The EU’s carbon border adjustment mechanism (CBAM) has been touted as a key policy for cutting emissions from heavy industries, such as steel and cement production.
By taxing carbon-intensive imports, the EU says it will help its domestic companies take ambitious climate action while still remaining competitive with firms in nations where environmental laws are less strict.
There is evidence that the CBAM is also driving other governments to launch tougher carbon-pricing policies of their own, to avoid paying border taxes to the EU.
It has also helped to shift climate and trade up the international climate agenda, potentially contributing to a broader increase in ambition.
However, at a time of growing protectionism and economic rivalry between major powers, the new levy has proved controversial.
Many developing countries have branded CBAMs as “unfair” policies that will leave them worse off financially, saying they will make it harder for them to decarbonise their economies.
Analysis also suggests that the EU’s CBAM, in isolation, will have a limited impact on global emissions.
In this Q&A, Carbon Brief explains how the CBAM works and the impact on climate policies it is already having in the EU and around the world, as nations such as the UK and the US consider implementing CBAMs and related policies of their own.
- What is a carbon border adjustment mechanism?
- Why was the CBAM introduced in the EU?
- How will the EU’s CBAM work?
- How is the mechanism expected to cut emissions?
- What are the reactions from developing countries?
- Are other countries introducing their own mechanisms?
What is a carbon border adjustment mechanism?
A carbon border adjustment mechanism (CBAM) is a tax applied to certain imported goods, based on the amount of carbon dioxide (CO2) emissions released during their production.
It targets industries that are typically emissions-intensive and relatively easy to trade internationally, such as steel, aluminium and cement.
CBAMs work on the basis that climate laws and standards in some nations – usually those in the global north – are tighter than those found elsewhere.
This means that the producer of a particular emissions-intensive product might have to pay a domestic carbon price, for example, whereas an overseas competitor might not.
Under a CBAM, a nation that applies a carbon price to its domestic steel industry would apply an equivalent charge at the border, to steel imported from overseas.
This is meant to “level the playing field” between producers in different countries. Those that make goods at a lower cost, but without a domestic carbon price of their own, would have to pay an equivalent fee when exporting to the country imposing a CBAM. This would allow domestic industries in the importing country to compete, while still curbing their own emissions.
CBAMs have been proposed as a response to fears of “carbon leakage”.
If nations lose carbon-intensive businesses because they close down or choose to do business elsewhere, this could harm the economies of nations trying to implement carbon pricing. At the same time, it could increase global emissions, if domestic manufacturing is simply replaced by more carbon-intensive imports.
This issue has risen to prominence in recent years, as the EU has become the first actor to introduce a CBAM.
CBAMs have been discussed ever since the early days of international climate action in the 1990s. There was recognition at that time of the risks of carbon leakage, as developed countries were being tasked with cutting their emissions under the Kyoto Protocol.
In particular, the EU launching its emissions trading system (ETS) in 2005 prompted what one study describes as “heated discussion” of the role that border taxes could play in preventing high-emitting industries moving away from EU member states to other countries.
(Despite these concerns, there has to date been essentially no evidence of carbon leakage. However, researchers have noted that this could be because high-emitting industries are yet to face strict carbon pricing: those in the EU generally receive free emissions allowances.)
The EU frames its CBAM as not only a means of placing a “fair price” on emissions bound up in imported goods, but also a way to “encourage cleaner industrial production” in the nations it imports goods from.
However, critics say variously that it is more to do with economic protectionism, or that it will harm trade, or that it will exacerbate existing inequalities between nations.
Why was the CBAM introduced in the EU?
The EU CBAM was brought in as part of the European Green Deal, the EU’s strategy to reach net-zero emissions by 2050.
A CBAM has been under consideration in the EU for years. The European Commission informally proposed a border adjustment in 2007, following the launch of the ETS. In the years that followed, France suggested such a scheme on two more separate occasions.
In her 2019 manifesto to become European Commission president, Ursula von der Leyen raised the issue again, saying she would “introduce a carbon border tax to avoid carbon leakage” to “ensure our companies can compete on a level playing field”.
In recent years, there has been much concern around how the EU can avert “deindustrialisation” and maintain its competitive edge against other major powers, such as the US and China. The CBAM is one of the measures launched under Von der Leyen’s leadership in an effort to tackle these threats, whether perceived or real.
The idea came to fruition in 2021, when it was presented by the commission as part of its “Fit for 55” package to drive the EU’s transition to net-zero. Following negotiations with EU member state governments and members of the European Parliament, the CBAM became law in May 2023.
One reason the CBAM was finally adopted in the EU was because of a perceived need to avoid carbon leakage, while also ramping up overall emissions reductions. Emissions from heavy industry in the EU have not fallen considerably since 1990, despite being covered by the EU ETS for two decades.
This is partly because these sectors, many of which are considered “exposed” to international trade – and, therefore, carbon leakage – are handed free allowances in the EU ETS. These allowances enable businesses to continue emitting greenhouse gases at no extra cost – or even to profit from selling free allowances, if their own production falls.
Companies in these sectors are, therefore, able to compete with foreign imports from countries that do not have carbon-pricing systems. However, the free allowances also mean those companies have less of a financial incentive to decarbonise.
The CBAM is explicitly described as a replacement for the free allowances given to companies making steel, cement and other trade-exposed goods. It will be phased in as those allowances are phased out, a process that will be complete in 2034.
The CBAM has been framed as an “enabling policy” that boosts the political acceptability of higher carbon prices within the EU and, in doing so, drives industrial decarbonisation.
However, it has also been described as a policy to encourage global emissions cuts. After Von der Leyen took over as commission president, a communication concerning the European Green Deal said the CBAM would be introduced “should differences in levels of ambition worldwide persist, as the EU increases its climate ambition”.
Finally, another reason for the measure is that the European Commission estimates it will raise €1.5bn in revenue in 2028 – and this will increase as the mechanism expands. Of this total, 75% will go to the EU budget and the rest to member states.
How will the EU’s CBAM work?
The EU CBAM is being rolled out gradually. Between October 2023 and the end of 2025, any company that imports goods covered by the CBAM into the EU will have to declare them in quarterly reports.
The products covered by the CBAM include those deemed “at most significant risk of carbon leakage” by the EU, initially including cement, iron, steel, aluminium, fertilisers and hydrogen, as well as electricity transmitted from other countries.
