Decarbonization is not about curtailing production capacity, nor is it about disrupting the balance of supply and demand.

  Since the goals of peaking carbon emissions and achieving carbon neutrality were put forward, they have had a profound impact both domestically and internationally. This reflects China’s responsibility as a major, responsible country to the international community, while also embodying the intrinsic imperative of a comprehensive green transformation of our economy and society. Simply put, this transition is not something imposed upon us by others; it is one we must undertake ourselves. Gradually realizing these goals will bring broad, deep, and long‑term implications for China’s economic and social development. In essence, it will entail a major restructuring of the industrial landscape, open up significant opportunities for technological innovation and investment, trigger a parallel wave of institutional reforms and innovations, and usher in a systemic, far‑reaching transformation of lifestyles, modes of production, and development paradigms.

I would like to discuss three issues, drawing on the findings from our recent field research and the challenges that have emerged in the course of implementing the dual carbon goals.

First, decarbonization cannot be pursued in isolation; rather, it should be grounded in China’s current national conditions and advance in a coordinated manner, integrating carbon reduction, pollution control, green development, and economic growth. Because China remains, on the whole, a developing country, we differ significantly from developed nations. Developed countries have already passed the peak of industrialization—carbon emissions have reportedly peaked, and most pollution problems have been largely brought under control. With service‑oriented economies, their overall ecological environment is relatively sound. Crucially, their economies have entered a mature stage. In short, “the apple is ripe; no matter how hard you try, it can no longer sustain high growth.” By contrast, China faces pressing challenges: beyond carbon‑related issues, environmental pollution and ecological degradation remain acute. More importantly, we both need to and have the potential to maintain relatively rapid economic growth.

Some colleagues may ask: Won’t this approach undermine carbon reduction? “No—it will only strengthen, not weaken, carbon reduction.” Let me offer an example. Take the issue of externalities in economics: the externalities associated with carbon reduction differ significantly from those of conventional pollutant control. For instance, a hotel discharges polluted water or air, facing substantial pressure to address these pollutants, while local residents nearby are highly motivated to see such problems resolved. By contrast, the costs of carbon reduction are borne by the entity itself, whereas the benefits accrue globally, so overall, enthusiasm tends to be lower. Carbon reduction and the abatement of conventional pollutants share a common origin—many of the same substances contribute both to carbon emissions and to conventional pollution. Based on Shenzhen’s experience, this shared origin accounts for more than 70 to 80 percent of the relevant emissions. Thus, integrating carbon reduction with pollution control—and pursuing synergistic governance—effectively leverages the strong motivation behind pollution management to spur the relatively weaker drive for carbon mitigation, using this commonality to advance both objectives simultaneously. We have observed that Shenzhen has managed this integrated approach very well. Another example: ecological restoration and afforestation can enhance carbon sinks, which in turn help offset carbon emissions. Even more importantly, green growth—particularly the development of green technologies—can vigorously promote innovation and widespread adoption of high‑productivity, low‑emission, or zero‑emission, cost‑effective green technologies. This not only fuels economic expansion but also supports carbon reduction, pollution control, and environmental enhancement.

Second, carbon reduction must not be pursued in a campaign‑style manner. At its recent meeting, the Central Financial and Economic Affairs Commission emphasized that a campaign‑style approach to carbon reduction is unacceptable. Recently, I conducted field research in various localities. Some local officials have reported that the pressure to achieve short-term emissions reductions has been considerable, even impinging on near-term economic growth. There have also been reports that, in order to meet their targets, certain areas have resorted to rolling blackouts and power rationing; in some places, air conditioning remains unavailable even in summer. While such situations are not widespread—merely isolated cases—they warrant close attention, as they point to an emerging trend. Another issue is that, at this stage, our efforts to cut emissions largely rely on a top-down approach, with targets cascaded down through administrative channels and implemented via regulatory measures. Of course, some colleagues have asked whether alternative approaches exist; for now, this remains the only viable option, and no better solution has yet been found. The advantage of this method is its relatively swift implementation and potential for quick results. However, challenges remain: whether target allocations are equitable, the high transaction costs associated with free-riding, and the limited overall balance among stakeholders, among other concerns.

