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The People’s Bank of China announced a collaboration with the European Union to adopt a common taxonomy for green investments.

By Paul A. Davies, Nicola Higgs, and Edward R. Kempson

On 21 March 2021, the People’s Bank of China (PBC) announced that China is working with the European Union to adopt a common green taxonomy across the two markets later this year. PBC Governor Yi Gang, speaking at the China Development Forum, said strengthening the nation’s green finance system was the central bank’s priority for the next five years.[1] He emphasised that, in order for China to meet its 30/60 goal of peaking carbon emissions by 2030 and achieving carbon neutrality by 2060, China needs to engage in collaboration with global partners.

The EU Taxonomy Regulation,[2] which entered into force in July 2020 and will take effect on a phased basis from 1 January 2022, is one of the most significant developments in sustainable finance to date. It creates a classification system for environmentally sustainable economic activities and aims to provide clarity as to what should be considered “green”. The EU Taxonomy Regulation is intended to avoid issues of greenwashing and is considered to be an important tool in implementing the Paris Agreement climate goals. For more details on the EU Taxonomy Regulation, please refer to our blog post on the topic.

The Chinese Communist Party’s policy plans include an increased focus on climate change and a more open trade environment.

By Paul Davies, Ethan Prall and Andrew Westgate

The Central Committee, the top-level authority of the Chinese Communist Party (CCP), recently concluded its Fifth Plenary Session and created China’s 14th Five Year Plan (the Plan). The Five Year Plan is the primary policy document for the CCP, covering a variety of social, economic, and foreign policy topics, and effectively serving as the CCP’s political platform. The Fifth Plenary was attended by 198 members of the Central Committee, including President Xi Jinping in his role as General Secretary of the Central Committee (his most important title). The full text of the new Plan is not yet public, but a communique summarizing the discussions at the Plenary has been released (Chinese version only). The communique indicates that the CCP will continue its focus on developing environmental governance policies through 2025, and the party will also prioritize aggressive climate policies aimed at reaching the 2060 carbon neutrality target recently announced by President Xi.

China’s Ministry of Environmental Protection’s increased authority over climate change and pollution control issues indicates a greater enforcement role for central government.

By Paul A. Davies and Andrew Westgate

The Chinese government has announced a major reorganization of China’s ministries that comprise the Chinese central government at a session of the 13th National People’s Congress in Beijing. The reorganization, which will reduce the number of ministries from 34 to 26, is intended to streamline and strengthen central government’s role in accordance with the principle of “comprehensively deepening reforms,” a key component of President Xi Jinping’s political program.

The Ministry of Environmental Protection (MEP) will be reconstituted as the Ministry of Ecology and Environment (MEE) as part of the reorganization. The MEE’s authority will expand to consolidate pollution-related responsibilities currently allocated among several other ministries, as well as assuming responsibility for climate change policy from the National Development and Reform Commission, a powerful economic planning agency which developed the national emissions trading system launched in late 2017. Specifically, MEE will expand its authority with respect to supervision and prevention of groundwater pollution, wastewater emission control, protection of rivers, non-point source agricultural runoff, protection of oceanic environments, environmental oversight for China’s massive South-North Water Transfer Project, and responsibility for climate change and emissions reduction policies.

China’s new energy ministry demonstrates the country’s continued commitment to environmental protection and renewable energy.

By Paul A. Davies and Andrew Westgate

Recent comments from senior communist party leaders indicate that the Chinese government intends to establish a new Ministry of Energy to streamline and consolidate authority for energy-related issues. The responsibility for these issues is currently dispersed among a variety of other ministries. The new ministry will be responsible for managing sectors including electric power generation, oil and natural gas in a bid to improve the workings of government and policymaking in relation to energy. However, the full extent of the new ministry’s authority remains unclear, including whether it will have oversight of China’s state-owned oil companies.