Energy

How can China make good on its pledge to reach carbon neutrality by 2060? In Foundations for a Low-Carbon Energy System in China, a team of experts from China and the United States explains how China's near-term climate and energy policies can affect long-term decarbonization pathways beyond 2030, building the foundations for a smoother and less costly national energy transformation.

China recently launched the world’s largest emissions trading market, but it is just one component of the nation’s ambitious efforts to curb the rise in greenhouse-gas emissions. That was the message delivered on Thursday (July 22) by Carnegie Mellon University Associate Professor Valerie Karplus during a Virtual Forum hosted by the Harvard Project on Climate Agreements (HPCA) and moderated by Robert Stavins, HPCA Director and A.J. Meyer Professor of Energy and Economic Development.

Guangdong Province ranks first in economic output among China’s provinces and will play a major role in achieving China’s national climate-change goals. This paper examines the progress of Guangdong Province’s carbon dioxide emissions trading system (ETS) in reducing emissions; design features of the system; challenges it faces with regard to further development; and its relationship to China’s new national ETS.

The Harvard Project conducted a research workshop in June 2021, “Prospects for Guangdong Province’s Emissions Trading System.” Guangdong Province ranks first in economic output among China’s provinces and will play a major role in achieving increasingly ambitious national emissions-reduction targets. Guangdong’s emissions-trading system is, in turn, a key policy instrument in the Province’s climate-action plan.

China’s emissions trading system (ETS) for carbon dioxide (CO₂) will become operational in mid-2021. This paper describes the trading system’s history, design, rules governing implementation, and anticipated developments over the next decade. The ETS is expected to support China’s goals of reaching peak CO₂ emissions by 2030 and of achieving carbon neutrality by 2060.

This article examines both the premise and prescription of the argument to integrate renewable electricity in developing countries through elements of the standard model (such as a wholesale spot market, or an independent system operator for dispatch). This is done by highlighting the differences between power sector reform experiences in the developing and developed worlds, and the causal mechanisms underlying these differences.

Renewable hydrogen offers significant advantages for China. It can help Beijing meet its climate and pollution goals—at a time when coal continues to dominate—while avoiding increased reliance on imported fuels. As a readily dispatchable means of storing energy, hydrogen can help to address intermittency and curtailment issues as renewable energy increases its share of China’s energy mix. As a sustainable mobility energy carrier, it can power fuel-cell electric vehicles or be the base for synthetic fuels. Finally, renewable hydrogen can open new avenues for developing clean technology manufactured goods for both internal and export markets.

In this report, we propose a market reform pathway for Yunnan that is both feasible and applicable to address some of these challenges immediately, while aiming for a standard design based on well-documented international experience. Our proposal includes at its heart a pay-for-performance monthly capacity auction that can help cover revenue deficiencies in the energy market. Building on international experience with capacity markets, this approach provides incentives for availability when generation is needed most and is compatible with the adoption of a single energy market for all electricity resources. Out-of-market payments to cover stranded costs of certain firms can thus be minimized. Finally, engaging consumers in both these energy and capacity markets can create high-powered incentives to shift consumption to low-cost months and hours, benefitting the entire province.

Thucydides attributed the war that ripped apart the ancient Greek world to two causes: the rise of Athenian power—and the fear that this created in the established power, Sparta. Joseph Nye advises that in order to prevent a new cold or hot war, the United States and China must avoid exaggerated fears and misperceptions about changing power relations.

Both sides of the Atlantic are converging in their assessment of the challenges China poses to transatlantic prosperity and democracy. The U.S. and Europe must now build on this convergence to advance a common strategy toward China. Only together can the U.S. and Europe, alongside other democratic nations, maintain the necessary leverage in trade, technology and multilateral engagement to hold China accountable to a set of standards that protects democratic societies and contributes to global stability.

To develop a stronger transatlantic approach toward China, the Biden administration must work to rebuild trust in the transatlantic relationship and recommit to multilateral alliances and institutions abandoned by President Trump. Europe for its part must unite and take action where it sees China exploiting its critical industries and infringing on its values. A common position on China at the EU–level and across several influential EU member states is critical to making transatlantic cooperation on China feasible.