This list is expected to expand, following further assessments by the EU, to cover sectors such as ceramics and paper.
Reporting will cover all of the emissions generated when those products are made. This includes “direct” emissions, such as the carbon dioxide (CO2) released during cement production, and “indirect” emissions, such as those from the fossil-fuel generated electricity used to power cement factories.
The full compliance phase of the CBAM will begin from the start of 2026. From this point, companies bringing CBAM-covered goods into the EU will have to purchase enough CBAM certificates to cover their associated emissions. The cost of these certificates will be the same as the EU ETS market price.
If companies can demonstrate that they have paid a carbon price for goods in their country of origin, they will be able to deduct a corresponding amount from their certificate purchases to avoid taxing the products twice.
Initially, exporters in relevant sectors will only have to buy certificates equivalent to 2.5% of the emissions associated with producing their goods. This obligation will rise to 100% by 2034, in line with the removal of free allowances for EU industries.
The EU says that, when “fully phased in”, the CBAM will apply to more than half of the emissions covered by the ETS overall.
How is the mechanism expected to cut emissions?
The CBAM will add a carbon cost to EU imports that could encourage emissions cuts both domestically and internationally.
The mechanism is supposed to drive industrial decarbonisation by facilitating the removal of free EU ETS allowances for industries such as steel and cement.
Maintaining domestic industries in the EU is also intended to avoid an increase in global emissions due to carbon leakage.
Yet various calculations of the overall impact of the EU CBAM on global emissions have produced fairly modest results.
An initial 2021 assessment by the European Commission estimated that its proposed CBAM design would reduce emissions from affected EU industries by 1% by 2030. It calculated that global emissions from these industries would be cut by 0.4% over the same timescale.
More recent analysis, conducted by the Asian Development Bank (ADB), considers the impact of the CBAM at a carbon price of €100 per tonne of CO2 – a level that was reached for the first time last year before falling again.
It concludes that the CBAM would reduce global emissions by less than 0.2%, relative to the ETS on its own. This would be accompanied by a 0.4% drop in global exports to the EU.
Ian Mitchell, a senior policy fellow and co-director of the Europe programme at the Center for Global Development (CGD), tells Carbon Brief:
“It’s not so surprising that CBAM has a modest impact on global emissions. As a unilateral measure, most of the trade in carbon it affects will be diverted to other jurisdictions without similar charges.”
However, he adds that CBAM is still “extremely important and valuable”, because it establishes the principle of carbon pricing and a “level playing field” globally.
Another key way that the CBAM could drive emissions cuts is by encouraging other nations to implement their own climate measures, including carbon pricing.
A recent report by the NGO Resources for the Future says the hope is that CBAMs will “lead to a virtuous cycle, where more and more countries adopt carbon pricing”. It explains that CBAMs can allow governments to overcome domestic political constraints to carbon pricing:
“The external pressure of a CBAM can provide both impetus and a scapegoat, akin to pushing an open door, as policymakers can point out that exporting firms would have to pay these fees when they export regardless of domestic policy action.”
The EU CBAM has already sparked a wave of responses from other countries. These have ranged from threats of retaliatory measures (see: What are the reactions from developing countries?) to plans for domestic CBAMs of their own (see: Are other countries introducing their own mechanisms?).
Yet there is some debate about how much the EU’s policy is spurring on climate action.
Analysis by CGD at the end of 2023 concluded that the “vast majority of lower income countries are a long way from implementing any carbon price”. At that time, no low-income countries were considering carbon pricing and only 11% of lower-middle income countries had one “scheduled or under consideration”, the group concluded.
Others assessments have been more optimistic. One early report from thinktank Clingendael linked new climate policies from nations including Turkey and Russia to the looming threat of CBAM.
A more recent report for the International Emissions Trading Association (IETA), which speaks for companies involved in global carbon markets, tracks responses from countries trading with the EU.
Julia Michalak, EU policy head at IETA, tells Carbon Brief that, ultimately, the CBAM is “not in itself a global mitigation policy tool”. However, she points to evidence of impacts, including Turkey, India and Brazil advancing work on their own ETSs, as well as China moving to expand its ETS to include cement, steel and aluminium – mirroring the EU CBAM.
Critical experts from global-south institutions have argued that sharing emissions-cutting technologies and scaling up climate finance would be more effective measures to decarbonise industries in developing countries.
(The EU CBAM text includes language about supporting “efforts towards the decarbonisation and transformation of…manufacturing industries” in developing countries.)
There has been discussion around using CBAM revenues to support industrial decarbonisation in other countries, although there has so far been no formal agreement to do this.
A report by the Centre for Science and Environment (CSE) argues that CBAM revenues could be a new form of climate finance for developing countries. The thinktank suggests that this could function in a similar way to the EU’s modernisation fund, which is financed with ETS revenue and supports clean energy in low-income EU states.
What are the reactions from developing countries?
Some of the most vocal opponents of the EU’s CBAM are among those expected to be most exposed to its impacts.
The map below is colour-coded according to nations’ relative exposure, according to the World Bank, based on the carbon intensity of their industries and how much they rely on exporting CBAM-covered products to the EU.
Nations shaded green could gain export competitiveness to the EU, while those shaded red could lose competitiveness.
Many of the most exposed nations have vocally opposed what they describe as “unilateral” trade measures, both at UN climate negotiations and at the World Trade Organization (WTO), where they have questioned their compatibility with international trade rules.
Some of them have argued that the costs of compliance will leave less money for dealing with poverty and meeting their Paris Agreement targets.
Observers have cited the principle of “common but differentiated responsibilities”, arguing that the EU is penalising developing countries despite its historic – and current – high levels of emissions, relative to much of the global south. Avantika Goswami, climate change programme lead at CSE, tells Carbon Brief:
“You are imposing these external standards onto developing countries whilst not specifically earmarking funding that would enable this decarbonisation effort.”
China is one of the developing countries affected by the CBAM that has criticised the EU’s new policy.
China’s steel and aluminium sector would see the biggest impacts, according to an analysis from the Center for Eco-Finance Studies at Renmin University. It estimated a 4-6% ($200m-400m) increase in export costs for the steel industry, for example.
(The analysis does not appear to account for potential price rises in EU steel markets, which could allow producers to recoup higher costs at the expense of consumers within the bloc.)
