This report is produced in partnership with the Australia China Business Council under its landmark Green Channel initiative. Green Channel highlights the opportunities for Australian businesses arising from increased collaboration with China on outcomes addressing the climate challenge.
Five decades have passed since Australia and China formalised diplomatic relations. Overwhelmingly it is a relationship marked by strong trade bonds that have adapted and changed over time.
Today, amid the dislocations arising from the pandemic and geopolitics, the governments and businesses of both nations are looking to a sustainable recovery.
There is a growing recognition that China’s role in climate change mitigation globally is critical to achieving net zero goals. By leveraging strong economic and trade complementarities, Australian and Chinese businesses are well positioned to unlock new opportunities and deliver a greener future.
Momentum for a sustainable net zero future
At a national level, Australia and China have made significant commitments on carbon emissions reduction and are actively pursuing more sustainable models of economic growth. Australia has adopted a net zero by 2050 target, while China is aiming to have CO2 emissions peak before 2030 and achieve carbon neutrality before 2060.
Globally, the need to transition to a net zero economy and to do it collaboratively is at an historic high. The 2021 UN Climate Change Conference (COP26) culminated with agreement by all parties on a Climate Pact to drive action on climate mitigation, adaptation, finance and collaboration, as well as an acknowledgment that much more is needed. This ambitious new landscape requires innovative and unprecedented global collaboration.
Australia and China were among more than 40 countries which agreed to the Breakthrough Agenda at the conclusion of COP26. The Breakthrough Agenda aims to make low-emissions solutions the most affordable, accessible and attractive in emitting industries including power, transport, steel and cement. Measures taken in line with this commitment will provide opportunities for investment and innovation.
China: profound transformation ahead
Amid the growing wave of net zero emission targets, China's is arguably one of the most significant.. The country is the world’s largest energy consumer and carbon emitter, accounting for one-third of global CO2 emissions. The pace of China’s emissions reductions will be an important factor in international efforts to limit global warming to 1.5°C.
China has had laws in place for many years regarding environmental protection[1], pollution[2] and renewable energy[3], and established a carbon emissions trading scheme in 2021[4].
The programs and policies have attracted strong participation at both private and public levels, due to consistent messaging and clear standards particularly through China’s Five-Year Plans. The current 14th Five-Year Plan (2021-25) outlines the overall vision for a carbon neutral China, including goals of increasing the share of non-fossil fuel energy to 20% by 2025, establishing a modern energy system and improving forest coverage. It is supported by a comprehensive package of national, provincial, sectorial and technology plans.
China has made enormous strides in renewable energy. It is home to the largest share of the world’s solar photovoltaics (PV) and wind turbine manufacturing. More recently it has invested in the full stack of battery supply chain. According to the International Energy Agency (IEA), most electric vehicle (EV) batteries are made in China, accounting for 70% of the world’s manufacturing capacity.
China’s leadership in clean energy production has contributed significantly to the falling unit costs for wind and solar PV. Now, the same is occurring in the production of hydrogen-producing electrolysers.
The sheer scale of China’s energy needs means that it must move quickly. The IEA has warned that carbon neutrality “demands a rapid and profound transformation of the energy sector” and will rely on China greatly accelerating its clean energy innovation.
China has the technical capabilities, economic means and policy experience to drive this transformation, but for these efforts to succeed, international collaboration is essential.
Environmental Protection Law, Law on Environmental Impact Assessment (PRC) Standing Committee on the National People’s Congress, 29 December 2018.
Regulations on Administration of Pollutant Discharge Permits (PRC) China’s State Council, 9 December 2020.
Renewable Energy Law (PRC) National People’s Congress, 28 February 2005.
Measures for the Administration of Carbon Emissions Trading (draft instrument) (PRC).
Australia: Accelerating the transition
All Australian states and territories are committed to net zero emissions by 2050 and most have policies to foster investment and innovation in emissions reduction in a range of sectors including energy, transport, construction, urban design and agriculture. Almost all have implemented Renewable Energy Zones.
In 2022, the newly elected federal government set out a plan for what Climate Change and Energy Minister Chris Bowen called “the most dramatic economic transformation our nation has faced in our modern era”. This includes becoming a major player in hydrogen and exporting clean energy, green steel and other industrial products, as well as critical minerals.
One key pre-existing federal policy measure is the Safeguard Mechanism. This requires companies to report on emissions associated with around 215 high-emitting facilities and maintain these emissions at or below a baseline. Companies can offset emissions above this baseline by purchasing Australian Carbon Credit Units (ACCUs). The government will gradually lower those limits, pending industry and community consultations.
Australia also has its Emissions Reduction Fund (ERF), providing funding to incentivise the adoption of technologies and practices which generate carbon credits. Current priorities of the ERF include clean hydrogen, carbon capture and storage, and integrated farming methods.
The Australian Renewable Energy Agency (ARENA), a government body that financially backs renewable energy projects, includes within its strategic priorities the commercialisation of clean hydrogen, the transition to low emissions metals and scaling up carbon capture and storage.
Bringing research and industry together
“Just about every aspect of decarbonisation could benefit from a bilateral exchange. There are parallels and complementarities in zero-carbon supply chains.”
Professor Frank Jotzo, Australian National University
Universities are increasingly working with industry groups in the energy game, providing a critical commercialisation link to cutting edge research.
Australia-China collaborations between universities are informal and built on longer term relationships of trust. The Australian National University (ANU) has hosted delegations on climate change and energy, with senior participants including from Tsinghua University and government agencies from China. Tsinghua University is working with industry associations as well as major companies with a presence in Australia.
ANU has worked with Chinese colleagues on energy, a field where Australia and China are grappling with similar issues. Vast swathes of remote areas bring high potential for renewable energy including for heavy industry and the production of hydrogen.