We should recognize that the key to achieving the carbon peak and carbon neutrality goals lies in replacing conventional technologies with green ones. The aim is to reduce carbon emissions, not to curtail production capacity, slow economic growth, or—under conditions where green technologies are still lacking—artificially disrupt the normal balance of supply and demand. Throughout this process, it is essential to adhere to both the principles of green transformation and market dynamics; otherwise, even well‑intentioned efforts may fail to deliver results. As the saying goes, “to break the old, you must first establish the new”—but when it comes to green transformation, I believe the reverse holds true: “if the new does not arrive, the old will not depart.” This is precisely what was underscored at the recent meeting of the Financial and Economic Affairs Commission: prioritize establishing the new before dismantling the old. Our focus must remain on building new green supply capabilities, ensuring industrial supply security while facilitating a smooth transition.

Third, carbon reduction must avoid misalignment of targets. Recently, a contentious issue has emerged: whether the dual‑control approach—setting both total energy consumption and energy intensity targets—is reasonable and effective in achieving the carbon‑neutrality goals. Our field research indicates that, at present, local governments are relying on this dual‑control framework to meet their carbon‑neutrality objectives. The dual‑control mechanism was introduced to promote energy conservation, enhance energy efficiency, and curb excessive energy use, with the aim of supporting sustained economic and social development while minimizing energy consumption. This original intent is undoubtedly sound; however, two key questions regarding its effectiveness in achieving the dual‑carbon goals warrant further discussion.

A question is Energy conservation is not the same as carbon reduction, The same level of energy consumption can be either high‑carbon, low‑carbon, or even zero‑carbon. Our goal is, while ensuring an adequate energy supply, to adjust the energy mix by replacing high‑carbon sources with low‑ or zero‑carbon alternatives, thereby gradually reducing the carbon intensity of our energy system. At present, China’s per capita income has just surpassed US$10,000; by 2035, according to our plans, we aim to reach the per capita income level of a moderately developed country—roughly over US$30,000, possibly approaching US$40,000 in current‑dollar terms. With per capita income poised to rise from US$10,000 to between US$30,000 and US$40,000, there remains substantial room for growth—including in per capita energy consumption, particularly electricity use. Consequently, if total energy‑consumption targets are set too stringently and unduly constrain the pace of economic growth, such measures would run counter to the original intent of development.

Another issue is Setting aside issues such as carbon emissions and conventional pollutant discharges, what approach would be most effective for managing overall energy consumption and its intensity? Should administrative measures or market‑based approaches be employed? In this context, the dual control of energy consumption is essentially a matter of cost management. After all, only the enterprises themselves—those directly involved—can determine how and how much to use inputs, including energy, and make informed decisions; it is exceedingly difficult for the government to grasp such nuances at the macro level. For example, in recent years, the cost of photovoltaic power generation has fallen considerably. If a company uses such green electricity to produce a high‑tech, high‑value‑added product, even if its energy intensity is somewhat higher, the superior returns it generates would still make the overall economic calculation favorable.

We recommend accelerating the establishment of enabling conditions to replace the dual control targets for energy consumption—namely, total energy consumption and energy intensity—with dual control targets for carbon emissions—namely, total carbon emissions and carbon intensity—so as to better support the achievement of the dual carbon goals. Of course, the dual‑control targets for energy consumption remain valuable and can serve as an analytical indicator for assessing economic transformation. As I just outlined, we are currently facing certain challenges in advancing the dual carbon goals; however, we must also adopt a longer‑term perspective. With a view to addressing these issues and challenges, both now and over the coming years, we should prioritize efforts that lay a solid, long‑term foundation for the green transition.

