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China Hints at a Shift on Climate

HONG KONG—The environmental report was unusually harsh: China’s National Energy Administration had skirted air-pollution regulations, allowed excess construction of coal plants and failed to heed leader Xi Jinping’s instructions on environmental matters.

“Some comrades at the National Energy Administration believe that the energy sector’s most important task is to ensure supply and that excessive ecological requirements will increase production costs for enterprises,” China’s Ministry of Ecology and Environment concluded in a report late last month.

The rare public rebuke—authorized by two of China’s top state authorities, the Chinese Communist Party’s Central Committee and the country’s cabinet—signaled to some that environmental regulators in one of the world’s worst polluters had been empowered to counter the country’s entrenched coal industry.

“China’s top leaders are saying that in the future, it’s impossible to think about the economy and energy without also considering climate,” says Zhou Xizhou, a managing director at IHS Markit who advises a number of Chinese state-owned energy companies and says Beijing’s renewed emphasis on environmental protection caught these firms by surprise.

The National Energy Administration, which has 30 days to respond, said it would work quickly to address the issues identified in the report.

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