China faces US$6.5 trillion green financing gap to reach 2060 net-zero carbon emissions goal, WEF report finds
China faces a shortfall of 44 trillion yuan (US$6.5 trillion) in green financing over the next four decades as it strives to hit its carbon neutrality goal, according to a new report.
The country will need to raise about 140 trillion yuan from green bonds and other environmentally friendly funding tools to become carbon neutral by 2060, but will fall short by 44 trillion yuan, said the report published by the World Economic Forum (WEF) and consulting company Oliver Wyman on Thursday.
This means it needs to fill a funding gap of 1.1 trillion yuan each year between 2020 and 2060 in the financing of green innovative technologies across all sectors including electricity, steel, mobility and construction, said the report.
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"China's net-zero commitment will require a revolutionary transformation of its economy driven by the widespread adoption of green technologies, all of which will require enormous investment," said Qian Hang, a partner at Oliver Wyman in a statement on Thursday. "China's unique economic model will shape this transition."
President Xi Jinping pledged to lead the country to carbon neutrality - meaning its net carbon emissions will reach zero - by 2060, in a speech to the United Nations General Assembly in September, 2020.
China's net-zero transition is unique compared to the United States and countries in the European Union, because of its heavily industrialised economy, according to the report.
Manufacturing makes up more than a quarter of gross domestic product (GDP) in China, far higher than the 10.9 per cent in the US, 14.9 per cent in the EU, and 15.9 per cent global average.
Its transition to net-zero carbon emissions, therefore, will require massive funding to support substantial technological breakthroughs in carbon-heavy sectors, according to WEF and Oliver Wyman.
For example, the energy sector, which contributes to nearly half of China's greenhouse gas emissions, faces a financing gap of 15 to 20 trillion yuan over the 40 years to 2060 if it is to achieve the net-zero target. Of that, 6 to 8 trillion yuan will be in solar power, and 4 to 6 trillion yuan in wind power.
Investments in technology in those areas could help greatly reduce the energy sector emissions and contribute significantly to the 2060 net-zero goal, according to the report.