Coal Phase Out vs. Renewables Roll Out: Dissecting China’s First Energy Law

In 2020, President Xi Jinping announced China’s ambitious dual emissions target: to have carbon emissions peak before 2030 and achieve carbon neutrality before 2060. Additionally, China’s 14th Five-Year Plan aims for an 18% reduction in carbon intensity, and a 13.5% reduction in energy intensity from 2021 to 2025. Despite the possibility of China’s emissions peaking prior 2030, the Climate Action Tracker’s most recent update (published 17th September 2024) implies that China will fail to meet its carbon and energy intensity targets, and its net zero by 2060 domestic target (Figure 1).

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China’s struggle to shift from coal to renewables as its primary energy source is the key reason for its current Climate Action Tracker rating. Although China is a global leader in renewables investments, it continues to use coal in its electricity generation mix for energy security and system flexibility (Figure 2). For example, according to the International Energy Agency’s (IEA) ‘Electricity 2025’ report, coal-fired generation contributed to almost 60% of China’s electricity mix but is projected to decrease by at least 10% in 2027. Even though China will install 200 gigawatts (GW) of wind power and solar PV capacity in 2025, it will be about one-third less than in 2024.The government’s policies state that the utilisation rate of renewable energy across the nation from 2025 to 2027 must not be below 90%. However, such targets raise two key questions. Given that total national electricity consumption is expected to increase by 6% in 2025, how will China upgrade its electricity grid and infrastructure alongside retrofitting coal-fired power stations to cope with such vast renewable additions? Will renewables rollouts alone be sufficient to keep up with the rising electricity demand, if coal is sacrificed due to environmental pollution concerns?

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China’s first Energy Law was officially implemented on the 1st January 2025, almost 20 years after drafting began in 2006. This legal framework brings previously separate electricity, coal, energy conservation and renewable energy law policy documents together, setting the standard for future energy developments in China. The Energy Law includes, but is not limited to, topics such as energy planning, the energy market system, energy reserves and emergency response, legal liabilities and technological innovation. Critically, renewable energy development is prioritised, focussing on hydropower, wind, solar, biomass and geothermal. For the first time, hydrogen is included in national legislation, defining its role as a future energy source.

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Not only does the new law clarify what the responsibilities of different enterprises in managing the energy sector are, it boosts investors’ confidence that the country will support renewable projects to meet its overarching emissions targets. The Energy Law promotes both electricity grid connectivity and the market-based pricing system. Such concepts are consolidated by China’s reformed pricing approach for renewable energy, released in February 2025. Reinforcing the Energy Law’s requirements through similar subsequent polices with detailed Specific, Measurable, Achievable, Realistic and Time bound (SMART) targets is key to maximising its potential.

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Experts reviewed the 2025 policy goals discussed in China’s “two sessions” (两会), which ended on 11th March 2025. In short, even with the Chinese government’s tremendous efforts to enforce this new law, China aims to prioritise economic growth over environmental protection, as ‘expanding domestic demand’ displaces ‘innovation and modernising industry’ in 2025 (Figure 3). Contrarily, the Energy Law states that China will continue to encourage research and development of alternative solutions to fossil fuels energy sources; but coal will also continue to play a role in the energy mix, in a ‘cleaner and more efficient’ manner, due to energy security concerns. Such terminology highlights the Chinese government’s reluctance to remove coal from the energy mix and impedes the country’s ability to reduce the increase in carbon emissions each year.

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Another one of the Energy Law’s pitfalls is that it cannot resolve economic and geopolitical conflicts between various stakeholders’ needs. For instance, to achieve the carbon emission reduction targets, surplus energy must be transferred to less affluent regions across the country or stored safely and efficiently for future use. However, such schemes rely on timely infrastructure upgrades, which may not be delivered as required due to conflicting interests amongst policymakers.

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Looking towards the future, monitoring the energy sector’s projects in relation to the Energy Law faces external challenges posed by climate change. For example, China recorded its hottest July and August in more than 60 years in 2024, with extreme summer heatwaves, increased cooling needs, air conditioning and power demand. Consequently, China failed to meet its energy-intensity goal in 2024. Whilst the country’s efforts to retrofit coal-fired power stations are commendable, coal must be phased out of China’s electricity generation mix to meet its other upcoming energy and carbon emissions targets, which has not yet been committed to in the country’s Energy Law