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Chinese Firms Must Act Decisively on Climate Change, Report Says

Chinese companies will need to cut direct greenhouse gas (GHG) emissions of their operations by up to 2.7% a year if China is to stay on track with the level of action required to keep global warming well below 2 degrees Celsius, says a new report authored by climate consultants Ecofys for green group WWF.

China’s power generation sector, which draws upon coal for around 68% of its output, will need to cut its carbon footprint by around 8% a year if China is to do its bit in helping the world avoid runaway climate change, the report adds.

Companies in the world’s second-biggest economy account for around half of China’s emissions, the report says, and it adds that a decisive shift away from fossil fuels will only happen if management is committed to low carbon energy and specific targets.

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02.11.15

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Without additional efforts, global greenhouse gas (GHG) emissions will continue to increase by 3.7 – 4.8 °C, a level well beyond the 2 °C temperature rise limit widely agreed among scientists and governments across the world as a limit above which...

But the extent that many Chinese companies are willing to switch to cleaner forms of energy appears highly limited, at least in the short-term.

Data on air quality released by the Chinese government last month showed that policies aimed at curbing coal consumption and improving chronic air quality—which would also help drive down carbon emissions—had done little to reduce smog in Beijing.

Companies in heavily-industrialized neighboring provinces to the capital have been unwilling to take the painful steps necessary to shut carbon-intensive capacity, while their political benefactors fret about the impact of coal curbs on employment in China’s rustbelt.

The WWF/Ecofys report offers some solutions, however.

Companies outside the utility sector have the opportunity to use on-site renewable generation, improving the efficiency of the electricity they use, and buy renewable fuels and electricity, the report says.

Sze Ping-Lo, who heads WWF China, points to GHG reduction targets at Vanke (a real estate company) and Yingli (a maker of photovoltaic panels).

But whether most of corporate China, particularly big energy users, will even bother taking action to reduce their carbon footprint is likely to depend strongly on carbon pricing in a future nationwide emissions trading scheme, subsidies, taxes, and tough environmental laws that are enforced properly.

Corporate action on climate change, seen by the U.N. as crucial to put the world on a path to lower emissions, has been patchy at best elsewhere in the world.

Even in Germany, which has strong environmental controls, generous subsidies for renewables, increasingly decentralized solar and wind generation, and relatively enlightened boardrooms, companies still draw on a grid where around 50% of its electricity comes from lignite and coal.

Foreign companies also have a major responsibility for China's carbon emissions, given that the country is the world's largest manufacturer of electronics for large corporations such as Apple and Samsung, and is the world's biggest producer of primary materials such as steel, aluminum, and refrigerants.