Disclaimer. After nearly 40 years managing money for some of the largest life offices and investment managers in the world, I think I have something to offer. These days I'm retired, and I can't by law give you advice. While I do make mistakes, I try hard to do my analysis thoroughly, and to make sure my data are correct (old habits die hard!) Also, don't ask me why I called it "Volewica". It's too late, now.

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Sunday, April 24, 2016

China means business

A common rant in the deniosphere (among those who even admit that global warming is happening) is that there's no point in us doing anything to reduce emissions if China and India are not.  That's why I found this tweet about Q1 GDP in China most interesting.

Xinhua News Agency is the government's official news agency.  And the tweet shows real GDP, year on year CPI inflation, job creation and so on.  All well and good.  All quite normal for any government spruiking its achievements.  But look at the last line of that list.  "Reduction in energy consumption per unit of GDP".  The implication is that this is now one of the key policy objectives of the Chinese government.  And that's incredibly good news.  They really mean to do something about climate change.  I admit, I've been sceptical, arguing that their efforts to green their energy supply are mostly about air pollution.  This convinces me that they do in fact see global warming as a serious problem, and one that deserves their attention.  All countries should do this.  Along with GDP and unemployment data, they should be publishing monthly, easily accessible data about the greening of electricity generation and the sales of electric cars and the year-on-year declines in energy intensity.

The only fly in the ointment is this.  A decline in energy intensity of 5.3% per annum is simply not enough.  Let's assume world growth averages 3% per annum for the next 25 years.  If all countries managed to reduce their energy intensity by 5.3% per annum, following the Chinese lead, it would mean that in absolute terms, emissions would be falling by 2.3% per annum. This means global CO2 emissions  would fall by just 44% over 25 years.  This isn't fast enough, given how much temperatures have jumped over the last year.  We need to cut emissions faster than that.  To get a 80% cut in total global emissions over the next 25 years we need to cut absolute emissions by 6.5% per annum, or to cut energy intensity by 9.5% per annum.

China's commitment to cutting energy intensity of GDP is a big step in the right direction.  But we (the rest of the world) need to take more steps.  China's doing a lot to slash its emissions.  But she needs to do more.  And so do we.

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