Confucianism views the preservation and care for the environment as paramount for human development and Taoism centers on man and nature in harmony as the foundation of societal wellness. Traditional Chinese culture has long believed in the sustainability of ‘coexistence and cooperation’ with nature, and these philosophies are necessary to those coherent ideas.

Such concepts are especially pertinent in the modern environmental context than ever before. China, increasingly drawing on this cultural mindset, emerged as a global leader, with an investment in renewable energy of more than US$758 Billion higher than the combined investment in renewable energy of the US, Germany, and Japan.

State‐owned Enterprises (SOEs) and private corporations are the key power players in transitioning from a traditional economy to a green economy while the primary objective is to transform towards sustainable development.

China’s SOEs lead renewable energy advancements, contributing significantly to solar and wind capacity globally.

In the early 1980s, the Lubuge Hydropower Plant in Yunnan Province, China’s first World Bank-supported project, was a turning point. Together, they set the stage for China to quickly match what has long been recognized as the most rapidly growing major hydropower development in the world. Hydropower remained the most prominent renewable energy sector for over forty years but since then its preferential development has been shifted to new renewable energy on which China mainly concentrated on solar PV and wind energy.

For instance, the wind and solar energy industries in China have developed over the last decade and have been growing at a faster rate. Currently, the country has achieved 129 GW of installed capacity of wind energy and it is also having 43 GW of solar energy installed capacity by the year 2015. For wind energy alone, capacity addition for the year 2015 was 33GW and for solar energy, the addition was 15 GW, according to NEA (2016a, 2016b).

Currently, SEEs and private companies are pressing ahead of China to renewable energy accomplishment. The promotion of industrial development is mainly driven by state affiliates through concessional bidding, feed-in tariffs, and innovation subsidies, which category has its theoretical foundation on the developmental state model. This collaboration has put Chinese public and private enterprises to global leadership in solar panel and wind turbine manufacturing and grabbed a considerable part of the international markets. This synergy is as important because it underscores how SOEs can be the engine of both Chinese industrial development and climate efforts.

Dual Role of SOEs in China’s Climate Initiatives

In the national settings of China, SOEs undertake multiple roles. As a direct management institution of the State-owned Assets Supervision and Administration Commission of the State Council, oversees  97 central SOEs and nearly 460000 branches and sub-enterprises throughout the country are the work under it.

In most cases they are involved in conventional power (coal, oil, and natural gas), energy-intensive industries such as steel, iron, and cement transport and infrastructure, and also in commercial and finance. Listed Chinese 97 central state-owned corporations contributed 66% of the total Chinese Gross Domestic Product and actualized 31 % of entire tax collections by utilization of the budgeted average share of 20% by these 97 central state-owned corporations in the 2021 budget.

The remaining thousands of SOEs were owned by province and local governments. At the national level, besides being important for the China economy and covering a large number of industries SOEs remain the main governmental policy executers by altogether heights.

In China, SOEs are big energy producers, big energy users, and big CO2 emitters. The largest power generators include Huaneng Power International, a thermal power giant (in the fifth spot), which emits 317 million metric tons a year which is about the same as what the UK produces in a year.

Aggressive carbon neutrality goals mandate SOEs to reduce emissions by 18% by 2025 and achieve neutrality by 2060.

Likewise, China State Grid and China Southern Power Grid, the two state-owned companies controlling Chinese power transmission and distribution in the territory, account for around 49.6 percent of Chinese CO2 emissions. Four of the largest sources of coal-related SOEs, producing 4.61 billion tons of equivalent CO2 per annum, make a crucial political counterweight to dramatic climate action and coal phase-out in China.

Quite unexpectedly though to all stakeholders CSEs remain by far the most significant investors and developers of RE, especially at the deployment level. In 2020 83% of PV projects in the large-scale grid-connected PV power projects in China have been contributed by the solar PV SOEs. In the present scenario, they account for one-third of new wind capacity that is grid-connected. Indeed, China’s Development Bank, or the CDB was in support of renewable energies and channeled over 200 RMB when the 2010s started.

