President Xi Jinping has announced in September 2020 that China will strengthen its 2030 climate target (NDC), peak emissions before 2030 and aim to achieve carbon neutrality before 2060. China’s COVID-19 response contains elements of a green recovery, showing an improved strategic deviation from the post-2008 financial crisis, but as yet lacks the policies and direction to set China on a low-carbon trajectory. Positively, the government has issued broader stimulus packages to double down on existing priorities transitioning industry and labour force towards a modernised digital economy rather than restarting traditional infrastructure strategy, and remains committed to accelerated penetration of renewable energy systems and electric vehicles. However, recovery activities remain carbon-intensive and require high energy demand from a system run primarily on fossil fuels, while the phasing out of supply-side incentives has affected the growth of renewables and electric mobility in recent years. Most worryingly, China remains committed to supporting the coal industry while the rest of the world experiences a decline, and is now home to half of the world’s coal capacity. The CAT keeps its rating of China as “Highly insufficient”.

Economic uncertainty under COVID-19 has led to the government dropping its GDP target for the first time since 1990 and decrease its energy consumption per GDP target for 2020. Our analysis shows that the economic downturn from the pandemic has lowered China’s emissions trajectory despite its coal consumption, cement, and other heavy industries recovering faster than other sectors over the year.

In the last few years, there had been hopeful signs that China's CO 2 emissions were flattening. However, CO 2 emissions rose in 2018 and 2019, and we estimate 2020 GHG emissions will increase by 0.8% in our upper bound and decrease by 7.7% in our lower bound compared to 2019 levels, with most of the drop due to the pandemic.

China’s coal activities remain a large concern and are inconsistent with the Paris Agreement. It would need to phase out coal before 2040 under 1.5˚C compatible pathways, but it appears to be going in the opposite direction. After lifting a previous construction ban on new coal plants in 2018, China has rolled back policies restricting new coal plant permitting in each of the last three years. By mid-2020 China had permitted more new coal plant capacity than in 2018 and 2019 combined, bringing its total coal capacity in the pipeline to 250 GW, and brought 10 GW of new plants online. China is going against the global shift away from coal and now possesses roughly half of the world’s coal power capacity as well as coal-fired power plants in development.

China is the world’s largest financier and builder of both fossil fuel and renewables infrastructure worldwide. Of all coal-fired plants under development outside of China, one quarter, or 102 GW of capacity, have involved funding from Chinese financial institutions and/or companies. However, COVID-19 has – for now - curbed China’s investments on fossil infrastructure overseas, and its share of investment into foreign renewable projects has reached its highest-ever values.

China’s pandemic stimulus package will reach upwards of CNY four trillion (USD 565 billion) over 2020, approximately 4.5% of the country’s GDP, with figures expected to reach up to CNY 17.5 trillion by 2025 to support its New Infrastructure Plan. The recovery package is a clear display of China’s dedication to its existing leading industry strategies and targets to develop cutting-edge technologies and digital infrastructure. The package also includes budgets for electric mobility projects such as charging infrastructure and public transit as well as national high-speed rail. While this is an improvement from its post-GFC recovery package a decade earlier, where stimulus targeted hard infrastructure construction and caused a multi-year boom in emissions, the post-COVID-19 package still cannot be considered climate-friendly.

COVID-19 has increased uncertainty in the direction of China’s emissions to 2030. In the upper bound of China’s current policies under a COVID-19 scenario, the CAT’s projections show China’s GHG emissions would rise until 2030, although the rate of increase is projected to slow towards the end of the 2020s; in the lower bound, our analysis suggests it is possible that China’s emissions already peaked in 2019.

Consequently, China is on track to achieving its 2030 peaking target and overachieving its carbon intensity and non-fossil fuel share NDC targets without showing significant progression in its climate action. To date, many sectors have already rebounded to near pre-pandemic production levels, and emissions have responded accordingly. It is therefore critical that China uses further stimulus in Q3 and Q4 to clamp down on what may be the start of a new coal boom and dedicate recovery efforts to low-emissions infrastructure and clean energy projects, particularly ahead of finalising the 14th Five-Year Plan next year.