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China’s Climate Challenge:

Financing the Transition to Net Zero

INSIGHT REPORT

JULY 2022

In collaboration with

Oliver Wyman

Contents

Foreword

Executive summary

1 China’s commitment to tackling climate change

2 The ﬁnancing gap

2.1 Building a stronger information infrastructure

2.2 Balancing lending supply and demand

2.3 Enhancing the policy framework

3 Industry analysis

3.1 Mobility

3.2 Construction and real estate

3.3 Steel

Conclusion

Contributors

Acknowledgements

Endnotes

Images: Getty, Unsplash

reserved. No part of this publication may

be reproduced or transmitted in any form

or by any means, including photocopying

and recording, or by any information

storage and retrieval system.

Disclaimer

This document is published by the

World Economic Forum as a contribution

to a project, insight area or interaction.

The ﬁndings, interpretations and

conclusions expressed herein are a result

of a collaborative process facilitated and

endorsed by the World Economic Forum

but whose results do not necessarily

represent the views of the World Economic

Forum, nor the entirety of its Members,

Partners or other stakeholders.

China’s Climate Challenge: Financing the Transition to Net Zero 2

An April 2022 Intergovernmental Panel on Climate

Change report found that the global community

is on a pathway to global warming of more than

double the 1.5°C (or 2.7° Fahrenheit) limit agreed

upon in Paris in 2015. The report underscores

the urgency with which private and public sector

leaders must act, and China – currently the world’s

largest carbon emitter – has made an ambitious

pledge to achieve carbon peak by 2030 and

carbon neutrality by 2050.

Fulﬁlling this commitment will require an

enormous amount of ﬁnancing – about CNY

140 trillion (Chinese yuan renminbi) ($22 trillion)

in total for the 2020-2060 period across the

electricity, steel, mobility, and construction

and real estate industries alone. These are also

heavily polluting industries that are particularly

hard to transition and require the application

of innovative, new technologies that are early-

stage, capital-intense and risky. Public and

private stakeholders, both from carbon-intense

industries and the ﬁnancial services community,

need to create new ﬁnancing models to develop,

test and scale these technologies.

To facilitate this process, the World Economic

Forum, in collaboration with Oliver Wyman, is

engaging global industry leaders in the Financing

the Transition to a Net-Zero Future initiative. In

October 2021 – and in time for the 26th United

Nations (UN) Climate Change Conference of the

Parties (COP26) – initiative members published

an insight report presenting initial ﬁndings from

these global discussions. Building on this work and

recognizing China’s signiﬁcance in accelerating

capital mobilization towards these early-stage

decarbonization technologies, the Forum and

Oliver Wyman convened a group of Chinese

industry leaders and experts in early 2022 to

explore how challenges and opportunities in China

align with or differ from global dynamics. Through

numerous workshops and expert interviews,

more than 50 industry and public sector leaders

contributed insights and observations and posed

yet-to-be-solved questions that are presented in

this insight report.

China holds a critical and outsized role in helping

the global community achieve the targets

of the Paris Agreement and preserving the

planet’s biosphere. At the same time, China’s

available ﬁnancing mechanisms and its ﬁnancial

system remain somewhat distinct. A nuanced

understanding of prioritized net-zero technologies

and potential pathways to ﬁnancing these

technologies in Greater China is therefore critical

to ensure the country can achieve its net-zero

ambitions. This publication seeks to help in turning

these ambitions into realities, show the enormous

opportunities China holds for contributing to the

global carbon-neutrality agenda and also highlight

remaining challenges.

We welcome your feedback on the ideas

presented in this insight report and encourage you

to become part of this important work facilitated by

the World Economic Forum through the Shaping

the Future of Financial and Monetary Systems

Platform and the Mission Possible Platform.

Foreword

China holds immense opportunities

to realize net-zero ambitions and

global environmental change.

Jason Ekberg

Partner, Corporate and

Institutional Banking Practice,

Oliver Wyman

Kai Keller

Platform Curator, The Future

of Financial Services in China,

World Economic Forum

China’s Climate Challenge:

