Interview transcript
Teymoor Nabili
Christoph, hello, thanks very much indeed for joining me for a chat today.
Christoph Nedopil
Thanks for having me. What a pleasure.
Teymoor Nabili
So, I’m really interested in chatting with you because of your experience, not only in the climate field, but also your experience working in [the People’s Republic of] China with some of the key aspects of what Beijing is planning and thinking with regards to its climate policy. And I want to look at this in multiple dimensions, if we could. I don’t want to make it too complex, but to me it seems there are multiple dimensions: there’s the Belt and Road initiative, which you are heavily part of the institute that looks at the green aspect of the BRI activities. So that’s the external focus of [the People’s Republic of] China’s climate thinking. And then there’s the internal focus of [the People’s Republic of] China’s climate thinking. And we can even break that down further, I’d like to think of the policy and the practicality of [the People’s Republic of] China’s activities with regards to climate, and the philosophy and thinking conceptually of what they’re doing, as separate things. I hope that’s not too complex. But could we begin with just the big picture philosophy? I mean, we spent years complaining that [the People’s Republic of] China is pumping this stuff out, or at least the West is complaining that [the People’s Republic of] China is the problem and isn’t doing enough. And yet, on the other hand, we have the ecological civilization declaration that Xi Jinping has already made, and the very apparently determined approach to saying, right, we now believe that climate, ecology, environment are a core part of how we develop our economy, how we develop our country, how we develop our civilization. So just sum up for me, if you could, what is the philosophy of [the People’s Republic of] China’s climate activity today?
Christoph Nedopil
I think the philosophy of [the People’s Republic of] China’s climate ambitions is, if you look a little bit at the history, [the People’s Republic of] China has for a long time talked about balancing development in nature, having the ecological civilization as you just said, which is enshrined in the constitution, there is a lot of ambition right now, at least a lot of talk on climate change. But it has not always been like this. [The People’s Republic of] China, really over the last five to ten years has changed its approach to climate and the environment, where climate has become much more a centerpiece of their economic development model.
Teymoor Nabili
What does the ecological civilization mean? Let me just begin with that. What is the definition and the constitutional impact of that?
Christoph Nedopil
That’s a great question. It’s a Chinese phrase, and so it can mean many, many different things. The reiteration that Xi Jinping at the Biodiversity Conference of the Parties, gave is, of course, man has to live in harmony with nature. It is not that nature is being necessarily left alone, but much more, how can this ecological civilization, ecology and civilization live in harmony. I think that’s a moving target that we are all trying to wrap our head around more and more what it means. And it’s not a static system, where you can say this is exactly where we’re going. But it’s more a concept in a phrase.
Teymoor Nabili
But it does signify that they’re placing concerns about the environment, about climate, about ecology, at the heart of policymaking?
Christoph Nedopil
I think there have definitely been some important changes to put it much more at the heart of policymaking and economic development. Very simply, the province heads, the governors of the provinces and the bureaucrats are more and more also responsible for the ecological part in the development. That means, for example, air pollution, that means CO2 emissions, and they’re held accountable for that. That has not been the case a couple of years ago. So, it is indeed more becoming part of the general policymaking and implementation.
Teymoor Nabili
How is public opinion responding to the government’s positions on this stuff? Is there a gap between what Beijing wants and how the public sees this issue?
Christoph Nedopil
I think where we see the schism a little bit clearer is between what the central government wants and what the provinces can do, want to do. Public opinion in [the People’s Republic of] China is for me harder to gauge because, there is of course social media but there are also limitations on what’s available on social media and public media.
Teymoor Nabili
So, I’m wondering whether from a consumer perspective, the ambitions to drive SUVs and have TVs and eat beef and do lots of travel around the world, all these considerations, how do they fit in?
