China’s fossil fuel emissions fell 3% in 2014 Updated for 2024

Updated: 27/03/2024





China’s coal consumption fell by 2.9% in 2014, according to newly released official Chinese energy data.

The data confirms earlier projections of a fall in coal use and 1% reduction in Carbon dioxide emissions from fossil fuel burning according to calculations based on the data (excel spreadsheet).

An initial analysis by Glen Peters suggests that equates to a 0.7% drop in overall emissions.

This is the first fall in China’s emissions from oil, gas and coal burning since the Asian economic crisis more than 15 years ago. It’s also the biggest recorded fall in 30 years, and the first time on record that emission fell while total energy consumption grew.

Coal consumption growth in China has been slowing down since 2012 suggesting that China’s coal use is no longer rising in line with economic output – so-called ‘de-coupling’.

Based on China Statistical Yearbook 2014, coal consumption growth slowed from an average of 6.1% per year between 2007-2011, to 2.6% on average between 2012-2013, while GDP growth averaged 10.5% and 7.7% per year, respectively.

Has China’s coal burn peaked?

China’s coal consumption growth was responsible for more than half of global CO2 emission growth in the past 10 years.

The fall in China’s coal consumption comes as China has set new global records for wind and solar installations and seen an increase in both economy-wide and power plant efficiency.

Ambitious policies to control coal use, spurred by the air pollution crisis, along with policies to diversify the economy away from energy-intensive industries, are strongly constraining coal consumption.

The country also appears to be moving away from plans to reduce pollution in urban areas by gasifying coal in more remote locations due to concerns over economic viability.

Though China’s coal use is unlikely to continue falling year on year an analysis by Greenpeace suggests that full implementation of China’s existing energy targets, including targets for renewable energy and controlling total energy consumption, could see coal use peak by 2020.

China recently required four provinces in the key economic regions to set absolute coal consumption reduction targets, in addition to four others that already have ambitious targets, the provinces consume over 600 million metric tons of coal per year, almost as much as India.

Coal generation capacity increasing – a contradiction?

While China’s coal consumption fell in 2014, coal-fired power generating capacity continues to grow rapidly. This apparent contradiction has led some observers to conclude that China’s coal consumption growth is bound to resume.

But the evidence suggests otherwise. Instead the continued buildup of coal-fired power plants represents an investment bubble that will burst as overcapacity becomes too large to ignore.

If there is one factoid that every media consumer knows about energy in China, it must be that the country is ‘building one coal power plant per week’.

While coal-fired power generation capacity growth has slowed from the peak years – 2006 saw the equivalent of 1.5 large units added every week – the rate of coal-fired power plant additions and construction initiations in China is still breathtaking

In 2014 39 GW were added, or three 1,000MW units every four weeks, up from 36 GW in 2013.

Coal plants built – but not used 

At the same time, power generation from coal fell by approximately 1.6% in 2014, due to record increases in power generation from hydropower, wind, solar, nuclear and gas, along with slower power consumption growth – contributing to the 2.9% overall fall in coal burning.

In fact, coal-fired capacity growth has outstripped coal-fired generation growth since 2011, leading to dramatically reduced capacity utilization (see graph, above right) and financial pain to power plant operators. The headline making the rounds in China is that capacity utilization, at 54%, was at its lowest level since the reforms of 1978, when statistics began to be made available.

The Obama – Xi deal on peaking China’s CO2 emissions before 2030 has grabbed the headlines in English-speaking media, leaving many observers with the impression that China is planning to slack for another 15 years before starting to pull its weight in cutting CO2.

However, real action is in the implementation of China’s energy targets for 2020 and the air pollution action plans for 2017. For the power sector, the most significant target is the objective for non-fossil energy to make up 15% of all energy consumed in China.

Hitting the 15% target will require raising share of renewable energy and nuclear power in power generation from 22% in 2013 to 33-35% in 2020. Gas-fired power generation is also forecast by the IEA to grow to around 5% of total power generation, implying that the share of coal will shrink to about 60% in 2020, from 72% in 2013.

