China is wary of energy transition undermining social stability

Slow progress towards slowing climate change is also a reflection of the immensity of the physical and social change that reshaping energy systems requires. China, the world’s largest source of carbon emissions, is a case in point: Chinese officials are especially wary of threats to social stability, energy transition included.

An active participant in the UN Climate Change Conferences and a signatory to the 2018 Paris Agreement, China has become serious about curbing pollution and climate change. Government reforms since 2016 have created more effective regulation through stricter environmental standards, harsher penalties, and even production caps and shutdowns in heavily polluting industries.

And yet a report by a Chinese public research center recently warned China’s “stated policy scenario cannot comply with the Paris agreement.” Its current trajectory would see it fail in its ambition to keep the rise in average temperature to below 2°C against pre-industrial levels. According to the China Renewable Energy Outlook 2018, the main problem is systemic reliance on coal. The observation is alarming, because without success in China, tackling the global challenge remains elusive.

China has not yet reached "peak coal"

A little over a year ago, experts assumed China had reached “peak coal”. But recent data show that, rather than declining, coal consumption rose slightly in 2018. According to Boom and Bust, a report on coal-power plant construction, and Carbon Brief, a coal-power tracking website, also the construction of coal-fired power stations has been picking up again. Both trends were enough to raise questions about China’s declared goal of achieving a fast energy transition.

It is tempting to view this as a symptom of Beijing’s ignorance, deceitfulness or laziness in all matters regarding climate change. But a more thorough reading would also see it as an expression of the limitations of central-government power.

Some have argued that implementing an energy transition would be easier in authoritarian systems like China than in democratic countries. But even policy made in all-powerful Beijing can only work if it finds support at lower levels; Beijing has to work with – and at times against - local interests or constraints. Policy and implementation are a perpetual compromise between the demands of politicians and experts - and the competence of local officials.  

When local governments in northern China decided to meet implementation quotas on a “coal-to-gas” policy intended to cut pollution, a spike in gas consumption for heating quickly led to a shortage. Coupled with incomplete installation of both gas pipes and heating systems in some areas, and a ban on burning coal for heating private homes, this rocky implementation of central-government orders led to areas going for many weeks without heating.

Pollution has worsened in structurally weak regions

Such problems were most noticeable in structurally weak regions, in particular the northern Chinese Provinces of Shaanxi, Shanxi, and Henan, the heartland of coal and heavy industry. Regardless of Beijing’s ambitions, pollution in parts of these regions has worsened in recent years. This bucking of the national trend shows the gap between Beijing’s aims and the regional administrations’ means.

Minister of Ecology and environment, Li Ganjie, has admitted that, despite progress, the situation remains grim. He has warned the hardest parts of tackling pollution has yet to come. Despite Beijing’s ambition, China’s goal of a swift energy transition is blocked by technical problems - and by the political rationale of “social stability first”. Energy transition is no done deal.

Local officials often have to find a balance between Beijing’s ambitious targets, public pressure to clean up the environment, and socio-economic issues like employment. In areas dominated by mining, steelmaking and other heavy industries, officials have to enforce Beijing’s green growth policies, while also protecting local companies as important employers and taxpayers.

Focus on social stability slows progress

The National People’s Congress in March acknowledged the need for social stability. Given slowing growth and the challenges of industrial restructuring, Premier Li Keqiang emphasized the importance of stable employment. A new “Jobs First” policy allows officials to award factories grace periods before implementing environmental standards. Intended to prevent disruptions such as a heating crisis, such moves are also an invitation for environmental foot-dragging at the local level.

Yet in other areas, officials enforce blanket bans on polluting industries, harming companies in  forcing them to comply to environmental standards. This illustrates that poor local governance can cut both ways – and that Beijing is aware of the dangers of climate change and pollution. Still, Beijing knows energy transition can be painful for communities. Given the Xi administration’s focus on stability, perceptions of social risks will slow progress.

But, as the Renewable Energy Outlook shows, more ambitious targets are both possible and necessary, especially for offsetting coal.  Beijing needs to up its game and tackle deficits at local level, for example, by aligning the incentives of officials with Beijing’s policy. The effects of pollution and global warming are felt at the local level, so the fight against them has to take place there, too.