I arrived in Beijing in September 2023, my perspective: a one-year funded research stay at Peking University to advance the work on my PhD research that explores climate transition risks in the Chinese economy. Upon my arrival in Beijing, I started to take notes of my first impressions in China in 2023. It was not the first time for me to relocate to China, but I was motivated to document new or altered impressions of China after the Covid-19 pandemic. Here are a few notes I jotted down during my early days in Beijing:

* Lots of installed renewable energy – The plane was flying at a low altitude for a while before landing in Beijing and the sky was cloudless, which allowed me to see the many existing and newly constructed onshore wind and photovoltaic power stations covering the hilly landscape of Northern China. Later we learned that in 2023 China set new records in solar and wind power capacity growth.

* Many new electric vehicle brands on the roads – I had seen the logos of BYD, Geely and NIO before, but this time in China, I was mostly clueless about which brands were standing behind the many new metal logos on cars in Beijing’s notoriously jammed streets. Later I found out that China’s exports of electric vehicles hit record highs in 2023 and I witnessed the comfort of Chinese electric vehicles myself.

* Beijing’s sky is clear and blue – Beijing greeted me with a blue sky. Despite occasional hazy days and a rebound in air pollution levels in 2023, Beijing’s air has gotten considerably cleaner over the last decade. Later I came to know that this was the result of effective air pollution control programs targeting different sources of pollution–a blueprint for climate policies?!

These initial impressions give you a first sense of how much is happening in China when it comes to the green sector. Luckily, I had a full year to put my first impressions into context and learn in depth about decarbonisation efforts and green finance in China. I’d like to use this post to share key points on where China stands today in its efforts to decarbonize, after spending one year at the prestigious Peking University.

First of all, the Chinese government is taking climate change seriously and is committed to mitigate GHG emissions. Since the announcement of China’s dual carbon goal on an international stage in 2020, the ambition to decarbonize has trickled down to ministerial and departmental level and from the central level to province and city level. This manifests in repeated commitments to decarbonisation and consolidated climate targets expressed by state-affiliated newspapers, government spokespersons, or high-level political communiqués.

More importantly than the rhetoric though is a considerable step up of policies and legislations targeted at climate mitigation. In recent months, China has launched an unprecedented series of policies designed to accelerate its green transition and reduce carbon emissions. China is now exploring the full arsenal of climate policy instruments. Latest evidence: China’s new green-transition guidelines issued in August 2024, a comprehensive 33-point guideline that reflects the leadership’s strategic deployment of green objectives. One of these green objectives–in the fashion of a centrally planned economy–is the aim to grow China’s energy conservation and environmental protection industry to a US$2 trillion market by 2030.

Climate policies are inherently complex, since they require cross-disciplinary knowledge, they penetrate in literally all sectors of the economy and they can be introduced in a variety of forms. To overcome this complexity and to enhance concerted action, China established the National Leading Group for Climate Change, an interdepartmental body to coordinate ministries and commissions on climate policy formulation, as early as in 2007. Furthermore, China introduced a strategic "1+N" policy framework in 2021. “1” refers to the long-term approach to combating climate change, while "N" are specific implementation plans and supporting measures in key areas such as energy, industry, construction and transport. The attempt to create coherence in climate policies should be applauded. However, China’s climate legislation is still largely scattered in different policy fields. The proposed "1+N" framework could be enhanced to better leverage potential synergies between different decarbonisation policies and to improve its practical applicability.

To sum up, official announcements and newly introduced policies at all levels of policy making convey a clear message: China aims to bring down carbon emissions and reduce environmental pollution eagerly, at the city level, the province level, and ultimately the national level. I’m not arguing that China could not be more ambitious, in certain areas China’s climate policies still lack behind – consider for example the lack of a clear plan to phase out coal or the lack of a national climate law, but it is worth to note that the right course has been set to tackle climate change.

