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Analysis: China’s CO2 emissions see first quarterly fall since post-lockdown surge

Analysis: China’s CO2 emissions see first quarterly fall since post-lockdown surge

Year on year change in Chinas quarterly CO2 emissions from fossil fuels and cement 2021

China’s carbon dioxide (CO2) emissions fell by around 0.5% in the third quarter of 2021 compared to a year earlier, new analysis for Carbon Brief shows.

The year-on-year decrease in emissions from cement and fossil fuels represents a notable turnaround from the roughly 9% increase in emissions in the first six months of the year. This was when the Chinese economy recovered from the coronavirus epidemic with a wave stimulus spending.

Moreover, the declining trend in the third quarter steepened into September – the first month during which monthly emissions returned to 2019 levels – and looks set to deepen further in October, based on preliminary data.

This analysis is based upon official data for domestic production, import, and export of fossil fuels, cement, and commercial data on changes to stored fuel stocks. The growth rates for coal and natural gas are adjusted to match the quarterly growth rates when they are available.

It is the latest in an ongoing series. quarterly Carbon Brief updatesWith the previous one having reported early signs of China’s emissions growth cooling in the second quarter of 2021.

Looking ahead, the drop in emissions could mark a turning point and an early peak in China’s emissions total, years ahead of its target to peak before 2030.

Alternativly, if China’s government continues to invest in construction stimulus to boost its economy emissions could rebound before peaking later in the decade.

Quarterly fall

China’s CO2 emissions rose sharply in late 2020 and early 2021, as construction and heavy industrial activity led the recovery from the initial Covid-19 lockdowns.

In the end, CO2 emissions in 2020’s last quarter and 2021’s first quarter saw the following: largestIn a decade, year-on-year growth has been a hallmark of the global warming crisis. The increase in China’s emissions is also likely to result inGlobal aggregate emissions are expected to return to pre-pandemic levels by 2021.

This backdrop makes the quarterly year-on-year fall in the most recent three months of data for China’s emissions look particularly stark, as shown in the chart below.

Year on year change in Chinas quarterly CO2 emissions from fossil fuels and cement 2021

Year-on-year change in China’s quarterly CO2 emissions from fossil fuels and cement, %. Emissions are estimated starting at National Bureau of Statistics dataOn the production of different fuels, and cement China Customs dataOn imports and exports WIND InformationData on inventories changes, available IPCCEmissions default factors annual emissions factorsPer tonne cement production up to 2019. Monthly values are compared to annual data on fuel use in annual statistical communiquesTo and from National Energy Administration dataOn the consumption of coal and fossil gases in the first quarter of 2021 Chart by Joe Goodman to use Carbon Brief Highcharts.

Two reasons led to the reduction in emissions: a dramatic fall in construction materials demand that was precipitated by real estate slumpThe ongoing coal crunch. Sky-high coal pricesIndustrial users directly suffer as they have to purchase coal from the market. However, industrial electricity demand has also been affected by the resulting uncertainty. electricity rationing.

The government started to take measures last spring. tighten creditReal-estate is a key sector for economic growth following Covid-19. However, it is also the main driver of increased debt and emissions. Tamping down on real estate-driven economic expansion is in line with Chinese leader Xi Jinping’s repeated statements that “apartments are for living in, not for speculation”, and his calls for “high-quality economic growth”. It seems likely that a long-term economic theme will be to cool down real-estate growth.

The downturn in real estate volumes is affecting the upstream industries. As financial distress spread throughout the sector, construction activity slowed, which resulted in steel and cement production beginning to fall quickly from July, as shown below.

After coal power, China’s two largest emitting CO2 sectors are steel and cement. They have seen blistering 14% and 12% respectively. increasesrespectively, in the first half year. 

Industrial production volumes until October 2021

Industrial production volumes to October 2021, thousands per year Source: National Bureau of Statistics data. Chart by Joe Goodman to use Carbon Brief Highcharts.

Starting from September, China’s coal consumption has also been affectedRecord-high coal prices have led to a shortage and record-high supply. China is still regulating electricity prices, while the market determines coal prices.