Financing the Transition to Net Zero

July 2022

China’s Climate Challenge: Financing the Transition to Net Zero 3

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China’sClimateChallenge:FinancingtheTransitiontoNetZeroINSIGHTREPORTJULY2022IncollaborationwithOliverWymanContentsForewordExecutivesummary1China’scommitmenttotacklingclimatechange2Thefinancinggap2.1Buildingastrongerinformationinfrastructure2.2Balancinglendingsupplyanddemand2.3Enhancingthepolicyframework3Industryanalysis3.1Mobility3.2Constructionandrealestate3.3SteelConclusionContributorsAcknowledgementsEndnotes345101315172122283238394042Images:Getty,Unsplash©2022WorldEconomicForum.Allrightsreserved.Nopartofthispublicationmaybereproducedortransmittedinanyformorbyanymeans,includingphotocopyingandrecording,orbyanyinformationstorageandretrievalsystem.DisclaimerThisdocumentispublishedbytheWorldEconomicForumasacontributiontoaproject,insightareaorinteraction.Thefindings,interpretationsandconclusionsexpressedhereinarearesultofacollaborativeprocessfacilitatedandendorsedbytheWorldEconomicForumbutwhoseresultsdonotnecessarilyrepresenttheviewsoftheWorldEconomicForum,northeentiretyofitsMembers,Partnersorotherstakeholders.China’sClimateChallenge:FinancingtheTransitiontoNetZero2AnApril2022IntergovernmentalPanelonClimateChangereportfoundthattheglobalcommunityisonapathwaytoglobalwarmingofmorethandoublethe1.5°C(or2.7°Fahrenheit)limitagreeduponinParisin2015.Thereportunderscorestheurgencywithwhichprivateandpublicsectorleadersmustact,andChina–currentlytheworld’slargestcarbonemitter–hasmadeanambitiouspledgetoachievecarbonpeakby2030andcarbonneutralityby2050.Fulfillingthiscommitmentwillrequireanenormousamountoffinancing–aboutCNY140trillion(Chineseyuanrenminbi)($22trillion)intotalforthe2020-2060periodacrosstheelectricity,steel,mobility,andconstructionandrealestateindustriesalone.Thesearealsoheavilypollutingindustriesthatareparticularlyhardtotransitionandrequiretheapplicationofinnovative,newtechnologiesthatareearly-stage,capital-intenseandrisky.Publicandprivatestakeholders,bothfromcarbon-intenseindustriesandthefinancialservicescommunity,needtocreatenewfinancingmodelstodevelop,testandscalethesetechnologies.Tofacilitatethisprocess,theWorldEconomicForum,incollaborationwithOliverWyman,isengagingglobalindustryleadersintheFinancingtheTransitiontoaNet-ZeroFutureinitiative.InOctober2021–andintimeforthe26thUnitedNations(UN)ClimateChangeConferenceoftheParties(COP26)–initiativememberspublishedaninsightreportpresentinginitialfindingsfromtheseglobaldiscussions.BuildingonthisworkandrecognizingChina’ssignificanceinacceleratingcapitalmobilizationtowardstheseearly-stagedecarbonizationtechnologies,theForumandOliverWymanconvenedagroupofChineseindustryleadersandexpertsinearly2022toexplorehowchallengesandopportunitiesinChinaalignwithordifferfromglobaldynamics.Throughnumerousworkshopsandexpertinterviews,morethan50industryandpublicsectorleaderscontributedinsightsandobservationsandposedyet-to-be-solvedquestionsthatarepresentedinthisinsightreport.ChinaholdsacriticalandoutsizedroleinhelpingtheglobalcommunityachievethetargetsoftheParisAgreementandpreservingtheplanet’sbiosphere.Atthesametime,China’savailablefinancingmechanismsanditsfinancialsystemremainsomewhatdistinct.Anuancedunderstandingofprioritizednet-zerotechnologiesandpotentialpathwaystofinancingthesetechnologiesinGreaterChinaisthereforecriticaltoensurethecountrycanachieveitsnet-zeroambitions.Thispublicationseekstohelpinturningtheseambitionsintorealities,showtheenormousopportunitiesChinaholdsforcontributingtotheglobalcarbon-neutralityagendaandalsohighlightremainingchallenges.WewelcomeyourfeedbackontheideaspresentedinthisinsightreportandencourageyoutobecomepartofthisimportantworkfacilitatedbytheWorldEconomicForumthroughtheShapingtheFutureofFinancialandMonetarySystemsPlatformandtheMissionPossiblePlatform.ForewordChinaholdsimmenseopportunitiestorealizenet-zeroambitionsandglobalenvironmentalchange.JasonEkbergPartner,CorporateandInstitutionalBankingPractice,OliverWymanKaiKellerPlatformCurator,TheFutureofFinancialServicesinChina,WorldEconomicForumChina’sClimateChallenge:FinancingtheTransitiontoNetZeroJuly2022China’sClimateChallenge:FinancingtheTransitiontoNetZero3ExecutivesummaryChinahasthemostambitiousnet-zerotargetofanycountryworldwideandsomustensureitcanfinanceacarbon-neutraltransition.Chinahasdeclareditselffullycommittedtohavingadecarbonizedeconomyby2060,amassiveambition.Formorethan15years,duetoitsheavilyindustrializedeconomy,ithasbeentheworld’sbiggestemitterofgreenhousegases.Oneuniquechallengetheworld’ssecondbiggesteconomywillfaceintransitioningtocarbonneutralityisbalancingitsdecarbonizationambitionswiththeneedtomaintainacompellingeconomicgrowthrate.Atthe26thUNClimateChangeConferenceoftheParties(COP26)heldinGlasgow,Scotland,from31Octoberto13November2021,ChinaandtheUSagreedtoboostclimatecooperationoverthenextdecade.Inajointdeclaration,thetwocountriescalledforincreasedeffortstoclosethesignificantgap,whichwillbenecessaryiftheworldistokeepitstargetofrestrictingtheaverageglobaltemperateriseto1.5°C,assetoutintheParisAgreementof2015.TheyrenewedthiscommitmenttocooperateattheForum’sAnnualMeeting2022inDavos.Despitetheseboldwords,China’sjourneytoacarbon-freefuturehasonlyjuststarted.Asthisreportshows,thecomingdecadeswillseeChinahavingtoinvestheavilyineconomictransformation,aboveallinthreesectorsthat,alongwithenergy,dominatethecountry’scarbonemissions:steel,mobility,andconstructionandrealestate.CoveringtheR&Dexpenditureneededtoidentifyanddevelopthenecessarynewtechnologiesandpayingforthenewmachineryandequipmentthatmustbeboughtandinstalledwillrequireanimmenseamountoffunding.Thisreportidentifiesthreeareaswherechangewillbeneededtomaketheseshiftspossible:–Financeinnovation,particularlyinfindingwaysinwhichlendingpackagescanbestructuredtomeettheneedsoflong-termborrowersfacinghighercostsand/orlowermargins.–Collaboration,particularlybetweendifferentplayerswithinanindustrythatcancreateincentivesforcompaniestoproduceorusesustainableproductsandinputs.–Policysupport,particularlyintheareasofstandardsandtheuseoftaxincentivestodiscourageunwantedbehaviour,suchasthroughtheimpositionofcarbontaxes,andencouragedesirablepractices,suchastaxbreaksongreenproductsandservices.Althoughrealizingsomeofthesechangeswillbechallenging,nonelooksinsurmountable.Rather,asthisreportconcludes,giventheresourcesChinahasavailable,thecommitmentofitsgovernmentandthetimescaleoverwhichChina’stransitiontocarbonneutralitywilloccur,thereisgoodreasontobelievetheChineseeconomywillindeedbecarbonneutralby2060.China’sClimateChallenge:FinancingtheTransitiontoNetZero4China’scommitmenttotacklingclimatechange1Throughtheadoptionofgreentechnologies,Chinacanradicallytransformtheireconomytoachievenetzero.China’sClimateChallenge:FinancingtheTransitiontoNetZero5Chinaisactiveintheworld’smajorglobalinitiativestotackleclimatechange.Likemostothercountries,itrecognizesthataglobalproblemneedsglobalsolutions.ItismovingaheadwiththeongoingadoptionoftheParisAccords,includingthosecommitmentsagreedatCOP26inGlasgowinNovember2021.Inaddition,despitebroadergeopoliticaltensions,ChinaandtheUSissuedajointstatementaddressingtheclimatecrisis,followedbyajointdeclarationontacklingclimatechangeatCOP26,whichdemonstrateacommitmenttoboostingclimatecooperationoverthenextdecade(Figure1).DomesticpoliciesinChinaarealsoheavilyfocusedonclimatechange.Thelatestfive-yearplan,covering2021-25,putsdecarbonizationatthecentreofpolicy-making,andthecountryhasalsomadeprogressinthecarbontradingmarket.China’srecentcommitmenttotacklingclimatechangeFIGURE1UNGeneralAssemblySeptember2020TheChina-USpledgehasincreasedcollaborationtotackleclimatechange,includingcommitmentstocooperateonsharinginformationandtechnology,reducingmethaneemissionsandusingmorerenewableenergy.China’snationalcarbontradingmarketwaslaunchedwith2,162keyemissionunitsfromthecountry’spowergenerationindustry.Covering4.5billiontonnesofCO2emissions,CCETEistheworld’slargestcarbonmarket.China’stopeconomicplanningdocumentincludesamidpointnon-fossilenergysharetargetforitsnationallydeterminedcontribution,andenergyandcarbonintensityreductiontargetsfor2025.XiJinpingcommitsChina’sCO2emissionstopeakby2030andforthecountrytobecarbonneutralby2060.14thFive-YearPlanMarch2021ChinaCarbonEmissionTradeExchange(CCETE)July2021China-USjointdeclarationNovember2021Source:WorldEconomicForumandOliverWyman,2022,basedonofficialdisclosuresNonetheless,itisalsoclearthatChina’stransitiontoacarbon-freefuturehasonlyjuststarted.ItscommitmenttoreachingpeakCO2emissionsby2030andhavingnet-zeroCO2emissionsby2060representsagiganticprojectthatisuniqueintwoways.First,industrialoutputconstitutesamuchhigherproportionoftheChineseeconomythananyothermajoreconomy.Andsecond,itseconomicgovernancemodelmeansthattheWest’sfree-marketmechanismsmightbelessapplicabletodrivingchange.Chinaisconsideredtobe“theworld’sfactory”,withitsmanufacturing’sshareofGDP–27%in2019–farhigherthaninanyofthedevelopedeconomiessuchasGermanyandJapan(Figure2).1Furthermore,thismanufacturingisheavilyconcentratedinsectorswithhighCO2emissions(Figure3),includingsteel,cement,petrochemicalsandautomotive.2China’smanufacturingCO2emissionsaloneareequalto2.2timesthetotalemissionsinEuropeandalmost13timesthecarbonsunkfromphotosynthesisintheAmazonjungle.3Thiscarbon-heavycoreoftheChineseeconomywillrequiresubstantialtechnologicaladvancesandinvestmenttoreachnetzero.China’sClimateChallenge:FinancingtheTransitiontoNetZero6TheproportionofmanufacturinginGDPinChina,theEU,theUSandglobally(2015-2019)FIGURE201111.6%11.2%11.1%11.2%10.9%15.3%15.4%15.3%15.2%14.9%16.4%16.2%16.2%16.3%15.9%29.0%28.1%28.1%27.8%26.8%2015Manufacturing’sshareofGDP(%)2015–201920162017201820191516272829ChinaWorldEuropeanUnionUnitedStatesSource:WorldEconomicForumandOliverWyman,adaptedfromWorldBank,Data–Manufacturing,valueadded(%ofGDP),2021China’sClimateChallenge:FinancingtheTransitiontoNetZero7CO2emissionsbyfinalsector(2018)FIGURE30%10%20%30%40%50%60%70%80%90%100%EnergyindustryownuseManufacturingindustriesandconstructionTransportResidentialCommercialandpublicservicesOtherUnitedStatesChinaEuropeanUnionWorld6%58%11%13%5%8%7%7%7%36%19%25%30%29%21%3%14%22%4%19%25%17%10%5%Source:WorldEconomicForumandOliverWyman,adaptedfromInternationalEnergyAgency,Dataandstatistics,2020Consequently,China’snet-zerocommitmentwilldependonarevolutionarytransformationofitseconomydrivenbythewidespreadadoptionofgreentechnologies,whichwillrequireenormousinvestment(Table1).Prioritizedtechnologytobefinanced,withexpectedcontributiontoChinabecomingnetzeroby2060TABLE1Source:OliverWymanestimationIndustryTechnologybreakthroughsExpectedcontributionto2060netzeroinChinaEnergyPhotovoltaic(PV)GeneratingelectricityfromsolarpowerwithPVmodules15-20%WindpowerGeneratingpowerwithwindturbines10-15%Nuclearpower,etc.Generatingelectricityfromnuclearpower,geothermal,tidalandotherlow-carbonenergy5-8%ConstructionandrealestateGreencementUsingwasteorgreenmaterialsandmoreefficienttechnologiesincementproduction3-5%BuildingenergymanagementEfficientin-buildingenergymanagementanduseofbuildinginrenewableenergyproduction(e.g.rooftopPV)2-3%IronandsteelLongprocesstomini-millUsingelectricfurnaceswhichhaveshorterprocessesandloweremissions,usingscrapsteelasrawmaterial8-10%HydrogenmetallurgyUsinghydrogenasareducingagentinsteadofcoalformetallurgy1-2%MobilityElectrificationofautomobilesUsingelectricvehiclestoreplacefuelvehicles3-5%GreenautofactoriesUsingrecycledmaterialsandcomponents,efficientprocessesandenergymanagementtools1-2%HeatingGreenheatingUsinggeothermal,industrialwasteheatandotherenergysourcestoreplacecoalforheating3-5%GeneralCarboncapture,utilizationandstorageCapturescarbondioxideemissionsfromsourcesforeitherstorageorreuse15-20%China’sClimateChallenge:FinancingtheTransitiontoNetZero8China’suniqueeconomicmodelwillshapethistransitionwithboththegovernmentandprovincialadministrationsplayingkeyrolesduetotheirinvolvementindetailedeconomicplanning.State-ownedenterpriseswillalsobeimportantduetotheirsubstantialmarketshareinmanyindustries,includingthecarbon-heavyindustriesneedingtotransitionandthefinancialservicesthatwillhavetofinancethattransition.ComparedwithWesternmarket-drivenmodels,especiallythosewherecorporate’squarterlyresultsareafocus,thistop-downapproachtoeconomicplanningmayproveadvantageousininvestingforthelongterm.However,Chinawillalsoneedtoensuremarketvitalityremainsstrongsothatitencouragestheinnovationanddevelopmentofthenewtechnologiesneededtoensuresuccessfuldecarbonization(Figure4).FourkeyforcesinChinesesocietyandtheirparticipationinnetzeroFIGURE4Whilecentralandregionalgovernmentsandstate-ownedenterprisesoftenhavegoodaccesstoresources,theytypicallystruggletoidentifythebestprojectstofocuson.Financialinstitutionshaveamplefundingresources,butoftenlacktheprofessionalknowledgeneededtoidentifythemostproductiveinvestmenttargets.ManykeytechnologiesneedtobeimportedandtailoredtoChina’sspeciﬁcdemands,whichrequiresbothintensiveinvestmentandindustryexpertise.Privatesectorcompanies,themosteffectivegroupatdrivingenvironmental,socialandgovernance(ESG)development,usuallyrequiremajorincentivesbeforeaction.Source:WorldEconomicForumandOliverWymanChina’sClimateChallenge:FinancingtheTransitiontoNetZero9Thefinancinggap2Chinamustpromoteanenablingenvironmentthatcancreatefunctioningmarketsforgreenfinancing.China’sClimateChallenge:FinancingtheTransitiontoNetZero10China’stransitiontonetzerowillrequireanenormousamountofgreenfinancing–aboutCNY140trillion($22trillion)forthe2020-60periodacrosselectricity,steel,mobility,andconstructionandrealestate.Currently,however,afundinggapofaroundCNY1.1trillion($170billion)ayear,orCNY44trillion($6.7trillion)fortheentireperiod,existsbetweenthistotalandthelikelysupplyoffunds.Atthecoreofthisgapistheneedtofinanceinnovativetechnology.Giventheunprovennatureofmanyofthetechnologies,fundingsuchaninvestmentrepresentsamaterialrisktofinancingproviders.InChina,thegapisexacerbatedbyastructuralimbalancebetweenthesupplyofanddemandforfinancialservices,especiallyforvariousassetclassesandloantenors.ForthekeytechnologiesrequiredtosupportChina’s2060net-zeroambitions,financingchallengesrangefrominsufficientinvestorawarenesstohighlevelsofperceivedrisk(Figure5).Forexample,thesteelindustryfacesagapintheunfundedprocessoptimizationofmini-millelectricarcfurnacesanddepreciationofintegratedblastfurnaceprojectsofaroundCNY3-4trillionfrom2020to2060–approximatelyhalftheentiresteelindustry’sgap.Mobility,andconstructionandrealestatealsofacemajorgreenfinancinggaps(bothCNY8-10trillionfrom2020to2060).Energy,althoughfacingthelargestfundinggap–approximatelyCNY15-20trillion–hasafarclearerpathtocarbonneutrality.Anunderstandingofthetechnologiesrequiredalreadyexists,leavingtheissueofscalingfinancialsupportastheonlymajoroutstandingissue.Accordingly,therelativelymoredifficulttransitionpathwaysforthemobility,steelandtherealestateandconstructionsectorsarethemainfocusofthisreport.Greenfinancinggapinkeyindustriesandtechnologyareas(inCNYtrillion,2020-60)FIGURE5Energy15-20Mobility8-10Constructionandrealestate8-10Steel4-6OthersPhotovoltaic(PV)6-8Mini-millandotherprocessoptimizations3-4H2-DRIOthersOthersWindpower4-6Gridandstorage4-6OthersRoad6-8Aviation1-2Buildingmaterials2-3Buildingconstruction/operation6-8ShippingRailwaysFinancinggap44Source:OliverWymanestimationHydrogen-fuelleddirectreducedironForthekeytechnologiesrequiredtosupportChina’s2060net-zeroambitions,financingchallengesrangefrominsufficientinvestorawarenesstohighlevelsofperceivedrisk.China’sClimateChallenge:FinancingtheTransitiontoNetZero11Oneofthekeyreasonsforafundinggapisthestructuralmismatch,includinginstrumentsandtenors,betweentheavailableandrequiredfinancing.AccordingtosurveysconductedwithintheForumcommunitiesinChina,themanufacturingsectorexpectssignificantlylowerinterestratesforgreenfinancingprojectscomparedtoitsgeneralfinancingcostfornon-greenprojects.Otherfactorswhichwouldhelpcompaniesraisefundsneededforgreencapitalexpenditureandoperationalexpenditureinclude:–Moreflexiblecollateralrequirements,especiallyforsmallandmedium-sizedenterprises(SMEs)–Moredepthandavailabilityinthegreenbondmarket–Longertenorfinancing–Newproducts,includingblendedequitycapitalstructuresSuchchallengesarenotinsurmountable.Mismatchesinfinanceofferingsanddemands,includingfinancialinstruments,tenorsandotherterms,presenttheopportunityformitigatingtheyawninggapmoreefficientlybydevelopingamoreoptimizedgreenfinancesupply(Figure6).ThisposesthequestionofhowChinacancreatetheenablingenvironmentthatwillencouragesuchshiftstowardsrealizingthekindofsmooth-functioningfinancialmarketsneededforitsnet-zerotransition.Greenfinancinggapforkeyindustriesandtechnologyareas(inCNYbillion,2020-60)FIGURE6Loans<3yearsDemand40-45Supply45-50Gap<5EquityDemand20-25Supply<5Gap15-20Loans3-5yearsDemand30-35Supply30-35Gap<5Loans>5yearsDemand15-20Supply5-10Gap5-10BondsDemand10-15Supply5-10Gap5-10Greenﬁnancinggap44Source:OliverWymanestimationChina’sClimateChallenge:FinancingtheTransitiontoNetZero12Buildingastrongerinformationinfrastructure2.1Inrecentyears,financialresourceshaveflowedintofundstargetingChina’sESGventures.However,suchinvestmentsneedtobevalidatedbycredibledataandalignedwithunifiedstandardsforwhatisgreen,bothofwhichrequireclarificationsoftheexpectedscopeandmetricsofcorporatedisclosures.Manyfinancialinstitutionslamenttheabsenceofsuchdisclosuresandlacktheinfrastructuretocapturerelateddata.offinancialinstitutesinterviewedflaggeddataasthebiggestchallengeChinahasnorobusttoolsanddatatoevaluatewhetheratargetisreallygreen.Onmanyoccasions,it’sjustclaimedtobegreen.Demandexistsforgreenfinancingdataprovidersandstandardizedgreenevaluationtools.InChina,welackthedatatogaintherelevantfacts,includinghowtoassessatargetandhowtomonitorifit’susingmoneyproperly.EmissionfactorsusedinChinaarebasedon2012data.That’sveryoutdatedandcanonlycalculateunreasonablylowemissionnumbers.48%Source:QuotescollectedfrompollengineunderChathamHouseRule,2022China’sClimateChallenge:FinancingtheTransitiontoNetZero13Tocreatetherobust,dependabledatainfrastructureneededtosupportclimate-mitigationfinancinginChina,thefollowingstepsneedtobetaken:–DesigningdatastandardsandframeworksrelevanttoChina.Whileinternationalstandardsandframeworksdoexist,China’smarketidiosyncrasies,includingthescaleofitseconomy,itsmanydomesticallydevelopedmanufacturingpracticesandtheuseofheatvaluesandemissionsfactorsthatareonlyapplicableinChina,makeitdifficultfortheseframeworkstoadapttoChina’sneedsortheyarelikelytoresultinsignificantdivergencesinevaluationresults.–Puttinginplaceevaluationmethodologiesandtoolsforcarbonquantification.China’sevaluationmethodologiesandtoolsforcarbonquantificationareunderdevelopedcomparedtothoseusedindevelopedmarkets.Prevalentleadingevaluationsystems,suchasthoseofthePartnershipforCarbonAccountingFinancials(PCAF)ortheParisAgreementCapitalTransitionAssessment(PACTA),arenotdesignedtohandlemanufacturingonthescalefoundinChina.InterviewssuggestmanufacturersarealsounwillingtodisclosedatadeemedsensitivebytheChinesegovernment.CurrentlyavailablesolutionsinChinaareregarded,especiallybyoverseasfinancialinstitutions,asinsufficientlydevelopedandpronetounderestimatingCO2emissions.–Improvingdatacollection.Chinalacksmechanismsforcollectingindustrydataregularlyandconsolidatingdatagatheredfromdifferentsources.Asaresult,itsemissionsdataisfragmentedandoutdated.Variousdatapoints,includingsomeservingascrucialparametersforcarboncalculations,havenotbeenupdatedformorethantenyears.–Standardizingdisclosuresneededforcarbon-neutralitycompliance.Regulatorystandardsforgreenprojects,especiallythosewhichalignwiththeTaskForceonClimate-RelatedFinancialDisclosuresanditsspecificlocalizationforChina,arelimitedintheirrequiredcontents,formatsandtimingsofdisclosures.Theresultingdeficienciesandinconsistencieshinderfinancialinstitutionsfromadequatelymonitoringfundflowsandusage.Addressingtheabovechallengeswillrequireeffortsfrommultipleparties:–Thecentralgovernmentcanhelpprovidetheimpetustoestablishuniversalgreen-financingstandardsanddisclosureframeworksandensuretheirconsistentimplementationacrossthecountry.Theseshouldbesupportedbyappropriateincentivesandpenaltiessuchastaxbenefits,accesstogovernmentsupport,finesandwithdrawalofofficialbacking.–Carbon-evaluationmethodologiesmustberefinedandalignedacrossthecountry.Thiscanbeachievedeitherthroughlocalizingglobalmethods(suchasthoseofPCAF,PACTAandtheIntergovernmentalPanelonClimateChange),adjustingthemtoChina’sspecificconditions,orbyrefiningtheevaluationsystemthatChinanowhasinplace.–Itisessentialtobuildtheappropriatedatabasesforprovidingbettergreenportfolioevaluation.Suchdatabaseswillhavetoincludeinformationsuchasproductioncapacity,emissions,pricingandgeospatialupdatesthatcanbereadilyupdatedandaccessed.Emergingtechnologies,suchassensorsbasedontheinternetofthings(IoT),canplayaninvaluableroleinthisrespect.Carbon-evaluationmethodologiesmustberefinedandalignedacrossthecountry.China’sClimateChallenge:FinancingtheTransitiontoNetZero14Balancinglendingsupplyanddemand2.2Therisk-aversenatureoffinancialinstitutionshaslongledthemtofavourprovidingfundsforprojectsinindustries,innovations,companiesandassetclasseswithtestedprofitabilitytrackrecords.Withmanynet-zeroschemesunproven,institutionswillperceiveahigherdegreeoflendingriskthantheyareaccustomedto.WehaveidentifiedseveralareasthatmustbeaddressedduringChina’snet-zerotransition,butwhichfinancialinstitutionshavepaidinsufficientattentiontoduetoalackofinformation.Thisisparticularlytrueforcertainindustries,companiesandinnovationareas.Theunbalanceddistributionoffinancialsupplysignificantlyexacerbateskeypartsofthefundinggap.Underlyingthelackoffinancingsolutionsfortheseinnovationsaretwokeyreasons:–Knowledgegap.ProjectsrequiredeepindustryexpertisetounderstandemissiondynamicsandinvestorsinChinahaveyettoacquirethenecessarytechnicalexpertisetoassessthem.Industryresearchsuggeststhatmostplayersinthemarketdon’thavesufficientexpertisetoengagein,letaloneevaluate,suchprojects(Table2).–Endogenousrisks.Thestructureofcertainindustriesmakesinvestinginthemlessattractive.Forexample,thesteelindustry’slimitedprofitabilityandtherealestatesector’shighleveragepointtowardsthemhavingahighercreditrisk.Inaddition,theseindustriessometimesresorttodisguisingprojectsasgreentoraisefundstoresolveimmediatefinancialdifficulties.Thiscreatesanevenmorechallengingmarketandanuncertainoutlookforgenuinelygreenprojects.ThechallengesofassessingasteelprojectTABLE2Afairinvestmentdecisionrequires…Financialinstitutionsarechallengedbythefactthat…Technicalexpertisetoprojectkeyevaluationindicatorsaccurately,suchasmanufacturingcapacity,finalpassedyield,costs,etc.Timeisrequiredtosetupaninvestmentteamwithcutting-edgemetallurgicaldomainknowledgeInsightsabouttheprospectsofdifferentpathwaysTheiraccesstoprospectsonpolicies,technicaladvancementtrends,etc.islimitedThewillingnessandresourcestoconductcontinuouson-siteduediligenceItishardtorecruitanalystswhoarewillingtoperformcontinuouson-siteduediligence;outsourcedteamswiththerightknowledgearescarceofinterviewedindustryplayersflaggedlendingsupply-demandimbalancesasamajorchallengeSomesectorsarealreadyovercapitalizedthankstofloodsofhotmoney.Meanwhile,someotherinnovations,suchasmini-mills,arestilllittleunderstoodbyfinancialinstitutions.Formanyleadingplayers,debtfinancingmaynotbeattractive.Capitalmarketplaysandcashmanagementsolutions,suchasindustryfunds,IPOsorinjectionsfromdownstreamsuppliers,arerequired.Manygreenprojectsaretoosmallandsotoocostlytododuediligenceon.44%Source:QuotescollectedfrompollengineunderChathamHouseRule,2022China’sClimateChallenge:FinancingtheTransitiontoNetZero15Smallandmedium-sizedmanufacturinginnovatorsfaceanespeciallyhardtimesecuringfinancing.Thisisdespitethembeingthemostproactivebusinesseswhenitcomestoresolvingnet-zerotechnicaldifficultiesandtheirgeneralimportancetotheeconomy,accountingfor65%oftotalCO2emissionsinChina4andaround60%ofGDPand80%ofallemployment.AsSMEsaremoreresponsibleforScope3emissionsthanlargercompanies,greeningtheiroperationswillhaveamajorimpactonloweringtheupstreamemissionsofthoselargercompanies.Underlyingtheirproblemsinsecuringfundingare:–Alackofappropriatelytailoredfinancialproducts.FinancialinstitutionstendtoavoidlendingtoSMEsduetolesspublicdatabeingavailableaboutsuchcompanies’performance.Ifdataisavailable,financialinstitutionsoftenstillstruggletodevelopfinancingofferingsthatmeettheneedsofSMEs.