Li Chenggang, China’s ambassador to WTO, said at a meeting last June:
“We fully understand the EU’s environmental goals and appreciate its efforts…However, it is regrettable that the [CBAM] measures…fail to follow the basic principles of the UNFCCC and the Paris Agreement [the principle of “common but differentiated responsibilities”], as well as WTO rules. In fact, this measure may cause discrimination and market access restrictions on imported products, especially those from developing members.”
A report by the China office of consultancy PwC says about $35bn of trade between China and the EU could eventually be affected by the CBAM.
African countries have raised similar concerns. According to Akinwumi Adesina, president of African Development Bank, the continent could lose up to $25bn per year as a “direct result of CBAM”.
However, the $25bn figure cited by Adesina comes from a modelling scenario that does not correspond to the EU’s actual approach, says Tennant Reed, director of climate change and energy at the Australian Industry Group, in a post on LinkedIn.
In his post, Reed points to a series of issues with the underlying modelling in this and other studies of the impact of the EU’s CBAM on developing countries’ economies. He tells Carbon Brief:
“CBAM analysis can easily go awry if it: considers higher supply costs for covered products but not higher selling prices; assumes manufacturers and nations have static emissions intensities; or fails to represent the actual structure of policy. A genuinely non-discriminatory border adjustment should not disadvantage developing country exporters at all. Instead it can create a firmer commercial basis for clean industrial investment everywhere and a chance for developing countries that price carbon to effectively raise tax revenue from Europe.”
In July 2024, India’s economic affairs secretary Ajay Seth commented that the EU’s CBAM was “unfair and detrimental to domestic market costs”.
There have even been reports of India planning “retaliatory” trade measures and the Indian government has indicated its concerns will feed into discussions around India’s prospective free-trade agreement with the EU.
In addition, Simon Göss, managing director of the Berlin-based consulting firm carboneer, tells Carbon Brief that, for smaller companies, “hir[ing] [data] experts and set[ting] up monitoring systems…might make the end product more expensive”. He adds:
“In the short-term – until the end of 2024 – monitoring and reporting real emissions for producers of CBAM-goods in non-EU countries represents a huge challenge for smaller companies in technologically less advanced countries.”
Despite their criticisms, some developing country analyses have pointed to positive steps that their industries can take in response to the EU’s CBAM.
Beijing-based thinktank iGDP, for example, says, “looking at the long-term trend, China’s steel industry striv[ing] to reduce emissions is more economical than to pay the CBAM adjustment fee”.
Similarly, Renmin University says in a CBAM analysis that China’s steel industry should accelerate its shift to lower emissions and the country’s own carbon market “should be improved”.
Are other countries introducing their own mechanisms?
Other nations are expected to implement CBAMs and related measures of their own in response to the EU’s new policy.
Progress on this has been fairly slow, but there are signs that some nations in the global north are considering this approach in order to protect trade with the EU and support their own industrial decarbonisation.
Perhaps the most advanced CBAM outside of the EU is the UK’s effort. The UK government announced at the end of 2023 that it would implement the mechanism by 2027.
Unlike the EU’s CBAM, the UK’s version, in its initial stage, will include ceramics and glass. It will also not include the electricity the UK imports from its European neighbours via interconnectors. Some observers have called for greater harmonisation with the EU, suggesting that this would reduce the economic risk to the UK.
The Canadian government also announced plans to establish its own CBAM in the 2021 budget and launched a consultation to this effect.
Australia has also been considering a CBAM, with the government launching a review in 2023 to assess its potential to prevent carbon leakage – especially targeting steel and cement.
As for the US, there has been much debate around how it could implement a CBAM, despite lacking a domestic carbon-pricing system. (Carbon pricing has long proved controversial in the US. In fact an early form of CBAM was blocked in 2010 by Senate Republicans in the infamous Waxman-Markey bill, along with a national carbon pricing scheme.)
US leaders were initially hostile to the EU’s CBAM, even though the nation does not export large amounts of CBAM-covered products to the bloc. However, in the context of industrial rivalry with China, US lawmakers have proposed various CBAM-like policies in recent years, with a view to avoiding carbon leakage and ensuring global competitiveness.
These include the Clean Competition Act, backed by Democrats, and the Foreign Pollution Fee Act, backed by Republicans, both of which involve adding a carbon-intensity fee to imports.
Analysis by NGO Resources for the Future describes these proposals as a “significant sign of bipartisan interest in climate and trade policy”. Moreover, it says these actions can be attributed to the EU’s leadership in this area:
“Just as it is hard to imagine the EU coming up with as extensive a green industrial policy as it has without the [Inflation Reduction Act], it is equally hard to imagine the US devising specific climate and trade proposals without the impetus of CBAM.”
Ellie Belton, a senior policy advisor on trade and climate at the thinktank E3G, tells Carbon Brief that, while the EU CBAM “may well have kickstarted a new wave of climate ambition globally”, there is a need for “better diplomacy” to avoid disrupting multilateral progress:
“There is also an emerging risk of divergent CBAM schemes creating a patchwork of disjointed regulations worldwide, which would disproportionately impact developing countries and exacerbate the inequity in climate outcomes.”
Reflecting concerns about the impact such a “patchwork” could have on businesses, the International Chamber of Commerce has released a set of “global principles” to guide countries in introducing their own CBAMs.
Among other things, they include compliance with WTO rules and the principles of the Paris Agreement, as well as exemptions for least developed countries and small island states.
The post Q&A: Can ‘carbon border adjustment mechanisms’ help tackle climate change? appeared first on Carbon Brief.
Q&A: Can ‘carbon border adjustment mechanisms’ help tackle climate change?
Climate Change
China Briefing 11 December 2025: Winter record looms; Joint climate statement with France; How ‘mid-level bureaucrats’ help shape policy
Welcome to Carbon Brief’s China Briefing.
China Briefing handpicks and explains the most important climate and energy stories from China over the past fortnight. Subscribe for free here.
Key developments
Record power and gas demand
DOMESTIC TURBINES: China’s top economic planning body, the National Development and Reform Commission (NDRC), expects both electricity demand and gas demand to hit the “highest level yet recorded in winter”, reported Reuters. Data from a sample of coal plants nevertheless showed a recent drop in output year-on-year. Meanwhile, China has developed a “high-efficiency” gas turbine which will “strengthen[ China’s] power grid with low-carbon electricity”, said state news agency Xinhua. According to Bloomberg, the turbine is the first to have been fully produced in China, helping the country to “reduce reliance on imported technology amid a global shortage of equipment”.
