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Assessing China’s Prospects for Carbon Neutrality

China’s aim to become carbon neutral by 2060 is a global game-changer, and neatly dovetails with the goal of rebalancing its economy toward consumption. A new analysis suggests that lifting the country's consumption share to the level of advanced economies could help to reduce its emissions by more than 30% over the next two decades.

NEW YORK – At the United Nations General Assembly this September, Chinese President Xi Jinping announced that China aims to achieve carbon neutrality by 2060. Given that China has been the planet’s single-largest source of global carbon dioxide emissions in recent years – accounting for about 30% – decarbonization there could contribute substantially to the global effort to mitigate climate change.

China, of course, will have to rebalance its economy. Among other things, that means shifting from manufacturing to services, from capital-intensive to innovation-led activity, from exports to domestic demand, and from investment to consumption. All of these changes are mutually reinforcing, such that delivering on one facilitates progress on the others.

More to the point, rebalancing will also contribute to China’s energy transition, by shifting from energy-intensive to energy-light activity. For example, if capital and labor move from the production of steel, cement, and industrial goods to the provision of education, health care, and leisure opportunities, the economy should gradually consume less energy for each unit of GDP produced.

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