Christoph Nedopil
I think on the individual behavior side, and this is definitely more my feeling, is that there is a desire and recognition that [the People’s Republic of] China is still in a developing stage, and therefore, there is a lot of catch-up to do and the right to develop and the right to consume and that other countries have polluted more. And that therefore, consumption of meat products, the driving of nice cars, is important. And the desire to drive electric cars, in my opinion, does not necessarily come from the belief that it protects the climate, I think. It might be a nice side effect, but it’s much more very practical. You get subsidies to reduce the cost of buying an electric car. And the license plates are more easily available for electric cars compared to combustion engines. And so, it’s very practical policies that are if anything driving behavior change there.
Teymoor Nabili
Tell me how this is manifesting in actual policymaking. Where are we seeing change? Where are we seeing activity from the central government on these principles?
Christoph Nedopil
You mentioned that I’m looking both at the Belt and Road Initiative, which is [the People’s Republic of] China’s overseas financing, and, of course following very much what’s happening domestically because it informs [the People’s Republic of] China’s overseas financing as well. And I think very clear, on the overseas finance, the announcement by President Xi a couple of weeks ago to not support or not to build coal-fired power plants abroad anymore, is a new development where it really manifests itself in policies. We have already seen a phase-out of fossil fuel investments as one of the drivers of climate change over the last years, where 2020 was the first time we saw the majority of energy investments going into renewable energies from [the People’s Republic of] China abroad. And no new coal-fired power plants were announced with Chinese backing in 2020. This is where it’s manifesting both in practice and in policy. Now, of course, there’s a long way to go. [The People’s Republic of] China has been the largest financier and developer of coal-fired power plants as one of the challenges for the climate.
Teymoor Nabili
Let’s dig a little deeper into some of those aspects you just mentioned. The coal policy seems to be something that a lot of people are struggling to fully comprehend. We’ve had various statements, the most recent one of note being what Xi Jinping said to Biden back in April. He promised to strictly control domestic coal power, and peak coal consumption by 2025. But so much of the Western media is still blaming [the People’s Republic of] China for being the prime driver of new coal development, new coal investment, ongoing coal activity. So, can you just give me – what is the bottom line on the coal policy?
Christoph Nedopil
I think you already mentioned, I think, the core of the dilemma. The world is hoping to get out of fossil fuels as fast as possible, to phase out fossil fuels, not to build new coal-fired power plants, but rather to accelerate the phase-out of existing coal-fired power plants in order to not have zero emissions by 2050. But – and this is very much if you look at the European Union and Germany – the question is, how much carbon stock do we have in the atmosphere rather than how much carbon emissions. By phasing out late in 2050, 2060, and then only coming to carbon neutrality then, it might actually be too much carbon in the atmosphere. So, the goal must be to upfront the phase-out of coal. Now [the People’s Republic of] China has, in its current five-year plan, room for developing more coal-fired power plants. It has committed to peak carbon emissions before 2030. So until 2029,[the People’s Republic of] China, in its own policy, can increase its CO2 emissions which can be coming from coal-fired power plants. And only by 2060 does it want to be carbon neutral, not even climate gas or greenhouse gas neutral, but carbon neutral. So, there’s still room to invest in coal-fired power plants in its commitments.
Teymoor Nabili
What is that investment plan? Are they going to invest new money? Or are they just going to continue with the existing plants?
Christoph Nedopil
I think the challenge right now, as we’re seeing with the blackouts, is that there is a real cost of inefficient energy system and electricity grid and electricity market in [the People’s Republic of] China. There’s a number of compounding factors, the question of where do we need to invest in the energy system in order to avoid such blackouts? And I think right now, internationally, there’s of course a strong eye on [the People’s Republic of] China, what is [the People’s Republic of] China going to do? Is it going to invest more in coal because it believes that coal is the solution to the energy source or electricity shortages? Or is it going to take another path? I think it’s too early to tell really what’s going to happen in order to address the current situation, mostly because the factors that drive the electricity shortages are, I think, different in different provinces, and also of a global nature. One of the main reasons is, of course, the high price for buying coal. And if you have a very high price for coal, your cost of producing electricity with coal is of course going up. Now in [the People’s Republic of] China, the electricity price is fixed. And that means that all the coal-fired power operators are making a loss. And what we’re seeing is that the coal-fired power plants are not operating at full capacity. So, building new coal-fired power plants won’t solve the problem of electricity shortage. The loss-making will still continue. You might increase the efficiency in new coal-fired power plants, but ideally, a coal-fired power plant has to run for 30 to 40 years. And so I think it’s too early to tell and unlikely that we’re going to see massive new investments in coal-fired power over the next year.
