China’s decarbonization goals
Many consider that China’s decarbonization goals of reducing carbon emissions by 2030 and achieving carbon neutrality by 2060 to be ambitious. According to the Energy Sector Roadmap to Carbon Neutrality in China, which has been compiled by the International Energy Agency (IEA), achieving the peak earlier than 2030 is possible but challenging. Some required technologies need to be developed; the recent worldwide power shortages; geopolitical stability are all factors to be considered. Despite that there are doubts on whether they can be achieved on time, China’s commitment to achieving the decarbonization goals implies strong potential for companies having the needed technologies and solutions for China.
According to the “Green Infrastructure Investment Opportunities Green Infrastructure the Guangdong-Hong Kong-Macao Greater Bay Area 2021 Report “by the Climate Bonds Initiative and HSBC, China’s every year green investment demand accounts for about 2% of its total GDP.
At a regional level, the Greater Bay Area (GBA) is set to become a world-class city cluster and an international innovation and technology hub. Together, the GBA Outline Development Plan, the 14th Five-Year-Plan (FYP) and local strategies spanning different sectors have resulted in tremendous infrastructure investment needs. “The Greater Bay Area is the most developed and integrated region for China’s digital and information technology industries”, which will accelerate the development of the green energy sector and help China overhaul its existing electricity supply infrastructure, said Dr Roy Xiang Luo, the chairman of the Steering Committee of ESG & Carbon Neutral Investments of the United Nations Industrial Development Organization’s Global Innovation Network.
Direct business opportunities for foreign investors in GBA’s Green sectors
Having gone through the above chart on investment by green sectors, we highlight hereunder some business opportunities for foreign investors in GBA’s major green sectors:
- The major construction projects in the 14th FYP of Guangdong Province are expected to have a total investment of RMB 5 trillion (approximately USD 776.9 billion), of which no less than USD 299 billion will be invested in green infrastructure construction.
- In the next few years, the Hong Kong government will invest USD12.9 billion annually in infrastructure.
- In 2020, the Macau government launched more than 410 public construction projects with a total value of US$1.7 billion.
Indirect business opportunities for foreign investors in GBA
In addition to providing products, services, technologies, and solutions which contribute to reducing emissions along the entire value chain of greener GBA, businesses should strive to become carbon neutral with their own factory operations and supply chains. This poses business opportunities for other foreign investors as well, in such areas as Lightweight solutions, Green supply chain management, Green manufacturing and Green finance.
For reducing carbon emissions by 18% by 2025, lightweight solutions are key for making products lighter and reducing emissions in all kinds of industries. In China’s 14th FYP, a reference to light alloy materials in the aviation industry is also made.
In China, demand for lightweight solutions is increasing in all kinds of industries such as aerospace, wind energy, rail transportation, as well as automotive. In the automotive sector, lightweight solutions do not only satisfy requirements of safety and comfortable driving but also help to meet carbon emission reduction targets: the lighter the material, the fewer the emissions.
Green supply chain management and advisory service
Green supply chain management is recognized as a direct and effective mechanism to optimize carbon emission footprint along the global value chain, reducing pollution and improving energy and resource efficiency. Also, suppliers are encouraged to use raw materials produced with renewable energy. For instance, a China supplier of aluminium ingot has completed its shift to produce aluminium ingot for a German automobile manufacturer by renewable electricity. The supplier is now successfully utilizing renewable electricity in the upstream aluminium electrolysis and ingot production process.
To accelerate the green transformation and upgrading of the manufacturing industry, it is important to have green upgrading of traditional manufacturing industries as well as the development of green products, and create a green supply chain. One of the highlights of the GBA is the construction of NEV facilities and the production of NEV. By the end of 2012, Shenzhen has promoted the use of 750,000 NEVs and built 120,000 charging piles, ranking among the top in China.
Whilst the proportion of coal in the overall energy mix in GBA is around 30% that is relatively high as compared to 20% or lower in other key bay areas in the US and Japan , GBA is well positioned to lead carbon reduction efforts in China. Due to different social and tax systems in mainland China, Hong Kong SAR and Macau SAR, “The overall green development of the Greater Bay Area will face a complex situation”, said Meng Meng, general manager at the Guangzhou-based China Emissions Exchange (CEEX) at the Synergise GBA Forum on Thursday. This complexity, however, will bring more opportunities for enhancing green finance, she added.
Guangzhou, the provincial capital, has pledged to accelerate the innovation of carbon-related financial products, and develop leadership in the field of carbon reduction. Green loan disbursements have more than tripled in the past five years to USD 95.4b) as of March 2022, the Guangzhou Daily reported, citing a central bank official.
Speaking during a panel on carbon market development in the GBA and Asia, Grace Hui Suk-han, the former head of green and sustainable finance at Hong Kong Exchanges and Clearing (HKEX), said new voluntary carbon markets in the GBA can complement China’s national carbon trading system and promote Asia’s green economic transition.
This article has been provided courtesy of CW CPA, one of our long term service delivery partners in Greater China.