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China’s giant state-owned companies struggle to align climate rhetoric with reality

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November 1, 2021

By David Stanway

SHANGHAI (Reuters) – Ambitious pledges from China’s leaders to cut emissions have put its giant, carbon-intensive state corporations under pressure to respond, but they are at risk of falling short amid confused policy signals and other constraints. 

When Chinese President Xi Jinping said last September that the world’s biggest source of greenhouse gases would slash emissions to “net zero” by 2060, attention turned to China’s state-owned enterprises (SOEs).

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China has already submitted updated climate targets to the United Nations as a new round of climate change talks gets under way in Glasgow. The next challenge is working out how to implement them.

However, the struggles facing China’s giant firms will make it harder for Beijing to offer stronger pledges and smooth the way for a more ambitious programme of global emissions cuts – especially as it negotiates its way through crippling power shortages.

“State firms are busy drafting their plans and trying to set their targets, and some of them are already creating more detailed planning for the transition,” said Ma Jun, director of the Institute of Public and Environmental Affairs (IPE), which tracks the environmental and climate records of big corporations in China.

“How to ensure that they can fulfil other demanding targets while in the meantime achieving climate targets needs a real solid transitioning strategy, and so far there are still major gaps,” Ma added.

IPE has assessed 58 listed units of Chinese state-owned enterprises from sectors such as steel, petrochemicals, electric power and aviation, covering more than 1 billion tonnes of annual emissions.

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The study found that although they are generally ahead of their private sector counterparts, some are lagging, and on indices such as energy efficiency, sectors like steel are still behind global rivals, Ma said.

Of the 58, 91% have disclosed climate and emissions data in their official reports. More than half have taken action to reduce emissions, but only 16% so far have announced targets.

Meanwhile, just six have issued formal “climate declarations”, including giant power generators like Huaneng, Huadian and Datang, all of which have vowed to bring emissions to a peak by 2025, earlier than the national 2030 goal.

Three others – Baowu Iron and Steel, China’s biggest steelmaker – as well as the two biggest oil and gas suppliers PetroChina and Sinopec – have all promised to hit “net zero” around 2050, a decade earlier than the national target.

According to IPE data, Sinopec scores highest among Chinese SOEs when it comes to data disclosure, targets and specific actions relating to climate change, and ranks 35th globally, behind the likes of Dell and Apple.

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In a report published last month, IPE said the average score in the Greater China region is significantly lower than the rest of the world.

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SOEs play a big role in China’s top-down political system, and Xi’s pledge last year to neutralise a 10 billion-tonne annual carbon footprint prompted associations from a wide range of high-emitting industries to draw up roadmaps.

But they are also compelled to meet other “social responsibilities”, including the guarantee of energy and raw material supplies, as well as wider goals such as employment and social stability.

Crippling power shortages in recent weeks are seen as a sign that in a crisis, Chinese firms will quickly return to fossil fuels because the system gives them no other option.

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Some critics – including policy researchers at state think tanks – say China’s targets have not put enough pressure on big firms, with coal consumption only set to fall in 2026 and local authorities still allowing coal power capacity to increase.

China’s structural reliance on coal – caused in part by an inflexible power market and pricing system – also makes it difficult for enterprises to source renewable power.

Many enterprises have no choice but to buy electricity from state coal-fired power plants, with local governments seeking to protect jobs and economic interests.

“There’s always been an incentive for provinces to build within the province and trade amongst themselves, when really what they should be doing is making use of the transmission lines,” said Matt Gray, analyst with climate think tank TransitionZero.

Though steel firms, for example, have been encouraged to switch from blast furnaces to cleaner electric arc furnace technology in order to slash pollution, they are still forced to rely on coal-fired electricity.       

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Solar and wind power lost because of a lack of grid access also remains a bigger problem than regulators admit, according to a report by environmental inspectors this year.

    “If we really want renewables to really function, we need a lot more support – the whole (electric power) system needs to be transformed,” Ma said.

(Reporting by David Stanway; Editing by William Mallard and Gerry Doyle)

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U.S. stock futures, oil regain some ground after Omicron battering

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November 29, 2021

By Wayne Cole

SYDNEY (Reuters) – Asian markets regained a little composure on Monday as investors settled in for a few weeks of uncertainty on whether the Omicron variant would really derail economic recoveries and the tightening plans of some central banks.

Oil prices also bounced $3 a barrel to recoup some of Friday’s shellacking, while the safe haven yen took a breather after its run higher.

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The new variant of concern was found as far afield as Canada and Australia as more countries imposed travel restriction to try to seal themselves off.

