China’s carbon neutrality pledge at the UN general assembly last September has received enthusiastic responses from local governments, state-owned enterprises, and the private sector. But the message coming out of a Politburo meeting on the economy last Friday says simply being enthusiastic is not enough, if not outright harmful. Instead, it calls for “coordinated and orderly” work toward carbon neutrality, “construction before destruction”, and rectification of “campaign-style decarbonisation”. Policy observers and financial analysts told Reuters that the intention of the message is to alleviate the impact of the carbon neutrality “frenzy” on the economy, which could cause widespread inflation as it is already driving up the prices of key commodities.
The reductions in the production capacity of industrial commodities such as coal, steel, aluminium, cement, and glass are good examples of such “over-reactions”. The rapid rise in prices of these commodities cut into the profit margins of downstream manufacturers, passing on the pressure of inflation. The cuts in coal power generation capacity have also resulted in the tighter supply of electricity in multiple provinces. Hence the “construction before destruction” message from the Politburo meeting – build adequate low carbon infrastructure and industry before doing away with high carbon ones.
A researcher with the Development Research Center of the State Council told financial outlet Yicai that the “campaign-style” wording is a very rare occurrence in Party Central documents. According to him, in the scramble to achieve carbon neutrality, some local governments have made pledges beyond their means, acting without adequate research and proper action plans – this could result in “floods of empty promises”.
Read China Dialogue’s recent interview with National People’s Congress Standing Committee member Wang Yi on China’s routes to carbon neutrality.