While coal power plants were paying low electricity prices, fuel costs were rapidly rising. leadingDue to a shortage in coal supplies and purchases, plants were unable to make a profit. This has led to electricity shortages, particularly in energy-intensive sectors, which is also limiting the demand for coal.

In response to the crisis, government officials have been urgingTo fill the gap between demand and supply, miners are increasing their output. This has caused a widespread – but inaccurate – perceptionWhile coal demand is rising at the moment, data shows the contrary.

Monthly CO2 emissions from each fossil fuel and cement individually and in total

Monthly CO2 emissions are calculated for each fossil fuel and cement separately and as a whole, millions of tonnes. Emissions are calculated from National Bureau of Statistics dataOn the production of different fuels, and cement China Customs dataOn imports and exports WIND InformationData on inventories changes, available IPCCEmissions factors for default annual emissions factorsPer tonne cement production up to 2019. Monthly values are compared to annual data on fuel use in annual statistical communiquesTo and from National Energy Administration dataThe first three quarters (2021): Coal and fossil gas consumption Carbon Brief Chart by Joe Goodman Highcharts.

Despite a decline in coal consumption, the third quarter saw a 2% increase in demand. Coking coal consumption fell 8%, while thermal coal consumption increased 3%, driven by power generation.

Despite the small increase from coal, China’s quarterly CO2 emissions overall fell regardless, due to cement output falling by 8% and oil consumption by 10% compared with the same period last year.

Oil consumption in the petrochemical and freight industries fell sharply while gasoline and fossil fuel demand continued to grow, although at a slower pace.

Electricity demandRetail and households remained strong, with 11% and 16% respectively. This indicates that consumption is recovering.

October continues to see a drop in emissions

The slowdown in China’s emissions became steeper during the third quarter, with CO2 output falling an estimated 2.3% in September. Early data OctoberThis suggests that the trend is deepening with crude steel production down 23% and cement output down 17%, respectively, compared with the same time last year.

Also, power generation growth continued to slow down from 5% in September to 3% October. Without a decrease in hydropower generation due to annual variation fossil power generation would also have fallen. However, total output from wind and solar increased by 17%. Manufacturing industry power demand gainedJust 1%, which illustrates the impact of the real-estate slowdown and power rationing.

Real-estate lending continued to contract. There are some signsThis policy is being relaxed now in November, however, weekly reports on operating rates for the steel industry are still not showing any signs of bottoming out, as shown in the chart below. 

Iron and steel plant operating rates for key steel-related outputs

Operating rates of steel and iron plant operations for key steel-related outputs. The Chinese new Year is responsible for the large drops in February and March each year. Source: Weekly surveys through Wind Financial Terminal. Chart by Joe Goodman to use Carbon Brief Highcharts.

Operating rates were also falling steadily before the current slowdown – from more than 90% until 2014 to less than 70% since 2018 in the case of blast furnaces. This is due in part to the increase in sector capacity. continued investmentIn new, largely coal-based steelmaking capacity.

The pace of electric and clean energy vehicles is picking up

New policies and expectations are clearly reflected in investments in flagship low-carbon technologies such as solar, nuclear and wind. These technologies will be deployed more quickly. key component of delivering China’s carbon goals.

The chart below shows that there are approximately 26 gigawatts (16GW) of solar power and 16GW of wind power. were installedThe first nine months of 2015 saw an increase in 37% and 33% over the previous year. These figures are from the National Energy Administration. They tend to be incomplete but show the trend. InvestmentIn solar power, 27% more was achieved than in nuclear power. Nuclear power rose 52%.

Grid connection deadlines play a part in increasing capacity additions for solar and wind. Projects will then receive lower electricity tariffs.

This year, 55–65GW of solar50GW of windThey are expected to be in line with industry expectationsTo meet climate targets, well above 100GW will be required each year. China’s target for 25% of its total energy consumption in 2030 to come from non-fossil sources, in particular, requires accelerating wind and solar installations.

Power generating capacity added by technology

Technology adds power generating capacity, first nine months, gigawatts. Source: National Energy Agency monthly data. Chart by Joe Goodman to use Carbon Brief Highcharts.

However, reportedThe addition of fossil power capacity was also slightly higher. Reports of investment in thermal power rose by 12%, indicating that fossil capacity investments are not being scaled back.

