In 2021, China’s leader Xi Jinping made two important promises intended to signal China‘s commitment to fighting climate change. At the Leaders Climate Summit in that April, he announced that China would “strictly control” coal generation until 2025 when it would start to gradually phase it out. He also pledged that year that China would reduce the energy intensity of its economy — the amount of CO2 used to produce a unit of GDP — to 65 percent below 2005 levels by 2030. 

This month, as China unveiled its plans for the next five years, both promises appeared to be in trouble.   

The annual meeting of the National People’s Congress, held in the Great Hall of the People in Beijing and attended by some 3,000 delegates, is the occasion for China’s Communist Party leaders to make important policy announcements to China and the world. This year’s meeting was keenly watched: Running from March 5 to March 12, it marked the launch of China’s 15th Five-Year Plan, a set of national policies and targets that will determine the shape and ambitions of China’s economy up to 2030. 

China is the biggest installer of renewable energy, the biggest emitter of greenhouse gases, and the biggest user of coal.

China’s government can point to some progress in the long battle against coal: In 2015 coal generated 69 percent of China’s primary energy, and by 2024 it was down to 56 percent (still much higher than the United States at 8 percent). But the actual volume of coal consumed was greater than ever, simply because China’s electricity demand continues to grow. Despite its efforts to reduce coal use, four years after Xi Jinping’s pledges, China was consuming 40 percent more coal than the rest of the world combined. 

That total might have been greater still if not for China’s impressive growth in renewable energy. China installed a record 300 gigawatts of solar power and 100 gigawatts of wind power last year, which meant that the continuing increase in China’s electricity demand was largely met by clean energy. But although China’s decades-long investment in the manufacture of renewable technologies has been a hugely successful industrial policy, its attachment to coal means that this success has not translated into a correspondingly large reduction in greenhouse gas emissions. 

Until recently, China has argued that its claim to be a developing country meant it did not need to set emissions limits.

In October that year, the then Premier Li Keqiang reacted to the crisis, signaling an adjustment to China’s approach to climate policy. Economic growth, he said, was the key to lowering emissions in the long term and “energy security should be the premise on which a modern energy system is built.” China soon announced a new lending facility to support the “clean and efficient use of coal.”  

The following year there was a new energy crisis: A severe drought in Sichuan caused output to drop from the province’s hydroelectric plants, normally the source of 80 percent of its electricity. Factories were ordered to close or reduce their output to save households from power cuts, and applications for permission to build new coal-fired power plants reached record levels as provincial authorities worried about having the energy to meet their economic growth targets. The equivalent of two new coal plants per week were approved in 2022, and by 2023, permitting reached a 10-year high of 112.8 gigawatts.  The pace of construction continued in 2024, when China started building  94.5 gigawatts of new coal-fired capacity — roughly 93 percent of all new global coal construction that year.

By 2023, analysts were warning that, in addition to putting its climate goals out of reach,  the surge in new coal meant that China risked building coal-fired power stations that would never recover their investment and were likely to become stranded assets. Most of the new projects, according to a report from the energy think tank CREA, did not meet the central government’s criteria for new plants since they were located in provinces that had sufficient generating capacity to meet their needs.   

With a further 243 gigawatts of new coal power permitted or under construction and 149 gigawatts more announced, CREA’s analysts predicted that there were two possible results, both negative: a massive increase in coal power generation and emissions, or the coal plants would have to run well below their capacity. There would be no reduction in coal use, the report concluded, unless new projects were canceled or existing plants retired early. 

Not only have none been canceled, but the rush to build new plants has continued, and as predicted, the utilization rate of the new plants has dropped. 

The 15th Five-Year Plan offered a chance to correct these negative trends and get China’s climate ambitions back on track, but it is an opportunity the government appears to have missed. The plan does promise a continuing effort to produce and install renewable energy, and China did install more renewable solar and wind power last year than the whole of the rest of the world, but other signals were less encouraging.

