Why Electric Vehicles Could Drive China’s Carbon Pledge to Success

As the COP27 in Sharm El-Sheik approaches, China is once more expected to be in the spotlight. When it comes to decarbonization, China has preferred to carve its own path, and the electric vehicle sector is no exception. Carefully balanced on the peak between economic and environmental development, the sector could become the driver of its decarbonization process.

This article is part of a series of articles authored by young, aspiring China scholars under the Future CHOICE initiative.

At the UN General Assembly in 2020, China’s Xi Jinping announced that China would peak emissions before 2030 and achieve carbon neutrality by 2060. These targets have since been included in China’s obligations under the Paris Agreement. However, the Asian giant was also criticized for not outlining a clear pathway to reach these goals in the months after the announcement, as well as in the wake of COP26 due to its role in limiting the ambition of the Glasgow Climate Pact. 

Additionally, one of the major breakthroughs linked to China at COP26, the US-China agreement to boost climate cooperation, was suspended by Beijing in response to US House of Representatives speaker Nancy Pelosi’s high-profile visit to Taiwan in August, barely 100 days before COP27. Consequently, as the 2022 summit in Sharm El-Sheik approaches, China’s climate policies have come under increasing scrutiny. 

Chinese authorities have expressed an interest in ensuring the success of the COP27, presenting themselves as more optimistic and, possibly, open to discussion. Nonetheless, Beijing continues to openly oppose the generalized decrease of industrial activities linked to major pollution espoused by most of the world, instead insisting that the development of sound environmental policies goes hand-in-hand with the development of the economy. Already on the occasion of the COP26, China shared the widespread concerns of the financial world about the impact of a too-strict environmental policy on economic growth.

This combination of environmental and economic development constitutes the basis of Xi Jinping’s “ecological civilization,” a core concept that encompasses the Communist Party’s long-term vision of a sustainable China. The journey towards an ecological civilization is also one of the guiding principles of China’s N+1 framework, the as-of-yet not fully disclosed climate policy system that is to provide the guidelines for the country’s efforts to fulfill its Nationally Determined Contributions (NDCs) to the Paris Agreement. This framework aims to drive transformation and innovation in ten areas, some more concrete than others. Among the more concrete is the fourth of these ten goals: building a green and low-carbon transportation system.

The Transport Sector: A Driver of Chinese Carbon Neutrality Success?

China’s share of global CO₂ emissions continues to rise year after year. By 2020, it was above 30 percent. China is not only the world’s biggest emitter, but also emits more than all developed nations combined. Its per capita emissions remain below those of the US, but have also increased in the last decades. The transport sector accounted for around 10 percent of China’s total 2020 emissions, making it the sector with the third highest carbon footprint in China, behind industry and power generation. Transport also saw the biggest increase in energy demand over the decade ending in 2020, largely due to a spectacular boom in car ownership and road freight as mobility of people and goods has risen with growing prosperity and economic activity. 

This trend is projected to continue, despite the increase in electric vehicles, which, although they now account for a quarter of all new passenger cars registered in China, is not enough to offset the net yearly increases of CO₂ emissions stemming from the sector. In fact, Greenpeace has projected that 63 percent of total automobile sales will have to be zero-emission vehicles by 2030 in order for China to be on track to reach its emissions targets.

But why focus on transport? Why shouldn’t China target industry and power, the two sectors with the highest emissions? The main holdup in these sectors is the balancing act that China’s central authorities must continuously maintain in order to progress with green transition within a tolerable range of economic costs. In areas where authorities are not so risk averse, green technology thrives. And although these areas are still not many, electric vehicles feature prominently among them.

The development of the electric vehicles sector has already positioned China at the forefront of the electric vehicle revolution, with the Asian giant accounting for 53 percent of global sales in 2021. This trend also aligns with China’s broader climate and security goals by reducing air pollution, dependency on imported energy oil, and, of course, CO₂ emissions. Beijing knows this, and has taken steps towards creating a policy framework that boosts its electric vehicle industry.

The Chinese New Electric Vehicle Policy Framework

The involvement of the automotive sector in reaching more ambitious environmental goals is not new. It was already presented during COP26, in the shape of a pledge for all new cars to be zero-emission by 2040 and to accelerate sales in this sector for developed countries. China did not sign this pledge, choosing instead to continue to develop its own framework, which is currently based on three main policy pillars.