Britain called an urgent meeting of G7 health ministers on Monday to discuss developments on the virus, although a South African doctor who had treated cases said symptoms of Omicron were so far mild.

“There is a lot we don’t know about Omicron, but markets have been forced to reassess the global growth outlook until we know more,” said Rodrigo Catril, a market strategist at NAB.

“Pfizer expects to know within two weeks if Omicron is resistant to its current vaccine, others suggest it may take several weeks. Until then markets are likely to remain jittery.”

Trading was erratic early on Monday but there were signs of stabilisation as S&P 500 futures added 0.8% and Nasdaq futures 0.9%.

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Both indices suffered their sharpest fall in months on Friday with travel and airline stocks hit particularly hard.

MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.1% but was off early lows. Likewise, Japan’s Nikkei pared early losses to be down 0.9%.

Bonds gave back some of their gains, with Treasury futures down 11 ticks. The market had rallied sharply as investors priced in the risk of a slower start to rate hikes from the U.S. Federal Reserve, and less tightening by some other central banks.

Two-year Treasury yields edged up to 0.55%, after falling 14 basis points on Friday in the biggest drop since March last year. Fed fund futures had pushed the first rate rise out by a month or so.

The shift in expectations undermined the U.S. dollar, to the benefit of the safe haven Japanese yen and Swiss franc.

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Early Monday the dollar had steadied somewhat at 113.81 yen, after sliding 1.7% on Friday. The dollar index held at 96.190, after Friday’s 0.7% drop.

The euro paused at $1.1294, following its rally from $1.1203 late last week.

European Central Bank President Christine Lagarde put a brave face on the latest virus scare, saying the euro zone was better equipped to face the economic impact of a new wave of COVID-19 infections or the Omicron variant.

The economic diary is also busy this week with China’s manufacturing PMIs on Tuesday to offer another update on the health of the Asian giant. The U.S. ISM survey of factories is out on Wednesday, ahead of payrolls on Friday.

Fed Chair Jerome Powell and Treasury Secretary Janet Yellen speak before Congress on Tuesday and Wednesday.

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In commodity markets, oil prices bounced after suffering their largest one-day drop since April 2020 on Friday.

“The move all but guarantees the OPEC+ alliance will suspend its scheduled increase for January at its meeting on 2 December,” wrote analyst at ANZ in a note.

“Such headwinds are the reason it’s been only gradually raising output in recent months, despite demand rebounding strongly.”

Brent rebounded 3.9% to $75.57 a barrel, while U.S. crude rose 4.5% to $71.24.

Gold has so far found little in the way of safe haven demand, leaving it stuck at $1,791 an ounce.

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(Reporting by Wayne Cole; Editing by Richard Pullin & Shri Navaratnam)

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Nissan Motor to spend $17.6 billion to accelerate electrification

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November 29, 2021

TOKYO (Reuters) – Nissan Motor Co said on Monday it will spend 2 trillion yen ($17.59 billion) over the next five years to accelerate vehicle electrification as it bets tighter carbon emission restrictions will spur demand for electric cars and hybrids.

Japan’s No. 3 car maker will introduce 23 electrified vehicles by 2030, including 15 electric vehicles (EV), and plans to introduce all solid-state batteries by March 2029, it said in a statement.

Nissan’s deeper push into battery-powered cars comes as consumer demand for such vehicles grows in key auto markets such as China and the United States and as its competitors release new electric vehicles.

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Although still only a small portion of vehicles on the road, global electric car registrations in 2020 grew 41% even as the overall car market contracted by almost a sixth, according to the International Energy Agency (IEA).

Nissan, like other Japanese car makers, however, has yet to commit to completely abandoning fossil-fuel vehicles.

At the U.N. climate summit in Glasgow this month, major car makers, including General Motors and Ford Motor Co, signed on to a declaration that committed them to phase out fossil fuel vehicles by 2040.

($1 = 113.7000 yen)

(Reporting by Tim Kelly; Editing by Christopher Cushing and Muralikumar Anantharaman)

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Shares of Macau casino operator Suncity suspended -HKEX

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November 29, 2021

HONG KONG (Reuters) – Shares of Suncity Group Holdings Ltd were suspended on Monday after its chief executive was believed to be among 11 people arrested by Macau authorities on Sunday over alleged links to cross-border gambling and money laundering.

The South China Morning Post reported that Macau police said on Sunday a 47-year-old businessman surnamed Chau was among those arrested. Alvin Chau is head of Suncity.

Suncity could not be reached for comment. Shares of the company last closed at HK$0.255.

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(Reporting By Anne Marie Roantree; Editing by Kim Coghill)

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