Guide to Chinese Climate Policy

Electric Vehicles
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Background
China leads the world in deployment of electric vehicles. At the end of June 2019, almost half the electric cars and 99% of the electric buses in the world were in China. China also dominates global markets for low-speed electric vehicles and electric two-wheelers.^[16]
 
In 2018, roughly 1.1 million electric cars were sold in China—an 80% increase over 2017 sales. (In contrast, total car sales in China fell by roughly 3%.) Roughly 92,000 electric buses were sold. In 2018, 4.2% of the vehicles sold in China were electric.^[18]
The growth in electric car sales continued in the first half of 2019, with more than 632,000 units sold—a 50% increase over the same period in 2018. (Total car sales fell 12% as compared to the same period in 2018.) In June 2019, electric car sales reached 8.5% of the Chinese car market—their highest share ever. That figure was in part due to the June 26 subsidy cuts for electric vehicles, leading some buyers to advance their purchases.^[19]
As of the end of June 2019, more than 3.5 million electric vehicles were on the roads in China. This was roughly 1% of the Chinese vehicle stock.^[20]
 
 
The foregoing figures do not include either electric bicycles or low-speed electric vehicles.
· Electric bicycles are omnipresent in China today. More than 250 million electric two-wheelers are on the roads in China, with roughly 25 million new units sold each year.^[22]
· Roughly 5 million low-speed electric vehicles (LSEVs) are in use in China. Almost 700,000 were sold in 2018. These LSEVs generally have top speeds of no more than 70 kilometers (40 miles) per hour, short ranges and lead acid batteries. They typically are not counted in tallies of electric vehicles sold. LSEVs are especially popular in Shandong Province.^[23]
 
The number of EV charging stations in China is growing rapidly. In January 2019, the Chinese Electric Vehicle Charging Infrastructure Promotion Agency (EVCIPA) reported 808,000 EV chargers in China (an 80% increase in one year). Of these, roughly 330,000 were public chargers, and 480,000 were home chargers. Other data suggest the number of EV chargers in China could be even higher.^[24]
China has hundreds of auto manufacturers, many of which are owned in whole or in part by provincial or local governments. According to some reports, as many as 200 Chinese auto manufacturers have produced electric vehicles. The quality of these products has been uneven.^[8]
In 2018, 1527 fuel cell electric vehicles were sold in China, bringing the country’s total fuel cell electric vehicle fleet to 3428.^[25]
Policies
“Developing new energy vehicles is essential for China’s transformation from a big automobile country to a powerful automobile country. We should increase research and development, seriously analyze the market, adjust existing policy and develop new products to meet the needs of different customers. This can make a strong contribution to economic growth.”—President Xi Jinping (May 2014, visiting an electric vehicle factory in Shanghai).^[27]
The Chinese government strongly supports electric vehicles. Central government policies include a target of 5 million electric vehicles on China’s roads by 2020, EV quotas for vehicle manufacturers and importers, manufacturing subsidies, tax exemptions, government procurement, and support for the construction of electric vehicle charging stations. Many provincial governments also support electric vehicles, with preferential access to license plates and other incentives. These policies have three principal goals: to clean the air in China’s cities, reduce China’s oil import bills and position China for global leadership in a strategic industry.^[28]
The Chinese central government’s principal policies to promote electric vehicles include the following.
1. Zero emissions vehicle mandate. In 2019, each Chinese vehicle manufacturer and importer is required to make or import at least 10% electric vehicles. The percentage will increase to 12% in 2020. These regulations apply to any company that manufacturers or imports more than 30,000 vehicles in China. Companies that fail to achieve the required percentages may purchase credits from companies that over-comply.^[29]
2. Subsidies. The Chinese government provides subsidies to manufacturers of electric vehicles. These subsidies have been steadily reduced in recent years. In June 2019, many of these subsidies were cut roughly in half, and others were eliminated.
· All-electric plug-in cars with a range over 400 km are now eligible for subsidies of RMB 25,000 (approximately $3600).
· All-electric plug-in cars with a range of 250–400 km are now eligible for subsidies of RMB 18,000 (approximately $2600).
· All-electric plug-in cars with a range of less than 250 km are no longer eligible for subsidies.
· Plug-in hybrid cars are now eligible for subsidies of RMB 10,000 (approximately $1,500).
All subsidies for the manufacture of plug-in electric cars are scheduled to be eliminated in 2021. Subsidies for plug-in electric buses are being reduced as well.^[30]
3. Tax exemptions. The Chinese government exempts electric vehicles from consumption and sales taxes, which can save purchasers tens of thousands of RMB (equivalent to thousands of dollars). It also waives 50% of vehicle registration fees for electric vehicles.^[31]
4. Procurement. The Chinese government also uses its procurement power to promote electric vehicles. A May 2016 order requires that half of new vehicles purchased by China’s central government be new energy vehicles within five years.^[32]
5. New auto factory requirements. Chinese regulations strongly discourage the construction of factories for manufacturing internal combustion engine vehicles only. Subject to exceptions that are difficult to satisfy, any new vehicle factory is required to include capacity for the construction of electric vehicles.^[33]
6. Support for charging infrastructure. The Chinese central government promotes the development of EV charging infrastructure as a matter of national policy. It sets targets (120,000 EV charging stations and 4.8 million EV charging posts by 2020), provides funding and mandates standards. In addition, many provincial and municipal governments promote EV charging infrastructure with financial incentives and requirements that building owners provide EV charging. China State Grid and China Southern Grid, China’s two state-owned electric utilities, both have programs to promote the development of electric vehicle charging infrastructure.^[34]
7. Support for fuel cell electric vehicles. The Chinese government offers subsidies of up to RMB 200,000 (roughly $29,000) for fuel cell electric cars and RMB 500,000 (roughly $72,500) for fuel cell electric trucks and buses. These subsidies are not scheduled to be reduced in the years ahead. This is part of a broader program to promote development and deployment of vehicle fuel cell technology, with a focus on heavy duty vehicles in particular. In 2018, the Ministry of Science and Technology announced plans to develop a “hydrogen city” in Shandong Province to promote fuel cell electric vehicles.^[35]
 
