Nicholas Stern and Chunping Xie

Grantham Research Institute on Climate Change and the Environment, London School of Economics and Political Science (LSE)

A submission to the China Development Forum 2021

1. Sustainable development and transition towards carbon neutrality in the post-COVID-19 world

The world currently faces the twin crises of COVID-19 and climate change. The COVID-19 pandemic has caused severe damage to the world economy, disrupting lives, societies and politics. Yet despite the magnitude of the crisis, which is truly global, the risks posed by unmanaged climate change are likely to be still greater and longer-lasting than those posed by the pandemic. There is now widespread recognition across the world both that the threats must be dealt with simultaneously, and that we cannot go back to the old economic growth model which was fragile and polluting. For most of the world, tackling the twin threats will require both increasing investment and fundamentally changing its industrial composition towards sustainability. And for most of the world, it is crucial not to repeat the mistake following the financial crisis of 2008-10 of an early relapse into austerity in the public finances, thereby choking off growth. For China it is important not to repeat a different mistake, made at that time, namely overinvesting in traditional high-carbon infrastructure. And, for China, the challenge now is not to increase investment, the rate is already very high, but to shift it strongly in the direction of low-carbon and less polluting activities and technologies.

We are facing a rapidly changing world. The US–China strategic relationship and the shape of the global economy after COVID-19 have contributed to an external environment that is less favourable to China than it was a decade or so ago. And, as a result of the COVID-19 crisis, the world will likely continue to see a phase of deglobalisation, a trend that began in the middle of the last decade. China’s share of trade in goods to GDP decreased over the past decade, but is still over 30 per cent. However, due to the global economic depression and the deterioration of the global trade environment, exports are facing increasing uncertainties and difficulties. The 14th Five-Year Plan (2021–2025) needs to take, and has indeed taken, account of these challenges, in relation to external demand and geopolitical tensions, and put forward a new model of growth that shapes future development, contributing to China’s own prosperity and a better world.

Sustainable growth is the only feasible path forward, and it is one of the few areas where a broad consensus might be reached globally. As China leads the world out of the COVID-19 crisis, it has a great opportunity, to build both a new vision for the country’s own development and its relationship with the world. As one of the first major G20 countries to have made the transition from rescue to recovery following COVID-19, China can show the world that the crisis offers an opportunity for building back better. Moving strongly towards sustainable investment drives recovery, boosts growth and accelerates the transition to the inevitable low-carbon economy. These three crucial features of the next few years are mutually supportive. Failing to take this opportunity would give us a deeply dangerous world. China is at centre stage.

In September 2020, President Xi Jinping announced at the United Nations General Assembly that China will aim for carbon neutrality by 2060. This significant pledge shows China’s long-term ambitions and priorities, and that the Chinese government has linked low-carbon development and carbon-neutral transition with the country’s sustainable development strategy and long-term prosperity.

Download the full report：The 14th Five-Year Plan: peaking in China’s greenhouse gas emissions and paving the way to carbon neutrality