By David Stanway

SHANGHAI (Reuters). China’s ambitions to lower its emissions have put pressure on large, carbon-intensive state companies to act. But they may not be able to due to misinterpreted policy signals or other limitations. 

China’s state-owned enterprise (SOEs) were the first to be notified when Xi Jinping, China’s President, stated last September that it was the largest source of greenhouse gasses in the world.

As a round of talks on climate change begins in Glasgow, China already has submitted revised climate targets to United Nations. Now comes the next step: implementing them.

However, Beijing will find it difficult to make stronger commitments and open the door for more ambitious global emission reductions plans.

Ma Jun (director of the Institute of Public and Environmental Affairs in China), said, “State companies are busy drafting and trying to establish their targets and some of them have already created more detailed planning for this transition.”

Ma stated, “How do they meet other challenging targets and at the same time achieve climate targets?”

IPE has evaluated the 58 listed units in Chinese state-owned enterprises, including those from steel, petrochemicals, and electricity, which cover more than 1,000,000 tonnes annually of emissions.

Ma stated that while they were generally more successful than their counterparts in the private sector, there are some sectors where they fall short. He also said that on indicators such as energy efficiency and steel, these sectors are still far behind global competitors.

Of the total 58 countries, 91% of them have published climate and emission data in their reports. While more than half of the 58 have already taken steps to lower emissions, only 16% have set targets.

Six companies have made formal climate declarations, including power plants like Huaneng and Huadian, which pledge to reduce emissions by at least 2025. This is earlier than the goal set for 2030.

Baowu Iron and Steel (China’s largest steelmaker) and PetroChina and Sinopec, the biggest oil and natural gas suppliers, have also all pledged to reach “net zero” by 2050. This is a decade ahead of the national goal.

IPE data shows Sinopec is the highest-scoring Chinese SOE in respect to data disclosure targets and actions. This ranking places it 35th overall, after Apple (NASDAQ):

IPE released a report last month that stated the average score for Greater China was significantly lower than in other regions.

SOCIAL RESPONSIBILITIES

China’s TOP-Down Political System plays a significant role in SOEs. Xi’s last-year pledge to eliminate a 10-billion-tonne annual carbon footprint prompted associations of a broad range high-emitting industry to develop roadmaps.

They are also required to fulfill other “social responsibilities”, such as the guaranteed supply of energy and raw materials, and wider goals like employment and stability.

The recent power crisis in China is seen as an indication that, in times of emergency, Chinese companies will return quickly to fossil fuels since they have no alternative.

Some critics, such as policy-researchers at state think tank states that China’s targets do not exert enough pressure on large companies. China’s coal consumption is expected to drop in 2026 while local authorities allow coal power capacities to grow.

China’s dependence on coal is partly due to an inflexible pricing and power market. It makes it hard for companies to find renewable energy.

Many businesses have to choose to use electricity generated by state-owned coal-fired power plant. Local governments are trying to safeguard jobs and other economic interests.

Matt Gray from TransitionZero, an analyst, said that there has always been an incentive to provinces to trade within their provinces and build infrastructure. But, what should they be doing? Making use of transmission lines.

For example, steel companies have been encouraged not to use blast furnaces but to adopt cleaner electric arc furnace technologies to cut pollution. But they must still rely on coal fired electricity.       

According to an environmental inspectors’ report, solar and wind power that is lost due to lack of grid access remains a larger problem than regulators acknowledge.

    “If we really want renewables to really function, we need a lot more support – the whole (electric power) system needs to be transformed,” Ma said.