In September 2017, Xin Guobin, a vice minister at the Ministry of Industry and Information Technology, said at a news conference that government officials are studying a possible timetable for phasing out sales of gasoline-powered cars in China. This announcement received considerable international attention, however it was not an official statement of Chinese government policy. To date the Chinese central government has not announced a timetable for phasing out sales of gasoline-powered cars.^[37]
Many Chinese provincial and local governments are very active in promoting electric vehicles as well.
· Many municipalities provide license plates for electric vehicles much faster and cheaper than for conventional vehicles. (In Beijing for example, plates for electric vehicles can be obtained in months, while plates for conventional vehicles can take years. In Shanghai plates for electric vehicles are free, while plates for conventional vehicles cost more than $12,000.)
· Free and preferential parking spaces for electric vehicles are common.
· Many large Chinese cities restrict passenger cars from driving on certain days based on license plate number but exempt electric cars from such restrictions.
· Some municipalities pay local manufacturers subsidies for electric vehicles.
· Several municipalities, including Beijing and Shenzhen, have announced that their entire taxi fleets will transition to electric vehicles within several years.
· Some local governments are supporting the development of hydrogen fueling stations for fuel cell electric vehicles.
· In March 2019, Hainan provincial officials announced that the sale of fossil fuel cars would be banned in the province starting in 2030.^[38]
The provincial and municipal government policies play an important role in the development of China’s electric vehicle market.
Chinese government policies with respect to electric vehicles are set forth in a number of documents, including:
· Planning for the Development of the Energy-Saving and New Energy Automobile Industry 2012–2020 (June 2012)^[39]
· Accelerating the Promotion and Application of New Energy Automobiles (July 2014)^[40]
· 13th Five-Year Plan for National Strategic Emerging Industries (December 2016)^[41]
· Action Plan for Enhancing the Charging Capacity for Electric Vehicles (November 2018)^[42]
Impact on CO2 Emissions
What impact do electric vehicles have on China’s CO₂ emissions? Analyses of the short-term impacts vary widely.
· The IEA estimates that electric vehicles in China avoided 30 MT of CO₂ emissions in 2018.
· A 2017 study by several Tsinghua University researchers found that life-cycle CO₂ emissions from electric vehicles in China today are greater than those from vehicles with internal combustion engines.
Other studies have found a range of results. The different results are due to different assumptions concerning comparable internal combustion engine vehicles, the energy intensity of manufacturing processes and other topics.^[43]
The CO₂ impacts of electric vehicles likely vary within China depending on where the vehicles are charged. (China’s electric generation is more carbon intensive in the north than south, for example.)
There is broad consensus that electric vehicles have the potential to significantly reduce CO₂ emissions from the Chinese vehicle fleet as the carbon intensity of China’s power sector declines in the decades ahead. In the medium to long term, vehicle electrification will be important to meeting the Chinese government’s goals with respect to a low-carbon economy.