Teymoor Nabili
The issue of the electricity problems that [the People’s Republic of] China has been having – the blackouts and the supply – was addressed in the UK media. They presented the situation as [the People’s Republic of] China almost doing a U-turn, they’re quoting Li Keqiang talking about the fact that they need to satisfy domestic issues here, and that this represents a reversal of previous pledges on the coal issue. Is that how you’re reading those comments and the situation?
Christoph Nedopil
Actually, I do not see such a reversal. And as you said before, President Xi and others have announced that the coal phase-out will start in the next five-year plan, starting in 2026. So right now, we are 2021. And this has been a consistent policy that [the People’s Republic of] China might increase their overall coal-fired power generation capacity. I think for me, the challenge is much more on fossil fuel subsidies. This has been an important issue over the last climate COPs – how do we decrease the use of public money to prop up spending in fossil fuels and to prop up fossil fuel consumption through subsidies? And last week, in the wake of the electricity outages, we saw announcements that the banking sector is supposed to support the loss-making coal-fired power plant operators. Now, this is of course a direct or indirect subsidy for these operators, by giving them preferential treatment on the capital markets or through better loan terms. And this, I think, is a very challenging issue, if we want to say we need to phase out these subsidies. And [the People’s Republic of] China, of course, also has its role to play, potentially even as a role model for other developing countries. And so I think that’s where I’m a little bit more worried than the announcement that electricity and stability of the energy system is important. I don’t think there’s something so new about that.
Teymoor Nabili
Let me just go back to the specific issue of what the UK media are reporting and be absolutely clear on this. I’m quoting one paper, The Guardian, which says ‘[the People’s Republic of] China plans to build more coal-fired power plants, and has hinted that it will rethink its timetable to slash emissions’. And the paper says that this is going to be a major blow for the upcoming COP conference in Glasgow. Do you agree with that framing from The Guardian? Has [the People’s Republic of] China actually made significant change to its existing commitments? And does this present a threat to some kind of agreement at COP?
Christoph Nedopil
I think [the People’s Republic of] China reiterated its ambition to peak before 2030 and to be carbon neutral by 2060, at a number of recent meetings, high-level meetings, including the EU, [the People’s Republic of] China and high-level dialog on environment and climate in September. So I think it’s too early to say that it’s a strong deviation. Again, building new coal-fired power plants is part of the 14th five-year plan, the current five-year plan. It is not something that should be welcomed, if you want to protect the climate but it’s nothing that [the People’s Republic of] China had not announced before.
Teymoor Nabili
As we’re talking about COP, what do you think [the People’s Republic of] China’s position will be at this Glasgow conference? Is Xi Jinping going to go in there personally and represent [the People’s Republic of] China forcefully in this? And give us, if you could, just a quick sketch of what [the People’s Republic of] China’s position is on nationally determined contributions?
Christoph Nedopil
That’s a very, very good question. If I would know the answer, I probably couldn’t tell you. I think we have to be realistic about what [the People’s Republic of] China has already committed, and whether it actually is going to deviate from any of the commitments that it made. The desire is, of course, that [the People’s Republic of] China commits to an absolute emission peak, for example, not just an emission peak per se, with no number attached. That [the People’s Republic of] China also therefore commits to an absolute reduction, and particularly over the timeframe after 2030, and a clear plan how to get there. These would be, I think, good outcomes. It is currently unknown whether this is possible. Of course, the current five-year plan does not have absolute emission targets, but only relative emission targets. It means for example, the CO2 intensity per unit of GDP has to be reduced by a certain number. And so most likely, we’re going to see similar commitments also in the NDCs, as we see in the five-year plans.