SOEs as Pioneers in Advancing China’s Carbon Neutrality Goals

SOEs play an important role as strategic supporters of China’s realization of carbon peaking and carbon neutrality. But new investment areas for foreign investment and state-owned enterprises in essentially the key sectors for China’s long-term goal of net zero carbon in the future include green finance, renewables, energy efficiency, electrification, hydrogen, and many others.

China recently through a remarkable announcement in September 2020 that CO2 emissions will peak before 2030 and become net zero emissions before 2060. The Guidance on Promoting High-Quality SASAC issued the Guidance on Promoting High-quality Development of Central SOEs in November 2021, which defines the SOEs’ demonstrative and leading role. SOEs are mandated to reduce CO2 emissions per ton of output value by 18 percent against 2020 levels by 2025, and 65 percent against 2005 levels by 2030.

Specifically, in this paper, the direct activities stimulated by the priorities of the central government towards carbon neutrality of SOEs are considered. This year, the State Grid Corporation of China became the first SOE to publicly declare it’s going fully green by announcing its carbon neutrality target and laying out this year’s reduction target for carbon emission as well as its green investment plan followed by Petro China and China Development Bank.

Currently, all 97 fundamental SOEs have defined peaking points mainly, out of which 92 are according to the country’s goal of reaching the maximum level of carbon emission by 2030, Amid are stricter, SASAC said, adding that 20 out of the 97 have clear roads for achieving carbon neutrality by 2060.

SOEs drive green finance, with billions invested in clean energy projects and bonds supporting hydro and wind power.

In its bid to be carbon neutral and drive the green transformation, SOGP is ramping up its spending on low-carbon technology and schemes. China Huaneng Group has been dedicating more than 70% of annual expenses to support clean energy projects every year since 2010.

Some major state-owned enterprises are also actively developing projects in fields such as carbon capture, utilization, and storage (CCUS), smart grids, ultra-high voltage (UHV) grids, hydrogen energy, and new energy automobiles.

For instance, China Telecom has come up with an advanced AI-based energy-saving technology for cooling deployed in a Beijing data center that has been reducing the output of CO2 by up to 3,740 tons per annum.

SOEs are also directly engaged in green finance through their direct investment Department of Public Sequel Journal Indices 102. As at March 2021 Sinopec, State Power Investment Corporation China Energy, and Huaneng Group released bonds worth 11.1 billion RMB with 90 % fund for clean energy including hydro and wind power projects.

Even later in December 2021, China Power Investment Corporation (SPIC) and China Life Asset Management jointly formed an 8 billion RMB clean energy fund hoping to finance 75 renewable energy projects.

It then holds CEOs in SOEs accountable if they do not achieve the carbon reduction targets and chastises the CEOs who failed to perform in this regard. Providing false statistics about CO2 emissions might result in a tough appraisal at the annual evaluation for executives. Consequently, SOEs are beginning to develop both monitoring and evaluation procedures that will report to SASAC.

The regulation of China’s renewable energy sector was replaced by a dynamic process between multiple entities. The roles of state-owned utility corporations, private investors, and indeed major manufacturers are now important in policymaking. It is a tightly interconnected policy network involving multiple bureaucratic and industrial interests that compete and collaborate, and whose interactions driven by complex inter- and intra-state power dynamics inform renewable energy policies beyond state control.

Collaboration with private and foreign investors enhances innovation, market reach, and the renewable energy ecosystem in China.

State-owned firms helped propel China’s rise as the world’s leader in the production of renewable energy in this manner. Aggressive carbon reduction goals and supporting innovation and industrial growth is attained by China through the leverage of private and foreign investor involvement in large-scale renewables programs. We are both significant investors as well as critically important players in the energy revolution.

SOEs have made important contributions to the development of sustainable energy infrastructure, including wind and solar plants, through policies that promote carbon peaking and neutrality. SOEs have gained money, upgraded technology, and increased their market reach through collaboration with private and foreign investors, propelling them to the forefront of renewable energy manufacturing worldwide.

However, issues such as increased openness, regulatory risk, and geopolitical tensions persist. Despite these challenges, the ability of SOEs to use their scale and resources in the renewable energy sector places them as essential actors in China’s energy future.

Disclaimer: The opinions expressed in this article are solely those of the author. They do not represent the views, beliefs, or policies of the Stratheia.