Voices: Why China’s INDC carbon cap goals are a big deal

By Anders Hove
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China’s newly released Intended Nationally Determined Contribution (INDC) represents an important contribution by this major economy and carbon emitter to the UN process to come to an agreement on global climate targets. China’s INDC is in line with the country’s prior policy announcements and commitments for carbon reduction, which are significant, especially China’s agreement under the recent China-U.S. accord signed in November 2014.

As a developing country that relies heavily on coal, China has a larger decarbonization challenge than any other large country, and has been facing that challenge head-on with regional coal caps, aggressive renewable energy development, and pilot projects to test carbon trading. China’s coal-cap goals have the potential to dramatically reduce carbon emissions and drive economic growth. A 4.2 billion ton coal cap by 2020 would reduce coal’s share in China’s primary energy mix to 62%, which is tightly in line with the nation’s commitment to peak carbon by 2030. If firmly implemented, the cap will naturally accelerate clean development, creating jobs in renewable energy, energy efficiency products and services, and education. A recent study by the Natural Resources Defense Council (NRDC) estimated that the cap would result in an overall net gain in power sector jobs and create over 5.6 million direct and indirect jobs in the solar and wind industries alone by 2050. On a national level, China is also working to reduce conventional and greenhouse gas emissions through tightening environmental laws, strengthening enforcement and increasing penalties.

We believe that placing a price on carbon, such as through the national carbon trading system, would be the most significant factor in helping China meet its own carbon emission targets. Other market-oriented reforms in the power sector could also help the country’s grid absorb more renewable energy (currently, a large amount of energy generated by wind, solar and hydro is wasted) and prioritize investments in end-use energy efficiency. Financial sector policies are also critical to speeding the transition away from energy-intensive heavy manufacturing industries and towards consumer-oriented and services-oriented industries.

Anders Hove is Associate Director for China Research at the Paulson Institute. This article originally appeared in Carbon Pulse.