China’s policy pendulum shifts back toward environmental protection, but will bureaucracy get in the way?

Since the end of 2023, policy documents in China have increasingly highlighted environmental protection and have either set tighter and more specific targets or called out the need for faster progress towards existing goals. 2024 also brings three important catalysts for accelerated environmental policy. First, the 14th Five Year Plan (FYP) interim report, published in late 2023, highlighted that China is not on track to meeting its CO2 and energy intensity targets. Second, as planning gets underway for the 15th Five-Year Plan, this year China will need to revisit its Nationally Determined Contribution (NDC) climate pledges. Third and related to these, China is expanding its emissions trading scheme (ETS) and is increasing penalties for non-compliance in energy-intensive industries.

But even as policy documents emphasize environmental protection, implementing climate goals remains a challenge. Disagreement between the Ministry of Environment and Ecology (MEE) on one hand and the National Energy Administration (NEA) on the other on carbon accounting guidelines is one case in point. As China looks to balance economic growth—in large part from energy intensive industries—with increased renewable penetration, carbon accounting is an important part of the toolbox. But with the NEA and MEE disagreeing on guidelines and fighting for policy making power, the lack of clarity raises uncertainty for companies, particularly those in the aluminum and cement sectors that will soon need to comply with mandates for both carbon and renewables. At the diplomatic level, the incompatibility of the two measures also complicates China’s response to the EU’s Carbon Border Adjustment Mechanism (CBAM).

By: Michal Meidan , Anders Hove , Yan Qin