Therefore, the next key step is to promote two types of innovation. One is technological innovation, and the other is institutional innovation. Achieving carbon peaking and carbon neutrality fundamentally depends on green‑technology-driven transformation—requiring large‑scale, systemic technological upgrading, that is, replacing less environmentally friendly technologies (gray and black‑carbon‑intensive processes) and non‑green solutions with green alternatives. I have outlined three key criteria for these green technologies: they must be highly technology‑intensive and highly productive, generate low or zero emissions, and—compared with traditional industries—demonstrate strong competitiveness at lower costs. While some may view these goals as challenging, they are, in fact, attainable.

Take the development of the photovoltaic industry as an example: ten years ago, the idea that solar power could compete with coal‑fired generation in terms of cost might have seemed unrealistic. Yet over the past decade, the cost of solar power has fallen by 80% to 90%, and today it is already lower than that of conventional coal‑based electricity. I’ve heard some industry insiders suggest that, in the coming years, solar‑power costs could decline even further—by a substantial margin. That’s why the three goals I mentioned earlier are achievable; this will be the focus of our next phase of innovation. In the past, the emphasis was on boosting productivity; going forward, the priority will shift to low‑carbon and zero‑carbon solutions at competitive costs. Innovation can enable us to accomplish many things that once seemed difficult or even impossible, so the center of gravity must change.

When discussing technological innovation, the priority is to promote technologies that, once fully matured and widely adopted, can deliver significant social and economic benefits. At the same time, we must accelerate the development of institutional mechanisms and policy frameworks that incentivize the dissemination and application of green technologies. In the past, when examining the relationship between green innovation and economic growth, it was commonly believed that the two were mutually exclusive—for instance, some argued that prioritizing environmental protection and green development might hinder economic expansion. This perception was indeed prevalent in earlier stages, as our focus on green technologies and innovations was largely “subtraction‑oriented,” concentrating on pollution abatement. Moving forward, the emphasis will shift to “addition” and “multiplication”—for example, the research, development, and industrialization of low‑carbon and zero‑carbon technologies. Some studies suggest that such efforts could attract investment on the order of hundreds of trillions of yuan, a scale of growth that would be unattainable without pursuing green development.

Regarding institutional innovation, I would like to raise a fundamental question: In the pursuit of green development, should the market play a role—and if so, can it assume a decisive role? At present, objectively speaking, we are still far from achieving this; there remains a considerable gap. However, as we enter the phase of green transformation under the carbon neutrality goal, we must undertake systemic reforms. We should—and with concerted effort, we can—establish a micro‑level foundation in which the market plays a decisive role. Institutional innovation entails many tasks, and one foundational step is to set up carbon accounts and green‑responsibility accounts. First and foremost, we need to advance carbon accounting and ecological accounting. I wish to emphasize that accounting is the cornerstone of the green transition: whether through administrative or market‑based approaches, the prerequisite is to ensure that all accounts are meticulously calculated and that a scientifically sound methodology for verification is in place. This is both critical and urgent, yet it remains a major weakness to this day—unfortunately, it has not yet received sufficient attention. Moreover, meeting the dual‑control targets for carbon emissions is proving challenging, largely because of the absence of a robust accounting framework.

A salient challenge in developing green finance is the lack of clear green standards; what constitutes “green” is, to a large extent, a matter of green accounting. In my view, the current level of attention and research progress in green accounting fall far short of meeting the needs of green‑finance development. Therefore, moving forward, building on carbon accounting and ecological accounting, we should first establish carbon accounts and ecological accounts, and then develop green accounts at all levels—national, provincial, municipal, district, as well as for individual enterprises and every citizen—that incorporate four key elements: carbon emission reductions, conventional pollutant control, ecological restoration, and economic growth. These accounts would define the green responsibilities borne by each actor—economically speaking, this amounts to clarifying property rights and accountability, which are the foundation for market mechanisms to function effectively. If everyone takes responsibility for their own sphere, the world will be much cleaner. Localities should be encouraged to proactively explore and innovate in this area. By leveraging green‑responsibility accounts, we can translate the nation’s carbon‑neutrality goals into concrete actions, drive the green transition, and achieve steady, effective progress.