‘SUBDUED’ OIL GROWTH: Chinese oil demand is likely to “remain subdued” until at least the middle of 2026, reported Bloomberg. Next year will see “one of the lowest growth rates in China in quite some time”, said commodities trader Trafigura’s chief economist Saad Rahim, reported the Financial Times. Demand is set to plateau until 2030, according to research linked to “state oil major” CNPC, said Reuters. In the building materials industry, carbon dioxide (CO2) emissions are “projected to fall by 25%” in 2025 relative to pre-2021 levels, China Building Materials Federation president Yan Xiaofeng told state broadcaster CCTV.
FLAT EMISSIONS GROWTH: China’s CO2 emissions in 2024 grew by 0.6% year-on-year, reported Xinhua, citing the newly released China Greenhouse Gas Bulletin (2024). This represented a “significant narrowing from the 2023 increase and remains below the global average growth rate of 0.8%”, it added. (The bulletin confirms analysis for Carbon Brief published in January, which put China’s 2024 emissions growth at 0.8%.)
China-France climate statements
CLIMATE BONHOMIE: During a visit by French president Emmanuel Macron to China, the two countries signed a joint statement on climate change, reported Xinhua. It published the full text of the statement, which pledged more cooperation on “accelerating” renewables globally, as well as “enhancing communication” in carbon pricing, methane, adaptation and other areas. It also said China and France would support developing countries’ access to climate finance, adding that developed nations will “take the lead in providing and mobilising” this “before 2035”, while encouraging developing countries to “voluntarily contribute”.
MORE COOPERATION: China and France issued separate statements on “nuclear energy” cooperation, Xinhua reported, as well as on expanding cooperation on the “green economy”, according to the Hong Kong-based South China Morning Post.
EU’s new ‘economic security’ package
NEW PLANS, SAME TOOLS: Meanwhile, the EU has issued new plans to “boost EU resilience to threats like rare-earth shortages”, said Reuters, including an “economic security doctrine” that would encourage “new measures…designed to counter unfair trade and market distortions, including overcapacity”. A second plan on critical minerals will “restrict exports of [recyclable] rare-earth waste and battery scrap” to shore up supplies for “electric cars, wind turbines and semiconductors”, according to another Reuters article. Euractiv characterised the policy package as a “reframing of existing tools and plans”.
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‘NOT VERY CREDIBLE’: EU climate commissioner Wopke Hoekstra told the Financial Times that the latest push against the bloc’s carbon border adjustment mechanism (CBAM), which the outlet said is “led by China, India and Saudi Arabia”, was “not very credible”. A “GT Voice” comment in the state-supporting Global Times said the CBAM exposed a dilemma around the “absence of a globally accepted, transparent and equitable standard for measuring carbon footprints”. It called CBAM a “pioneering step”, but said climate efforts needed “greater international coordination, not unilateral enforcement”.
FIRST REVIEW: The EU has undertaken its first “formal review” of the tariffs placed on Chinese-made electric vehicles (EVs), assessing a price undertaking offer submitted by Volkswagen’s Chinese joint venture, reported SCMP. Chinese EVs – including both hybrid and pure EVs – saw their “second-best month on record” in October, with sales coming down slightly from September’s peak, said Bloomberg.
More China news
- ECONOMIC SIGNALS: At the central economic work conference, held in Beijing on 10-11 December, President Xi Jinping said China would adhere to the “dual-carbon” goals and promote a “comprehensive green transition”, reported Xinhua.
- EFFORTS ‘INTENSIFIED’: Ahead of the meeting, premier Li Qiang also noted earlier that energy conservation and carbon reduction efforts must be “intensified”, according to the People’s Daily.
- JET FUEL: A major jet fuel distributor is being acquired by oil giant Sinopec, which could “risk slowing [China’s] push to decarbonise air travel”, reported Caixin.
- SLOW AND STEADY: An article in the People’s Daily said China’s energy transition is “not something that can be achieved overnight”.
- ‘ECO-POLICE’: China’s environment ministry published a draft grading system for “atmospheric environmental performance in key industries”, including assessment of “significant…carbon emission reduction effects”, noted International Energy Net. China will also set up an “eco-police” mechanism in 2027, China Daily said.
- INNOVATION INITIATIVE: The National Energy Administration issued a call for the “preliminary establishment of a new energy system that is clean, low-carbon, safe and efficient” in the next five years, reported BJX News. The plan also noted: “Those who take the lead in [energy technology] innovation will gain the initiative.”
Spotlight
Interview: How ‘mid-level bureaucrats’ are helping to shape Chinese climate policy
Local officials are viewed as relatively weak actors in China’s governance structure.
However, a new book – “Implementing a low-carbon future: climate leadership in Chinese cities” – argues that these officials play an important role in designing innovative and enduring climate policy.
Carbon Brief interviews author Weila Gong, non-resident scholar at the UC San Diego School of Global Policy and Strategy’s 21st Century China Center and visiting scholar at UC Davis, on her research.
Below are highlights from the conversation. The full interview is published on the Carbon Brief website.
Carbon Brief: You’ve just written a book about climate policy in Chinese cities. Could you explain why subnational governments are important for China’s climate policy in general?
Weila Gong: China is the world’s largest carbon emitter [and] over 85% of China’s carbon emissions come from cities.
We tend to think that officials at the provincial, city and township levels are barriers for environmental protection, because they are focused on promoting economic growth.
But I observed these actors participating in China’s low-carbon city pilot. I was surprised to see so many cities wanted to participate, even though there was no specific evaluation system that would reward their efforts.
CB: Could you help us understand the mindset of these bureaucrats? How do local-level officials design policies in China?
WG: We tend to focus on top political figures, such as mayors or [municipal] party secretaries. But mid-level bureaucrats [are usually the] ones implementing low-carbon policies.
Mid-level local officials saw [the low-carbon city pilot] as a way to help their bosses get promoted, which in turn would help them advance their own career. As such, they [aimed to] create unique, innovative and visible policy actions to help draw the attention [of their superiors].
They are also often more interested in climate issues if it is in the interest of their agency or local government.
Another motivation is accessing finance [by using] pilot programmes, if their ideas impress the central-level government.
CB: Could you give an example of what drives innovative local climate policies?
