Over the past two decades of rapid growth, automobiles have become a necessity of daily life for many Chinese families. Today, clean and low-carbon vehicles are increasingly becoming the preferred choice, with new energy vehicles (NEVs) now filling auto malls, and green license plates – once a rare sight – now common on the streets. Sleek, modern NEV models from various manufacturers are gaining popularity, particularly among younger consumers.

"China's automotive industry has evolved from clean and fuel-efficient vehicles to NEVs, and is now steadily advancing toward zero emissions. This transformation has improved air quality, reduced carbon emissions, and enhanced people’s quality of life. Energy Foundation China is proud to be part of this journey, and we believe that the automotive industry in China – which includes auto companies from around the world – will lead the way in developing smart cities, intelligent transportation, clean energy, and healthier lifestyles," said Huiming Gong, Senior Program Director of the Transportation Program at Energy Foundation China (EF China).

Reducing Air Pollutants with Clean Vehicles

EF China’s commitment to clean vehicle development began with a focus on pollution control. In the 1990s, as rapid economic growth made cars more accessible to everyday households, the convenience of increased car ownership was rising tailpipe emissions, which worsened air quality with pollutants like particulate matter and ozone. Consequently, reducing these emissions became an urgent priority for the industry. 

At that time, China lacked mandatory expertise to guide its efforts. In 1999, EF China initiative by supporting research into the country’s emissions regulations. Leveraging its global network, EF China brought in leading international experts and organized forums and seminars to facilitate dialogue between the U.S. and China on vehicle pollution control. These efforts provided critical international insights in shaping China’s first vehicle emissions regulation, the "China I" standard. 

EF China and its partners also played an active role in piloting local programs before the national rollout of the standard. In Beijing, EF China supported research on key issues such as curbing gasoline evaporation at gas stations, scrapping high-emission vehicles, and limiting the use of older, more polluting cars. These efforts enabled Beijing to spearhead the implementation of the "China I" standard, providing practical experience for other cities nationwide. Moreover, EF China also worked with local partners in heavily polluted cities like Shanghai, Guangzhou, and Shenzhen to address the specific challenges in each area.

While emissions standards were established, compliance remained a challenge, including due to delays in fuel quality improvements. Internationally, fuel standards are typically implemented in tandem with emissions regulations. In China, however, fuel standards – especially regarding the reduction of sulfur content – lagged behind for a long time. This discrepancy hindered the advancement of emissions standards and slowed progress in reducing pollutants.

A major concern in the industry regarding low-sulfur fuels was the high cost. In 2005, EF China organized the first international conference on fuel desulfurization, advocating for the implementation of both emissions standards and low-sulfur fuel standards, which could deliver substantial environmental and public health benefits at minimal cost. EF China also proposed distributing the cost of desulfurization among various stakeholders, providing new perspectives for further exploration. Over the next seven years, EF China worked with its partners to conduct extensive economic studies on desulfurization technologies and costs, fostering exchanges between the petrochemical and environmental sectors, which paved the way for synchronizing fuel standards with emissions regulations.

Thanks to the sustained efforts of the government, industry, experts, think tanks, and other stakeholders, the National Development and Reform Commission (NDRC) issued a new pricing policy for higher-quality fuels in September 2013. This notice set pricing standards for upgrading gasoline and diesel quality, driving the transition from III to China IV and Vfuel standards. By aligning fuel quality with vehicle emissions standards, the policy provided a significant boost to emissions reductions in the automotive industry.

“Over the past 18 years, China’s vehicle emissions standards have evolved from 'China I' to ‘China VI,' now ranking among the most rigorous globally. Fuel quality has also progressed from lead-free to some of the world's most advanced low-sulfur levels. These strides greatly enhanced China’s efforts to cut emissions and drive technological innovation in the automotive industry. EF China has played a vital role throughout this journey, providing essential support in driving key developments,” said Hang Yin, Director of the Vehicle Emission Control Center at the Chinese Research Academy of Environmental Sciences.

Supply-Demand Imbalances with Fuel-Efficient Vehicles

The rapid increase in car ownership placed immense 1993, China became a net oil importer, and by 2012, oil imports accounted for 57% of the country’s total consumption—largely driven by the surge in oil demand from the expanding number of vehicles.

This raised a critical question: how can vehicles become more energy-efficient? In 2000, EF China turned its focus to passenger cars, which accounted for the highest sales and fuel consumption. By facilitating domestic and international exchanges, EF China and its research partners introduced international best practices for developing fuel economy / fuel consumption standards for passenger cars. Moreover, it played a key role in establishing China's first Passenger Vehicle Fuel Economy Research Steering Committee, which brought together representatives from six government ministries to guide and coordinate the development of fuel consumption standards for passenger vehicles.

The collaborative efforts led to the introduction of China’s first Fuel Consumption Limits for Passenger Cars in 2004. Phase I and II of the standards, implemented in 2005 and 2008 respectively, greatly improved fuel efficiency, marking a major step towards more fuel-efficient vehicles in China.

While the initial phases delivered substantial fuel savings, challenges persisted, particularly due to the lack of fleetwide fuel consumption limits. This allowed automakers to produce more luxury cars which, despite meeting individual fuel consumption standards, raised the overall consumption of their fleets. In response, EF China supported research that led to  a new evaluation system being proposed: Corporate Average Fuel Consumption (CAFC) limits, aimed at lowering the average fuel consumption of the fleets. The CAFC system was then adopted by Chinese authorities and became the foundation for refining the first two phases of fuel economy standards and for developing Phase III standard. For the first time, the new standard applied to all vehicle models under each manufacturer, setting a fleetwide fuel consumption target and mandating a gradual reduction year by year, as guided by the CAFC system.

