Incollaborationwith WORLD OliverWymanECQNOMIC FORUM China'sClimateChallenge: FinancingtheTransitiontoNetZero INSIGHTREPORT JULY2022 Images:Getty.Unsplash Contents Foreword8 Executivesummary4 1China'scommitmenttotacklingclimatechange5 2Thefinancinggap10 2.1Buildingastrongerinformationinfrastructure13 2.2Balancinglendingsupplyanddemand15 2.3Enhancingthepolicyframework17 3Industryanalysis21 3.1Mobility22 3.2Constructionandrealestate28 3.3Steel32 Conclusion38 Contributors39 Acknowledgements40 Endnotes42 Disclaimer Thisdocumentispublishedbythe WorldEconomicForum.asacontribution toaproject,insightareaorinteraction. Thefindings,interpretationsand conclusionsexpressedhereinarearesult ofacollaborativeprocessfacilitatedandendorsedbytheWorldEconomicForum butwhoseresultsdonotnecessarly representtheviewsoftheWoridEconomicForum,northeentiretyofitsMembers. Partnersorotherstakeholders. @2022WorldEconomicForum.Allrights reserved.Nopartofthispublicationmay bereproducedortransmittedinanyfom -orbyanymeans,includingphotocopyingandrecording,orbyanyinformation China'sClimateChallenge:FinancingtheTransitiontoNetZero July2022 China'sClimateChallenge: FinancingtheTransitiontoNetZero Foreword Chinaholdsimmenseopportunitiestorealizenet-zeroambitionsandglobalenvironmentalchange JasonEkbergKaiKeller Partner,CorporateandPlatfomCurator,TheFuture InstitutionalBankingPractice,ofFinancialServicesinChina, OiverWymanWorldEconomicForum AnApril2022intergovernmentalPanelonClimaterecognizingChina'ssignificanceinaccelerating Changereportfoundthattheglobalcommunitycapitalmobilizationtowardstheseearly-stage isonapathwaytoglobalwarmingofmorethandecarbonizationtechnologies,theForumand doublethe1.5C(or2.7Fahrenheit)limitagreedOliverWymanconvenedagroupofChinese uponinParisin2015.Thereportunderscoresindustryleadersandexpertsinearly2022to theurgencywithwhichprivateandpublicsectorexplorehowchallengesandopportunitiesinChina leadersmustact,andChina-currentlytheworid'salignwithordifferfromglobaldynamics.Through largestcarbonemitter-hasmadeanambitiousnumerousworkshopsandexpertinterviews, pledgetoachievecarbonpeakby2030andmorethan50industryandpublicsectorleaders carbonneutralityby2050.contributedinsightsandobservationsandposed yet-to-be-solvedquestionsthatarepresentedin Fulfllingthiscommitmentwillrequireanthisinsightreport. enormousamountoffinancing-aboutCNY 140trillion(Chineseyuanrenminbi)($22tillion)Chinaholdsacriticalandoutsizedroleinhelping intotalforthe2020-2060periodacrossthethegiobalcommunityachievethetargets electricity,steel,mobility,andconstructionoftheParisAgreementandpreservingthe andrealestateindustriesalone.Thesearealsoplanet'sbiosphere.Atthesametime,China's heavilypollutingindustriesthatareparticularlyavailablefinancingmechanismsanditsfinancial hardtotransitionandrequiretheapplicationsystemremainsomewhatdistinct.Anuanced ofinnovative,newtechnologiesthatareearly-understandingofprioritizednet-zerotechnologies stage,capital-intenseandrisky.Publicandandpotentialpathwaystofinancingthese privatestakeholders,bothfromcarbon-intensetechnologiesinGreaterChinaisthereforecritical industriesandthefinancialservicescommunity,toensurethecountrycanachieveitsnet-zero needtocreatenew.financingmodelstodevelop,ambitions.Thispublicationseeksto:helpinturning testandscalethesetechnologies.theseambitionsintorealities,showtheenormous opportunitiesChinaholdsforcontributingtothe Tofacilitatethisprocess,theWorldEconomicglobalcarbon-neutralityagendaandalsohighlight Forum,incollaborationwithOliverWyman,isremainingchallenges. engagingglobalindustryleadersintheFinancing theTransitiontoaNet-ZeroFutureinitiative.InWewelcomeyourfeedbackontheideas October2021-andintimeforthe26thUnitedpresentedinthisinsightreportandencourageyou Nations(UN)ClimateChangeConferenceofthetobecomepartofthisimportantworkfacilitatedby Parties(COP26)-initiativememberspublishedtheWorldEconomicForumthroughtheShaping aninsightreportpresentinginitialfindingsfromtheFutureofFinancialandMonetarySystems theseglobaldiscussions.BuildingonthisworkandPlatfomandtheMissionPossiblePlatform. China'sClimateChallenge:FinancingtheTransitiontoNetZero*5 Executivesummary Chinahasthemostambitiousnet-zerotarget ofanycountryworldwideandsomustensureit Chinahasdeclareditselffullycommittedtohavingpayingforthenewmachineryandequipment adecarbonizedeconomyby2060,amassivethatmustbeboughtandinstalledwillrequirean ambition.Formorethan15years,duetoitsheavilyimmenseamountoffunding industrializedeconomy,ithasbeentheworld's biggestemitterofgreenhousegases.OneuniqueThisreportidentifiesthreeareaswherechangewill challengetheworld'ssecondbiggesteconomywillbeneededtomaketheseshiftspossible: faceintransitioningtocarbonneutralityisbalancing itsdecarbonizationambitionswiththeneedtoFinanceinnovation,particularlyinfindingways maintainacompellingeconomicgrowthrate.inwhichlendingpackagescanbestructuredto meettheneedsoflong-termborrowersfacing Atthe26thUNClimateChangeConferenceofthe Parties(COP26)heldinGlasgow,Scotland,from31 Octoberto13November2021,Chi