WG: National-level policies and pilot programme schemes provide openings for local governments to think about how and whether they should engage more in addressing climate change.
By experiment[ing] with policy at a local level, local governments help national-level officials develop responses to emerging policy challenges.
Local carbon emission trading systems (ETSs) are an example.
One element that made the Shenzhen ETS successful is “entrepreneurial bureaucrats” [who have the ability to design, push through and maintain new local-level climate policies].
Even though we might think local officials are constrained in terms of policy or financial resources, they often have the leverage and space to build coalitions…and know how to mobilise political support.
CB: What needs to be done to strengthen sub-national climate policy making?
WG: It’s very important to have groups of personnel trained on climate policy…[Often] climate change is only one of local officials’ day-to-day responsibilities. We need full-time staff to follow through on policies from the beginning right up to implementation.
Secondly, while almost all cities have made carbon-peaking plans, one area in which the government can make further progress is data.
Most Chinese cities haven’t yet established regular carbon accounting systems, [and only have access to] inadequate statistics. Local agencies can’t always access detailed data [held at the central level]…[while] much of the company-level data is self-reported.
Finally, China will always need local officials willing to try new policy instruments. Ensuring they have the conditions to do this is very important.
Watch, read, listen
BREAKNECK SPEED: In a conversation with the Zero podcast, tech analyst Dan Wang outlined how an “engineering mindset” may have given China the edge in developing clean-energy systems in comparison to the US.
QUESTION OF CURRENCY: Institute of Finance and Sustainability president Ma Jun and Climate Bonds Initiative CEO Sean Kidney examined how China’s yuan-denominated loans can “ease the climate financing crunch” in the South China Morning Post.
DRIVING CHANGE: Deutsche Welle broadcast a report on how affordable cleantech from China is accelerating the energy transition in global south countries.
EXPOSING LOOPHOLES: Economic news outlet Jiemian investigated how a scandal involving the main developer of pumped storage capacity in China revealed “regulatory loopholes” in constructing such projects.
$180 billion
The amount of outward direct investment Chinese companies have committed to cleantech projects overseas since 2023, according to a new report by thinktank Climate Energy Finance.
New science
- A new study looking at battery electric trucks across China, Europe and the US showed they “can reach 27-58% reductions in lifecycle CO2 emissions compared with diesel trucks” | Nature Reviews Clean Technology
- “Shortcomings remain” in China’s legal approach to offshore carbon capture, utilisation and storage, such as a lack of “specialised” legal frameworks | Climate Policy
China Briefing is written by Anika Patel and edited by Simon Evans. Please send tips and feedback to china@carbonbrief.org
The post China Briefing 11 December 2025: Winter record looms; Joint climate statement with France; How ‘mid-level bureaucrats’ help shape policy appeared first on Carbon Brief.
China’s central and local governments, as well as state-owned enterprises, are busy preparing for the next five-year planning period, spanning 2026-30.
The top-level 15th five-year plan, due to be published in March 2026, will shape greenhouse gas emissions in China – and globally – for the rest of this decade and beyond.
The targets set under the plan will determine whether China is able to get back on track for its 2030 climate commitments, which were made personally by President Xi Jinping in 2021.
This would require energy sector carbon dioxide (CO2) emissions to fall by 2-6% by 2030, much more than implied by the 2035 target of a 7-10% cut from “peak levels”.
The next five-year plan will set the timing and the level of this emissions peak, as well as whether emissions will be allowed to rebound in the short term.
The plan will also affect the pace of clean-energy growth, which has repeatedly beaten previous targets and has become a key driver of the nation’s economy.
Some 250-350 gigawatts (GW) of new wind and solar would be needed each year to meet China’s 2030 commitments, far above the 200GW being targeted.
Finally, the plans will shape China’s transition away from fossil fuels, with key sectors now openly discussing peak years for coal and oil demand, but with 330GW of new coal capacity in the works and more than 500 new chemical industry projects due in the next five years.
These issues come together in five key questions for climate and energy that Chinese policymakers will need to answer in the final five-year plan documents next year.
Five-year plans and their role in China
1. Will the plan put China back on track for its 2030 Paris pledge?
2. Will the plan upgrade clean-energy targets or pave the way to exceed them?
3. Will the plan set an absolute cap on coal consumption?
4. Will ‘dual control’ of carbon prevent an emission rebound?
5. Will it limit coal-power and chemical-industry growth?
Five-year plans and their role in China
Five-year plans are an essential part of China’s policymaking, guiding decision-making at government bodies, enterprises and banks. The upcoming 15th five-year plan will cover the years 2026-30, set targets for 2030 and use 2025 as its base year.
The top-level five-year plan will be published in March 2026 and is known as the five-year plan on economic and social development. This overarching document will be followed by dozens of sectoral plans, as well as province- and company-level plans.
The sectoral plans are usually published in the second year of the five-year period, meaning they would be expected in 2027.
There will be five-year plans for the energy sector, the electricity sector, for renewable energy, nuclear, coal and many other sub-sectors, as well as plans for major industrial sectors such as steel, construction materials and chemicals.
It is likely that there will also be a plan for carbon emissions or carbon peaking and a five-year plan for the environment.
During the previous five-year period, the plans of provinces and state-owned enterprises for very large-scale solar and wind projects were particularly important, far exceeding the central government’s targets.
The five-year plans create incentives for provincial governments and ministries by setting quantified targets that they are responsible for meeting. These targets influence the performance evaluations of governors, CEOs and party secretaries.
The plans also designate favoured sectors and projects, directing bank lending, easing permitting and providing an implicit government guarantee for the project developers.
Each plan lists numerous things that should be “promoted”, banned or controlled, leaving the precise implementation to different state organs and state-owned enterprises.
Five-year plans can introduce and coordinate national mega-projects, such as the gigantic clean-energy “bases” and associated electricity transmission infrastructure, which were outlined in the previous five-year plan in 2021.
The plans also function as a policy roadmap, assigning the tasks to develop new policies and providing stakeholders with visibility to expected policy developments.
1. Will the plan put China back on track for its 2030 Paris pledge?
Reducing carbon intensity – the energy-sector carbon dioxide (CO2) emissions per unit of GDP – has been the cornerstone of China’s climate commitments since the 2020 target announced at the 2009 Copenhagen climate conference.
Consequently, the last three five-year plans have included a carbon-intensity target. The next 15th one is highly likely to set a carbon-intensity target too, given that this is the centerpiece of China’s 2030 climate targets.