Academics, analysts and industry experts are also coming together to exchange knowledge in the green iron and steel space. Demand for low-carbon products from importers, plus a relative cost advantage, will ultimately drive the establishment of a green steel industry. Which parts of the value chain will be located in Australia, China and other countries respectively remains an open and economically important question.
ANU isconvening a number of decarbonisation roundtables, in association with ACBC's Green Channel.
Surge in private sector targets
Voluntary net zero commitments are increasingly common across Australia and China, although more work is needed to ensure that these are scientifically supported and aligned with the Paris Agreement which aspires to limit global warming to 1.5°C.
A December 2021 study in China by the United Nations Development Programme and PwC found that over 75% of surveyed companies were undertaking low-carbon initiatives. Almost 38% had calculated their carbon inventory and a third had set carbon targets.
This was evident at ACBC’s 2021 business roundtable Green Channel event, “Collaborations towards net zero”. Many of China’s most prominent companies in high-emission industries, including SOE’s Shandong Energy, Baowu Iron and Steel, PetroChina and Sinopec, shared their respective immediate actions on decarbonisation on the way to ‘Peak Carbon’ by 2030.
"It was striking how committed to outcomes the companies sharing with us were. There is a huge industrial transformation underway in China. Companies that had investments in Australia were already active with their decarbonisation initiatives. All wanted a path to peak emissions by 2030, with many determined to show results against new 14th Five-Year plan targets by 2025. It was eye-opening."
Anthony Coles, ACBC Net zero Working Group Chair
In Australia, a 2021 study by KWM found that net zero commitments were widespread among the 50 largest ASX-listed companies: 54% targeted net zero by 2030, 2040 or 2050, while 18% had committed to (or had already achieved) carbon neutrality.
Only four of these companies had set targets verified by the Science Based Target initiative as sufficient to meet Paris Agreement standards, while another four had made commitments to do so.
Reporting on climate risk against the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and in line with guidance from regulators is now market standard for large ASX-listed Australian companies. Companies must measure and report on progress towards these targets.
The power of collaboration: “we need to know each other”
“For many important reasons, we need to know each other and foster strong network connections not only to generate IP but, ultimately, to develop collaborative, global solutions that address the greatest challenges of our times.”
Professor Jun Huang, University of Sydney, School of Chemical and Biomolecular Engineering
In 2018 the academic heads of Zhejiang University and the University of Sydney agreed: there was a need for a better, more global approach in the sustainability field. Efforts stalled due to COVID-19, but now the academic institutions are reinvigorating their connection.
A joint sustainability lab launched in late 2021 brings together their best minds to focus on areas such as renewable energy, carbon neutralisation, environmental pollution and ecosystem restoration. By connecting scientists to the vast manufacturing capacity in China, the joint lab accelerates the commercialisation process.
The partnership is about more than scientific breakthroughs – addressing global environmental challenges requires collaboration. The goal is to ensure there are regular interactions between the next wave of scientific talent across Australia and China, to help them to understand and respect their cultures and know how to work together.
The universities do not share intellectual property – ownership remains where it otherwise would have. Regular seminars involving researchers from similar fields across the universities will begin in late 2022, bringing opportunities to build connections and share innovations.
Professor Jun Huang leads the University of Sydney’s side of the arrangement. Among the ground-breaking projects his team of more than 20 researchers are working on are:
- using sea water to produce hydrogen
- upgrading power grids to accommodate renewable energy during peak loads
- carbon capture and conversion: artificial synthesis to transforming carbon into zero-emissions fuels like hydrogen
- converting wastes to products: waste plastics to high value materials, sea food wastes to health food additives.
Where to from here?
Shared commitments to transition to net zero are clear.
What is missing are stronger bridges between Australia and China as they forge that path. This is particularly critical for Australia’s future-facing industries as they prepare for the energy transition: there is a need to reach out to those who have demonstrated not only how to do it, but how to do it relatively quickly.
The unit costs of several low-emission technologies have fallen continuously since 2010 thanks to the scale and efficiencies of China’s manufacturing ecosystem.
Australia has an opportunity to establish itself as an influential contributor towards an international framework for a sustainable, decarbonised net zero world. This includes piloting new green capital products, acting as a green funds source and user, and showcasing and commercialising new technology.
Innovative policies can support the shifts. Further, improvements to climate governance can help to avoid emissions creep and increase investment in low-emission technology and infrastructure.
"The transformation in how the world produces, distributes and consumes energy will drive trillions of dollars in global investment. Opportunities include the electrification of transport, the commercialisation of hydrogen, and financing energy efficient buildings."
Shayne Elliot, ANZ CEO in Blue Notes
In the following chapters, we explore the feasible and effective solutions that can assist in reducing emissions in the energy, industrial, construction, transport and agricultural sectors. We also look at how we might fund those solutions.
Achieving these solutions will require cooperation across national borders and industries. COP27 takes place in Egypt in November 2022. Priorities are likely to include strengthening climate resilience, growing green finance contributions, accelerating action on net zero and strengthening accountability and trust on commitments.
Continuing to strengthen cooperation across business, government and academia will help Australia and China to achieve net zero faster, together.
Download
14.51MB, 51 Pages
Reference
-
[1]
Environmental Protection Law, Law on Environmental Impact Assessment (PRC) Standing Committee on the National People’s Congress, 29 December 2018.
-
[2]
Regulations on Administration of Pollutant Discharge Permits (PRC) China’s State Council, 9 December 2020.
-
[3]
Renewable Energy Law (PRC) National People’s Congress, 28 February 2005.
-
[4]
Measures for the Administration of Carbon Emissions Trading (draft instrument) (PRC).