–Alackoflong-termfinancingsupport.Greenprojects,especiallythoserequiringinvestmentinresearchandinnovation,typicallyrequirealongerpaybacktimethanconventionalprojects.Forexample,agreencementmanufacturingplanttypicallytakes8-10yearstorepayitsloans,longerthanatraditionalcementplant.Itisalsolikelytohavehighercostsandsowillbelessprofitable.Mostfinancialinstitutionsprefershorttenors(1-3years)forsuchprojects.–Top-downpushfromanchors.Drivinginnovationandgreeningthesupplychain,forwhichSMEsarekey,requiresagreaterpushfromtheiranchors,i.e.corebuyers.However,iftheanchorsthemselveslackcarbonemissionambitionsandknow-how,theentiresupplychainremainsdisincentivized.Assuch,ensuringthereareclearanchorcommitmentstodrivingthegreeningofsupplychainswill,inturn,increasethedemandformoreinnovativegreeningsolutions.Thefollowingapproachescouldhelpfinancialinstitutionsde-risklendingtoSMEs:Establishtouchpointswhereinvestorsandentrepreneurscangainexposuretoeachother.Suchpointscouldincludefocusgroups,industryforumsandassociations,andone-offevents,allaimedatmitigatingtheinformationgapbetweenSMEsandfinancialdecision-makers.–Developnewknowledgeservices.Knowledgeservices,suchasconsulting,expertnetworks,dataprovision,andAI-drivendatacaptureandknowledgetools,haveenormouspotentialtoprovidetoolsusefulforunderstandingnewgreentechnologies.–Createappropriatefinancingproducts.Investorswith“smartgreenmoney”–fundsthatcanbecommittedtolong-termgreenprojects–andgrassrootsfinancingefforts,suchasgreendeposits,arethebestfundingsourcesforinnovatorswithlongfinancingcycles.Forexample,HSBC,thefirstinternationalbanktooffergreendepositsinChina,putsthefundsraisedintolong-termgreeninvestmentprojects.Suchschemesalsohavethebenefitofcontributingtothebank’scorporatesustainabilityagendasandreputation.–Offerone-stopfinancingsolutionsthatintegratefundingsourceswithdifferenttenors.Forexample,privateequityfirms,assetmanagersandbankscanworktogethertoprovidefundingfordifferenttenors,withprivateequity/venturecapitalfirmsofferingthelongestterms,assetmanagersofferingmid-termfacilitiesandbankscoveringshort-termloans.–Clearcommitmentsfromanchors.Anchorsneedtoworkcollaborativelywiththeirfinancierstodesignpropositionsthatcreatetherightincentivesforgreensupplychainsandaccesstoinvestmentsthatsupportthetransition.Thiswillrequirebroadercollaborationbeyondbanksandanchors,includingthirdparties,toassess,measureandverifyincentivesforSMEs.Ensuringthereareclearanchorcommitmentstodrivingthegreeningofsupplychainswill,inturn,increasethedemandformoreinnovativegreeningsolutions.China’sClimateChallenge:FinancingtheTransitiontoNetZero16Enhancingthepolicyframework2.3Governmentpoliciesarecrucialforsupportinggreeninitiativesandrelatedfinancingactivities,manyofwhichhavepowerfulexternalitywelfarebenefitsbutcannotbeself-financedorexpectedtohavepositivecashflows.Anintensiveeffortisrequiredtodevelopsuchpoliciesandthestructureandorganizationsneededtooverseetheirimplementation.Chinahasmadegoodprogresswithitspolicyframework,butroomforimprovementremainsinvariousareas.Forexample,itsLimitThree,AllowTwopolicycoveringemissionsbythesteelindustryhasbeenimplementedwithdifferinglevelsofstringencyacrossthecountry(Figure7).TheLimitThree,AllowTwopolicyFIGURE7Source:WorldEconomicForumandOliverWymanLimitadditionalproductioncapacitystartingin2016LimitproductionusingsubstandardenvironmentalgovernanceLimitproductionfromintegratedblastfurnaces✓AllowproductioncertifiedashavingClassAsuper-lowemissions✓Allowproductionusingmini-millelectricarcfurnacesThreeLimitsTwoAllowsStandardsareunclearforenvironmentalgovernance,leavingroomfordiscretionbylocalgovernments.Policiesareinconsistentlyimplemented.Industryparticipantsacknowledgelargecompaniesaremorelikelytoescapethelimitations.SMEsfacemorestringentregulations.Policiesareneglectedandstandinthewayofinnovation.Newproceduresandtechniques,suchasenhancedexperimentalH2-DRIandblastfurnaceswithnewcarboncapture,utilizationandstoragetechnology,arelesslikelytobedeployedasthenewtechnologieslackempiricalproofofemissionreduction.Policycanbeunpredictable,especiallyforsmallandmedium-sizedplayers.Asaresult,theystruggletoplanaccordingly.China’sClimateChallenge:FinancingtheTransitiontoNetZero17Otherpolicychallengesremain.Amongthosewhichstandoutare:–Reducingtheneedforgovernmentsupport.GovernmentsupportiscrucialduringtheearlystagesofmanyESG-relatedinnovations.However,companiesshouldalsobeencouragedtofindwaysofmonetizingtheirnewproductsinsteadofrelyingongovernmentsubsidiesastheirprimarysourceofincome.Inthelongrun,evidenceofmarketviabilitywillalsobeneededtoobtainfinancingfromthemarket.–Regionalpolicyvariation.PoliciesandpolicyimplementationoftenvarybetweenprovincesinChinaandsometimesevenbetweencitiesandprefectureswithinthesameprovince.Amongtheelementswhichcanvaryaremetrics,subsidiesandtechnicalspecifications.Suchdifferencescanmakeithardforcompaniestocreateproductsthatcanbeusedatanylocationandforfinancialinstitutionstoconductduediligencestudies(Figure8:DifferentgreenbuildingstandardsinselectedChinesecities).5,6,7,8InApril2022,theStateCouncilannounceditwaslaunchinganinitiativetoestablisha“unifiednationalmarket”,whichappearstohavethepotentialtoendormitigatelocalprotectionism,policyvarianceandmarketfragmentation.9–Taxincentives.Despitebeingapotentiallypowerfultooltoacceleratetransitions,taxincentivesremainanunderutilizedtoolinChina.Carbontaxesonexports,theoppositeoftheEUapproach,couldhaveasizeableimpactgiventhescaleofthecountry’sexports.Taxexemptionscouldbeputinplaceforgreenproductsandservices.DifferentgreenbuildingstandardsinselectedChinesecitiesFIGURE8HuzhouHuzhouGreenConstructionAssessmentGuidelinesHangzhouDB33/1092-2021ShanghaiDG/TJ08-2090-2020Ningbo2017YONGDX-17Source:WorldEconomicForumandOliverWyman,basedonlocalgovernmentdisclosuresPoliciesaredifferentacrossregionsandoftenkeepchanging,forcingfinancialinstitutionstokeepreviewingtheirstrategies.Top-downpoliticalpressureisstillneededtoforcetheindustrytofinishitsgreentransition.Source:QuotescollectedfrompollengineunderChathamHouseRule,2022China’sClimateChallenge:FinancingtheTransitiontoNetZero18SeveralapproachescouldbeusedtohelpfinancialinstitutionsfacelessriskintheirdevelopmentofproductsforfinancingChina’stransitiontocarbonneutrality:–Buildconsumerawarenessofthebenefitsofbuyinggreenproductstoreducerelianceonpolicies.Promotionsandmediacampaignsexplainingthelong-termbenefitsofpayingapremiumforgreenproductscanplayaroleinchangingpublicattitudestosustainability.Accordingtothe2021OliverWymanForumGlobalConsumerSentimentSurvey,clearersustainabilitylabelsalonewouldencourage45%ofpeopleinChinatoadoptmoresustainablebuyinghabits.10Dedicatedproductscouldalsosupportsalesofgreenproductsfromfinancialinstitutions,suchasgreenmortgageproductsforgreenresidencesandgreeninsuranceforelectricpassengervehicles.Asaresult,theprimarysourceofrevenuecouldshiftfromdirectgovernmentsupportmechanismssuchassubsidies,taxbenefitsandextra-low-rateloanstomarketmechanisms.–Carboninclusioncouldprovetobeanimportantinstrumentforraisingcustomerawarenessoftheimportanceofswitchingtocarbon-neutralproducts.GivingpeopleCO2emissioncredits,suchasthoseoftheChinaCertifiedEmissionReduction(CCER)scheme,couldstimulateanawarenessoftheneedforemissionscontrol.OnepossiblewayofdoingthiswouldbetograntpeoplecreditsforusingpublictransportorEVs.Whilesuchschemespresenttechnicaldifficulties,overcomingthemcouldalsoleadtoinnovativewaysofeducatingthepublicabouttheimportanceofcuttingCO2emissions.–Putinplaceaunifiedandconsistentnationwidepolicyframeworkgoverningregulations,standards,subsidiesandotherrelevantmechanisms.AusefulmodelforemulationinthisrespectistheoneusedintheEuropeanUniontobuilditsemissionstradingsystem(Figure9:TheevolutionoftheEUEmissionsTradingSystem(ETS)policies).11–Developmechanismsformobilizingpublic-privatefinancing.Forexample,stateguaranteesareonewayofprovidingadditionalreassurancetolenders,whilenewmarketmechanisms,suchastheCCER,havegreatpotentialtoattractmoresupportfromprivatecapital.TheevolutionofEUETSpoliciesFIGURE9Emissionallowance:SetbasedonKyototargetsMarket:25countrieswithintheEUIndustry:PowerGas:CO2Phase1(2005-2007)Emissionallowance:6.5%lowerthan2005Market:EU27+Iceland,Liechtenstein,NorwayIndustry:PowerandaviationGas:CO2+N2OPhase2(2008-2012)Emissionallowance:Annualdeclineof1.74%Market:EU28+Iceland,Liechtenstein,NorwayIndustry:Power,aviationandmanufacturingGas:CO2,N2O,Perﬂuorocarbons,etc.Phase3(2013-2020)Emissionallowance:Annualdeclineof2.2%Market:EU27+Iceland,Liechtenstein,NorwayIndustry:Addshippingby2023Gas:CO2,N2O,Perﬂuorocarbons,etc.Phase4(2021-2030)Carboninclusioncouldprovetobeanimportantinstrumentforraisingcustomerawarenessoftheimportanceofswitchingtocarbon-neutralproducts.Source:WorldEconomicForumandOliverWyman,adaptedfromtheEuropeanCommission,EUEmissionsTradingSystem,2022NitrousoxideChina’sClimateChallenge:FinancingtheTransitiontoNetZero19China’semissionstradingmarket,CCETEandtheCCERschemehadbeenintendedtoplayasimilarroletotheEUETS(Figure10:EmissionstradingsystemsinChinaandinternationalmarketscompared).WhileCCETEwaslaunchedsuccessfullyinJuly2021,theCCERschemewassuspendedin2017duetoalackofdemandforcarboncreditsfromindustry,underdevelopedcarbon-reductionevaluationmechanismsandsubstandardprojects.AnimprovedmechanismforCCER,includingevaluationmechanismsandprojectadmittance,willbeneededatsomepoint.EmissionstradingsystemsinChinaandinternationalmarketsFIGURE10SurplusallowanceSurplusallowanceFundingRealemissionsSecondarymarket:CarboncredittradingmarketChineseCertiﬁedEmissionReductionmarketMainmarket:CarbonallowancetradingmarketChinaCarbonEmissionTradeExchange(CCETE)RealemissionsAllowanceshortageCarboncredits(CCER)FundingRealemissions<primaryallocationEntityAEntityBEntityCEmissionsreductionmarketRealemissions>primaryallocationSource:WorldEconomicForumandOliverWymanChina’sClimateChallenge:FinancingtheTransitiontoNetZero20Industryanalysis3TransitioningChina’scriticalsectorswillbeinstrumentalinreducingcurrentemissionsandclosingfundinggaps.China’sClimateChallenge:FinancingtheTransitiontoNetZero21Initstransitiontocarbonneutrality,Chinawillhavetotransformitsentireeconomy.Atthesametime,itisclearthattransitioningahandfulofindustrieswillbeparticularlycriticalbecauseoftheircurrentemissionscontribution,theirroleintheeconomy,andthesizeoftheirrespectivefinancinggaps.Onesuchcriticalindustryismobility,becauseofitsroleineverydaylife.Similarly,constructionandrealestateposesanotheruniquechallengebecauseofthescaleofbuildingthatChinawillneedinthecomingdecadesaspartofitsongoingurbanization.Andthenthereissteel–arguablythegreatestmarkerofChina’sindustrialdevelopmentduetothecountry’s57%shareofworldoutput.Thissectionexplorestheinnovationandfinancingneedsofeachoftheseindustriesindetail.Mobility3.1OverviewChina’smobilitysectoremitted1.1billiontonnesofcarbonin2020,accountingfor11%ofallemissions.12Althoughthisrelativefigureisfarlowerthanintheworld’sdevelopedeconomies,wheretheindustrytypicallyaccountsforatleast30%ofemissions,itislikelytogrowasChina’sindustrializationandconstructionslow.Withinmobility,China’sautomotivesector,includingvehiclemanufacturinganduse,andcoveringbothfreightandpassengertransport,isbyfarthebiggestsourceofCO2emissions,accountingformorethan80%ofallsuchemissionsfromthefourmajortypesoftransport(Figure11),13and9%ofChina’stotalCO2emissions.ProportionofCO2emissionsofthefourmajortypesofmobilityinChina(2019)FIGURE1135%74%10%82%21%15%50%FreightturnoverPassengerturnoverTotalcarbonemissionsAviationRoadsRailwaysShipping1%4%2%6%1%Source:WorldEconomicForumandOliverWyman,adaptedfromMOT,StatisticalBulletinonTransportIndustryDevelopment,2020China’sClimateChallenge:FinancingtheTransitiontoNetZero22WithvehicleusagestillontheriseinChina,automotiveemissionsaregrowingatmorethan5%ayear,higherthananyothermajorsector(globally,theshareoftotalemissionsisfargreaterat18%,butthetotalamountisshrinkingby0.5%ayear).Passengervehiclesaccountforapproximately40-45%ofthesector’semissions(35-40%duringthefuelcycle,10-12%duringproductionandformaintenance),whilecommercialvehiclesaccountforaround55-65%(between45-50%inthefuelcycleand8-10%duringproductionandmaintenance)(Figure12).14,15DistributionofCO2emissionsinChina’sautoindustryFIGURE12PassengervehiclesFuelcycleVehiclecycleCommercialvehicles(includingtrucks,buses,excludingsubways)10-12%8-10%35-40%45-50%Source:WorldEconomicForumandOliverWyman,adaptedfromWorldResourcesInstitute,EvaluationandManagementforVehicleLifeCycleCarbonEmission,2020,andCATARC,ChinaEnergySavingandNEVDevelopmentReport2021,2021China’sClimateChallenge:FinancingtheTransitiontoNetZero23Becauseoftheautomotiveindustry’sdominantshareofmobility’semissions,thissectionlargelyfocusesonthissector.Thisdoesnotmean,however,thattheemissionsfromothermobilitysectorsareinsignificant.Aviation,whichaccountsfor10%ofallmobilityemissions,clearlypresentsseverechallengestoChina’snet-zerogoal,especiallygiventhatthiswilllikelybethefastestgrowingofthefoursectors.DuetothehugevolumeofChineseexportstransportedbysea,shippingaccountsforaround6%ofChina’smobilityCO2emissions.Withinternationalshippingaccountingforapproximately2%ofglobalCO2emissions,andChinaresponsibleforaround26%ofthattotal,Chineseshipperscanplayanimportantroleinhelpingtheworldrealizeitsmaritimenet-zeroambitions.Withmostofitsgreenhousegasemissionsarisingfromfuelcombustion,addressingthisissuewillbethemosteffectiveandimportantwayofreducingitsimpact.Railtransport,althoughaccountingforjust1%ofChina’smobilityCO2emissions,hasadifferentkindofsignificance.Giventhatitisalreadyarelativelygreenmeansoftransport,thequestionishowbesttoreduceitsemissionswhileatthesametimeexpandingusage,bothbypeopleandforfreight.OliverWymanestimatesthetotalinvestmentneededtotransitionthemobilitysectortocarbonneutralitybetween2020and2060tobeCNY30-35trillion(around$5trillion),oraroundCNY800billionayear.ItestimatesthefundinggapforthesectortobeCNY8-10trillion.Inlinewiththegreaterpublicsupportgiventotheroadsector–around76%ofallofficialfundingtothemobilitysectorduringthe2016-21period–fundingisexpectedtobemoreeasilyavailablefortransitioningtheautosectortonetzerothanfortheothersectors.Overall,OliverWymanestimatesthetotalfundinggapforautomobilitytobeCNY6-8trillion,foraviation,CNY1-2trillion,andforshippingandrail,CNY1trillion.Keynet-zerotechnologypathwaysTheprincipalsteptowardsgreeningautomotivemobilitywillbehavingnewenergyvehicles(NEVs)dominatethemarket,which,combinedwiththedevelopmentandintroductionofrenewableenergysources,willendthesector’srelianceonfossilfuels.Keytechnologyinnovationsarestillunderdeveloped.ItiswidelyforecastthatNEVswillneedatleastanothertentofifteenyearstobeascostefficientacrosstheirlifecycleastraditionalinternal-combustionenginevehicles.Currently,NEVstypicallycostmoretoproducethantraditionalvehiclesanddepreciatefaster.Productionwillrequirelarge-scaleinvestmentandinnovationrangingfromlong-lifebatteriestoefficientelectricengines,andnotjustfortheirmanufactureanduse.Forexample,batteryladderingtechnologycontinuestoholdgreatpromisebothtoimprovebatteryutilizationandlowerbatteryproductioncosts.However,problemswithsafety,includingthethreatofexplosions,areholdingbackitsadoption.Forexample,large-scaleenergystorageprojectsusingladderbatterieshavebeenbanned.Inaddition,movingtoanautomotivesectordominatedbyNEVswillrequireconcertedeffortstogreentherestoftheindustrychain,fromautomotivecomponentproduction,throughvehiclemanufacturingandsales,totheaftermarketsupplyofpartsandaccessoriesandprovisionofeco-servicessuchasintelligentroute-planningandcar-sharing,totheeventualdismantlingandreuseordisposalofvehiclesandtheirmaterials.AkeychallengeherethatneedssubstantialR&Disidentifyingthestatusofrecycledbatteries.GiventhesizeofChina’sautoindustry–productionwasaround21millionpassengercarsin2019,morethanforanyothercountry–reworkingtheindustrywillbeanenormousandcomplextask,especiallywhenitcomestoestablishingnet-zerosupplychainsacrosstheextendedproductionnetworksthatcharacterizetheindustry(Casestudy1:GACMotorgreenfactory).Currently,CO2emissionsattributabletoindirectsourcesintheautomotivevaluechain–Scope3emissions,astheyareknown–accountforaround35%ofautomotiveemissions.Measurement,reportingandverification(MRV)standardsandclassificationswillalsohavetobeputinplaceforusedandscrapmaterialstosupporttherecyclingofparts.Immatureenergy-conversiontechnologiesalsoremainproblematic.Withmanysafetyissuesstillunresolved,large-scaleenergy-storageprojectsremainbannedinChina.Withinternationalshippingaccountingforapproximately2%ofglobalCO2emissions,andChinaresponsibleforaround26%ofthattotal,Chineseshipperscanplayanimportantroleinhelpingtheworldrealizeitsmaritimenet-zeroambitions.China’sClimateChallenge:FinancingtheTransitiontoNetZero24GACMotorgreenfactoryCASESTUDY1Smartdrivingservicesusingtheinternetofvehicles(IoV),bigdataandothertechnologiescanoptimizeroutestoreduceidlingandunnecessarydetoursfortrafficschedulingandpredictivemaintenance.Forexample,DidaChuxing,oneofChina’sleadingcar-hailingplatforms,reportscuttingCO2emissionsby1.1milliontonnesthroughcarpooling.Accordingtothecompany,eachkilometreofcarpooldrivingsavesanaverageof173gofCO2emissions.16BeijingSinoiovInformationTechnologyisanIoVsolutionproviderthatofferssensorsandmonitorstoprovidedriversandtrafficmanagerswithroutealgorithmsandintelligentvehicleschedules.Amongtheservicesitisdevelopingfordriversaresmartremindersforvehiclemaintenance,refuellingrouteplansandadvicefordriversonenergy-savingdrivinghabits.Forcities,itofferssupervisedmachinelearningoftrafficdatathatcanhelpimprovetheplanningoftrafficrestrictionmechanismsandinfrastructure,suchaschargingstations.GACMotor,aGuangzhou-basedChineseautomobilemakerownedbytheGuangzhouAutomobileIndustryGroup,whichworkswithFiat,Jeep,Honda,MitsubishiandToyota,isexploringnew,greenerprocesseswithitsAIONSmartEcologicalFactory.Amongthefactory’sfeaturesare:–Anenergy-savingdesignthatusesunequalroomheightscutsconstructioncostsby8%andreducesenergyconsumptionby15%throughspacesaving.–Lightweightcomponentmaterialssuchasaluminumalloyswhich,byreducingavehicle’sweight,cancutitsenergyconsumption.–Environmentally-friendlyproductiontechniquesthatreplacevolatileorganiccompoundssuchasbenzenewithwater-basedsolutionsandusenewcoatingpre-treatmentprocessesthatreducetheemissionofharmfulsubstances.–Intelligentenergymanagementsystemswhichusenewenergy-storagetechnologiestostoresurpluselectricityandintegrateitsdispatch.–Renewableenergyproductionthroughtheinstallationof52,000PVpanelswithanannualgeneratingcapacityofmorethan16.7millionkWh–15%ofthefactory’sfull-loadelectricityconsumption.–IoTenergymanagementusingsensorsdeployedacrossthestampingworkshopthatreduceprocessessuchasmotorbrakingandstartingby98%.Source:WorldEconomicForumandOliverWyman,2022China’sClimateChallenge:FinancingtheTransitiontoNetZero25Mobility’sgreentransitionchallengesfortheshipping,aviationandespeciallytherailwaysectorsappearmanageable.Short-terminitiativesaimedataddressingshippingemissionsincludedinthe14thFive-YearPlancoveringthe2021-25periodincludesettingupanationalshipenergyconsumptioncentre,anemission-reductionmonitoringsystemandactivelyparticipatingintheglobalgovernanceofindustryemissionreductions.Atransitiontousingliquidnaturalgasasshipping’sprincipalfuelwouldbringsizeablebenefits,amongthemtheeliminationofnitrogenoxideandsulfideemissionsreleasedbyfuelscurrentlyused.However,technicaldifficultiesandtheriskinherentinthescaleoftherequiredinvestmentareimpedingthedevelopmentandapplicationoftherelevanttechnologies.Inthelongerterm,reductionswillcomefromleveragingsynergywithportsandotherinfrastructure,andthedevelopmentandapplicationofnewfuelsandpropulsivetechnologies.Becauseofrail’slowshareofChina’smobilityemissions,itsmaincontributiontomovingthecountrytowardsitsnet-zerotargetwillbebyincreasingitsshareofpassengersandfreighttransport,therebyreducingroadandairtransport.Incities,thiswillcallforafurtheraccelerationintheconstructionofsubwaynetworksandelsewhereforagreateruseofrailinmultimodalcargonetworkssuchasrail-water,rail-seaandrail-air.Efficientschedulingandcommandsystems,networkoptimizationandtheuseofgreenconstructionandoperationpracticescanalsoplayarole,alongwithadaptingdecarbonizationsolutionsintheconstructionofinfrastructureandrailvehicles.Aviation,likeshipping,primarilyemitscarbonandothergreenhousegasesthroughfuelcombustion.Sustainableaviationfuels,producedfromsustainablefeedstocks,willlikelybethesolution.Currently,suchfeedstocksincludefoodwastesuchascookingoilandsolidwastefromhomesandindustry.Potentialsourcesincludealgaeandvariousplants.Transitioningshipping,aviationandrailBOX1GreentransitionendstageofmobilityFIGURE13Railroadshaveahighershareofcapacityintransportduetoitsenergyefﬁciency.Morecleanenergy(e.g.hydrogen)hasbeenpiloted.Commercialvehiclesalsoshiftedtocleanenergyincludinghydrogenandelectricity.Vehiclesaremanufacturedingreenfactoriesviacleanenergyandrecycledmaterials.Passengervehiclesaremostlyelectric.Well-developedNEVinfrastructuresuchaschargingpiles.Cleanfuels(e.g.LNG)becomethemajorenergysources.Sustainableaviationfueliswidelyadopted.Source:WorldEconomicForumandOliverWymanChina’sClimateChallenge:FinancingtheTransitiontoNetZero26WhatneedstohappenDuetothescaleofchangeneeded,theautosector’sgreentransitionwillneedtobeaddressedbothfromwithinthesector,byautomakersandtheirsuppliers,butalsofromtheoutsidebylookingattheneedsofconsumers,whatpolicystepsthecentralandregionalgovernmentsshouldbetakingandhowfinancecanbestplayarole.Innovationwillbecriticalinalltheseareas.1.FinanceinnovationGiventhefundinggapfacedbyvariousemergingNEVtechnologiesandtheslowpaceofinfrastructuredevelopment,financialsupportwillberequiredacrossseveralkeyinnovationareas.CapitalhasbeenrushingintoNEVsbuttherearealsoothercarbon-reducingtechnologiesthatrequirefunding,aswellaspotentiallyprofitableinnovationareaswithlargerfinancinggaps.Financingtheinfrastructureforchargingisoneareathatstandsout,alongwithsupportforbatteryrecyclingandpossiblyestablishinganationalrare-earthpricingmechanism.Also,newfinancialsolutionsrequiredatainfrastructure,strongerandextendedresearchcapabilities,andchannelstoreachrelatedtargets,asdescribedinsection2ofthispaper.InterviewswithexpertsfromdifferentForumcommunitiesshowedthatloanswithtenorsoffiveormoreyearsarestilllackingintheseareas.Theindustry,andespeciallyemergingNEVmakers,wouldalsobenefitfrommoreequityinvestmentsandcapitalmarkettoolsthatmorecloselymeettheirspecificrequirements.Developingthesenewtoolswillrequireclosecollaborationbetweenbanks,privateequityandventurecapitalfirmstomanagetherisk-rewardtrade-offs.Financialinstitutionsmustalsoexaminewhetherandhowtheycanbeincentivizedtoofferdiscountedlendingratestogreenvehiclemakersandtheirsuppliers.Suchanapproachwouldhelptheindustryandfinancialinstitutionsachievetheirnet-zeroambitions.Banksneedtogetaheadoftheirownambitionstoaffectchange.2.CollaborationAsScope3emissionsaccountforaround35%ofallmobilityemissions,producingandoperatinggreenvehicles,trains,aircraftandshipscallforcoordinatedeffortsinvolvingmanycompanies.Findingwaystoincentivizeallplayerstomovetogetherposesdifficultorganizationalproblems,butthereisnoalternativetoclosercollaboration.Buildingoutvehiclechargingnetworksisonecrucialareathatcouldbenefitfrompublic-privatepartnerships,withtheprivatesectorsupplyingthetechnologyandfinancing,andthepublicsectorhelpingwiththeprovisionofsites.Morebroadly,manufacturingsupplychainsacrossthemobilitysectorarelongandcomplex.Achievingagreentransitionacrossthesector’svariousvaluechainswillrequireinnovativemechanismstomotivateupstreamplayers.Oneapproachisformanufacturerstosetmandatorygreenstandardsfortheirsuppliers,workingwithfinancinginstitutionstodesigngreenfinancingpropositionstoverifyprogressinlinewithincentivesandgoals.Anotherisforbuyerstopayhigherratesforgreenproductstoincentivizetheirsupplierstomaketheiroperationssustainable.Alternatively,companiescanexploresofterapproaches.Ford’sPartnershipforaCleanerEnvironment(PACE),forexample,doesnotsetmandatoryrequirementsforsuppliersbutrathersetsouttogaintheirsupportthroughathree-stageprocess:–Empowerment:providingsupplierswiththemeanstheyneedtoovercometheircarbonneutrality“painpoints”,suchasnothavingtherightdataevaluationtools.–Guidance:helpingsuppliersstandardizetheircarbonneutralitypracticesbydesigningnormsandstandards,includingdatacollectionandresultreporting.