Moreover, it was president Xi himself who pledged in 2021 that China would reduce its carbon intensity to 65% below 2005 levels by 2030. This was later formalised in China’s 2030 “nationally determined contribution” (NDC) under the Paris Agreement.
Xi also pledged that China would gradually reduce coal consumption during the five-year period up to 2030. However, China is significantly off track to these targets.
China’s CO2 emissions grew more quickly in the early 2020s than they had been before the Coronavirus pandemic, as shown in the figure below. This stems from a surge in energy consumption during and after the “zero-Covid” period, together with a rapid expansion of coal-fired power and the fossil-fuel based chemical industry. as shown in the figure below.
As a result, meeting the 2030 intensity target would require a reduction in CO2 emissions from current levels, with the level of the drop depending on the rate of economic growth.
Xi’s personal imprimatur would make missing these 2030 targets awkward for China, particularly given the country’s carefully cultivated reputation for delivery. On the other hand, meeting them would require much stronger action than initially anticipated.
Recent policy documents and statements, in particular the recommendations of the Central Committee of the Communist Party for the next five-year plan, and the government’s work report for 2025, have put the emphasis on China’s target to peak emissions before 2030 and the new 2035 emission target, which would still allow emissions to increase over the next five-year period. The earlier 2030 commitments risk being buried as inconvenient.
Still, the State Council’s plan for controlling carbon emissions, published in 2024, says that carbon intensity will be a “binding indicator” for the next five-year period, meaning that a target will be included in the top-level plan published in March 2026.
China is only set to achieve a reduction of about 12% in carbon intensity from 2020 to 2025 – a marked slowdown relative to previous periods, as shown in the figure below.
(This is based on reductions reported annually by the National Bureau of Statistics until 2024 and a projected small increase in energy-sector CO2 emissions in 2025. Total CO2 emissions could still fall this year, when the fall in process emissions from cement production is factored in.)
A 12% fall would be far less than the 18% reduction targeted under the 14th five-year plan, as well as falling short of what would be needed to stay on track to the 2030 target.
To make up the shortfall and meet the 2030 intensity target, China would need to set a goal of around 23% in the next five-year plan. As such, this target will be a key test of China’s determination to honour its climate commitments.
A carbon-intensity target of 23% is likely to receive pushback from some policymakers, as it is much higher than achieved in previous periods. No government or thinktank documents have yet been published with estimates of what the 2030 intensity target would need to be.
In practice, meeting the 2030 carbon intensity target would require reducing CO2 emissions by 2-6% in absolute terms from 2025, assuming a GDP growth rate of 4.2-5.0%.
China needs 4.2% GDP growth over the next decade to achieve Xi’s target of doubling the country’s GDP per capita from 2020 to 2035, a key part of his vision of achieving “socialist modernisation” by 2035, with the target for the next five years likely to be set higher.
Recent high-level policy documents have avoided even mentioning the 2030 intensity target. It is omitted in recommendations of the Central Committee of the Communist Party for the next five-year plan, the foundation on which the plan will be formulated.
Instead, the recommendations emphasised “achieving the carbon peak as scheduled” and “promoting the peaking of coal and oil consumption”, which are less demanding.
The environment ministry, in contrast, continues to pledge efforts to meet the carbon intensity target. However, they are not the ones writing the top-level five-year plan.
The failure to meet the 2025 intensity target has been scarcely mentioned in top-level policy discussions. There was no discernible effort to close the gap to the target, even after the midway review of the five-year plan recognised the shortfall.
The State Council published an action plan to get back on track, including a target for reducing carbon intensity in 2024 – albeit one not sufficient to close the shortfall. Yet this plan, in turn, was not followed up with an annual target for 2025.
The government could also devise ways to narrow the gap to the target on paper, through statistical revisions or tweaks to the definition of carbon intensity, as the term has not been defined in China’s NDCs.
Notably, unlike China’s previous NDC, its latest pledge did not include a progress update for carbon intensity. The latest official update sent to the UN only covers the years to 2020.
This leaves some more leeway for revisions, even though China’s domestic “statistical communiques”, published every year, have included official numbers up to 2024.
Coal consumption growth around 2022 was likely over-reported, so statistical revisions could reduce reported emissions and narrow the gap to the target. Including process emissions from cement, which have been falling rapidly in recent years, and changing how emissions from fossil fuels used as raw materials in the chemicals industry are accounted for, so-called non-energy use, which has been growing rapidly, could make the target easier to meet.
2. Will the plan upgrade clean-energy targets or pave the way to exceed them?
The need to accelerate carbon-intensity reductions also has implications for clean-energy targets.
The current goal is for non-fossil fuels to make up 25% of energy supplies in 2030, up from the 21% expected to be reached this year.
This expansion would be sufficient to achieve the reduction in carbon intensity needed in the next five years, but only if energy consumption growth slows down very sharply. Growth would need to slow to around 1% per year, from 4.1% in the past five years 2019-2024 and from 3.7% in the first three quarters of 2025.
The emphasis on manufacturing in the Central Committee’s recommendations for the next five-year plan is hard to reconcile with such a sharp slowdown, even if electrification will help reduce primary energy demand. During the current five-year period, China abolished the system of controlling total energy consumption and energy intensity, removing the incentive for local governments to curtail energy-intensive projects and industries.
Even if the ratio of total energy demand growth to GDP growth returned to pre-Covid levels, implying total energy demand growth of 2.5% per year, then the share of non-fossil energy would need to reach 31% by 2030 to deliver the required reduction in carbon intensity.
However, China recently set the target for non-fossil energy in 2035 at just 30%. This risks cementing a level of ambition that is likely too low to enable the 2030 carbon-intensity target to be met, whereas meeting it would require non-fossil energy to reach 30% by 2030.
There is ample scope for China to beat its targets for non-fossil energy.
However, given that the construction of new nuclear and hydropower plants generally takes five years or more in China, only those that are already underway have the chance to be completed by 2030. This leaves wind and solar as the quick-to-deploy power generation options that can deliver more non-fossil energy during this five-year period.
Reaching a much higher share of non-fossil energy in 2030, in turn, would therefore require much faster growth in solar and wind than currently targeted. Both the NDRC power-sector plan for 2025-27 and China’s new NDC aim for the addition of about 200 gigawatts (GW) per year of solar and wind capacity, much lower than the 360GW achieved in 2024.