The introduction of fuel economy standards for passenger vehicles has not only reduced fuel consumption but also encouraged EF China and other stakeholders to extend research to other vehicle types, such as heavy-duty and light-duty commercial vehicles. As Zhao Wang, Chief Engineer of Automotive Standardization Institute, China Automotive Technology and Research Center, noted, “With the release of the Fuel Consumption Limits for Heavy-Duty Commercial Vehicles in February 2014, China established a comprehensive set of fuel economy standards for all major vehicle types. EF China made significant contributions throughout the development of these standards and supporting policies, utilizing its international expertise to help Chinese researchers broaden their perspectives and refine their methodologies."

Driving the Shift to NEVs for Improved Energy Efficiency and Emission Reduction

Since 1999, EF China and its partners have been advocating for the adoption of advanced automotive technologies to reduce emissions – from fuel cell and hybrid vehicles to today's NEVs.Globally, these innovations have also been a focus for automakers at different stages of development. Compared to conventional fuel-powered vehicles, NEVs have gained industry-wide consensus as a key solution for industrial transformation, improved energy efficiency, better air quality, and climate change mitigation.

as a way to reduce emissions was verifying their technical feasibility through pilot demonstrations. In 2009, China launched the “Ten Cities and Thousand Vehicles” program, selecting 10 demonstration cities annually for three years to deploy 1,000 NEVs in public transportation, taxis, sanitation, postal services, and other public sectors in each city. EF China supported its research partners by assisting in the selection of demonstration cities, designing pilot projects, and conducting multi-year evaluations. Key recommendations, such as “improving braking energy recovery efficiency” and “fast charging for public vehicles and slow charging for private vehicles,” were well-received by the industry and incorporated into relevant policies. By the program’s conclusion in 2012, 25 cities had participated in the demonstration, deploying a total of 27,400 NEVs across various sectors.

As the pilot program progressed, discussions around policies to promote NEVs gained momentum among research institutes, universities, and think tanks. In 2008, EF China partnered with a leading research team to conduct the first comprehensive study on China’s NEV roadmap, focusing on medium- and long-term development strategies and supportive measures, to help drive NEV adoption and reduce emissions in the automotive sector. This study offered scientific analysis and long-term insights for stakeholders across the industry. Over the next four years, as research deepened and consensus grew, China unveiled the Energy Saving and New Energy Automobile Industry Development Plan (2012-2020)in 2012, committing to accelerated growth in the fuel-efficient and NEV industry. This plan laid groundwork for the second phase of NEV pilot projects over the following three years, and expanded the focus from public fleets, as seen in the “Ten Cities and Thousand Vehicles” program, to the broader private consumer market, marking a pivotal shift in NEV adoption.

With the advancement of both policies and pilot programs, the NEV sector entered a critical phase of scaling up, prompting researchers to increasingly focus on establishing market mechanisms for the industry’s sustainable growth. In 2012, EF China and its research partners studied the California Zero Emission Vehicle (ZEV) credit-trading program, which mandates automakers to meet a required percentage of ZEV sales or purchase credits to offset any shortfalls, so as to incentivize ZEV production and promotion. In 2013, EF China supported efforts to introduce the credit-trading concept in China, facilitating discussions on its feasibility through case studies, international workshops, and global exchanges. A series of studies was conducted to provide technical support for developing a ZEV credit system tailored to China’s specific context. As discussions among the government, industry experts, and think tanks deepened, there was growing recognition of the potential for a ZEV credits policy to drive progress in the automotive sector.

On September 28, 2017, the Ministry of Industry and Information Technology (MIIT) released the Measures for the Parallel Administration of the Average Fuel Consumption and New Energy Vehicle Credits of Passenger Vehicle Enterprises, widely known as the dual-credit policy. This regulation, drawing on California’s ZEV credit-trading system, was adapted to China’s context by combining passenger car fuel consumption credits with NEV credits. With the introduction of this policy, China became the first country to implement a ZEV credit quota system on a national scale.

The dual-credit policy has leveled the playing field and improved the quality of NEVs, accelerating their transition to a fully market-driven phase. Since then, various types of NEVs have advanced together in the market, with sales of pure electric vehicles (EVs) and plug-in hybrid vehicles (PHEVs) gradually reaching parity. However, from the perspective of energy saving and emission reduction, pure EVs – capable of near-zero emissions – remain the most climate-friendly option.

In 2019, to further drive emissions reductions and mitigate climate change, EF China and its partners launched a pioneering study that outlined the prospects for achieving zero emissions in the automotive sector over the next 30 years, providing cutting-edge analysis and recommendations for industry stakeholders. In 2020, China released the New Energy Vehicle Industry Development Plan (2021-2035), which identified "complete electrification of public sector vehicles" as a key priority. This was followed by a series of pilot projects in various cities, marking the beginning of China's transition toward complete electrification and zero emissions in the automotive sector.

"The technological advancements and large-scale adoption of NEVs have positioned the automotive industry as a frontrunner in achieving carbon neutrality," said Huiming Gong. "The sector’s transition to zero emissions will be pivotal for advancing sustainable development and carbon neutrality both in China and globally. However, the transition requires more than scaling up NEV production; it demands a holistic approach that integrates renewable energy, smart grids, urban charging infrastructure, and air pollution control measures. By aligning national strategies with local pilot projects, we can create a synergistic effect to achieve zero emissions in the automotive sector while accelerating progress towards China’s carbon neutrality goals."