Daily Update: China's Ambitious Climate Targets

Today is Tuesday, February 4, 2025, and here’s your?curated selection of essential intelligence on financial markets and the global economy?from?S&P Global.?Subscribe?to be notified of each new?Daily?Update.?

For the global effort to reduce emissions to succeed, one thing is certain: The world's powerhouse economies must be aligned.

China has been at the forefront of two pathways to reduce emissions. In 2023 alone, China added more solar power capacity than the total capacity of the US, according to a recent report from S&P Global Ratings.

The second pathway is the mobility revolution over the past two decades, part of broader socioeconomic change. The government aimed to tackle two problems at once: to increase car ownership, sidestepping established US and European automakers' expertise and dominance of internal combustion engine vehicles; and to reduce oil reliance and promote decarbonization by concentrating on electric vehicles — crucially, affordable ones.

The economies of scale that have characterized the mass-market EV in China have enabled an extremely rapid rollout, shrinking the price premium between EVs and traditional internal combustion engine vehicles. China-manufactured EVs have also become very attractive to buyers in Europe, where EVs have historically commanded a larger price premium. The days of this premium look numbered.

Despite dipping domestic demand, China's production has continued at high levels. Some Europe-based automakers have said the export of these cheap EVs is overcrowding the market. As Germany's auto industry is so important economically, it is no surprise that there has been significant government lobbying for protectionist measures to safeguard European jobs and exports.

"As climate change issues become more and more closely linked to economic and trade issues, international trade rules and policies are also undergoing significant changes," said Lü Wenbin, director of the Energy Research Institute under China's National Development and Reform Commission.

China's economic success has also reopened the debate on fair contributions to combat climate change. At the UN's Climate Change Conference, known as COP 29, representatives of some developed economies said developing economies should be classified based on current income standards, not those decided in 2016, and therefore China should contribute more toward other countries. But Liu Zhenmin, China's special envoy for climate change,?said after the conference that "China must first solve its own problems in its own energy transition."

Also at COP 29, China's vice premier, Ding Xuexiang, revealed that the country has provided more than 177 billion yuan (about $24.50 billion) of climate finance since 2016, supporting developing countries' efforts to cope with climate change, the first time this contribution of approximately $2.7 billion per year has been quantified abroad. Developed countries contributed a total of $115.9 billion in climate finance in 2022, with the US government providing about 5%, or $5.8 billion, according to S&P Global Commodity Insights data. Most developing economies have called for the total contribution to be between $1 trillion and $1.3 trillion.

Ding also said that China, the world's largest emitter, will "strive to achieve carbon neutrality" before 2060, a slight acceleration from the previous target "by 2060." Peak carbon is still set for 2030.

By the time of COP 30 in November, China is likely to push for the EU's Carbon Border Adjustment Mechanism (CBAM) to be on the official agenda. The CBAM is the means by which embedded carbon emissions in steel imported into the EU will be charged, with the aim of protecting EU steelmakers as they undergo the expensive process of enforced decarbonization. Many countries consider CBAM a unilateral tariff.

The latest development is that the world's largest economy has left the Paris Agreement on climate change again, with the executive order to do this stating that any future climate agreements "must not unduly or unfairly burden the United States." Critical minerals are also increasingly subject to trade actions between the US and China, a trend that started under the Biden administration.

Global cooperation will not come easy.

Today is Tuesday, February 04, 2025, and here is today’s essential intelligence.

Written by Tom Cobbe.

Sustainability

Green Bond Issuance by US REITs Picks Up in 2024

Total proceeds through green bond issuance by US equity real estate investment trusts picked up in 2024 compared with the year prior. However, issuance remained limited to a handful of companies. Five REITs issued green bonds in 2024, aggregating $4.25 billion in gross proceeds, according to an S&P Global Market Intelligence analysis. The green bond proceeds accounted for 8.1% of total bond proceeds for the REIT sector.

—Read the article from S&P Global Market Intelligence

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Economy

Africa Brief: CEMAC's Scarce External Financing Options Heighten Domestic Funding Uncertainty

The eroding external funding for members of the Economic and Monetary Community of Central Africa (CEMAC) could prompt the governments to increase regional market issuance. CEMAC sovereigns are facing uncertain official creditor funding and limited international market access. As a result, they will likely intensify domestic currency financing on an already-saturated regional market. Subscription rates are low, and banks' exposure to sovereigns are high. Member states' ability to meet financing needs has therefore decreased.

—Read the article from S&P Global Ratings

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Capital Markets

Do Active Funds Outperform in Less-Efficient Markets?

Active managers sometimes tout their ability to select stocks in markets that are considered less informationally efficient and those that offer larger rewards to successful stock pickers. Smaller companies and those in emerging markets are typically presented as examples. What are the grounds for debate, and what do over 20 years of SPIVA? Scorecards tell us about the historical record?

—Read the article from S&P Dow Jones Indices

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Global Trade

Low Freight Earnings Weigh on Crude Tanker Orders: Frontline

Meager earnings for crude tankers, rather than uncertainty about decarbonization options, are weighing on fleet renewal, but potential increases in long-haul demand present some green shoots, the CEO of crude tanker major Frontline told S&P Global Commodity Insights. The last few years have been a boom period for the so-called "shadow fleet" that carries sanctioned Iranian and Venezuelan barrels as well as Russian barrels that breach the G7 $60/b price cap. This has taken custom away from the compliant fleet and trimmed long-haul voyages available to its ships, Lars Barstad said in an interview.

—Read the article from S&P Global Commodity Insights

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Energy & Commodities

Listen: CERAWeek Podcast | Sanjiv Lamba, Linde: The Essential Role of Industrial Gases in Energy Transformation

S&P Global Chief Energy Strategist?Atul Arya speaks with Sanjiv Lamba, CEO and member of the board of directors at Linde, about the transformative role of industrial gases in advancing decarbonization, energy efficiency, and innovations in manufacturing. Their conversation highlights the essential function of these gases in everyday life — powering healthcare, enabling manufacturing and supporting technology, from medical oxygen to semiconductors. They set the stage for CERAWeek 2025, where global leaders will gather to address the critical challenges and opportunities shaping the future of energy.

—Listen and subscribe to the podcast from S&P Global

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Technology & Innovation

AI and Education: Embracing the Disruption

The adoption of AI promises to fundamentally alter the education sector in terms of the skills and talent that need to be developed, how the education system teaches and how students learn. Governments, policymakers and institutions will need to invest and adapt to new paradigms to secure potential benefits, including improvements to educational methods and results, greater accessibility and cost savings. Constraints, including those due to cultural resistance, funding and regulatory regimes are likely to contribute to uneven outcomes across and within regions.

—Read the special report from S&P Global

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Events & Webinars

AI in the Markets (New York City | Feb. 12, 2025)

In today’s rapidly evolving landscape, artificial intelligence is a transformative force revolutionizing business, the economy and society. The disruption created by AI and generative AI presents an opportunity for leaders to drive innovation and solidify their position on AI’s opportunities and risks. Join us for a half-day event offering a balanced look at AI’s complexity. AI in the Markets will provide you with best practices, peer experiences and industry-leading research and insights on the impacts of AI. After AI in the Markets, you’re re invited to join S&P Global and IBM for a fascinating session on Quantum Computing: Opportunities, Risks and Implications for Enterprises.

—Register for the in-person event from S&P Global

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