If China continued to add capacity at similar rates, going beyond the government’s targets and instead installing 250-350GW of new solar and wind in each of the next five years, then this would be sufficient to meet the 2030 intensity target, assuming energy demand rising by 2.5-3.0% per year.
All previous wind and solar targets have been exceeded by a wide margin, as shown in the figure below, so there is a good chance that the current one will be, too.
While the new pricing policy for wind and solar has created a much more uncertain and less supportive policy environment for the development of clean energy, provinces have substantial power to create a more supportive environment.
For example, they can include clean-energy projects and downstream projects using clean electricity and green hydrogen in their five-year plans, as well as developing their local electricity markets in a direction that enables new solar and wind projects.
3. Will the plan set an absolute cap on coal consumption?
In 2020, Xi pledged that China would “gradually reduce coal consumption” during the 2026-30 period. The commitment is somewhat ambiguous.
It could be interpreted as requiring a reduction starting in 2026, or a reduction below 2025 levels by 2030, which in practice would mean coal consumption peaking around the midway point of the five-year period, in other words 2027-28.
In either case, if Xi’s pledge were to be cemented in the 15th five-year plan then it would need to include an absolute reduction in coal consumption during 2026-30. An illustration of what this might look like is shown in the figure below.
However, the commitment to reduce coal consumption was missing from China’s new NDC for 2035 and from the Central Committee’s recommendations for the next five-year plan.
The Central Committee called for “promoting a peak in coal and oil consumption”, which is a looser goal as it could still allow an increase in consumption during the period, if the growth in the first years towards 2030 exceeds the reduction after the peak.
The difference between “peaking” and “reducing” is even larger because China has not defined what “peaking” means, even though peaking carbon emissions is the central goal of China’s climate policy for this decade.
Peaking could be defined as achieving a certain reduction from peak before the deadline, or having policies in place that constrain emissions or coal use. It could be seen as reaching a plateau or as an absolute reduction.
While the commitment to “gradually reduce” coal consumption has seemed to fade from discussion, there have been several publications discussing the peak years for different fossil fuels, which could pave the way for more specific peaking targets.
State news agency Xinhua published an article – only in English – saying that coal consumption would peak around 2027 and oil consumption around 2026, while also mentioning the pledge to reduce coal consumption.
The energy research arm of the National Development and Reform Council had said earlier that coal and oil consumption would peak halfway through the next five-year period, in other words 2027-28, while the China Coal Association advocated a slightly later target of 2028.
Setting a targeted peak year for coal consumption before the half-way point of the five-year period could be a way to implement the coal reduction commitment.
With the fall in oil use in transportation driven by EVs, railways and other low-carbon transportation, oil consumption is expected to peak soon or to have peaked already.
State-owned oil firm CNPC projects that China’s oil consumption will peak in 2025 at 770m tonnes, while Sinopec thinks that continued demand for petrochemical feedstocks will keep oil consumption growing until 2027 and it will then peak at 790-800m tonnes.
4. Will ‘dual control’ of carbon prevent an emission rebound?
With the focus on realising a peak in emissions before 2030, there could be a strong incentive for provincial governments and industries to increase emissions in the early years of the five-year period to lock in a higher level of baseline emissions.
This approach is known as “storming the peak” (碳冲锋) in Chinese and there have been warnings about it ever since Xi announced the current CO2 peaking target in 2020.
Yet, the emphasis on peaking has only increased, with the recent announcement on promoting peaks in coal consumption and oil consumption, as well as the 2035 emission-reduction target being based on “peak levels”.
The policy answer to this is creating a system to control carbon intensity and total CO2 emissions – known as “dual control of carbon” – building on the earlier system for the “dual control of energy” consumption.
Both the State Council and the Central Committee have set the aim of operationalising the “dual control of carbon” system in the 15th five-year plan period.
However, policy documents speak of building the carbon dual-control system during the five-year period rather than it becoming operational at the start of the period.
For example, an authoritative analysis of the Central Committee’s recommendations by China Daily says that “solid progress” is needed in five areas to actually establish the system, including assessment of carbon targets for local governments as well as carbon management for industries and enterprises.
The government set an annual target for reducing carbon intensity for the first time in 2024, but did not set one for 2025, also signaling that there was no preparedness to begin controlling carbon intensity, let alone total carbon emissions, yet.
If the system is not in place at the start of the five-year period, with firm targets, there could be an opportunity for local governments to push for early increases in emissions – and potentially even an incentive for such emission increases, if they expect strict control later.
Another question is how the “dual” element of controlling both carbon intensity and absolute CO2 emissions is realised. While carbon intensity is meant to be the main focus during the next five years, with the priority shifting to reducing absolute emissions after the peak, having the “dual control” in place requires some kind of absolute cap on CO2 emissions.
The State Council has said that China will begin introducing “absolute emissions caps in some industries for the first time” from 2027 under its national carbon market. It is possible that the control of absolute carbon emissions will only apply to these sectors.
The State Council also said that the market would cover all “major emitting sectors” by 2027, but absolute caps would only apply to sectors where emissions have “stabilised”.
5. Will it limit coal-power and chemical-industry growth?
During the current five-year period, China’s leadership went from pledging to “strictly control” new coal-fired power projects to actively promoting them.
If clean-energy growth continues at the rates achieved in recent years, there will be no more space for coal- and gas-fired power generation to expand, even if new capacity is built. Stable or falling demand for power generation from fossil fuels would mean a sharp decline in the number of hours each plant is able to run, eroding its economic viability.
Showing the scale of the planned expansion, researchers from China Energy Investment Corporation, the second-largest coal-power plant operator in China, project that China’s coal-fired power capacity could expand by 300GW from the end of 2024 to 2030 and then plateau at that level for a decade. The projection relies on continued growth of power generation from coal until 2030 and a very slow decline thereafter.
The completion of the 325GW projects already under construction and permitted at the end of 2024, as well as an additional 42GW permitted in the first three quarters of 2025, could in fact lead to a significantly larger increase, if the retirement of existing capacity remains slow.
In effect, China’s policymakers face a choice between slowing down the clean-energy boom, which has been a major driver of economic growth in recent years, upsetting coal project developers, who expect to operate their coal-fired power plants at a high utilisation, or retiring older coal-power plants en masse.
