China’s covid-19 stimulus plan isn’t as green as it looks

To reboot economies in recession after pandemic-related lockdowns and disruptions, governments around the world are planning ambitious recovery packages. Many environmental groups want these plans to include climate conditionalities — and fund sustainability, not just unemployment assistance, infrastructure spending, industry bailouts and regulatory relief. The $825 million European Union proposal includes these features, while the U.S. package seems to favor oil and gas industries over renewable energy sectors in terms of bailouts, tax relief and regulatory rollbacks.

How climate-friendly is China’s coronavirus recovery package? One analysis of Group of 20 countries’ committed public finance places China near the top in terms of funding for clean energy vs. fossil fuel. This fits with the narrative about China’s leadership in photovoltaic solar, wind energy and electric vehicles.

But Beijing’s recovery package isn’t likely to establish China as a green stimulus leader. Here’s why.

China will invest in green new infrastructure — but also stockpile cheap oil

To put China’s economy back on track, Beijing has focused heavily on sectors like infrastructure, where funding can produce rapid economic and employment impacts. Although it has not attached E.U.-type climate conditionalities on these projects, Beijing reportedly will earmark $205 billion for “new infrastructure” outside of electricity generation, such as high-speed rail, smart grid and electric vehicle chargers.

At the same time, the Chinese government has continued to support the fossil fuel industry, especially in terms of regulatory interventions. China imported 127 million tons of crude oil in the first quarter of 2020, 5 percent above 2019. In March alone, China imported 41 million tons of crude oil, 4.5 percent higher than March 2019 levels.

To be sure, year-on-year growth in oil imports might have been even higher without the sudden covid-19 economic contraction this year. But with imports accounting for 72 percent of the country’s crude oil needs, the Chinese government’s willingness to announce oil import quotas earlier than usual may also reflect a desire to increase the country’s oil reserves. If oil prices remain low, which the recent write-downs by Shell and BP indicate is possible, China does not appear likely to aggressively wean its economy away from oil.

China’s electricity relies on coal

Despite strides in the renewable sector, coal remains the mainstay of China’s power generation, accounting for 42 percent of installed capacity. In 2016, the Chinese government sought to limit new coal plants by listing provinces with coal overcapacity, which meant no licenses for new coal-fueled power plants in those provinces. However, the government began loosening its control on constructing power plants in 2018. Post-covid-19, the Chinese government has further shortened this list from eight provinces to just three, reducing the obstacles to building more power plants.

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The Chinese government is encouraging regional governments to increase coal production as the economy begins to recover from the covid-19 recession. Greenpeace reports while China added about 30 gigawatts of coal-fired power projects in 2019, China had about 46 gigawatts of coal capacity under construction as of May 2020, with another 48 gigawatts under development. Nationwide, more coal power plants have been approved. By April, at least 15 coal plants were in the planning stages and 14 coal projects were under construction. As of June 15, China had approved 17 gigawatts of coal capacity, more than the total of newly installed coal capacity in 2018 and 2019.

Why is the Chinese government continuing to add new capacity, when the utilization of existing coal power plants is below 50 percent? Given their massive scale, new coal-fired power plants require large amounts of local labor, which boosts the local economy. This growth is important for local party leaders — their performance is evaluated on the basis of the province’s economic growth. Guangxi province alone in March announced investment of $4.7 billion in five new coal power plants from 2020 to 2022.

China, like countries across the globe, has energy policies shaped by political lobbies — even climate leaders such as the European Union are not immune from pressures from coal-dependent member countries like Poland, Hungary and the Czech Republic. In China, provinces with large coal industries support the coal industry. Although the renewable energy sector also creates jobs, many local governments back coal projects because they are larger in scale and have an immediate employment impact.

Renewables, however, do not have such concentrated local support. One recent paper finds when the central government shifted approval authority to the local government level in 2014, the approval rate for coal power projects increased threefold, and provinces with larger coal industries (such as Shanxi, Shaanxi and Inner Mongolia) approved more coal power than other provinces.

Beijing may see climate issues as a lower priority

In the May 2020 Report on the Work of the Government, Premier Li Keqiang stressed the government has been actively helping to relieve unemployment. From a climate perspective, however, prioritizing coal production may leave fewer political incentives to decarbonize in the future.

Some analysts point out the decline in momentum on climate issues in China dates to 2018, when the overhaul of China’s Ministry of Ecology and Environment shifted climate policymaking from the powerful National Development and Reform Commission to a lower-ranked environment ministry. Post-pandemic, domestic stability and the need to get the economy back on track are probably higher priorities for Beijing or local authorities than prioritizing climate leadership.

China’s domestic environmental policy tends to focus on issues visible to citizens. In recent years, concerns about air pollution, a direct result from burning coal, have prompted citizen protests. Although air quality in many parts of China improved dramatically during the shutdown, pollution appears to have rebounded. However, there have been no major citizen protests to date. This means reviving the economy and focusing on regulating the wildlife trade, which many scientists blame for outbreaks like SARS and covid-19, are likely to become higher policy priorities, despite the potential for long-term health benefits of renewable energy.

In the absence of an increase in domestic demand for climate action, the Chinese government is likely to continue to focus on policies with immediate domestic political payoffs — and that address top concerns like unemployment and social stability. Despite the talk of government support for new infrastructure, Beijing may pay less attention to climate issues overall, and sidestep the opportunity to become a global leader in climate change solutions.

Hanjie Wang is a PhD student in the Political Science Department and a graduate fellow at the Center for Environmental Politics at the University of Washington, Seattle.

Nives Dolšak (@NivesDolsak) is the Stan and Alta Barer Professor in Sustainability Science and the Director of the School of Marine and Environmental Affairs at the University of Washington, Seattle. Aseem Prakash is the Walker Family Professor for the College of Arts and Sciences, and the founding director of the Center for Environmental Politics at the University of Washington, Seattle.

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