This will require almost doubling non-fossil power generation from 2014 to 2020, meaning that, on average, non-fossil power generation will have increased as much as it did in 2014, every year until 2020.

As in so many other respects, the radical changes in 2014 were not a one-off anomaly, but the ‘new normal’.

No room for new coal power plants – so why build them?

As a result of booming non-fossil power generation, even assuming GDP growth of 7% per year until 2020, growth in coal-fired power generation will be limited to around 1.5% per year on average, slowing down towards 2020 as non-fossil generation additions are ramped up.

Together with a targeted 0.7% per year reduction in coal use per unit of power generated, this means that coal use growth in the power sector will average less than 1% and will stabilize before 2020. If capacity utilization is to return to financially sustainable levels, there is room for little more capacity to be added until 2020.

To grasp why coal-fired power plants can still get built in the face of a worsening overcapacity problem, it is necessary to understand the basics of China’s economic model.

The country’s growth miracle has been based on an economic system designed to enable extremely high levels of investment spending, particularly by state-owned companies and local governments.

These actors have a very liberal access to near-zero interest loans from state-owned banks, and state-owned companies are generally not required to pay dividends to the state, enabling (or forcing) them to re-invest their profits.

Investments do not need to be wise or profitable

Banks exercise minimal due diligence on loans, which have implicit government backing. As a result, investment spending now amounts to over $4 trillion per year, making up a staggering 50% of China’s GDP, higher than any other major economy in history, and compared to around 20% in developed economies.

This model served China well for decades, enabling the growth miracle and lifting hundreds of millions from poverty. However, finding profitable and sensible investment projects worth trillions of dollars every year is bound to become harder and harder as the investment boom goes on.

Recently published research estimated that 67 trillion yuan ($11 trillion) has been spent on projects that generated no or almost no economic output – ghost cities being the most famous example.

In this context, it is not too hard to see how investment in coal-fired power plants can speed way ahead of demand growth.

A new coal-fired power plant will still generate power and revenue even if there is overcapacity, as the lower capacity utilization gets spread across the entire coal power fleet and across all power plant operators.

What does continued coal-fired power buildup mean for the climate?

The conventional assumption in power business is that once a coal-fired power plant or other capital-intensive generating asset gets built, it will run pretty much at full steam for 40 years or more. Even if there is overcapacity at the moment, demand growth will raise utilization and the existing capacity will crowd out future investment.

However, this is not how things work in China. The government is not going to scrap the internationally pledged 15% non-fossil energy target for 2020 because of excess coal-fired capacity. Rather the overcapacity will lead to losses for power generators and will be eliminated by closing down older plants, as has happened with coal mining, steel and cement already.

Therefore, continued investment in coal-fired power plants does not mean locking in more coal-burning. It does, however, mean massive economic waste, and a missed opportunity to channel the investment spending into renewable energy, enabling even faster growth.

Furthermore, the underutilized coal-fired capacity can exacerbate the conflict between coal and variable renewable energy in the grid, as grid operators are known to curtail renewable power in favor of coal.

Hence, investment in coal-fired power plants needs to be rapidly scaled back by restricting approvals and finance. The first step has already been taken with China banning new coal power plants in its three key economic regions, home to one third of currently operating coal-fired capacity.

 


 

Lauri Myllyvirta writes for Greenpeace EnergyDesk on energy and climate issues in China and elsewhere.

This article combines two articles by Lauri Myllyvirta originally published on Greenpeace EnergyDesk:

 

Sources: The energy data is from China Statistical Yearbook 2014 except 2014 growth rates from National Bureau of Statistics of China: STATISTICAL COMMUNIQUÉ OF THE PEOPLE’S REPUBLIC OF CHINA ON THE 2014 NATIONAL ECONOMIC AND SOCIAL DEVELOPMENT. February 26, 2015. CO2 emissions calculated using IPCC default emission factors. Oveall emissions data via @glenpeters. Graph of coal power plant utilization compiled from China Electricity Council statistical releases.

 

 






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