The cost of a total, immediate transition to renewables remains prohibitive for the heavy industries, such as steel, cement, and chemicals, that still underpin the national GDP.
As China enters the inaugural year of its 15th Five-Year Plan (2026–2030), the world’s second-largest economy finds itself at a defining crossroads. The tension between maintaining robust economic development and fulfilling international climate commitments has moved from a theoretical debate to a pressing policy challenge. While Beijing has pledged to peak carbon emissions before 2030, the immediate necessity to stabilize a cooling economy and ensure energy security often pulls the levers of power in the opposite direction.
Economic Priorities: The Push for “New Quality Productive Forces”
China’s primary economic development priority for 2026 is the cultivation of “New Quality Productive Forces.” This strategy, spearheaded by the National Development and Reform Commission (NDRC), focuses on high-tech manufacturing, artificial intelligence, and “self-reliance” in science and technology to offset a sluggish property market. The goal is to transition the economy away from labor-intensive exports toward high-value innovation.
However, these priorities create a significant cost conflict. To fuel this high-tech industrial base and protect against global energy price volatility, China continues to rely on its most abundant domestic resource: coal. Despite record-breaking installations of solar and wind power, permitting for coal power surged between 2022 and 2025 as a “backstop” for energy security. This reliance limits the country’s ability to aggressively cut carbon intensity in the short term, as the cost of a total, immediate transition to renewables remains prohibitive for the heavy industries, such as steel, cement, and chemicals, that still underpin the national GDP.
The Impact on Climate Mitigation: A “High Plateau” Peak
These economic drivers directly affect China’s ability to align with the IPCC’s 1.5-degree pathway. While the country is technically on track to meet its 2030 peaking goal, current development policies suggest a “high-plateau” peak, where emissions remain high for several years rather than decline sharply and immediately. Investing in new coal-fired power plants, even those labeled as “flexible backup” for renewables, risks locking in high-emission infrastructure for decades. Observers note that while China’s latest Nationally Determined Contribution (NDC) aims to reduce from peak levels, the targets remain cautious to provide “breathing room” for industrial modernization.
This tension explains the changing status of climate policy as a national priority. Climate change is no longer viewed solely as an environmental issue in Beijing; it is now an economic and security issue. When energy shortages hit in previous years, the priority shifted instantly from “dual carbon” goals to “energy supply guarantee.” This illustrates that while the green transition is a long-term strategy, short-term economic stability remains the non-negotiable “red line.”
Bridging the Barrier: Turning Climate Action into Growth
Despite these conflicts, China is attempting to bridge the gap between development and mitigation by turning climate action into a growth engine. By framing decarbonization as an industrial opportunity rather than a cost burden, the state is aligning its climate goals with its economic survival.
Concrete Examples of Bridging the Gap:
- The “New Trio” Export Engine: China has successfully turned climate mitigation into a core economic pillar by dominating the global supply chains for Electric Vehicles (EVs), lithium-ion batteries, and solar products. By early 2025, these industries became significant drivers of GDP, proving that green technology can generate wealth rather than just drain resources.
- Zero-Carbon Industrial Parks: To support energy-intensive manufacturing without the associated carbon footprint, China is rolling out massive industrial parks in regions like Inner Mongolia and Gansu. These parks are powered by dedicated wind and solar hubs, allowing local governments to meet high development quotas while adhering to strict “dual control” carbon limits.
- National Carbon Market Expansion: In late 2025 and early 2026, the National Emissions Trading Scheme (ETS) began expanding beyond the power sector to include steel and aluminum. This uses a market-based cost mechanism to force efficiency. Instead of shutting down plants, the policy incentivizes companies to modernize their technology to save on carbon costs, effectively merging industrial upgrades with climate mitigation.
This Post was submitted by Climate Scorecard China Country Manager, Vincent Mao.
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