While pundits have expressed mixed views about China’s pledge to achieve carbon neutrality by 2060, the chair of think tank Energy Transitions Commission Lord Adair Turner is not only optimistic but believes that the timeline can even be accelerated.
Following China’s pledge to peak carbon emissions by 2030 and achieve carbon neutrality by 2060, some onlookers expressed disappointment about the timeline and the lack of detailed targets.
According to Lord Adair Turner, chair of the Energy Transitions Commissions, this is also unaligned with Beijing’s other timeline of becoming a rich and developed economy.
«We've always argued: look, you say China will be a fully developed rich economy by 2050. Well, fully developed rich economies should be zero carbon by 2050,» said Turner at Credit Suisse’s 2021 Asia Investment Conference this week. «Certainly, developing ones should be so by 2060.»
«Absolutely Possible»
Politics and rhetoric aside, Turner strongly believes that China is capable of achieving carbon neutrality by 2050 and the Energy Transitions Commission released a report in 2019 that detailed the technical possibilities of achieving this groundbreaking objective.
The country is home to various industry leaders across the renewable energy sector including electric vehicles, solar and wind power. And the Energy Transitions Commission believes that China now can already generate all new growth of electricity coming from zero carbon sources at «no economic cost at all».
«We think it's absolutely possible for China by 2050 – not even by 2060 – to be a fully developed rich economy with a standard of living on par with, let’s say, Western Europe today, and also to be zero carbon,» Turner reiterated.
Property: ESG Risks
Despite the optimism, Turner noted that there were still challenges to be addressed, most notably China’s strong focus on construction – a very emissions-intensive industry.
About 30 percent of China’s total 12 gigatons of emissions are from steel and cement production with both accounting for 50 percent or more of global output.
«What this reflects is the extraordinary focus of the Chinese economy towards construction,» Turner said.
Property: Macroeconomic Risks
Investments as a share of GDP has surged to 45 percent – «a complete outlier in economic history» – with housing and infrastructure representing the dominant share. Chinese investors' unrelenting focus on real estate has historically provided economic growth but weaning them off the asset class may be easier said than done.
Turner, who served stints as the vice chairman of Merrill Lynch Europe and chairman of the Financial Services Authority, said that senior regulators from the CBIRC have acknowledged this issue and have long hoped to transition the economy towards consumption.
«We know that at the moment that every time the economy slows down, the bias in the system is to return to stimulating property and real estate,» Turner said. «This isn’t real estate in the middle of London which will always be worth something. This is sometimes real estate just by another apartment in a third or fourth-tier city which bluntly will never be occupied.»
Better Incentive Structure
Turner believes that this rebalancing of China’s economy away from real estate will require more top-down push in the form of better aligned incentives for government officials who have traditionally relied on the sector to generate economic growth, revenue and expand balance sheets.
«It turns out in China, Inc., how you remunerate people impacts their behavior,» he said. «So you better get your incentive structures right because people respond to it.»
COP Predictions
On the upcoming COP (Conference of Parties) meeting in November this year, Turner is optimistic that China may in fact make new commitments to further their climate change efforts.
Possible announcements include an earlier deadline for peak emissions or micro policies goals such as increased wind and solar energy targets.
«I’d love to try to persuade President Xi Jinping to say China will be a fully developed, rich, zero carbon economy by 2049 because that would be a neat 100-year aim after the takeover of the Communist Party,» Turner added.