Teymoor Nabili
So the broad picture remains one of opacity, doesn’t it? I mean, there’s a lot of top-line declarations, but a lot of detail missing in what that really means. I remember there was a piece fairly recently, in which Wang Yi was quoted saying that a lot of these pledges need to be clarified by follow-up documents. And we haven’t seen those documents yet, have we?
Christoph Nedopil
No, but that does not mean that they’re not under development. So, there’s a policy framework called One Plus N, which is kind of the top-level goal, different policies that permeate through the different sectors. That is under development, and it had been announced, and most likely will be part of the NDCs. There’s also much more stringent control of the provinces. Again, that’s where I see the biggest struggle. Of course, on the central government level, there is this double goal of peaking before 2030 and being carbon neutral by 2060. Now the question is, of course, the provinces have a lot of possibilities to influence that goal, to implement that goal. And so the provinces need to come up with their plans. Everybody is developing a five-year plan, including the provinces. So they have to include that there, and they have to be very specific about how they reach that, and we have not seen the five-year plans so far. There’s a lot of work that currently needs to be done. Now, we have to be very conscious that the announcement of the 30-60 targets was last year. And with such a big country, it just takes a while to get everybody on board. It’s not that all the [the People’s Republic of] China can just decide something and then the plan is already there. It’s a very complex economy with a lot of different interests that also have to be consolidated.
Teymoor Nabili
How’s that system working? I mean, how does enforcement take place and how effective are Beijing’s directives when it comes to actually getting provinces to play ball?
Christoph Nedopil
So the way it works, and I think that’s an improvement compared to previous years, is again that the governors of the provinces and various bureaucrats have to report very specifically on particular climate targets, including the emission intensity targets. Which is one of the reasons again – as I said it’s a complex issue why we have these electricity shortages – one of the reasons is that some of the provinces have not hit their emission targets. And so they were also potentially proactive in terms of shutting down parts of the electricity grid in order to meet actually the emission targets. Now, whether this is the best way to do it is a different question. But nevertheless, they are directly held responsible for meeting some of these targets.
Teymoor Nabili
It’s kind of interesting that there’s been this explosion in litigation, hasn’t there? A lot of it is driven by Beijing-filed public interest litigation suits on climate issues. Is this part of a policy – that Beijing seems to think that going through the courts is the best way to control the process?
Christoph Nedopil
I think the court is one way and the courts have been beefed up. There’s a lot of work going on also from the Supreme Court, the Supreme People’s Court, also with support of a couple of international organizations, for example like ClientEarth that works a lot with the courts and provides capacity building and international experiences. So, the courts and public interest litigation has increased. But this is not necessarily my field of expertise.
Teymoor Nabili
Okay, let’s talk a little bit then about the investment proposal. Now with the BRI – the Belt and Road Initiative – it wasn’t too long ago, when [the People’s Republic of] China began first making its commitments to reducing domestic coal consumption and use, that people started saying yes, yes, but all they’re doing now is they’re funding all the coal overseas, and so there’s still a problem. So where is the current situation with respect to the BRI, and its climate activities, climate-related thinking?
