Why isn’t China’s emissions growth slowing like its GDP?

Despite slowing GDP growth, China’s coal consumption is on the up, writes Dialogue Earth (formerly China Dialogue)'s Xia Zhijian. But could growth in coal production and use over the past two years actually bring about an?earlier?carbon peak?

Following the emergence of Covid-19 and its impacts, China put a strong emphasis on coal power and energy-intensive heavy industry to secure energy security and GDP growth. This has put it a long way off reaching its 2025 targets for energy intensity (the amount of energy required to produce a unit of GDP).

How can China ensure these decisions do not make it more difficult to?achieve?peak carbon emissions by 2030 and carbon neutrality by 2060? In conversation with Dialogue Earth, experts recommend tougher controls on coal, reforms to electricity markets, and more rigorous management of energy supply and demand.

Mission almost-impossible

China’s five-year economic plan for 2021-2025 set 20 binding targets, including a 13.5% fall in energy intensity and an 18% fall in carbon intensity (carbon emitted per unit of GDP). Meeting these would have required annual falls of 2.8% and 3.9%, respectively.

In late 2023, the chair of the National Development and Reform Commission, Zheng Zhajie, said falls in both energy and carbon intensity had been less than expected. According to a recent bulletin from the National Bureau of Statistics (NBS), energy intensity fell only 2.5% in 2023, while carbon intensity held steady.

Energy intensity fell by 2.7% in 2021, and carbon intensity by 3.8%, according to Dialogue Earth’s calculations. However falls in 2022 were only 0.1% and 0.8%.

Zheng Zhajie did not give specific figures in his speech. However, Dialogue Earth’s calculations using the NBS bulletin show cumulative falls since 2020 of 3.3% in energy intensity and 4.6% in carbon intensity. Meeting its 2025 targets will, therefore, now require China to achieve two annual falls of 10.5% in energy intensity and 14% in carbon intensity from 2023 levels.

“It’s not possible to have carbon intensity and energy intensity fall that far in two years,” says Dr Yang Fuqiang, a research fellow at Peking University’s Institute of Energy. “There is no doubt the targets will be missed.”

The recently published 2024 Government Work Report has set a target for reducing energy intensity by 2.5% this year. “We’re too far behind to get back on track overnight easily, so a 2.5% target for the year was set,” Yang tells Dialogue Earth. “All we can do is try to get back on track in the time remaining.”

The problem: Security is trumping efficiency

Professor Zhou Dadi, a member of the National Climate Change Expert Committee, said in an?interview?with Yicai.com that the disappointing progress was for two reasons: energy intensity has been pushed up by a combination of slowing economic growth and sustained growth in energy demand; while carbon intensity has been driven up by growth in coal consumption, which accounts for about 60% of national carbon emissions.

The statistics for 2023 show a?5.7%?increase in year-on-year total energy consumption, while GDP grew by only 5.2%. This bucks a years-long trend in China of GDP growth being higher than energy consumption.

“Although the Covid-19 pandemic had a significant impact on the service sector, which slowed GDP growth, demand for energy, particularly related to life activities, has continued to grow more quickly, meaning less-than-ideal reductions in both energy and carbon intensity,” Zhou told?Yicai.com .

Meanwhile, coal consumption grew faster than GDP for the second year running. According to our research, this hasn’t happened since 2005.

In that year, China had recently joined the World Trade Organisation and every sector of its rapidly growing economy demanded more energy. Coal prices skyrocketed, leading to the “coal boss” phenomenon: super-rich coal mine owners.

But in 2024, the Chinese economy is facing a number of downward pressures – so why is demand for coal on the up?

“We’re in a period of transition, so GDP growth is slow,” says Yang. “International experience shows that when GDP growth slows, energy consumption should follow suit. Yet we’re seeing energy consumption grow faster than GDP. There are a lot of issues behind this, but a very important one is a failure to pay enough attention to energy efficiency.”

The electricity sector was responsible for over 80% of 2023’s coal-consumption growth (which is equivalent to about 100 million tonnes of coal), according to an?analysis?by the Climate Change and Energy Transition Program at Peking University’s Institute of Energy.

Yang thinks the “oddities” in coal consumption during the past two years are down to the government prioritising supply demands over energy-efficiency improvements:

“In the past three years, electricity shortages in the north-east of China, the Sichuan drought and the instabilities in the energy market caused by the war in Ukraine have all made the government put security of supply first. Also, it was necessary to ensure supply could keep up with returning demand during the recovery from the pandemic. So, with coal being cheap and pricing mechanisms still preventing electricity prices from rising, China burned a lot of coal to generate the power needed.”

When electricity is cheap, businesses and individuals don’t see any need to limit their usage. “Energy prices are kept very low, and supply is guaranteed,” adds Yang. “The financial benefits of saving energy are limited and there’s little motivation for anyone, business or individual, to make an effort.”

Yang underlines that these energy- and carbon-intensity targets are binding, however. This means failure to meet them will be taken seriously by central government and the relevant ministries, with investigations and remedial measures certain to follow.

The 2024 Government Work Report has, therefore, introduced a resource-consumption strategy. It will push for a faster roll-out of energy- and water-saving measures in key sectors, and the development and use of advanced, energy-saving and carbon-reduction tech to create green- and low-carbon supply chains.

Peaking early?

An important qualification was added to the energy-intensity figure reported in the recent National Bureau of Statistics bulletin: it now?excludes?energy from non-fossil-fuel sources and from the petrochemicals sector. This is significant for two reasons.

Firstly, it lowers the energy-intensity figure, as?Dialogue Earth has explored. This explains the apparent contradiction in the 2023 figures – that energy consumption is growing faster than GDP, yet energy intensity is falling.

Secondly, the exclusion is an adaptation to China’s?shift?in focus from controlling energy consumption to controlling carbon emissions. It is intended to grant more freedom for the growth of renewable energy, as this accounts for an increasing proportion of China’s energy consumption.

In 2023, coal accounted for?55.3%?of all energy consumed in China. That figure is dropping annually however, because the proliferation of clean generation is expanding the country’s total energy pie. Wind and solar have seen huge growth in the past five years, with their share of the energy mix increasing from 23.3% in 2019 to 26.4% last year – a trend that can be expected to?continue.

Yang believes the “unusually fast” growth in coal production and use over the past two years may actually bring about an?earlier?carbon peak. While it is not central government policy to ban coal, the government has imposed a “strict and reasonable” cap on coal consumption. The coal power boom of the past two years may have been an excessive exercise in ensuring a “reasonable” supply, but the central government will now be “strict” regarding any further expansion.

“There will be significant drops in additional coal-power capacity from now on and there’s a strong probability China will hit its 2030 peak-carbon target early, in the next two or three years. The energy-consumption plan China is drafting ensures economic growth, and while specific energy-intensive industries like coal chemicals and petrochemicals are still growing, output of most other energy-intensive industries has already peaked.”

But Yang also notes that, as there’s no hard number for “peak carbon”, there is a risk this peak will be higher and last longer. This will make the 2060 target of carbon neutrality harder to achieve. To avoid this, he adds, China needs tougher measures to control coal, as well as reforms to – and better supply-and-demand management of – its energy markets.

This article was originally published on China Dialogue with the title “Why isn’t China’s emissions growth slowing like its GDP? ” and has been reproduced under the Creative Commons BY NC ND licence.