Their response to these choices may not become clear for some time. The top-level five-year plan that will be published in March 2026 will likely provide general guidelines, but the details of capacity development will be relegated to the sectoral plans for energy.
The other sector where fossil fuel-based capacity is rapidly increasing is the chemical industry, both oil and coal-based. In this sector, capacity growth has led directly to increases in output, making the sector the only major driver of emissions increases after early 2024.
The expansion is bound to continue. There are more than 500 petrochemical projects planned by 2030 in China, of which three quarters are already under construction, according to data provider GlobalData.
As such, the emissions growth in the chemical sector is poised to continue in the next few years, whereas meeting China’s 2030 targets and commitments would require either reining it in and bringing emissions back down before 2030, or achieving emission reductions in other sectors that offset the increases.
The expansion of the coal-to-chemicals industry is largely driven by projects producing gas and liquid fuels from coal, which make up 70% of the capacity under construction and in planning, according to a mapping by Anychem Coalchem.
These projects are a way of reducing reliance on imported oil and gas. In these areas, electrification and clean energy offer another solution that can replace imports.
Conclusions
The five-year plans being prepared now will largely determine the peak year and level of China’s emissions, with a major impact on China’s subsequent emission trajectory and on the global climate effort.
The targets in the plan will also be a key test of the determination of China’s leadership to respect previous commitments, despite setbacks.
The country has cultivated a reputation for reliably implementing its commitments. For example, senior officials have said that China’s policy targets represent a “bottom line”, which the policymakers are “definitely certain” about meeting, while contrasting this with other countries’ loftier approach to target-setting.
Depending on how the key questions outlined in this article are answered in the plans for the next five years, however, there is the possibility of a rebound in emissions.
There are several factors contributing to such a possibility: solar- and wind-power deployment could slow down under the new pricing policy, weak targets and a deluge of new coal- and gas-power capacity coming onto the market.
In addition, unfettered expansion of the chemical industry could drive up emissions. And climate targets that limit emissions only after a peak is reached could create an incentive to increase emissions in the short term, unless counteracted by effective policies.
On the other hand, there is also the possibility of the clean-energy boom continuing so that the sector beats the targets it has been set. Policymakers could also prioritise carbon-intensity reductions early in the period to meet China’s 2030 commitments.
Given the major role that clean-energy industries have played in driving China’s economic growth and meeting GDP targets, local governments have a strong incentive to keep the expansion going, even if the central government plans for a slowdown.
During the current five-year period, provinces and state-owned enterprises have been more ambitious than the central government. Provinces can and already have found ways to support clean-energy development beyond central government targets.
Such an outcome would continue a well-established pattern, given all previous wind and solar targets have been exceeded by a wide margin.
The difference now is that a significant exceedance of clean-energy targets would make a much bigger difference, due to the much larger absolute size of the industry.
To date, China’s approach to peaking emissions and pursuing carbon neutrality has focused on expanding the supply and driving down the cost of clean technology, emphasising economic expansion rather than restrictions on fossil-fuel use and emissions, with curbing overcapacity an afterthought.
This suggests that if China’s 2030 targets are to be met, it is more likely to be through the over-delivery of clean energy than as a result of determined regulatory effort.
The post Q&A: Five key climate questions for China’s next ‘five-year plan’ appeared first on Carbon Brief.
Q&A: Five key climate questions for China’s next ‘five-year plan’
Governments sent fewer people to the COP30 summit in Belém than they did to any COP talks since 2014, newly-released UN data reveals, as they faced a shortage of officially-sanctioned and affordable accommodation.
While 42,618 people – including security and volunteers working at COP30 – attended the conference in the Amazon, just 7,527 of them were there with official government lanyards, known as “party badges”.
That’s the smallest number of government delegates than for any COP since the Paris Agreement was adopted in 2015 and around half as many as attended last year’s COP in the Azerbaijani capital of Baku.
While government attendance was well down in Brazil, other delegates from non-governmental organisations, the media and those given “party overflow” badges by governments were present in good numbers.
Many government departments have strict rules about which types of accommodation can be booked. This prevented many officials from finding rooms on websites like Booking.com or Airbnb and restricted them to the official COP30 accommodation platform, which was sanctioned by the Brazilian government.
Accommodation providers in Belém told Climate Home News that the Brazilian government’s bureaucratic restrictions prevented them from listing their properties on this platform. With the supply of rooms limited, prices on the platform were high, starting at around $240 a night.
Flights to Belém were also expensive. With the city’s airport only having a handful of international flights, many delegates had to transit through bigger Brazilian cities thousands of kilometres away like Rio de Janeiro and Sao Paulo.
To combat the shortage of reasonably priced accommodation, the Brazilian government offered countries 10-15 price-capped rooms each on two cruise ships near Belém.
The government also moved the leaders’ segment of the COP to just before the start of the negotiations to ease the peak in demand for accommodation. The UN, meanwhile, increased the daily allowance it gives to negotiators from most developing countries.
The drop in attendance was most pronounced among government negotiators from Central Asia and Eastern Europe, who went to COP29 in nearby Baku in large numbers. This was only partly balanced out by an increased number of Brazilians and neighbouring Latin Americans at COP30.
The UAE and Azerbaijan, the outgoing and incoming presidencies at COP29, also sent far fewer people to COP30 than they did to COP29. The official US delegation fell from 234 at COP29 to zero at COP30, as the Trump administration dismissed the importance of the talks and decided not to send a team.
But other declines in the numbers appeared to have no particular political or geographic pattern. The delegation of the Pacific island of Nauru dropped from 17 at COP29 to one at COP30 while Zimbabwe’s fell from 181 to just 44.
Despite fears they would be worst hit by a shortage of accommodation, small island and least-developed nations did not reduce their delegation sizes more than governments did on average.
Some large wealthier countries also pared back their delegations, with Germany and China both cutting their head count by around half.
The total attendance of 42,618 people was the fourth-highest of any COP, behind the last three conferences – but less than the over 50,000 people Brazilian officials said had been expected and the 56,118 who registered to participate.
Around 11,000 were working at the conference as support staff including security guards and volunteers. The number of people at the COP taking part in the talks – comprising government officials, observers and media – was just under 32,000.
COP31 will take place in November 2026 in the Turkish tourist-resort city of Antalya, where hotel rooms and international flights are expected to be more abundant than in Belém.
The post Government attendance at COP30 was lowest in 10 years appeared first on Climate Home News.
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