresses the online Leaders Summit on … [+] Climate. Alexei Druzhinin/TASS MORE FOR YOUThe Supreme Court Deals Ethanol A Blow By Undermining The Renewable Fuel StandardRepublicans Should Embrace Alternatives To Coal While They CanFord’s New Electric Pickup Could Spark Changing Attitude In Oil Industry But other nations are also advancing The Leader’s Summit also provided a platform for other nations to enhance their climate commitments in advance of the COP 26 climate change conference in Glasgow in November. Japan used the Summit to improve its target from a 26% cut in emissions to a 46% cut by 2030 from 2013 levels. Similarly, Canada also announced a target of 40-45% cuts from 2005 levels. Ahead of the Summit, the European Union’s European Climate Law, which commits the EU to cut emissions by at least 55% by 2030 was a milestone. The law makes the EU the biggest GHG emitter yet to establish legally binding climate targets. China did not announce any new targets at the Climate Summit. It committed to net zero emissions by 2060 in September 2020 and updated its climate goals for 2030 in December. But, President Xi did indicate at the Summit that coal use will start to fall from 2026 with the start of China’s 15th five-year plan. With its massive reliance on coal, this is one of the first things China needs to tackle in order to meet its long-term goals. Why do we need a race for climate leadership? With a raft of targets being set by both countries and global companies, why do we need a race for climate leadership? The answer is simple. Based on our latest forecast in the DNV Energy Transition Outlook, the world is not on target to meet the goals of the Paris Climate Accord. Unlike many assessments, which forecast what needs to happen to avoid runaway climate change, the Energy Transition Outlook is a best estimate of what is likely to happen with the global energy transition between now and 2050. The 2020 Energy Transition Outlook shows that low-carbon transition is not happening at the scale or pace needed to hit the Paris goals. To achieve the 1.5°C Paris goal, a 50% reduction in GHGs is needed globally by 2030. Close to net-zero is needed by 2050. Even though our forecast shows rapid progress with decarbonization and reduced energy intensity, it is not fast enough, leading to the 1.5°C carbon budget being exhausted in 2028 and the 2°C budget in 2051. Our outlook suggests warming of 2.3°C by the end of the century, a level termed dangerous by the UN Climate Panel, the IPCC. A recent report by the Energy & Climate Intelligence Unit and Oxford Net Zero underlines how much more work is needed. Their research shows that current net zero commitments only cover 61% of global emissions, 68% of global GDP (assessed in purchasing power parity terms) and 56% of the world’s population. The benefits of climate leadership Apart from the reputation and planetary benefits from leading on emissions reductions and reaching net zero, the other side of the climate leadership equation is economic. Together, the USA, China and the EU account for more than half of global GDP and almost half of global GHG emissions. Although big emitters, they are also key players in the energy transition in terms of low-carbon technology, renewables, electrification and digitization. Carving out a leadership position in this huge emerging arena in the short to medium term will pay significant economic benefits to the countries that get it right. Our forecast estimates global expenditures on renewables and energy grids to reach 2.7 trillion USD/year in 2050. There is also a political angle at play. President Biden has clearly stated his commitment to leading a clean energy revolution that will deliver a double benefit – carbon reductions and job creation. He has noted that countries taking decisive action now will reap the economic benefits of the future. This approach aims to send a clear message to critics who argue that cutting emissions too far and too fast To seize this economic opportunity of the energy transition, countries need to provide an enabling environment that provides certainty to the private sector. Legally binding carbon commitments backed up with strong policies allows business and investors to commit to the research and infrastructure needed to deliver green technology that will create jobs, value and progress towards net zero. This is one of the benefits the European Union intends to achieve with the European Green Deal. Why China’s energy transition is important to everyone As a global superpower and the world’s largest emitter of greenhouse gases, how China approaches the energy transition in the coming decades matters wherever you are in the world. Consider the statistics: China is the world’s most populous nation with almost 1.4 billion citizens or 17.5% of the world population. It is responsible for around 30% of global GHG emissions and uses more than half the of the world’s dirtiest fuel, coal. Add to this economic growth projections of more than 5.5% until 2025 and around 4.5% from 2025-2030, which will drive increased demand for energy, before it peaks and starts to fall. The sheer scale is such that Climateactiontracker has estimated that if China hits net zero GHG emissions, it will reduce projected climate warming by 0.2-0.3°C on its own. The role of China in meeting the Paris goals cannot be overstated. And its current climate commitments – to hit peak emissions by 2030 and achieve net zero emissions by 2060 – are to be commended. One thing is certain, with emissions only peaking in 2030, China’s energy transition has to happen at an unprecedented pace if it is to hit net zero by 2060. Ideally, as it is the sum of all year’s emissions that make up the CO2 concentration in the atmosphere, it should peak well before 2030, which we also think is likely to happen. What will China’s energy transition look like? The first point to note is that China’s energy transition is starting from a position that is well behind other major economies. This is due to the scale of its emissions and the country’s huge industrial and manufacturing base, which includes many hard-to-decarbonize sectors. It is an unavoidable fact that China produces a large proportion of the world’s goods and is responsible for manufacturing emissions for products and materials used elsewhere in the world. Arguably, China’s start point for decarbonization is 20 years behind the USA and even further behind Europe. For China, this brings some benefits because existing technologies, especially renewable energies, are now so cheap that China’s transition can go much faster. By comparison, the USA – the world’s second largest emitter with around 15% of global emissions – has one of the world’s highest per capita carbon footprints. So, it faces a different energy transition challenge to China. One that involves changing behaviour and consumption patterns among its 330 million citizens. DNV’s Energy Transition Outlook has mapped the most likely energy transition for China up to 2050. Overall, we forecast that China will reduce energy-related CO2 emissions by 77% by 2050 and will be on track to meet its 2060 net zero goal. But, how will it get there? Less coal, more electricity Although China’s energy use will peak by 2030, through a combination of reduced economic growth and increased energy efficiency, it drastically needs to reduce coal and fossil fuel use. Throughout the 2020’s coal use will be flat, followed by a significant decline after 2030 as electrification and new energy sources substitute. Oil follows a similar path with slight increase up to 2030, followed by a steep decline. With energy use continuing to grow up to 2030, natural gas use will double in the next 10 years combined with a significant growth in renewables as a proportion of total energy use. Use of fossil-based energy remains stubbornly high in China through to 2030, when energy use peaks. … [+] It then starts to decline rapidly driven by growth in renewable electricity. DNV’s Energy Transition Outlook 2020 Rapid electrification As coal and oil use decline, China’s use of electricity will increase dramatically and is forecast to double by 2050. This will be supported by huge expansion in solar PV and wind power, including offshore wind. By 2050, we estimate that almost 90% of China’s electricity will come from renewables and 6% from nuclear. Electricity use in China will double by 2050, driven by a huge expansion in renewables as they … [+] replace fossil fuels. Renewables will account for almost 90% of electricity generation by 2050. DNV Energy Transition Outlook 2020  TAKING STOCK: A global assessment of net zero targets, Energy & Climate Intelligence Unit and Oxford Net Zero, March 2021.  Centre for Economics and Business Research (CEBR)  Climate action tracker: BBC NewsChinese economy to overtake US ‘by 2028’ due to Covid