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environment | IST

Explained: Is China’s pollution control effort likely to slow down?

China's comments with respect to decarbonization or achieving carbon neutrality - via reducing pollution overall have significant direct and indirect impacts. Both, the earlier April and the current July meetings, discussed de-carbonization but the difference is crucial – there was caution against too aggressive de-carbonization in Saturday's meeting.

China’s commitment to environmental reform has been one of reasons behind the big bullish commodity thesis. However, did the top Chinese leadership just send out a 'go-slow' signal?
China's top decision making body , the Politburo, has indicated after a meeting over the weekend that the country must "avoid campaign style carbon reduction efforts". Steel prices in China are down sharply and steel stocks in China are trading limit down.
So what has happened?
The Chinese politburo hosts a meeting to discuss economic issues towards setting policy tone and agenda for coming months in late April and July which takes place every year. The latest such meeting took place over the weekend gone by on July 30.
Why is this important for us to note?
PraThis means that that the "campaign-style' decarbonization efforts being perused must be rectified.
The statement said that China must build new energy first and only then eliminate old energy second.
Decarbonisation remains a priority for China. In fact the Politburo has asked provincial governments to issue their carbon peak plans and curb investment projects with high energy consumption and high emission However -the Politburo told provincial governments to avoid using campaign-style decarbonisation.
The reason for slowing this down is simple. The Chinese leadership wants to avoid too fast a push for de-carbonization that could exert a significant drag on the economy, especially when growth is facing other headwinds
Last year, specifically September 2020, when China's leader Xi Jinping pledged to reach "carbon neutrality" meaning China's net carbon emissions will reach zero by 2060. In that sense 2021 marks the 1st year of a 40-year journey of de-carbonization ahead.
Sectors set to be reshaped
Contributing more than one-third of China's total carbon emissions - the upstream sectors, including steel, cement, aluminum, and chemicals - are the big ones which are seen being at the frontier of this multi-decade effort.
Chinese efforts to control pollution has had global implications on the sectors mentioned that is steel, non- ferrous metals, chemicals and others. If future Chinese policies will be more nuanced - balancing the short-term economic needs with long term decarbonization objectives - this may mean that many assumptions that have been built into commodity prices like fast steel capacity reduction in China may have to be readjusted.
For more, watch the accompanying video of Prashant Nair.