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What China’s ‘Two Sessions’ mean for the climate and commodities

Food and energy security featured prominently in China’s ‘Two Sessions’ as the Russia-Ukraine war exacerbates concern over inflation and supply chain pressures.

On energy security, the government announced plans to accelerate the exploration and production of oil, gas, and minerals. In the near term, we will likely see China increasing purchases of crucial commodities from global markets in order to ensure adequate supply in the event of further disruptions. Therefore, the tighter global supply dynamics we are currently seeing, combined with potential Chinese stock building, suggest that commodity prices will remain well supported in the short term.

With energy security now a higher priority, the government has not set limits on energy consumption per GDP or coal production, signalling its intention to ensure flexibility in the event of a severe energy shortage.

Yet China is still doubling down on renewable energy. The Two Sessions highlighted the progress that was made in reducing pollution last year, with the average concentration of fine particulate matter in big cities dropping by 9.1% while the capacity of renewable energy power generation exceeded 1 billion kilowatts.

And clean energy continues to be a key element of China’s energy policies. For example, it was confirmed that its wind and solar power programme will grow to at least 450 gigawatts in size, larger than most countries’ total power fleets. And the Ministry of Finance has said it will provide funding for new clean energy projects.

Plans mentioned during the Two Sessions include the construction of large-scale wind and solar bases and improvements to the grid’s ability to absorb renewable energy power generation. Green energy will be measured by total carbon emissions and intensity. The government work report also emphasised improving pollution control in important rivers, lakes and bays, and to continue to control and prevent soil pollution, as well as strengthening the treatment of solid waste and new pollutants in 2022. It also plans to replace clean coal with other clean power sources to save energy and reduce carbon emissions.