China’s state-owned companies struggle to align climate rhetoric with reality

China’s leaders’ ambitious pledges to cut emissions have put their carbon-intensive state-owned giants under pressure and they risk failing amid mixed signals from politicians and other restrictions.

When Chinese President Xi Jinping said in September that the world’s biggest source of greenhouse gases would reduce emissions to zero by 2060, attention turned to Chinese state-owned companies.

Beijing has already submitted updated climate targets to the United Nations as a new round of climate change negotiations is underway in Glasgow at the Climate Summit (COP26). The next challenge is figuring out how to implement them.

However, the difficulties facing China’s giant companies will make it difficult for Beijing to offer stronger promises and smooth the way to a more ambitious program of global emissions cuts – especially as the country faces an energy shortage.

“State-owned companies are busy drawing up their plans and trying to define their goals, and some of them are already creating more detailed planning for the transition,” said Ma Jun, director of the Public and Environmental Affairs Institute (IPE), which monitors environmental records and climate of large corporations in China.

“To ensure that they can meet other demanding targets when, however, they are affected by climate targets, a really solid transition strategy is needed, and so far there are still big gaps,” added Ma.

The IPE assessed 58 listed units of Chinese state-owned companies in sectors such as steel, petrochemicals, electricity and aviation, covering more than 1 billion tons of annual emissions.

The study found that while they are generally ahead of their private-sector counterparts, some are lagging behind, and on indices like energy efficiency, sectors like steel still lag their global rivals, Ma said.

Of the 58, 91% disclosed climate and emissions data in their official reports. More than half have taken steps to reduce emissions, but only 16% have so far announced targets.

Meanwhile, only six have issued formal “climate declarations,” including power-generating giants such as Huaneng, Huadian and Datang, which have pledged to peak emissions by 2025, ahead of the 2030 national target.

Three others, including Baowu Iron and Steel – China’s biggest steelmaker – as well as the two largest oil and gas suppliers PetroChina and Sinopec – have pledged to achieve zero emissions by 2050, a decade ahead of the national target.

According to IPE data, Sinopec has the highest score among Chinese state-owned companies in terms of data disclosure, targets and specific actions related to climate change and ranks 35th globally, behind companies such as Dell and Apple .

In a report published last month, the IPE said the average score in the China region is significantly lower than in the rest of the world.

social responsibilities

SOEs play a huge role in China’s political system, and Xi’s pledge to neutralize an annual 10 billion tonnes of carbon footprint has prompted associations from a wide range of high-emission industries to chart roadmaps.

But companies are also required to fulfill other “social responsibilities”, including ensuring the supply of energy and raw materials, as well as broader goals such as employment and social stability.

The reduction in energy shortages in recent weeks is seen as a sign that, in a crisis, Chinese companies will quickly return to fossil fuels because the system gives them no choice.

Some critics – including policy researchers at state think tanks – say China’s targets haven’t put enough pressure on big companies, with coal consumption only falling from 2026 and local authorities still allowing the capacity to generate electricity. charcoal increase.

China’s structural dependence on coal, caused in part by an inflexible energy market and pricing system, also makes it difficult for companies to source renewable energy.

Many companies have no choice but to buy electricity from state-owned coal-fired power plants, with local governments looking to protect jobs and economic interests.

“There has always been an incentive for provinces to build and trade with each other, when in fact what they should be doing is using the transmission lines,” said Matt Gray, an analyst at the Climate Studies Institute TransitionZero.

Although steel companies, for example, have been encouraged to switch from blast furnaces to cleaner electric furnace technology to reduce pollution, they are still forced to rely on coal-fired electricity.

Loss of solar and wind energy due to lack of access to the grid also remains a bigger problem than regulators admit, according to a report by environmental inspectors this year.

“If we really want renewable energy to work, we need a lot more support – the entire (electricity) system needs to be transformed,” said Ma.