The first, known as the “Guiding Opinion of the General Office of the State Council to Accelerate the Promotion and the Use of the New Energy Vehicles”, was published in 2014, with the aim of developing a long-term energy vehicle strategy which would bring benefits not merely to the environment but also to economic growth. “New Energy Vehicles” (NEVs) is the official state designation of plug-in electric vehicles eligible for public subsidies, and includes only battery electric vehicles, plug-in hybrid electric vehicles, and fuel cell electric vehicles. The Opinion states that the development of this sector should take into account innovation, follow the tendencies of the market and of the political class, to be pushed by the public sector, and to adapt to the conditions of the singular locations in which the policies are implemented. In this sense, the advancement of this sector is two-fold: The development of this sector is two-fold: it includes both the development of the vehicles and the development of the charging infrastructure. Consequently, the policy also covers development in other related areas, quoting both adequate energy pricing, but also public services and business models. Most importantly, the Opinion proposes the adoption of ad-hoc subsidies, tax incentives and funds for the development of NEVs. 

This Opinion is possibly the main instrument of the policymaking side of the promotion of this sector, but a more concrete approach has been developed in the shape of two ad hoc plans: the 2012-2020 “Circular of the State Council on the Plan to Develop Energy-saving and New Energy Vehicle Industries” and the 2021-2035 “Circular of the General Office of the State Council on the Plan for the Development of the New Energy Vehicles Industry”. The 2012-2020 Plan stresses the importance of the automotive industry for China and the extent to which the development of an NEV sector could be beneficial for the environment and for future sector competitiveness in the global market. It also proposed goals for limiting fuel consumption, albeit in a manner that has not been respected in practice, and highlighted research and development as part of the implementation of this policy. Furthermore, the plan emphasizes the role of the public sector in promoting the widespread use of NEVs.

The 2021-2035 Plan takes the results of its predecessor as a starting point and delves deeper into the industrial development of the sector, also including a commitment to quality and safety and the use of internet and communications technology. This aspect is not merely addressed in reference to cars, but also to the infrastructural architecture of the charging stations. Additionally, it goes beyond the topic of tax reductions, which were already mentioned in the previous plan, and covers matters concerning intellectual property and cultivation of talent.

In spite of the ambitious regulatory framework, and even if China were to meet the declared goals, this might not be sufficient for the country to achieve the carbon neutrality pledge and the 2060 goal. While China has gone far in developing this area of the policy, it has not been coherently integrated into the development of its broader environmental policy, and while its policy goals are more realistic in terms of achievement they are still far from being realized. In relation to NEVs in particular, a recent report published by Greenpeace concludes that zero-emissions vehicles must make up 63 percent of China’s total vehicles by 2030, rather than the 40 percent goal pursued by existing policies. Furthermore, the Chinese transition would be expensive: government subsidies to purchase NEVs are being phased out due to how costly they have become for Beijing, and the transition cost could amount to 0.1 percent of China’s GDP every year.

Who’s in the Driver’s Seat? China and EVs at COP27

China continues to place an emphasis on the development of NEVs, as exemplified by the contents of Xi Jinping’s speech at the 20th Party Congress. The question, in view of the rapidly approaching COP27, now becomes if China will continue to develop this sector within an internationally agreed-upon framework or will solely follow a “development with Chinese characteristics.” On one hand, this might be desirable for China, given that the COP27 agenda includes a focus on implementation, which could assist in improving the rollout and financing of its NEV policies. Participation in joint decarbonization efforts also provides opportunities for China to accumulate technological know-how for the continued development of NEV technologies, as well as the chance to continue pursuing its quest for global climate leadership in yet another sector, all the while favoring an industry that allows for simultaneous pursuit of environmental, economic, and security goals.

On the other hand, however, decarbonization collaboration is not as straightforward as it seems. Despite China’s interest in pursuing NEV development, its recent retreat from climate cooperation with the US may prove to be a stumbling block in a Climate Summit US President Joe Biden is expected to attend in order to tout recent intense US climate action. This is especially so given the fact that the US climate retreat under the Trump administration was a key opportunity for China to take on a leading role in the international climate change agenda. Additionally, even if China proves willing to cooperate with the US, there have been calls by both policymakers and academics in the West for strategic disengagement with China in the last few months, closely linked to the Asian giant’s control over a number of key renewable energy supply chains. These calls are also mostly from (but not limited to) the US.

COP27 will be a test for Chinese climate leadership and Beijing-Washington cooperation, among others. It will require a delicate balancing act to reach a final consensus on a myriad of topics, including decarbonization strategies, among which the wide-spread introduction of electric vehicles has often been touted as indispensable. The world sees China as a key player in decarbonization efforts, and China cannot meet its NDCs without continuing to develop its NEV sector. However, any negotiation will likely be made trickier by current inflation levels and the energy crisis, not to mention the backdrop of geopolitical tensions. Nonetheless, as stated in the targets of the COP27 presidency, “challenging times create opportunities for a speedy transition”.