Yet, besides the mere quantity of climate policies, it is also, and probably even more so about their stringency and their effectiveness in curbing emissions. The success of any policy hinges on its implementation, which is often challenging in China due to unique factors such as central and local government interactions. It is hard to assess the stringency of a wide array of climate policies. Many of these policies are recent and data is scarce to conduct meaningful research on policies’ practical implementation and their effects on carbon emissions yet. For these and other reasons, stated policies—though significant—represent only part of the picture when trying to grasp China’s approach to climate change.

At the current stage, China's climate policies are largely shaped by high-level policy documents or action plans (often overlapping and repetitive when issued by different departments) that outline climate targets or broader industry decarbonization pathways (the verbs “promote,” “improve,” or “strengthen” are used abundantly in these documents). While this charts a clear course for businesses to prepare for China’s green transition and while it sends a signal to markets, it often still remains vague which specific policy measures are introduced to support the intended direction. While the top-down guidance is a common feature of China's system, it might not ignite the transition dynamic needed to decarbonize at the speed required for a below 2-degree future. It is encouraging to observe that Chinese authorities are now working intensively on further developing and improving concrete and binding climate policy tools.

Fortunately, more and more concrete policy measures are being introduced or strengthened recently in China. These climate policies can be highly diverse, ranging from emissions trading systems for high-emitting sectors, or tiered electricity pricing based on energy resources, to reforestation actions aimed at increasing carbon sinks. To give you a better understanding of such policy measures and to discuss their effectiveness, let’s take a look at a few examples.

The first example is China’s Emissions Trading System (ETS). After years of piloting the ETS at local levels and establishing key infrastructure like emissions monitoring, China launched its national ETS in 2021. Currently, the system only applies to power sector companies, which are the largest contributors to the country’s carbon emissions. However, more sectors are expected to be included in the near future; only recently the imminent inclusion of cement, steel, and aluminium companies got announced. A crucial aspect of any ETS is how carbon allowances are distributed—they can be either freely allocated or auctioned. Auctioning is generally seen as a more environmentally effective approach. While China’s young ETS has so far relied on free allocation of allowances, policymakers are now considering a shift towards auctioning.

Another example is China’s green building code. This policy aims at decarbonisation of the building sector through mandatory energy efficiency standards for housing. The crux about the current policy design is however that the standards only apply to newly developed buildings. Through massive investment in real estate projects in the past decades, China has piled up a building stock that does not have to comply with the green building code. The effect of the current policy design on lowering emissions is therefore most likely only mild. A bolder net zero emission building code that could also cover the existing building stock and incentivize refurbishments could be a more effective policy tool.

A third example is China’s ban on financing coal power projects abroad. In 2021, China announced it would not build new coal-fired power projects overseas, marking a pivotal shift in its investment strategies and a chance to reduce future global GHG emissions. Initially, the policy's implementation was unclear, but it ultimately meant that Chinese financial institutions were no longer allowed to fund new coal projects abroad, although they could continue to support projects with signed contracts and permits that were planned or under construction. The enforcement of this policy has been strict, with Chinese authorities refusing approvals and export credits for new coal projects, as required for major infrastructure in China. However, clearer initial guidelines might have discouraged Chinese financiers and developers from clinging to coal projects that had already secured financing or construction agreements before the ban was announced.

The final example is China’s “Green Bond Endorsed Project Catalogue,” also referred to as China’s green taxonomy. This initiative was a pioneering step towards standardizing the labelling of low-carbon projects and financial products, with the goal of boosting investment in sustainable initiatives. However, the inclusion of certain activities that weren’t truly low-carbon sparked controversy. For instance, the initial version categorized “clean coal” projects as green; though this has since been removed, and China’s taxonomy is now evolving towards stricter standards. When comparing the updated Chinese taxonomy with the EU’s, often considered a benchmark, it's not easy to label one as stricter than the other. In some cases, China’s technical thresholds for what qualifies as green are more rigorous, while in others, the EU's are. Occasionally, the two are almost identical. Overall, China’s taxonomy tends to be less detailed but more flexible compared to the European standards.

