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On 24 January 2022, the State Council issued the Comprehensive
Work Plan on Energy Conservation and Emissions Mitigation in the
14th Five-Year-Plan Period. The work plan will serve as the guiding
document on energy conservation under China's "1+N" climate policy
framework, in addition to being part of the regular policy streams
of China's FYPs.
Modest relaxation of energy consumption dual-control scheme
during the 14th FYP period
Different from the 13th FYP work plan, the 14th FYP work plan
sets no predetermined—although non-binding—national cap on
total energy consumption, but rather gives provinces more room to
set and adjust their own targets to better suit local development
needs. This signals that China is taking on a marginally relaxed
stance towards capping energy consumption in an effort to
prioritize economic growth.
In the meantime, China will also adopt a more flexible approach
in setting and assessing energy-intensity reduction targets.
Specifically, the national target to reduce energy intensity by
13.5% can be flexibly adjusted across the five years, and will be
assessed only once at the end of the five-year period, instead of
annually, as in most previous years, or even quarterly, as in 2021.
This will better allow provinces to allocate energy use over the
five-year period depending on the pace of local economic growth,
instead of having to "dash" toward a set of predetermined year-end
intensity reduction targets at the risk of disrupting economic
activities.
The dual-control scheme is further refined to better
accommodate growth needs
The Work Plan designed some new mechanisms to enhance the
implementation flexibility of the "dual-control" scheme.
Incremental renewable power consumption during the 14th FYP
period will be exempted from the provincial accounting of total
energy consumption and hence will not add to the pressure of
meeting total energy consumption targets. The exemption, together
with the RPS targets, will incentivize provinces to prioritize the
use of renewable power to support economic growth. However, this
does not mean that renewable power can be used without limit to
develop energy-intensive industries or towards inefficient ends, as
all renewable power consumption, be it incremental or not, will
still be assessed against energy intensity reduction targets.
In addition to renewable power, energy that is used as
feedstocks will be exempted from the assessment of both energy
intensity reduction and total energy consumption targets. This
primarily concerns the use of coal, crude oil, and natural gas to
produce petrochemical and agricultural feedstocks. This will ease
fossil-to-chemicals projects from the pressure of securing energy
consumption quotas, thereby helping to maintain the supply security
of a range of fossil-based industrial and commercial products. This
will also pave the way for the transition of "dual-control" of
energy consumption to that of carbon emissions, by excluding
embedded carbon from the calculation.
Xiaonan Feng, based in Beijing, is a senior research
analyst Gas, Power, and Climate Solutions team and primarily
focuses on the Asia Pacific carbon market analysis, including
carbon capture and storage outlook in the power sector, carbon
trading, carbon emissions, carbon tax, and carbon- and climate
change-related policies.
Posted on 25 April 2022
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
