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The announcement at the weekend that the U.S. and China will rise above strained relations over issues like human rights to work together on climate change was a huge boost for hopes for meaningful increase in ambition at critical climate talks in Glasgow later this year.

The joint statement by U.S. special climate envoy John Kerry and his opposite Chinese number, Xie Zhenhua, said the world’s two biggest emitters “committed to cooperating with each other and with other countries to tackle the climate crisis, which must be addressed with the seriousness and urgency that it demands.”

The statement was short on details, but paved the way for progress at this week’s Earth Day climate summit of 40 global leaders being hosted by President Joe Biden, which is seen as one of the last opportunities ahead of the COP26 climate talks in November to ratchet up targets to cut emissions. Scientists say that commitments made by 196 signatories enshrined in the 2015 Paris Agreement would leave the world on a path to a disastrous 3C-4C warming.

“Even if we did everything that we set out to do in the Paris Agreement the Earth’s temperature is going to increase a very significant amount, perhaps as much as 3.7C or more,” Kerry said at the weekend. “The reason for the real urgency now is we are not getting the job done.”

The U.S., the world’s second biggest emitter, is expected to set out its roadmap to decarbonise its power sector by 2035 and achieve net zero by 2050 at this week’s summit, while China is under pressure to bring forward its previously announced target to peak emissions before 2030 and reach net zero in 2060.

The U.S.-China statement, which emphasised action in the short term to address the climate crisis, including moving away from oil and gas and coal and unlocking flows of finance for clean technology, comes amid fears that China is not moving anywhere near fast enough to peak emissions, even by the 2030 deadline.

China’s latest five-year plan disappointed, with goals for reducing energy consumption and CO2 per unit of GDP no more ambitious those set in the previous five-year plan, and only a “modest acceleration” in adding wind and solar to the energy mix, according to a research note by Morgan Stanley, which predicted that total emissions in China could grow by 8% between 2020 and 2025.

Even more alarming has been a steep rise in coal use in the past year, fuelling a 2.3% increase in GDP. A new report from Global Energy Monitor reveals that while most of the rest of the world retreated from coal in 2020, retiring 37.8GW of coal plants, these gains were more than offset by China, which commissioned 38.4GW of new coal last year – resulting in the first increase in global coal capacity since 2015.

China already has 88.1 GW of coal-fired generation under construction, or almost half the global total, and a further 158.7 GW in the pipeline.

The Global Energy Monitor report said China’s coal boom was initiated at the provincial level, as provinces used coal projects to stimulate their economies in the wake of the Covid-19 pandemic, pushing energy-intensive steel and concrete production to record levels.

Cary Krosinsky, author of the book “Modern China: Financial cooperation for solving sustainability challenges”, agrees that it will be difficult for China to peak its emissions ahead of 2030 on its current trajectory.

“The 14th five-year is not ambitious enough. If it stays as it is, all the work [of cutting CO2 emissions] will be in the latter half of the decade.”

But he observes that China’s leaders have a year to finalise the details of the five-year plan, meaning there is all to play for at this week’s leaders’ summit.

“No country changes as quickly as China,” Krosinsky said. “There are internal conflicts [between different ministries], but the scales have tilted to sustainable development. [China’s leaders] want to solve the air quality and pollution challenges for their people.”

One positive sign is that Yi Gang, the governor of the People’s Bank of China, reportedly told a closed door meeting of the China Development Forum in March that China’s central bank is co-operating with the European Union to converge green investment taxonomies and is aiming to implement a jointly recognised classification system for sustainable investment by the end of the year.

This could be hugely significant given that China is the world’s largest financier and builder of fossil fuel infrastructure worldwide, and Chinese financial institutions and companies fund one quarter of coal-fired plants outside China, according to Climate Action Tracker.

Another is China’s national emissions trading system,which finally came into operation in February, and is expected have an impact on decarbonising the power sector in its first phase, before being rolled out to other high-emitting sectors.

And while the pace of renewable energy roll-out may have slowed, China leads the world in development of nuclear power, which Europe’s Joint Research Centre recently recommended could be included in Europe’s sustainable investment taxonomy plan – though nuclear was not one of the technologies mentioned in the joint statement.

Tim Nixon, co-founder and CEO of Signal Climate Analytics, expressed scepticism that Europe and China would be able to align sustainable investment taxonomies and allow ESG finance to flow into Chinese companies.

He points out that Chinese industrials dominate a list of the world’s 250 biggest greenhouse gas emitters, compiled by Signal Climate Analytics in a collaboration with Reuters to delve into the extent to which big corporates are bringing their operations in line with the global agenda of keeping global temperature rises to well below 2C.

“Chinese industrial giants have lower levels of disclosure [than western firms]. Most don’t disclose prior emissions and don’t have meaningful public 2030 targets. Yet the whole taxonomy is built on investors being able to look into a company and measure the different parts of it to judge how ‘green’ or ‘brown’ it is. We have nowhere near that level of transparency right now in China.”

He points out that China’s coal dependency and high energy consumption per unit of GDP (at $2.12 kWh in 2016, compared to $1.49 kWh in the U.S. and $0.86 kWh in the UK) has impacts on the decarbonisation efforts of all western companies, most of which have outsourced their manufacturing to China.

But delivering on corporate net-zero carbon commitments will be particularly tricky for companies, such as BP, VW, GM and BMW, that have are staking future growth on providing China’s fast-growing middle class with consumer goods like cars, and the energy to run them, as governments in North America and Europe seek to regulate fossil fuel vehicles off the roads, says Nixon.

VW, with 44% of its sales in China, GM (47%), BMW (31%), Honda (38%), Tesla (31%) and Daimler (27%) are heavily exposed, according to Signal’s data.

And though corporates are emphasising their electromobility plans in the Chinese market, where they have to comply with government mandates to sell a certain percentage of “new energy” vehicles, the carbon intensity of China’s grid, particularly in the north of the country, means the lifecycle carbon benefits of EV vehicles compared with internal combustion vehicles may in some cases be only marginal, according to a 2019 study for the Belfer Center for Science and International Affairs.

The difficulty of trying to square this circle was evident during a video interview with BMW boss Oliver Zipse in Reuters Sustainable Business’s Delivering Net Zero series.

In its Power of Choice sustainability plan, launched last year, the German manufacturer says its plans to sell 4.6m fully electric and 2.4m plug-in hybrids within the next 10 years will put it on track to meet targets to reduce its scope 1 and 2 emissions by 80%, and cut CO2 emissions of its vehicles in their use phase by 40% by 2030.

“We have a progressive expansion path for electromobility, which is happening swiftly in Europe and China,” Zipse said.

But Axel Threlfall, Reuters Editor-at-Large, questioned the climate impact of the automaker’s strategy of aggressively expanding sales, particularly of gas-guzzling mid- and large-size SUVs. According to data from the Transition Pathways Initiative, in order to be compliant with a 2C world, the average carbon intensity of BMW’s global fleet will have to fall dramatically, from 133g of CO2 per km travelled to 41g or 42g by 2030. “Is [reaching that target] realistic?” Threlfall asked.

Although the 133g figure was in BMW’s own report, Zipse questioned where it had come from, and instead quote the 90g per km figure for Europe. “At the end of the day it’s important that we have new cars,” Zipse said. “The worst outcome [for climate change] is if customers stop buying cars and drive their old [more polluting] cars forever.”

Nixon is not convinced. “You have BMW with one set of decarbonisation targets and this big, important market with another. How its that going to work? You have a mismatch and wherever we see that mismatch we know from experience that the climate is going to suffer.”