China rolls out a raft of new green energy laws and projects to cement its global lead in the green transition

China rolled out a tidal wave of new legislation and action plans to bolster its drive to switch from fossil fuels to green energy, as early indicators suggest it has reached peak emissions six years early.

China is emerging as the global green energy champion after renewable energy recently overtook coal in its energy mix. China remains the world’s biggest emitter of CO₂, accounting for more than a quarter of total emissions, but still has plenty of wiggle room as its carbon budget – the amount of emissions permitted to each country by the Paris Agreement in 2015 – is still in surplus. It is still on target to easily meet its emission reduction goals by the 2030 deadline.

Both the US and EU have already exhausted their emissions allowance and indeed, have heavily overspent, making hitting the 1.5C of temperatures target by 2030 much more difficult to achieve.

To maintain the momentum, China has rolled out a series of ambitious action plans aimed at reducing carbon emissions further and improving energy efficiency across various sectors.

In June, the government introduced the Coal Decarbonization Retrofit Action Plan 2024-2027, which outlines a pilot program to reduce emissions from "low carbon" coal plants by 50% by 2027. The plan involves co-firing with ammonia and biofuels, as well as implementing carbon capture technology. "If successful, it'll be roughly equal to gas plant emissions," noted energy analyst David Fishman.

In May, the 2024-2025 Energy Efficiency and Carbon Reduction Action Plan was released, setting stringent energy efficiency benchmarks for energy-intensive industries. The plan mandates that these industries use 20% non-fossil fuels by 2025, with specific targets for key sectors. "Aluminium is 25% by 2025 and 30% by 2030," Fishman said, adding that "data centres must be 80%." August saw the announcement of the Action Plan for Accelerating the Construction of a New Power System (2024-2027), which Fishman described as a "big one." The plan addresses nine critical challenges within China's power system and proposes targeted measures and programs to tackle each issue.

China is rapidly catching up with Western nuclear and green technology and plans to build dozens of new nuclear reactors, whereas the US is planning only one new unit and in Europe, only the UK is building one new nuclear power plant (NPP). China recently successfully tested the first nuclear fusion reactor that produces more power than it takes to create the fusion reaction and also a melt-down proof “pebble-tech” nuclear reactor.

US export controls on technology exports to China have backfired, hurting US technology companies, and have been unsuccessful in cutting China off from the technology, thus driving innovation in China’s technology sector, according to a report from the Federal Reserve Bank of New York.

Also in August, the government raised its renewable energy targets through the 2024 Renewable Consumption Quota Obligations. Compared to last year’s draft targets, most provinces saw their renewables quota increase by an average of 2.3 percentage points. Notably, Sichuan, Qinghai, and Yunnan provinces have already achieved a 70% Renewable Portfolio Standard (RPS).

To further tighten emission controls, the Further Strengthening the Carbon Peaking Benchmark System Action Plan 2024-2025 was also released in August. This plan sets emissions-related standards at an "international leading level" and enforces these on a project-by-project basis, particularly in heavy industry.

China is also focusing on improving its power distribution infrastructure through the Action Plan for the Development of a High-Quality Distribution Grid 2024-2027, which appears to address key distribution-related challenges identified in earlier policies.

The recent flurry of policy announcements has been so extensive that, according to Fishman, "the policy section for this quarter's issue took 2x longer than usual because of all the big policies from the last 3 months." In light of these aggressive measures, early indicators suggest that China may have already peaked its carbon emissions, six years ahead of its scheduled target making it the global leader in the green transition.