The labelling of transitional economic activities, such as lower-emission coal power or steel production, as green highlights a broader challenge within China’s economy. China recognizes that simply promoting low-carbon projects isn’t sufficient; it must also focus on transforming high-emission sectors where low-carbon technologies are either unavailable or can only be adopted gradually. This shift towards transitioning high emitting sectors and transition finance is becoming evident in China’s climate policy and is reflected in various policy measures, making it a pragmatic approach to tackling emissions across different sectors.

The four examples discussed above demonstrate the measured approach of the Chinese leadership when it comes to climate policy design and implementation. The government aims to avoid taking overly hasty steps and introduces policies without burdening the finances of ordinary citizens. Policies are implemented gradually to mitigate unintended side effects.

Stepping back to a broader view of China’s climate policies, the widely referenced Climate Action Tracker currently rates China’s climate policies as insufficient to achieve a below 2-degree outcome (as is tragically the case for most countries). It highlights that the primary question remains whether China’s record renewables deployment is enough to accelerate its post-coal transition and reduce fuel-switching to fossil gas in end-use sectors. Innovative strategies are needed to initiate the gradual phase-down of coal in power generation—especially considering the continued growth in renewable capacity. This growth presents a crucial opportunity to gradually transition away from fossil fuels, which is essential for reducing the China's emissions.

How ambitious is China’s decarbonization plan? China’s dual carbon goals give the country a gap of around 30 years between carbon peaking and net-zero. In comparison, the EU’s gap is 71 years, the United States’ is 43 years, and Japan’s is 37 years. From this perspective, China’s targets appear highly ambitious. However, the development of new low-carbon technologies will likely make decarbonization easier in the future. China’s 2030 carbon peaking target may actually be conservative, as many observers believe China is on track to peak carbon emissions before then—some even speculate it may have already peaked. Additionally, China has consistently outperformed its own environmental goals. For instance, its early reforestation targets for 2030 were achieved more than a decade ahead of schedule. This track record suggests that China could exceed expectations in its decarbonization efforts.

Policymaking is about reconciling multiple, often conflicting policy objectives. Despite the successful initiation of a Chinese climate policy agenda, it is also a political reality in China that climate mitigation is only one policy objective among many – as experienced by any nation currently navigating the path toward carbon neutrality. Climate policies in China are therefore often shaped by additional policy objectives, including economic growth, cutting air pollution, improving energy security or promoting strategic industries.

While China’s leadership has spent the past decade encouraging a gradual shift towards a development model less reliant on infrastructure investments and exports, and more focused on sustainable, slower-paced growth, the recent downward trend in economic growth figures has nonetheless caused concern and pushed climate issues to the sidelines. Economic uncertainties, reflected in a real estate crisis, youth unemployment, capital outflow, or deflationary pressures, which are likely cyclical, are demanding attention and resources. In practice, this results in government authorities and public agencies diverting focus from climate issues, and reallocating resources elsewhere, which impedes the recruitment of additional specialized climate professionals in public agencies.

The tension between decarbonization efforts and another key policy objective, energy security, became evident shortly after China announced its dual climate goals. High demand combined with limited energy production—partly due to recurring severe droughts that reduced hydropower output—led to energy shortages across the country in 2021. As a consequence of this event, to ensure energy security in an economy with growing energy demand, China continues to expand coal power, which stands in contrast to its decarbonization agenda.

China is however also an example for successfully reconciling policy goals that have long appeared to be conflicting. With the emergence of a dynamic green sector, the green transition is increasingly recognized to be the powerhouse of future economic development in China. A balance between economic growth with environmental protection suddenly seems feasible.

The Chinese economic and political system has distinct features, many of which are also relevant to the country's decarbonization efforts. A key characteristic of China is the prominent role of the state, especially given the massive state-owned sector and the close ties between companies and the Communist Party. The same is true for decarbonisation, which is, besides technological pushes, largely steered by the government and authorities. The government continues to draft Five-Year Plans, which set the direction for economic development and outline long-term strategies, most recently including low-carbon strategies. The one-party political system in China facilitates consistent and clear long-term planning without major reversals, an advantage when pursuing an ambitious goal like decarbonization, which requires sustained effort over decades. Additionally, the government's significant influence over businesses and society enables it to effectively encourage behavioural changes, which can enhance the implementation of decarbonization policies, particularly on the demand side.

