Jasmine Tillu explains how China’s new ‘Leading Small Group’ can accelerate China’s environmental and economic goals by focusing on cities and working to peak carbon emissions by 2025 instead of 2030. 

On 27 May China’s government launched a high-level group, a ‘Leading Small Group’, to support carbon reduction efforts. Leading Small Groups are management bodies comprised of key national-level ministries and agencies that handle critical government issues through cross-departmental coordination; this Group’s mandate is to ensure China’s targets for a carbon emissions peak by 2030 and carbon neutrality by 2060 are met.

An even more powerful agenda for the Group would be to focus on cities, as they are the primary source of China’s emissions, and to support the country for a 2025 peak. Both China’s environmental and economic goals would be accelerated through these actions. 

China’s goals and the Leading Small Group

The 14th Five-Year Plan, published in March to cover the period 2021–25, left many climate and environmental experts underwhelmed due to the lack of detailed roadmaps or more specific targets, such as a carbon cap. Instead of furthering climate goals, the Plan reiterated China’s commitment to existing objectives.

Since the Plan’s announcement, however, a number of promising developments related to the climate pledges have progressed.

For example, financial regulators have since made strides in expanding green finance. In March, China announced its partnership with the EU to adopt a common set of green finance definitions by the end of this year, aligning standards that support better disclosure. The following month China declared that it will require financial institutions to transition towards green finance as early as possible by giving specific incentives to financial institutions and unveiled new tools to boost financing for carbon emissions cuts. Although actual nationwide trading for their national carbon emissions scheme is delayed, a growing number of regions are expanding carbon trading trials, underpinned by green energy certificates.

Of the recent developments, the formation of the Leading Small Group on carbon stands out prominently. It is a clear indication of China’s seriousness in achieving the ambitious climate goals it announced in 2020 on time: that is, reaching carbon neutrality (or ‘net zero’) by 2060 and a carbon peak by 2030.

Leading Small Groups play a pivotal role in China’s political system and governance and are a hallmark of Xi Jinping’s rule. Supervised by the central government, they have proven effective in implementing strategies across ministerial and departmental lines by ensuring follow-through across Chinese bureaucracy. This Group, headed by Vice Premier Han Zheng, includes Xie Zhenhua, China’s chief climate negotiator, and other high-level representatives from a range of government ministries.

Peaking emissions in 2025 can force cities to accelerate their sustainable transition – with economic benefits

Focusing the Group’s efforts on peaking the country’s carbon emissions by 2025 instead of 2030 will increase the likelihood of reaching carbon neutrality by 2060. It would also incentivise cities to expedite their transition to a cleaner model of urbanisation and further motivate China’s provinces and municipalities to be more ambitious with their targets.

However, there has been a gap between national high-level objectives and the policies and realities at the local level. For example, Shanghai is aiming for a carbon peak before 2025, but some cities and regions that are highly dependent on coal and other carbon-intensive industries have not yet identified a peaking year. While having different timetables is reasonable, planning for the peaking of carbon emissions in all cities should have already begun. Having clear city-level carbon inventories can accelerate their transition to long-term, higher quality economic growth.

Cities should also be at the heart of the Group’s workplan. Since cities are the primary source of China’s carbon emissions, a focus on their sustainable transformation is critical. As I discuss in this report, an urban transition is a key constituent of meeting the Paris Agreement and the country’s carbon neutrality goals, and will achieve vast economic benefits. As the world transitions to a low-carbon economy, there is a strong economic case for changing the development trajectory of cities: building cities to be clean, compact and connected would bring a plethora of measurable and less tangible but still essential economic, environmental and social benefits.

Investing in cities now can lead China more quickly towards liveable cities and a stronger economy. A number of studies show that sustainable investments are profitable. For example, the Coalition for Urban Transitions (CUT) has illustrated that it is costly to delay investing in these areas. According to the CUT’s research, China has the potential to reap US$8 trillion in returns by 2050 and create 15 million new jobs by 2030 while reducing emissions through low-carbon investments in cities. ‘The earlier the better’ is a clear message.

This major urban transition relies on sustainable and low-carbon infrastructure, for which the majority of funding must come from the market, as I describe in a second report. Meeting the financing needs of a sustainable urban transition will require a fiscal strategy that both empowers municipalities with stable financial resources and incentivises existing funding towards low-carbon and sustainable urban investments, now and over the long term.

China’s Leading Small Group is a welcome sign that meeting domestic carbon neutrality and carbon peak targets are very high on the political agenda and will not be left to chance. Putting cities at the heart of the Group’s plan and bringing forward the carbon emissions peak to 2025 will be a sure way for this Group to be successful.  

Jasmine Tillu is a Policy Fellow at the Grantham Research Institute and the author of two new policy insights published today by the Institute: Financing China’s sustainable urban transformation and The economic case for China’s sustainable urban transformation.

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