Christoph Nedopil
I think there has been a lot of progress, really a lot of progress has been made over the last, particularly, three years. The announcement by President Xi to not build a new coal-fired power plant I think is very important, because it solidifies the current trend that we have been seeing, that the construction of coal-fired power plants and the financing of coal-fired power plants has not been so much on the agenda over the last two years, compared to for example 2016, 2015, where we saw really tens of billions invested in coal-fired power. So that’s solidifying the trend that we see in the investment. And it’s a little bit different to understand the overseas finance and the domestic finance. The overseas finance is much more commercial-driven. It’s not that there is not some policy goals involved in the BRI as well, but particularly energy investments are much more commercial, where the power plants have to make a profit. And with the cost of renewable energies coming down so far, it’s just becoming so much more economical to invest in renewable energies, particularly solar and wind. And investing in coal-fired power plants is just loss-making. And so we’ve seen not only no new announcements for coal-fired power plants, but actually the cancellation of a number of coal-fired plants that had been already approved, or even partly constructed. For example, the coal-fired power plant in Zimbabwe, which was actively cancelled. Also, with the ICBC the host countries are canceling coal-fired power plants like Bangladesh, like Egypt, like Kenya. There’s a lot of movement away from coal for much more economical reasons. Compare this to [the People’s Republic of] China, where the situation is a lot more complex, and potentially also not only economically driven.
Teymoor Nabili
Let’s talk about [the People’s Republic of] China relative to the rest of the world. Of all the things that we’ve spoken of, how would you rate [the People’s Republic of] China’s policy and activity in this field, with respect to some of the other major polluting nations, whether they be the advanced nations or perhaps nations like India, which are still a little bit down that chain. Tell me what you think that that relative performance is.
Christoph Nedopil
It’s not so simple. It’s a complex question. To give you one answer, I think the green finance system, of where the central bank, particularly the People’s Bank of China, with a number of other banking regulators, is really aiming to push the application of green finance, more than many other central banks. To give you a very concrete example, if a bank holds insufficient amounts of green loans in their portfolio, or not enough green bonds, it will get publicly scolded at some point, which in the end decreases their ability to raise more funds. The central bank also provides incentives, really monetary incentives, to hold more green assets. It lowers the capital adequacy ratio, so banks can take on more leverage if they hold more green bonds. Now, this is something that really is groundbreaking, and where the People’s Bank of China has been a leader globally. So on the green finance space, there’s a lot of things happening. Now, the problem is that there’s a lot of things on the non-green finance space, dirty finance, happening as well, and to reconcile both sides is extremely challenging. And that’s why it’s not so easy to say, where are we? I think there’s many things where [the People’s Republic of] China is doing many, many good things, including massive investments in renewable energy, but it’s also doing a lot of things that are not necessarily aligned with the goal of the Paris Agreement.
Teymoor Nabili
The reason I ask, obviously, is, once we come out of this COP meeting we know very well that the Western media are going to be very critical of China’s position, whatever it is, and present [the People’s Republic of] China as being the major problem. We’ve seen this throughout the years. So, do you think that we’re going to see this in this COP situation? And will it be valid?
Christoph Nedopil
I think it’s too early to tell. The COP is happening in three weeks and I think we will know afterwards. I think there are a couple of elephants in the room that have to be addressed with [the People’s Republic of] China. Number one is of course the carbon stock rather the carbon emissions over time. So how do we reduce the carbon emissions as early as possible to get the carbon stock down? That’s number one, and it’s extremely challenging. The second aspect I think that is extremely challenging is the short-lived climate gases, which already contribute about 45% of global warming. And currently we’re only focusing on carbon emissions and not on the overall greenhouse gas emissions. I think these are the things where work needs to be done, and where a lot of where COP can make an influence. We’ve already seen in the European China Leaders summit some announcements around this, to include the short-lived climate gases at least in the policy framework and the cooperation framework. That’s a good sign. But COP is still three weeks away. Let’s hope we can have more positive outcomes then just some [the People’s Republic of] China-bashing.
Teymoor Nabili
Let me ask you a couple of quickfire questions around the COP conference. What do you think [the People’s Republic of] China’s biggest obstacle is to achieving its COP ambitions?
Christoph Nedopil
I think getting a fair or just transition in [the People’s Republic of] China. With a lot of people depending on the old sectors, it is a very big challenge. That, of course, is where we see the difference between the provinces, and that has to be balanced.
Teymoor Nabili
So you’re saying, balancing its ambitions and necessities with regards to economic growth and the climate goals; these are in conflict?