Another unique aspect of China’s system is its experimental approach to policy-making through pilot zones, which also plays a role in its decarbonization strategy. Green finance innovation pilot zones have been established to test the implementation of policies, with each zone focusing on different areas. For example, Huzhou in Zhejiang province is working on system innovation to create a digital infrastructure for transparent and rigorous green lending practices, yielding noteworthy results that inform policy-making at the central level. Additionally, in China, political cadres climb the career ladder based on their performance metrics, and now success in climate-related targets, such as emission reductions, factors into their evaluations. Climate mitigation as a new source of performance legitimacy for the Chinese government will encourage further climate action. And lastly, one aspect that should never be neglected in an analysis of China are the complex central-local dynamics. They also play a critical role in the success of climate initiatives, as collaboration between different levels of government is essential, given that local authorities are often responsible for implementing national policies.

Having shared my insights, I want to return to my initial impressions of China in 2023. Overall, I believe that these initial observations were fairly perceptive. As it turned out the green sector in China is more dynamic than ever. This momentum should be harnessed to further accelerate effective low-carbon initiatives across the country. Recent achievements in surpassing climate targets demonstrate that China is well-positioned to transition to a low-carbon economy. Given the critical importance of China’s decarbonization for the planet, it is crucial to continue observing and encouraging the country to make bold strides. With its rapid emergence as a leader in the green sector, China also holds significant potential to spearhead decarbonization efforts globally.

My research stay in Beijing was definitely rewarding. Peking University is a liberal institution where critical debates take place, new ideas are welcomed, and foreign researchers are considered an asset. The university, the National School of Development, and the MGF Lab are all well-connected across politics, government, business, and society (including NGOs), as well as internationally. Exciting events and lectures happen constantly. During my time in Beijing, prominent figures such as Yi Gang, former governor of China’s central bank, Janet Yellen, U.S. Secretary of the Treasury, and Jeffrey Sachs, the renowned economist, visited the school. I wish that Beijing university will remain eager and fierce to be a place for new ideas and innovations that can benefit and transform the Chinese and the global society.

Beijing University and the MGF Lab have excellent research infrastructure and a beautiful campus. I had the privilege of having my office in a beautifully renovated sìhéyuàn, a famous architectural style from the Qing Dynasty. The atmosphere at the MGF Lab is collegial, with a great leadership. I’m very grateful to the entire team for integrating me into their activities and for the many interesting insights I gained.

Although it takes some time to adjust to the pace and spirit of Beijing, it’s a fascinating city to explore. Beijing is recovering from the drastic COVID years, and new venues have been popping up frequently in recent months. The city offers a wide variety of experiences throughout the whole year: from lazy autumn afternoons on Hutong rooftops, to cosy winter days in traditional Beijing bathhouses during freezing outdoor temperatures, to spring hikes on the Great Wall, or warm summer nights in Beijing’s parks, where you can watch couples waltzing.

For those interested in a research stay, my advice is: don’t be discouraged by the bureaucratic application process, and be flexible enough to start your stay at the beginning of the Chinese academic year (usually in September). It’s worth it in the end. Speaking Mandarin is definitely very helpful and makes the experience much more enjoyable, yet it is not a must.

During my stay, I witnessed China becoming more open to foreign visitors, including visa-exempt tourist stays. As a German passport holder, I’m one of the lucky ones. Fingers crossed that this policy continues—if it does, I’ll be back in China soon!

If you have any questions about a research stay at Peking University, feel free to get in touch with Florian via email (705404@soas.ac.uk) or on LinkedIn.

Participation in a panel discussion during an event about decarbonisation organised by the Institute of Carbon Neutrality at Peking University

Visit of a green project during a field trip to Huzhou, one of China’s green finance innovation pilot zones