Research and analysis

China's 2030 emissions peak: is industry shifting down a gear?

Published 11 December 2014

This research and analysis was withdrawn on 1 August 2016

This publication was archived on 1 August 2016

This article is no longer current. Please refer to Overseas Business Risk - China

This publication was archived on 4 July 2016

This article is no longer current. Please refer to Overseas Business Risk - China

Summary

China has announced a target of peak carbon emissions in 2030. There are indications that they could do so earlier. The single biggest factor will be the speed and direction of economic restructuring. Growth is slowing in the big emitting industries. Latest figures for coal consumption show a decline for the first time in decades. Further emissions trajectories will be closely tied to the success of wider reforms.

Detail

China recently announced that it will peak its carbon emissions around 2030 and make best efforts to do so earlier. That date is based on two assumptions: nominal GDP between now and 2030 and the rate at which GDP growth can be decoupled from emissions growth. Put simply China will peak when its emissions per unit GDP (“carbon intensity”) is falling faster than its economy grows. We look at current trends on both.

What are the economic trends?

The 2030 date is based on an annual growth of 7 per cent for the next five years, 5-6 per cent from 2020 to 2030 and 4-5 per cent from 2030..

China’s economy is slowing; latest figures showed 7.3 per cent GDP annual growth, with many analysts predicting a fall to below 7 per cent next year. Crucially, this slow-down is driven by slower growth in investment, in particular in the property sector, with implications for high emitting heavy industry.

This is likely to be a long-term trend as China rebalances towards consumption, advanced manufacturing and services. At the recent APEC meetings President Xi described a ‘new normal’ for the Chinese economy which he characterised as a moderation from ‘super-fast’ to ‘relatively-fast’ growth.

What are the carbon intensity trends?

Here too there is sign of change. Between 2007 and 2011, China’s emissions grew by between 6 and 11 per cent a year: the economy 7 and 10 per cent. But in 2012 emissions grew at less than half the speed (3 per cent) of the economy (7.5 per cent). And Chinese analysts now confirm that they will overachieve their Copenhagen pledge to reduce carbon intensity by 40-45% by 2020.

The accelerated move away from coal that followed the outcry over air pollution is key. China is likely to hit the target of 65 per cent coal in the primary energy mix by the end of this year – two years ahead of schedule and a fall of four percentage points in just four years (huge for an energy system the size of China). This quarter , coal consumption declined year on year. We cannot yet say China has reached peak coal: most domestic analysts still coalesce around 2020. But set against an average growth of nearly ten percent per annum over the past decade it remains hugely significant.

This is feeding through to emissions projections. Recently released documents say that carbon emissions from the steel and cement industries will stabilise by 2020 at around 2015 levels.

Comment

The level at which China peaks (and the rate of subsequent decline) is as important as the peak date itself. There will undoubtedly be challenges over economic rebalancing and energy restructuring. But some of the key indicators are showing that the transitionis already underway. .

Disclaimer

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