–Sharing:encouragingsupplierstosharetheirsuccessfulcarbonneutralitypracticeswithothercompanies.Alreadymorethan50companieshavejoinedPACE.TheyareexpectedtoreduceFord’ssupply-chainCO2emissionsby680,000tonnesoverthenextfiveyears.Furtherdowntheroad,financialinstitutions,orpossiblyForditself,couldoffersupplychainfinancingproductstiedtothegreenperformanceofsupplychainplayers;thegreenertheiroperations,thebetterthefinancingtermstheyareoffered.Finally,asmanyconsumersremaineitherunawareorunconvincedoftheneedtoshifttogreenmobility,betterconsumereducationmeasurescouldleadtoincreasedadoptionofgreenmobilityproductsandtheirrelatedfinancialproducts,suchasloansandinsuranceforEVs.Achievingagreentransitionacrossthesector’svariousvaluechainswillrequireinnovativemechanismstomotivateupstreamplayers.China’sClimateChallenge:FinancingtheTransitiontoNetZero27Theconstructionandrealestatesectorcontributesaround15%18ofChina’sCO2emissions,slightlyhigherthanits14%contributiontoGDP.Theseemissionscomefromtwoprincipalsources:thematerialsusedinconstructionandconstructionitself,andfromtheoperationofabuildingoveritslifecycle.Overallemissionsacrossthebuildinglifecyclecanaccountfor51%oftotalChineseCO2emissions19iftakingallScope1,2and3emissionsfromindooractivitiesintoaccount(Figure14:CO2emissionsalongtheconstructionlifecycle).Scope3emissions,amongthemmaterials(includingsteel),constructiontechnologiesandbuildingoperations,arethemaintargetsforreduction.ConstructionProductionofmaterials–Heatingforfurnaces–Fluxdecomposition(dolomite/limestone)Construction–Fuelformachinery–TransportationofrawmaterialsOperation–Electricityforutilities–HeatingfuelsDemolitionandrecycling–Explosives–Wastetransportation–Non-CO2greenhousegasesfromlandﬁll–Repurposingofbuildingmaterials3.PolicysupportBeyondfinance,thecentralandlocalgovernmentswillalsohavetoprovidebroadpolicysupport.Taxpoliciesgivingpreferentialtreatmentregardingtheconstruction,purchaseanduseofEVsoverinternal-combustion-poweredvehicles,currentlycoveringtheperioduptotheendof2022,willneedtobeextendedandpossiblybroadened.HongKongoffersamodelthattherestofChinamightwanttoemulate,waivinguptoHKD97,500($12,500)ofthefirstregistrationtax(FRT)forelectricpassengercarsandwaivingallFRTandallowinga100%capitalexpenditureprofit-taxdeductionforcommercialEVs.Standardsareanotherimportantareaforpolicy,forexample,forchargingmethodstopreventsitesfromonlyofferingTesla-specificsuperchargers.AnexampleworthconsideringistheUnitedKingdomanditsrolloutofachargingnetworkwithstandardizedconnectors(plugs)andqualitystandardsdevelopedbytheBritishStandardsInstitute,datatransparencyrulesandpaymentmethods,allaimedatimprovingtheuserexperience.17Otherpolicyoptionsthatneedtobeconsideredincludetheconstructionofindustrialparks,specialland-leasingschemes,supportforupstreamsuppliersandstafftrainingandeducationschemes.Constructionandrealestate3.2OverviewSource:WorldEconomicForumandOliverWymanFormsofemissionacrosstheconstructionandrealestatelifecycleFIGURE14China’sClimateChallenge:FinancingtheTransitiontoNetZero28DevelopedcountriesareleadingChinaintheapplicationoftechnologiesforlow-carbonmaterials,construction,operationandrecycling,andalsoinhavingstringentenvironmentalstandards,allofwhichpointthewayforwardinmanyareas.FinancialinstitutionsarealsostartingtoexploreinitiativesaimedathelpingtheconstructionindustryreduceitsCO2emissions.Asasignificantportionofrealestate-relatedCO2emissionsoccurduringtheproductionofmaterials,especiallycement,andtheconstructionstagesofabuildingproject,investmentininnovationshouldbefocusedontheseareas.Upgradingconstructiontechnologiesalsohasaroletoplay,asdoesfindingwaysofreducingenergyusageandmaintenanceservicesthroughoutabuilding’slife.Keynet-zerotechnologypathwaysCO2emissionsareproducedduringthefourstagesofabuilding’slifetime,whichareconstructionandtransportofmaterials,thebuilding’soperationanddemolition.Thebuildingmaterialscomponent,referredtoasembodiedcarbon,contributesasignificantamountofemissions–cementproductionaloneisresponsiblefor15%ofChina’sgreenhousegasemissions.Worldwide,cementproductionisresponsibleforaround5-6%ofemissions.Thewidespreaduptakeoflow-carbonalternativestocementoffersapossiblewayforwardfortheindustry(Casestudy2:AnhuiConchCement).AnhuiConchCementCASESTUDY2Source:WorldEconomicForumandOliverWyman,2022AnhuiConchCementisChina’slargestcementmanufacturer.HeadquarteredintheAnhuiprovinceofWuhu,itswhole-processsmartcementproductionplantworkstoreducecarbonemissionsacrosstheentireproductionprocessthroughtheuseofinnovatetechnologiesandalternativeenergysources.AnhuiConchhasreceivedsubstantialofficialsupportforitsgreentransition.In2020,governmentsubsidies,includingtaxrebatesforthecomprehensiveuseofresources,totalledmorethanCNY800million($125million).IthasalsoobtainedloansatfavourableratesfromtheChinaCleanDevelopmentMechanismFundandotherinstitutions.ProductionprocessRawmaterialcrushingRawmealandclinkerproductionCementgrindingInnovationortechnologyappliedUsingindustrialsolidwasteasrawmaterial;installingcarboncapture,usageandstorageequipment.Improvedenergy-efficiencysystemsintroducedforgrinding,pre-heating,electricmotors,etc.Scrubbingtechnologiesintroducedtotreatkilnsmokeandfluegases.Introductionofsolar,wind,biomassandothernewenergysourcesforthesinglebiggestpower-consumingprocessincementmanufacturing.Outcome50,000tonnesofhigh-purityindustrial-andfood-gradeCO2producedannually.Nitrogenoxide(NOx)emissionscutbyaround1.3tonnesannually.Company-wide,energysavingswillreduceCO2emissionsby8.5tonnesannually.Company-wide,standardcoalusagewillbecutby10.8tonnesannually,andCO2emissionsby28tonnesannually.China’sClimateChallenge:FinancingtheTransitiontoNetZero29Oneoftheprincipalwaysofreducingemissionsisbyaddressingenergyefficiencyandtheuseoflowercarbonmaterialsupfrontinthedesignstage.Certaincertifications,suchasLeadershipinEnergyandEnvironmentDesign(LEED),canprovidehelpfulguidelines.Reducingemissionsoverthelifetimeofabuilding’soperationrequiresusingenergyfromrenewablesourcesandincreasingenergyusageefficiency.Applicableenergytechnologiesincludegeothermalheatpumpstodrawenergyfromthegroundaswellaswindmillsandsolarpanels.Insulatedbricksmadeofpolymermaterialswithlowthermalconductivitycanhelpretainwarmthinthewinterandkeepabuildingcoolinthesummer.Traditionally,abuilding’slifeendedwithitbeingdemolishedbybulldozersorexplosivesandmuchofthesubsequentwastematerialbeingtransferredtolandfills,resultinginbothresourcedepletionandenvironmentaldamage.Alternativesnowunderdevelopmentinvolvereusingasmuchasmuchofabuilding’smaterialsaspossible.Variouscountriesareexperimentingwiththedesignfordisassembly/adaptationprocessesthatallowfuturebuildingstobebuiltfrompreviousones.Thisrequiresbuildingstobebuiltwitheasilyseparablestructuralandarchitecturalcomponentsthatarepurposefullydesignedsothatwholebuildingscanbereused.RecyclingBuildingsaredesignedforrecycling,withthemajorityofcomponentsbeingrecycled.BuildingmaterialsCementisproducedwithrecycled/wastematerialsandgreenenergy.Reducedusageoftoxicmaterials.ConstructionEnergy-efﬁcientmachineriesandvehiclesareused.Greenstandardsarewidelyadopted(e.g.LEED).OperationBuildingmanagementsystemsforenergy,water,etc.toreduceresourceusage.BuildingsbecomeanenergygeneratoritselfbyapplyingdistributedPVmodules.DemolitionBuildingsaredesignedfordisassembly/adaptation.GreentransitionendstageofconstructionandrealestateFIGURE15OneoftheprincipalwaysofloweringemissionsduringthedesignandconstructionphaseisbyintroducingcertifiedgreenpracticesSource:WorldEconomicForumandOliverWymanChina’sClimateChallenge:FinancingtheTransitiontoNetZero30WhatneedstohappenTacklingtheconstructionandrealestatesector’stransitiontonet-zeroemissionswillrequirelesstechnologyinnovationthaninthemobilityandsteelindustries,andmorerelianceonregulatoryandincentiveschemesthatencourageoptimalindustrybehaviours.1.FinanceinnovationWithmanygreenrealestateprojectsrequiringhigherupfrontcostsandalongerpaybackperiod,long-termfinancialsupportiscritical.Whilethereisgrowingresearchthatindicatesgreenbuildingscangenerateincreasedcashflowrelativetolesssustainablepeers,thehigherinitialcostcandissuadedevelopersthatdonotplantoholdtheassetlong-term.Loanperiodsneedtoextendforatleasttenyears,theaverageperiodfromlandacquisitiontothefirstsaleofunits.Tofacilitatesuchloans,industryplayersneedtoaddressthegapbetweentheinformationanddataitcurrentlyprovideslendinginstitutionsandwhatthoseinstitutionswillrequirefortheirlendingdecisions.Alsoneededwillbetaxonomiesandstandardsforassessingenergysavings,emissionreductionsandothermeasuresforjudgingenvironmentalsustainability.Financialinstitutionsshouldplayaroleinensuringthatlendingpracticesalignwithofficialregulationsand,wherenecessary,stipulatehowstandardsshouldbeestablishedandthecriteriawhichneedtobemetforloanstobeextended.Realestatecompanies’demandsforgreenfinancingincludelonger-termsolutionsandmoreSMEfunding.Forthemostpart,SMEsarestillneglectedbylendinginstitutions,whichprefertoprovidegreenfinancingsupporttolargecompanies.Theselargeinstitutionsneedtoworkwithbankstoputinplacetherightincentivestosupportthegreeningoftheirsupplychains.Thereisasharedinterestinlargecompanies,financiersandSMEsworkingtogethertomakethishappen,whichrequiresbankstoinnovatetheirsolutionswhileworkingcloselywiththeindustry.2.CollaborationRaisinggreenfundingrequiresthesupplyofbetterinformationthantheindustrycurrentlyprovides.Developingandinstallingenvironmentalmonitoringsystemsalongwithappropriatedatamanagementandanalysistechnologiesarenecessarysteps.Cross-value-chaincooperationwillberequiredtoset,assessandregulateemissioncontrolefforts,allnecessarytoreduceScope3emissions.Allrelevantpartiesmustcontributetogreencertificationstandards,methodologiesforgreenhousegasMRVandhowinformationanddatacanbeaccessedandshared.Thiscollaborativeprocessneedstobesupportedbytherightincentives,bothfinancialandnon-financial.Theindustry’slong-termdevelopmentwillalsobehelpedbyeducatingend-usersontheroleofmortgagesandotherrealestatefinancialproductsandtheimpactgreenbuildingpracticescanhaveonthecostofsuchinstruments.InShanghai,forexample,thedailyrentforagreengrade-AofficebuildingisRMB10.5persquaremetre,whileforanon-greengrade-Abuilding,itisRMB8.5.Whatbenefitswillaccruetoarenteroftheformer?Asmanybuyersandusersremainunwillingtopayagreenpremiumforbuildings,educationontheimportanceofmovingtherealestatesectortowardscarbonneutralityisneeded.Shared-spacemodels,suchasWeWorkorAirbnb,canalsocontributetoreducingabuilding’scarbonfootprintbyincreasingitsspaceutilizationrateinthewaysimilarmodelsinthemobilitysector,suchascar-hailing,haveproveneffectiveinloweringoverallcarbonusagefortravel.3.PolicysupportGovernmentsatalllevelswillhavetoofferpolicysupport,particularlyforsettingandmonitoringgreenandotherstandards.Varioussurveyshavefoundthatpeopleacrossthecountrytendtoseeofficialsasthekeyforcedrivingchange.Forexample,whenasked“Whodoyouthinkshouldbemostresponsibleforaddressingclimatechange?”,some68%ofChinesepolledbytheForumandOliverWymannamedthegovernment,higherthantheglobalaverageof60%.20Currently,standardsvarywidelyindifferentpartsofChina,sometimesevenbetweenneighbouringregionssuchasShanghaiandZhejiang.Standardscanalsovaryacrossabuilding’slifecycle.Cementproductscertifiedasgreenbybuildingmaterialsdepartmentsmaynotberegardedassuchbyconstructionstandards.Methodologiesforcalculatingtheamountofcarbonreductionresultingfromtheapplicationofnewprocesseshavealsoyettobestandardized.Cityandprovincialgovernmentscancontributebyestablishingclearguidelinesalignedwithlocalneedsandresources.Beijing’sChaoyangdistrict,forexample,offersgrantsofRMB20persquaremetreforallnewLEEDplatinum-certifiedbuildingsandRMB800,000forbuildingsincludedinpilotenergy-efficiencyprojects.21Lastly,taxincentivesalsohavearoletoplayintherealestateandconstructionsector.Thesecouldrangefromtaxcreditsforinstallingrenewableenergysystemssuchassolarpanels,geothermalheatpumpsorwindturbinestoreductions,exemptionsandrebatesforcompletedgreenbuildings.Withmostgreenrealestateprojectstakingevenlongertoearnareturnthanconventionalschemesandtypicallyexhibitingbothhighercostsandlowermargins,long-termfinancialsupportiscrucial.China’sClimateChallenge:FinancingtheTransitiontoNetZero31Steel3.3OverviewSteelproductioncontributesaround13%22ofChina’sCO2emissions,largelyduetotheuseofcoalinmakingiron.Althoughtheindustryhasgreatpotentialfordecarbonization,holdingtheprocessbackisthehighcostofreplacingmanyrelativelynewblastfurnacesandthehighlevelsofleveragethatalreadyexistinthesector.OliverWymancalculatesthefundinggapforChina’ssteelsectortobearoundCNY4-6trillionforthe2020-60period,orCNY100-120billionayear.Thegapcomesfromthefundingshortageforkeytechnologyadvancements,includingmini-millsandH2-DRI.Policiesimpactingtheindustryincludethe14thFive-YearPlanandtheNationalDevelopmentandReformCommission’sIndustrialResourcesComprehensiveUsePlan,whichfocusonreducingrawmaterialsconsumptionbysteelproducers.The14thFive-YearPlan,covering2021to2025,includesacommitmentforChina’srawmaterialssectortoadoptadevelopmentstrategybuiltaroundachievinghigherquality,betterprofitabilityandlowcarbon.Astatementontheplan’sgoals,issuedbytheMinistryofIndustryandInformationTechnologyandothergovernmentagenciesinDecember2021,calledforeffortsacrosstheindustrytorealizea“digitalandgreenshift”.Italsocalledonsteelproducerstonotincreaseproductioncapacity.AnoticeissuedbytheNationalDevelopmentandReformCommission,togetherwithothercentraldepartments,callsforasubstantialreductioninindustrialsolidwasteinkeyindustries,includingironandsteel,toachieveautilizationrateforthebulkindustrialsolidwasteof57%by2025.China’sClimateChallenge:FinancingtheTransitiontoNetZero32Keynet-zerotechnologypathwaysShort-processmini-mills,whichusescrapsteeltoproducenewsteel,generatesignificantlylowerCO2emissionsthantraditionallong-processsteel-making,whichusesironoreasitsprincipalinput.However,suchmillsrequiresignificantcapitalexpenditure–aroundCNY4billionforatypical1milliontonneperyearproductionline–andareliablesourceofscrap.Steelproducedfromsuchmillscostsaround10-15%morethanlong-processsteel.Thegovernmentistryingtoboostthisshare,curbingtheusageoftraditionalintegratedsteelplantswhileraisingthecapacityformini-mills.Withsteelcompanies’profitabilitybeinglow–grossmarginsaveragedjust10.6%in2020andnetmarginsjust3.9%–encouragingthelarge-scaletake-upofnewtechnologiesrequiressubstantialsupportfromthegovernment,state-ownedenterprises,theprivatesector,banksandforeigntechnologyproviders(Figure16).23Longprocess–Effectiveuseofscrapsteelalloyingelements–Flexibleprocess:precisetemperaturecontrolinthefurnaceShortprocessEnergyconsumption11%21%NOXemissions2%SO2emissions8%Investmentinenvironmentalprotectionequipment13%EnvironmentalprotectionoperatingcostEnvironmentalimpactsoflongprocessandmini-millsFIGURE16Source:WorldEconomicForumandOliverWyman,adaptedfromtheChinaMetallurgicalGroup,Comparisonofenvironmentalprotectionandenergyconsumptionbetweenshortandlongprocesses,2020Nitrogenoxide;SulfurdioxideIndustryexpertsforecastthatmini-mills,whichusescrapsteelastheirrawmaterialandelectricitytopowertheirfurnaces,couldcontributetoreducingtheindustry’semissionsbyaround8-10%.IntheUS,mini-millsaccountforaround70%ofallsteel-makingcapacity;inChina,theirsharecurrentlyisonlyaround15%,thoughitisforecasttorisetoapproximately80%by2050(Figure17).24,25China’sClimateChallenge:FinancingtheTransitiontoNetZero33ChinaUnitedStatesEuropeanUnionKorea,R.O.JapanMini-millsIntegratedmills10%70%41%32%25%76%100%59%68%30%90%Percentageofmini-millsacrosscountriesFIGURE17Source:WorldEconomicForumandOliverWyman,adaptedfromChinaMetallurgicalInformationandStandardizationInstitute,Overviewofsteelproductionandsteelconsumptioninthe15RCEPcountries,2020;HwabaoSecurities,AnalysisofCarbonNeutralityStatusandCarbonReductionPathintheSteelIndustry,2021Thechallengestoswitchingtomini-millsincludethecostofelectricityneededtopowerthem(traditionalfurnacesrelyoncoal),insufficientsuppliesofscrapsteel(totalsuppliesin2020wereonly260milliontonneswhiledemandstoodatmorethan1billiontonnes),andaccesstofundstoinstallsufficientcapacity.Yet,withadequatesupportfrompolicy-makers,banksandlocaladministrations,thebenefitsofswitchingtomini-millscouldberealizedrelativelyquickly(Casestudy3:HebeiIronandSteel).China’sClimateChallenge:FinancingtheTransitiontoNetZero34HebeiIronandSteelCASESTUDY3UsingH2-DRIprocessescouldcontributeafurther1-2%reductionincarbonusage.DRI-basedreductionemitslessCO2thantraditionalsteelproductionlargelyduetousingflammablegases,suchasnaturalgas,andinamoreadvancedform,naturalhydrogengas,asitsfuel.ForChina,thechallengeissecuringadequategassuppliesatareasonableprice.Helpingtheindustrymovetonetzeroisthefactthatthegrowthofsteelproductionhaspeakedformanycompaniesduetotheintroductionofgovernmentproductioncurbs.ChinaBaosteel,oneofChina’sbiggestlistedsteelmanufacturers,increaseditsoutputyearlyfrom2016to2021.Lastyear,however,thegovernmentintroducedavolumecontrolpolicyforecasttoreduceoutputoverthenextfewyears.Despitethecapacitycuts,thecompany’sprofitabilityhasbeenincreasingduetoincreasedsalesofsiliconsteel,oneofitsflagshiphigh-endproducts,andcostreductions,whichhaveimprovedefficiency.Anunforeseendrawbackofthegovernment’sproductionlimitshasbeenthatithasdiscouragedcompaniesfromaddingproductioncapacityusingnewemissions-controltechnology,resultinginthemcontinuingtooperatetheirexistingplants.Change,perhapsdrivenbytheemergenceofascrapsteelindustrycomplementingChina’straditionalsteelsector,isleadingtonewcompaniesexploringdigitalopportunitiesforthesector(Casestudy4:Ouyeel).HebeiIronandSteel(HBIS)hasembarkedontheprocessofintroducingshort-processmini-millstoitsShigangNewAreafacilityinShijiazhuangcity,Hebeiprovince.Initially,itfacedtwomajorchallenges–securinganadequateandstablesupplyofscrapsteeloftherightqualityandbeingabletoaffordthehigherpriceofthemills.HBISsolvedthesupplyissuebydevelopingtwosourcesofscrapsteel:settingupanautosteelrecyclingprojectnearitsplantandusingimportsprocessedtomeetnationalstandards.Anditcompensatedforthecostofmini-millswithathree-prongedstrategy:–Reducinglogisticscostsbyusingcompactplantlayoutstoreduceinter-processlogisticsandtransportneeds–Loweringprocessingcostsbyoptimizingthestructureofscrapusedasitwasabletosecureaccesstohigh-qualityscrapsupplies–RaisingthequalityofoutputtoproducemorepremiumsteelsCrucialtotheplant’ssuccesshadbeengovernmentpolicyencouragingsteelmanufacturerstorethinktheirlong-termstrategies.NationalstandardsforrecycledsteelmaterialsreceivedapprovalinDecember2020andrecentlythego-aheadwasgiventoallowhigh-qualitysteelscrapimports.Whilecurbshadbeeninplaceonexpandingtraditionalsteel-makingplants,companieswereabletoaddunlimitedelectricfurnaceshort-processsteel-manufacturingcapacity.Thegovernmenthadalsoputinplaceanumberoffavourablefinancialandtaxpoliciesspecificallytargetingthedevelopmentofthescrapsteelindustry.HBIS’sShigangplantnowusesmini-millstoproducearound7,000tonnesofsteeldaily.Comparedwithtraditionalsteel-making,themillsuse62%lessenergyand46%lesswater,andproduce75%fewermajorpollutants(particulatematter,SO2andnitrogenoxides).HBISexpectsshort-processelectricfurnacestoaccountfor25%ofitsoutputby2030,withitsscrapsteelutilizationratiorisingto20%.Source:WorldEconomicForumandOliverWyman,2022China’sClimateChallenge:FinancingtheTransitiontoNetZero35OuyeelCASESTUDY4Ouyeel,anonlinesteeltransactionplatformestablishedbyShanghai-basedstate-ownedChinaBaosteel,whichhandlesmorethan20milliontonnesofsteelscrapannually,completedtworoundsoffinancingin2021throughtheShanghaiUnitedAssetsandEquityExchangeasaresultofitsadoptionofdigitalplatformtechnology,bringingitstotalfundingtodateto$432million.Thecompanyisnowplanningtoraisefurtherfundsthroughamarketlistingin2023.ThegreentransitionendstageofsteelFIGURE18EnergysourceIncreasedproportionofcleanenergyandreductant,includinghydrogen,asenergysources.RawmaterialsIncreasedproportionofscrapmetalasasourceofrawmaterials.Iron/steel-makingMini-millsreplacedthelong,traditionalprocess,asthemostusedthesteel-makingprocess.Pelletingreplacedsinteringinmaterialsfeeding.CCUSwaswidelyappliedtofurtherreducecarbonemissions.FinishingandothersWhatneedstohappenThesteelsector’stransitiontonetzerohingesonaccesstofinancing,particularlyonovercomingthechallengespresentedbytheindustry’slowlevelsofprofitability.Becauseofthesedynamics,collaborationandpolicysupportwillbothplayimportantrolesinhelpingsteelproducersfindtransitionpathwaysanddevelopanddeployseveralkeytechnologies.1.FinanceinnovationOneofthebiggestchallengesfordecarbonizingChina’ssteelindustrywillbesecuringthefundingnecessaryinanindustrywithalonghistoryofhighleverage,poorcashflowsandlowmargins.TheCNY100-150billionneededannuallytofinanceitstransitiontonetzeroisfartoogreattobepaidforfromoperatingcapital.Althoughthegovernmenthasmandatedthattheindustrymovetoultra-lowemissions,officialsupportisstillsomewhatlacking.Inaddition,steelproducerswilllikelyfindthemselveshavingtoparticipateinChina’scarbonmarketonamajorscale.OnlinetradingonChina’snationalcarbonmarket,CCETE,startedonJuly16,2021.Includedintheschemeare2,162keyemissionunitsinChina’spowergenerationindustry,responsibleforsome4.5billiontonnesofCO2emissions,makingitthelargestcarbonmarketintheworld.AlthoughCCETEonlycoversthetradingofcarboncreditsforthermalpowerplants,moresophisticatedcarbontradingmarketsareunderdevelopment.TheCCERschemehasthepotentialtoplayasignificantrolebyallowingultra-lowemissionsteelproducers,suchasthoseusingH2-DRItechnologies,tomonetizetheirinvestments.AsEuropehasdemonstratedwithitsEU-ETS,steel-makerscanreadilybemotivatedtoaccelerateChina’sClimateChallenge:FinancingtheTransitiontoNetZero36Tacklingthechallengesfacingthesteelindustry’smovetonetzerowillcallfortheinvolvementofofficialsatthehighestlevels,withcoordinationnecessarybetweentheindustry,fundingsourcesinboththeprivateandpublicsectorandpolicy-makers.carbonreductionprogrammeswherethereisaclearpathwaytoafinancialbenefit.Moregenerally,ascompaniesmayfindithardtosecureloansorotherformsofdebtfinancingatattractiverates,alternativeformsoftappingcapitalmarketsandmanagingcashwillberequired.Amongthepossibilitiestheindustryisexploringaretheestablishmentofindustryfunds,theflotationofinnovativenewbusinesses,capitalinjectionsfromdownstreamsuppliersandownershipreformthatbringsinnewpartners.2.CollaborationAnotheralternativeforsteelproducersistotransferthehighercoststheywillinevitablyfaceforproducinggreensteelforend-users.Ifthatsteelisofhigherqualityorshowsuniquecharacteristics,suchasbeingfire-resistant,itmaybepossibletofindcustomerswillingtopayapremium,inturnopeningapathwayforproducerstoaffordhigh-endmanufacturingcapabilitiesinavirtuouscircle.Companiescanthenexplorethepossibilityofturningthemselvesintoan“ecosystemplay”,meaningthattheytieupwithgreenpartnersalongtheirvaluechains,suchastheautoandconstructionsectors,byreducingtheirScope3emissions.ChinaMetallurgicalGroup(MCC),oneofthelargestmanufacturersofofsteelandotherequipmentinChina,hasdevelopedtieswithsupplierswithgreenqualifications.LinkingwithMCCisonewayinwhichsteelproducerscanplugintootherbusinessesthatcanhelpthemtransitiontonetzero.Anotherformofcollaborationisforbankstodivideaprojectintoseparateelementsratherthanviewitasawhole.Forexample,separatingtechnologydevelopmentfrombusinessoperationscanreducecomplexityandallowdifferenttypesofrisktobeassesseddifferently.Lendinginstitutionscanthenfundthepartsofasteelmanufacturingoperationtheyarecomfortablewithandchargeaccordingly.Finally,centralorlocalgovernmentscansupportthepriceofgreensteelforearlymoversanddrawupguidelinescoveringtheriskposedbystrandedassetsifallorpartofaprojectweretorunintodifficulties.263.PolicysupportTacklingthechallengesfacingthesteelindustry’smovetonetzerowillcallfortheinvolvementofofficialsatthehighestlevels,withcoordinationnecessarybetweentheindustry,fundingsourcesinboththeprivateandpublicsectorandpolicy-makers.Thegovernmentwillbehelpedbecausestate-ownedcompanies,manyofthemofenormoussize,dominateChina’ssteelsector.Astheirultimateowner,thegovernmentcanexertinfluencemoreeasilythanoverasectordominatedbyprivateplayers.Whileprofitabilityisimportanttothesector,throughitsownershipofsteelmanufacturersortheirparentcompanies,thegovernmentcanexerciseamajorinfluenceoverkeydecisions.TaxincentivesareanotherpowerfultoolacceleratingChina’stransitiontonetzero.Workisalreadyunderwayonacarbontax,withaschemelikelytobedrawnupinthenextoneortwoyears.Moretargetedwouldbeacarbontaxonexports,whichcouldbesignificantgiventhelargescaleofChina’soverseassteelsales(67milliontonnesin2021).ThisisacontrasttotheEU’splannedtaxonallnon-greenimports.Taxexemptionsinvariousformscouldbegrantedtogreenproductsandservices.Hinderingthedevelopmentofsuchmeasuresareconcernsoverthegovernment’sabilitytoputinplaceaccurateMRVemissionschemesandavoidingputtingtoogreatadditionalburdensonemission-heavybutimportantindustriessuchassteel.Directgovernmentsupportwilllikelyalsoplayanimportantrole,beitintaxbreaksforinvestment,spendingonR&Dorviadirectsubsidies.Incentivesforsteeluserscouldalsoproveimportant.BusinessessuchasautomakerswillneedtomanagethecarbonfootprintoftheirinputstoreducetheirScope3emissionsand,intheprocess,maydemandmorelow-emissionmaterials.China’sClimateChallenge:FinancingtheTransitiontoNetZero37ConclusionChinafacesmajorbutnotinsurmountablechallengesintransitioningitseconomytonet-zerocarbonemissions.Thecountry’suniquefeatures,notablyitsrelianceonmanufacturing,resultinthattransitionhavinggreatercoststhaninthemoreservice-driveneconomiesofEuropeandNorthAmerica.Atthesametime,China’suniquefeaturesarealsoanadvantage.Itsformofgovernance,forexample,offersagoodreasonforbelievingitwillstandbyitslong-termcommitmenttocarbonneutrality.Becauseofitsalreadypowerfulpositioninrenewableenergy,particularlywindandsolarpower,Chinaisonapromisingpathtobuildingasustainablepowersector.ItssignificantandrisingspendingonR&Dpositionsittodiscoveranddeploythetechnologiesneededtogreenothercriticalindustriesaswell.Nevertheless,majorfundinggapsremain.Thisreporthasoutlinedhowacombinationoffinancialinnovationbylenders,acollaborationbetweengovernmentandindustry,thenecessarypolicyenvironmentandaboveall,puttinginplacecarbonandothertaxincentives,canleadtoChinarealizingitscarbonneutralitygoalby2060.Whiletheroadtogetthereissteep,ifChinagetsthisjourneyright,itcouldpositionitselftodriveagreenrevolutiongloballyasthecountry’sscaleanditspositionintheglobaleconomyandsupplychainswillinevitablytriggeranddrivetransformationinotherpartsoftheworldaswell.China’sClimateChallenge:FinancingtheTransitiontoNetZero38TheprojectteamwouldliketoexpresstheirgratitudetothefollowingForumandOliverWymanstafffortheircontributionsandsupport:DerekBaraldiHeadoftheBankingIndustry,USA,WorldEconomicForumLLCKalinBrackenLeadRealEstate,USA,WorldEconomicForumLLCRikkaChenSeniorConsultant,OliverWyman(MarshMcLennan)ManuelaStefaniaFulgaPlatformCurator,BankingandCapitalMarkets,WorldEconomicForumKieraHanCommunityLeadBusinessEngagementGreaterChina,People’sRepublicofChina,WorldEconomicForumLiJingMarketingandCommunications,People’sRepublicofChina,WorldEconomicForumZhangJunyiPartner,OliverWyman(MarshMcLennan)VeeLiEnergySectorLead,ChinaClimateAction,MissionPossiblePartnership,People’sRepublicofChina,WorldEconomicForumLinLiFinancialServicesIndustryTeam,WorldEconomicForumLiuPeiranSeniorConsultant,OliverWyman(MarshMcLennan)JeromeTanPrincipal,OliverWyman(MarshMcLennan)VincentWangCommunityLeadBusinessEngagementGreaterChina,People’sRepublicofChina,WorldEconomicForumJiaYindongCommunityLeadBusinessEngagementGreaterChina,People’sRepublicofChina,WorldEconomicForumThedevelopmentofthispaperwassupportedbytheprojectteam:JasonEkbergPartner,OliverWyman(MarshMcLennan)QianHangPartner,OliverWyman(MarshMcLennan)KaiKellerTheFutureofFinancialServicesinChina,WorldEconomicForumMarcusLiuSeniorConsultant,OliverWyman(MarshMcLennan)EricMaAssociate,OliverWyman(MarshMcLennan)MariePenelopeNezurugoResearchandAnalysisSpecialist,WorldEconomicForumPeterReynoldsManagingPartner,HeadofGreaterChina,OliverWyman(MarshMcLennan)KellyTianPrincipal,FinancialServices,OliverWyman(MarshMcLennan)ContributorsChina’sClimateChallenge:FinancingtheTransitiontoNetZero39Theprojectteamwouldliketothanktheparticipantsofexpertworkshopsandallpublicsector,academicandseniorindustryparticipantswhocontributedtheirinsightstothispublicationthroughinterviews,interventionsatpublic-privateseniorleadershipdiscussionsandstrategicguidance.DingAnhuaChiefEconomist,ChinaMerchantsBankBangweiBaiDirector,MaterialTechnology,CITICDicastalBoBaiChairman/ChiefExecutiveOfficer,AsiaGreenFundManagementWuBoVice-DirectorofInvestmentDepartment,ChengduXingchengInvestmentGroupChangFengManagingDirector,Advisory,GlobalSustainableFinanceGroup,BankofAmericaAntoineDeGuillebonHeadofStrategyandPlanning,HSBCBank(China)JinJingHuangFinancingTransitionOfficer,ChinaConstructionBankXuangHuangEnergyManagement,EveBatteryVincentJiangChiefFinancialOfficer,DidaChuxingStephanieKaoCorporateSustainabilityOffice,CTBCFinancialHoldingChristyKwokSeniorCorporateStrategyOfficer,MTRLynetteLeongChiefSustainabilityOfficer,CapitaLandGroupChenLiManagerAutomobileFinance,ChinaCITICBankChenLiVice-President,GotionHigh-techDingLiTransitionFinanceOfficer,ChinaConstructionBankMichaelLiChiefExecutiveOfficer,China,Marsh(MarshMcLennan)WenboLiTransitionFinanceOfficer,ChinaConstructionBankYidingLiCustomerManager,EquipmentLeasing,CITICLeasingJiaLiuProductPlanningEngineer,GACCapitalXiaoshiLiuExecutiveDeputySecretary-General,ChinaEV100LeslieWarrenMaasdorpVice-PresidentandChiefFinancialOfficerChengchenPengTransitionFinanceOfficer,ChinaConstructionBankErFooPengVice-President,Sustainability,CapitaLandGroupFeifeiPengInvestorRelations,DidaChuxingRanQihaiTransitionFinanceOfficer,ChinaConstructionBankAdeelRizviDirector,AssetFinance,GlobalSustainableFinanceGroup,BankofAmericaReneeSongInvestorRelations,PrimaveraCapitalGroupTangShiIndustryPlanningResearchCentre,CreditManagementDepartment,BankofChinaWanTaileiChairman,ChinaBondCreditRating,NationalAssociationofFinancialMarketInstitutionalInvestorsMichaelTseChiefCorporateStrategyManager,MTRPengWangHead,Asset-Liabilities,ChinaCITICBankXiWangAutoFinanceDept.AIBank,CITICGroupZhuoyanWangSeniorManager,ChinaCITICBankAcknowledgementsChina’sClimateChallenge:FinancingtheTransitiontoNetZero40WenyuanWuChiefInvestmentOfficerandHeadofInvestmentDevelopmentDepartment,ChengduXingchengInvestmentGroupYimingWuGeneralManager,TransportationDepartment,CITICLeasingYangXingbaoManager,CITICGroupStrategyanddevelopmentdepartment,CITICGroupYeYingDirector,CITICGroupStrategyanddevelopmentdepartment,CITICGroupEricYiManagingDirector,ChinaInternationalCapitalHongYinDeputyHead,ModernFinanceResearchInstitute,IndustrialandCommercialBankofChinaYanfeiYinSeniorManager,ResearchandInnovation,ChinaCITICBankFrankieYuanGeneralManager,GACCapitalChenYueSeniorRegionalManager,FinancialInstitutions,AgriculturalBankofChinaEugeneYungSeniorVice-President,StrategyandPlanning,HSBCBank(China)DijiangZhangManagingDirectoradinterim,XinyinInvestment,CITICGroupJinZhangFoundingPartnerandChiefOperatingOfficer,AsiaGreenFundManagementPeterZhangLeadGeneralManagement,CNCB,ChinaCITICBankXiangZhangAssistanttotheSeniorVice-President,GotionHigh-techLiqiangZhaoChiefStrategyOfficer,GemdaleDandanZhengExecutiveDirector,DepartmentofInvestmentResearchandDevelopment,GreenDevelopmentFundPrivateEquityInvestmentManagement(Shanghai)EditinganddesignJoolsBondEditor,StudioMikoLaurenceDenmarkCreativeDirector,StudioMikoMarthaHowlettEditor,StudioMikoOliverTurnerDesigner,StudioMikoChina’sClimateChallenge:FinancingtheTransitiontoNetZero41Endnotes1.WorldBank,Data-Manufacturing,valueadded(%ofGDP),2021,https://data.worldbank.org/indicator/NV.IND.MANF.ZS.2.InternationalEnergyAgency,Dataandstatistics,2020,https://www.iea.org/statistics/co2emissions/.3.NationalOceanicandAtmosphericAdministrationCommunications,Deforestation,warmingflippartofAmazonforestfromcarbonsinktosource,14July2021,https://research.noaa.gov/article/ArtMID/587/ArticleID/2778/Deforestation-warming-flip-part-of-Amazon-forest-from-carbon-sink-to-source.4.Meng,Bo,etal.,“MorethanhalfofChina’sCO2emissionsarefrommicro,smallandmedium-sizedenterprises”,AppliedEnergy,vol.230,15November2018,https://www.sciencedirect.com/science/article/abs/pii/S0306261918312777.5.HousingandUrban-RuralDevelopmentBureauofHuzhou,Theproportionofhighstarratedgreenbuildingsinthecityhasincreasedsignificantly(我市高星级绿色建筑占比大幅提升),November2021,http://jsj.huzhou.gov.cn/hzgov/front/s52/xxgk/zcwj/bmwj/20211116/i3075211.html.6.HousingandUrban-RuralDevelopmentDepartmentofZhejiangProvince,AnnouncementontheReleaseofZhejiangProvinceEngineeringConstructionStandard“GreenBuildingDesignStandard”(关于发布浙江省工程建设标准《绿色建筑设计标准》的公告),December2021,https://jst.zj.gov.cn/art/2021/12/6/art_1229159347_58928368.html.7.ShanghaiHousingandUrban-RuralDevelopmentManagementCommittee,NoticeonFurtherRegulationofGreenBuildingEvaluationManagementintheCity(关于进一步规范本市绿色建筑评价管理工作的通知),June2020,https://zjw.sh.gov.cn/jsgl/20200615/54e24ab1ebfa43e68b98aa2002eab08d.html.8.HousingandUrban-RuralDevelopmentBureauofNingbo,NoticeonthePublicationoftheRulesfortheImplementationofGreenBuildingEvaluationinNingbo(关于发布《宁波市绿色建筑评价实施细则》的通知),December2017,http://www.ningbo.gov.cn/art/2017/12/19/art_1229095999_1014242.html.9.GlobalTimes,Chinatobuildunifiednationalmarkettotacklepersistentissues,enhanceeconomicsecurity,10April2022,https://www.globaltimes.cn/page/202204/1258963.shtml.10.OliverWymanForum,TheClimateCatalysts:Insistingthatbusinessestakeresponsibleaction,they’repushingtheleaderstowardasustainablefuture,2022,https://www.oliverwymanforum.com/global-consumer-sentiment/the-new-people-shaping-our-future/the-climate-catalysts.html.11.EuropeanCommission,EUEmissionsTrading,(n.d.),https://ec.europa.eu/clima/eu-action/eu-emissions-trading-system-eu-ets_en.12.InternationalEnergyAgency,AnenergysectorroadmaptocarbonneutralityinChina,September2021,https://www.iea.org/reports/an-energy-sector-roadmap-to-carbon-neutrality-in-china.13.MinistryofTransportofthePeople’sRepublicofChina(MOT),StatisticalBulletinonTransportIndustryDevelopment2020,(年交通运输行业发展统计公报),May2021,http://www.gov.cn/xinwen/2021-05/19/content_5608523.htm.14.WorldResourcesInstitute,EvaluationandManagementforVehicleLifeCycleCarbonEmissions(探索乘用车全生命周期碳排放的核算与管理),August2020,https://wri.org.cn/insights/life-cycle-carbon-emission.15.ChinaAutomotiveTechnologyandResearchCentre,ChinaEnergySavingandNEVDevelopmentReport2021(节能与新能源汽车发展报告2021),2021,http://www.cinn.cn/gongjing/202112/t20211215_251034.shtml.16.DidaChuxing,CarbonReductionResultsfor2021[Infographic](2021年全年减碳成绩单),https://mp.weixin.qq.com/s/gHJ3v05_FLUpnjYB0izfbg.17.HMGovernment,Takingcharge:theelectricvehicleinfrastructurestrategy,March2022,https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1065576/taking-charge-the-electric-vehicle-infrastructure-strategy.pdf.18.InternationalEnergyAgency,AnenergysectorroadmaptocarbonneutralityinChina,September2021,https://www.iea.org/reports/an-energy-sector-roadmap-to-carbon-neutrality-in-china.19.ChinaAssociationofBuildingEnergyEfficiency,2020ChinaBuildingEnergyConsumptionReport(中国建筑能耗研究报告2020),2021,https://www.cabee.org/site/content/24020.html.20.OliverWymanForum,TheClimateCatalysts:Insistingthatbusinessestakeresponsibleaction,they’repushingtheleaderstowardasustainablefuture,2022,https://www.oliverwymanforum.com/global-consumer-sentiment/the-new-people-shaping-our-future/the-climate-catalysts.html.21.ChaoyangDistrictPeople’sGovernmentofBeijingMunicipality,Measuresfortheadministrationofspecialfundsforenergyconservationandcarbonreduction(北京市朝阳区人民政府关于印发《朝阳区节能减碳专项资金管理办法》的通知),January2018,http://www.bjchy.gov.cn/zfxxgk/zfxxgkzcwj/5e2411f1ab75c16cfc17fa70.html.22.InternationalEnergyAgency,AnenergysectorroadmaptocarbonneutralityinChina,September2021,https://www.iea.org/reports/an-energy-sector-roadmap-to-carbon-neutrality-in-china.23.MetallurgicalGroup,Comparisonofenvironmentalprotectionandenergyconsumptionbetweenshortandlongprocesses(短流程和长流程在环保能耗方面的对比),October2020,http://www.scykjt.cn/?Article216/367.htm.24.ChinaMetallurgicalInformationandStandardizationInstitute,Overviewofsteelproductionandsteelconsumptioninthe15RCEPcountries(RCEP十五国钢铁生产和钢材消费概况),November2020,https://www.sohu.com/a/433579092_313737.25.HwabaoSecurities,AnalysisofCarbonNeutralityStatusandCarbonReductionPathIntheSteelIndustry(钢铁行业碳中和现状与减碳路径分析),July2021,https://mhuanbao.bjx.com.cn/mnews/20210729/1166658.shtml.26.WorldEconomicForuminCollaborationwithOliverWyman,FinancingtheTransitiontoaNet-ZeroFuture,14October2021,https://www.weforum.org/reports/financing-the-transition-to-a-net-zero-future.China’sClimateChallenge:FinancingtheTransitiontoNetZero42WorldEconomicForum91–93routedelaCapiteCH-1223Cologny/GenevaSwitzerlandTel.:+41(0)228691212Fax:+41(0)227862744contact@weforum.orgwww.weforum.orgTheWorldEconomicForum,committedtoimprovingthestateoftheworld,istheInternationalOrganizationforPublic-PrivateCooperation.TheForumengagestheforemostpolitical,businessandotherleadersofsocietytoshapeglobal,regionalandindustryagendas.

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