State Council:The highest executive organ of the state and highest organ of state administration is the State Council of China. It is composed of a premier, vice-premiers, state councillors, ministers in charge… Read More

Recently, the State Council announced a new state-backed initiative. lending facility for coal projects, including mining, preparation, use in industry, heating and power, as well as “comprehensive utilisation of coal”, which includes coal-to-chemicals, coal-to-gas and coal-to-oil projects.

Production of electric vehicles is also increasing. increasing160% year-on–year in the first ten months of 2021, and a record 2.7 million vehicles were produced. This represents a record market share at 13% for all vehicles manufactured in 2021, with 17% increasing in October. As shown in the chart below, more than 3 million electric vehicles were produced over the past 12 months. 

CAPTION

Volumes of vehicle production up to October 2021, millions units (top) & new energy vehicle share, %, (bottom). Source: National Bureau of Statistics data. Chart by Joe Goodman to use Carbon Brief Highcharts.

See Also
Factory workers in Tongcheng, China, on 17 November 2020. Credit: Costfoto / Alamy Stock Photo.

October saw an increase in electric vehicle production of 130% year-on–year, while the total number produced dropped by 8% during the same period.

How does the downturn in emissions impact climate policy?

China’s climate targets of peaking CO2 emissions before 2030 and reaching carbon neutrality before 2060 leave space for emissions increases until late this decade and for a very wide range of possible emissions trajectories over the decade that follows. 

In July, China’s climate envoy Xie Zhenhua saidThe top-level policies of the Central Committee and State Council on CO2 peaking, carbon neutrality, and carbon neutrality would set out a timetable and a road map for carbon peaking. 

However, Li Keqiang, the premier, was elected in September during the depths the coal and electricity crises. said “in light of the current situation, we must deepen the calculations and analysis, and…propose a timetable and roadmap for peaking emissions”, indicating that the government was taking a timeout.

Accordingly, top-level climate policy documents and China’s updated climate pledgeIt is also known as its nationally determined contribution), published just before the Glasgow COP26 climate summit, were very limited on targets and didn’t specify the emissions peaking timelines or peaking levels. 

The current downturn in emissions might make it seem paradoxical that there is a hesitancy of the government to set a specific emissions pathway or limit for this decade. However, the real-estate slump and coal crisis have increased the uncertainty over China’s economic outlook.

The big question is whether or not the economic slowdown will trigger another round of infrastructure and construction stimulus that would increase emissions before the target peak at the end of this decade. 

The coal crisis was also caused by a combination of price control policies and a ballooning coal use. widespread perception in China that the current coal crisis is the result of an overly ambitious shift to clean energy – rather than an over-reliance on coal and lack of progress in shifting away from it.

Some argue that this perception could be misleading. makeThe leadership is reluctant to highlight or reinforce climate targets until the crisis has been fully resolved.

On the other side, policies takenResponding to the coal crisis, the government is also supporting the economic transition and the energy transition by raising electricity prices and incentivizing clean electricity purchase.

The lack of clear targets for the decade meant that the Chinese delegation to Glasgow adopted a new line of communication when presenting the country’s climate actions, emphasising concrete actionand implementation to support stronger targets

The main focus is questioning the value of other countries’ commitments, as well as the importance of targets, but also de-emphasising emissions outcomes in favour of “actions”.

The government’s action plan does indeed initiate a lot of actions – policies, regulation, targets and governance reforms in the energy, industry, transport and other sectors, incentivising a shift to clean energy and reductions in emissions. 

The emissions slowdown and dramatic structural shift in the economy, together with accelerating investment in clean technologies, could lead to an early peak in emissions and overachievement of China’s targets.

The government is also emphasising [at 30:40]The Chinese delegation seems to have exceeded the earlier targets. suggested to John Kerry, during bilateral talks, the possibility of China’s emissions having “already peaked”.

However, if more specific targets are not set, there is the possibility of an increase in emissions.

This shines the spotlight on the entire process agreed in Glasgow, where all countries agreed to “revisit and strengthen” their current 2030 emissions targets next year.

China’s sectoral implementation plansFor steel, construction materials and power, as well as other sectors, there are currently more measurable targets being considered.

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