China’s energy demand has continued to rise, and so despite greater efficiency, its emissions have increased.

Until recently, China argued that its continuing claim to be a developing country meant it did not need to set emissions limits, focusing instead on the energy density (also known as energy intensity) targets highlighted by Xi Jinping. In measuring the energy required to produce a unit of GDP, they are essentially measures of efficiency: As long as energy consumption grows more slowly than GDP, energy intensity is reduced. 

China set its first energy density target in the 11th Five-Year Plan in 2006, and it has been an important target in every subsequent plan, steadily improving the efficiency of China’s energy use. But greater efficiency does not necessarily mean that emissions fall. China’s energy demand has continued to rise, and so despite its greater efficiency, its emissions have increased. In the last 18 months, emissions have been down slightly, but if energy density improvements slacken off, that trend is expected to reverse.

Over the last five years, China’s continuing dramatic growth in demand seemed largely to have been met by the equally rapidly expanding supply of renewable energy. But on the negative side, China has missed its energy density target, for the first time. Aiming at a 17 percent improvement over those five years, it achieved only 12.4 percent. Given its GDP growth, that would imply that its emissions increased by 13 percent over the same period. 

That would put the country’s hopes of meeting its Paris commitments and Xi Jinping’s promise to reduce China’s carbon intensity by 65 per cent below 2005 levels by 2030 severely off track. Planners could have compensated with renewed ambition in the 15th Five-Year Plan. Instead, they changed the way they calculate energy intensity, perhaps to disguise the failure to meet Xi’s target, and set a looser ambition for the next five years.   

If one aspect of China’s reluctance to abandon coal is related to energy security, another major obstacle is the vested interests within the system: Coal-producing provinces want to preserve jobs and local economies, and for provincial governments, a steady supply of electricity is more important than controlling emissions. These concerns can be in competition with national climate goals. 

In China, which has the largest electricity system in the world, power generation is under the control of provincial governments, while the generating companies and the grid operators who distribute the energy are dominated by state-owned companies. When China started to build large-scale wind and solar projects more than 10 years ago, the energy system was dominated by coal-fired power stations with annual contracts to supply the grid with electricity. Because the grid operator paid for that output regardless of how much it used, the operator ensured that coal output had preferential access. That meant that when wind farms were producing high levels of electricity, they frequently found that they were unable to sell onto the grid, and it was wasted.

The government claims coal is necessary to balance the grid, filling the gaps in supply when demand is at its peak.

There have been successive attempts to reform the system to favor renewable energy, and in the 15th Five-Year Plan, the government points to its continuing commitment to expanding the renewables sector as the key to its climate policy. But this industrial policy, however successful, will not in itself reduce emissions if coal continues to play a substantial role in the power sector. 

The government continues to claim that coal is necessary to balance the grid, filling the gaps in supply when demand is at its peak or when renewable output falls. But as the analysts at CREA point out, that is not the best or most efficient use of a coal-fired power station that has been designed for steady rather than sporadic operation. It can take several hours to get a coal-fired station into operation and, once operating at its maximum, it cannot easily be turned down when demand drops. To get around this problem, it appears that many operators are keeping plants in a state known as “spinning reserve,” running in the background and ready to dispatch energy at short notice. But this is inefficient both in energy use and in carbon emissions since the plant just keeps ticking, using fuel and emitting CO2.    

There has also been a remarkable expansion of various forms of energy storage in China, including battery and pumped hydro, precisely to address the challenge of intermittent renewable power. Battery storage alone has increased by a factor of 20 in just four years. These forms of storage are cheaper, more efficient, and more climate friendly than keeping a coal fleet on standby and, as they grow, the case for the continued use of coal, let alone its expansion, seems sure to grow even weaker. 

Of concern for investors, the cost of China’s recent coal build-out in long-term stranded assets could run into trillions. The cost to the climate is of concern to everybody.