China is leapfrogging the world when it comes to the environment
China is leapfrogging the world when it comes to the environment
Earlier this month, one of China's largest conglomerates held a conference in Beijing to discuss its plans to support the government's environmental goals.
Each of the company's dozens of large subsidiaries, from financial services to specialty steelmaking, announced lofty goals one by one.
Such events have become ingrained in Chinese corporate culture. Beijing's ambitious plans to achieve peak carbon emissions by 2030 and net zero emissions by 2060 may be a top-down initiative led by Xi Jinping, but they are being widely embraced not just by the most privileged economic entities, but also by private entrepreneurs and civil society.
Outside China, however, widespread doubt exists about Beijing's commitment and ability to accomplish its goals. Additionally, many analysts question whether a commitment to greener growth entails slower growth.
"China may become trapped between economic development and emissions reductions," Helen Qiao, Bank of America's chief Asia economist, noted in a recent report.
That is almost certainly far too pessimistic. China is well on its way to outpacing the rest of the world in terms of environmental stewardship. One of Beijing's most effective tools is to compel businesses to prioritize environmental, social, and corporate governance, which has become a significant catalyst for higher-quality growth, raising the standard of living for its citizens, and preserving the country's edge as the world's manufacturing workshop.
China will leverage recent technological advancements to become cleaner and greener while maintaining its competitive edge in high-value-added manufacturing.
Prior to last year, China invested 2.2 trillion yuan ($341 billion) annually in environmental projects. It intends to increase that to nearly 4 trillion yuan by 2030. Furthermore, China has been reducing carbon emissions at an accelerating rate per unit of gross domestic product, leading some economists to incorrectly conclude that China's growth was slowing.
According to economists, the shift to new, ESG-related technologies could result in the creation of 40 million net new jobs.
China is already the world's largest manufacturer of solar panels and wind turbines, the mechanical components of the renewable energy sources that will inevitably displace fossil fuels, with its companies accounting for up to 80% of global production. With each passing year, the cost of renewables becomes more affordable and attractive in comparison to coal.
China has similarly lofty goals for electric vehicles; analysts estimate that 20% of all vehicle sales will be electric by 2025, despite the fact that other major automakers are still more invested in hybrid vehicles. Urbanization is resulting in increasingly smart cities equipped with new infrastructures such as widely accessible charging stations.
Mainland China now accounts for 29% of global carbon emissions
That is good news for China and its neighbors – and for the rest of the world as well. Mainland China now accounts for 29% of global carbon emissions.
Climb a mountain in Japan's northern alps today and you'll find new snow covered in acid rain carried across the sea by easterly winds from thermal power plants. Indeed, many analysts, faced with toxic air, polluted rivers, and water scarcity resulting in drought and sandstorms, wondered until recently whether China was on the verge of environmental Armageddon.
However, China has been steadily reducing its reliance on coal, with the resulting carbon emissions expected to decline significantly from their peak levels by 2030. Additionally, China is currently transforming its traditional economic sectors.
Historically, steel production accounted for 17% of the country's total emissions, or 5% of global emissions, according to Goldman Sachs data. However, a combination of stringent capacity reduction mandates and the introduction of cleaner technologies in steel furnaces is gradually reducing those emissions. Aluminum and cement are also examples of this.
Beyond the newly unemployed coal miners, who number between 2.7 million and 6 million workers, there will be winners and losers from these trends. Fossil fuel-rich regions in China's interior will inevitably become poorer, resulting in ever-widening disparities with increasingly prosperous coastal provinces.
There will be defaults among companies in discredited sectors – as well as among mismanaged new economy firms. It's difficult to believe that every new electric vehicle manufacturer or battery manufacturer will succeed. Inflation is already increasing as a result of new environmental regulations requiring capacity reductions in commodity processing, which drives up prices.
Despite these lofty goals, China continues to build coal-fired power plants and – ironically – the processes used to manufacture solar panels are not always the most environmentally friendly. Despite the inevitable pain, the majority of Chinese believe that green is the new gold, not oil.
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