Christoph Nedopil
I think much more the regional differences that we’re seeing. And this has been a much bigger theme over the last weeks, with the concept of shared prosperity, where the recognition that the economic growth has not been equally distributed between particularly coastal cities and more provinces that are not at the coast. We need much more balancing, and a lot of the less-developed provinces are dependent often on more traditional sectors that are related to fossil fuels. I think that’s the biggest challenge, to get a just transition between the different provinces.
Teymoor Nabili
What do you think is the most ambitious target that it’s set itself, the most consequential?
Christoph Nedopil
The 30-60 target is the most consequential target – peaking before 2030 and being carbon neutral by 2060. It has really shifted the mindset of the industry, of the financial sector particularly, and, of course also of policymaking. It is the most important target right now for [the People’s Republic of] China’s climate ambitions.
Teymoor Nabili
With respect to the commitments that it has given and the targets that it has set, what do you think its trajectory is like? Do you think it’s going to meet its own targets?
Christoph Nedopil
I think meeting the 2030 target is very much possible. It is mathematically possible by just being extremely high on emissions in 2029. Possibly unnecessarily high if you really want to push it in order to peak in 2029. But it’s also a lot of possibility to invest in renewable energies, which is one of the biggest drivers, of course, of carbon emissions and the energy sector. There’s a willingness to address electricity markets, which is very challenging, even to trade electricity between the provinces. So there’s a lot of action. Usually [the People’s Republic of] China does meet its targets that it commits internationally to, and I also am very hopeful that it meets at least the 2030 target.
Teymoor Nabili
So much of the conversation around [the People’s Republic of] China is focused upon the idea of how much polluting they’re doing. A lot less seems to be focused on what they’re doing in the renewable energy field, in replacing those systems with new systems. Just give me your sense of their commitment, their activity, and their achievements when it comes to solar power, hydrogen power and other renewable technologies.
Christoph Nedopil
I think that’s a very important aspect of greening [the People’s Republic of] China’s economy. If you look at electricity production, [the People’s Republic of] China has become a leader in both wind and solar technology. I think it provides about 75% of global solar panels. It is also one of the largest producers of wind power and wind parks. It is investing globally in these renewable energy systems and the generation of electricity. There’s a lot of momentum going, and interestingly mostly driven by private companies. And I think this is an interesting conflict to explore between state-owned enterprises and private companies. A lot of the renewable energy, particularly wind and solar, is private corporations that are driving this is development, which is all good. Because of [the People’s Republic of] China, the cost of these renewables has come down for everyone in the world.
Teymoor Nabili
Let me end where we began – the really big picture look at what’s happening. This theme of balancing economic growth versus ecological requirements has been a constant one throughout the entire conversation. [The People’s Republic of] China’s desire, as you said, at the beginning, to play catch-up economically and bring its population to a state of development that it thinks is appropriate, is very strong and quite understandable to a large extent, but it is in direct conflict with a lot of these climate goals. How do you think that conflict is going to play out?
Christoph Nedopil
I think we are really at a point in history where we can ideally balance – particularly in the electricity system, and potentially in the transport system – the wish for more consumption and wealth with a more carbon-neutral economy, just because the cost of electricity from renewable energies has been dropping so much that we can generate enough electricity which is relatively carbon-free. So, I don’t see necessarily at this time in history that there is such a conflict, when we talk about carbon neutrality. I mentioned before that the goal must be actual climate neutrality. And that is, I think, a much bigger challenge if we have to look at the food systems, where particularly meat consumption contributes so much to climate change. And overall, the meat consumption in [the People’s Republic of] China probably has not reached its peak. So, if we would look at climate emissions more broadly, I think the conflict is much stronger than if we look at carbon emissions only.
Teymoor Nabili
Christoph, great, thank you very much for your insights into this. Hopefully, we can catch up after COP and see what actually transpires from those conversations. But for the meantime, I appreciate you talking to me.
Christoph Nedopil
My pleasure and I’m really looking forward to talking with you after COP to see what comes out of that.
