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Chapter 1: Targets and working together

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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.

"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 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.

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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).

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