China's emissions fall for 3rd quarter in a row

 From Carbon Brief

China’s carbon dioxide (CO2) emissions fell by an estimated 1.4% in the first three months of 2022, making it the third quarter in a row of falling emissions.

The new analysis for Carbon Brief, based on official figures and commercial data, shows that the three consecutive quarters, when seen together, represent the longest emissions decline in China for at least a decade.

Emissions peaked in summer 2021, as the government tightened policies on real estate to mitigate speculation and financial risk, before starting to fall in the third quarter last year. The fall in late 2021 and early 2022 was driven by the continued real estate slowdown and strong increases in clean energy. Starting from late March – at the very end of the period covered by this analysis – the main driver has become harsh Covid-19 control policies.

Furthermore, the second quarter of 2022 appears highly likely to extend the trend of falling emissions – even as the construction sector slowdown bottoms out – due to the impact of Covid lockdowns becoming much more pronounced.

In April, thermal power generation fell by the most since December 2015, the fall in cement output accelerated and apparent consumption of refined oil fell by almost as much as during the first Covid-19 lockdowns in 2020.

China has previously seen only two periods of stable or falling CO2 emissions in the past decade. First, during the construction and industrial slowdown of 2013-16, emissions growth halted for three years, with quarterly growth rates alternating between positive and negative.

Then, in the first quarter of 2020, the initial nationwide Covid-19 lockdowns resulted in a steep – but short-lived – drop in emissions.

After the lockdown ended in April 2020, the government responded to the negative economic shock with policies designed to boost construction, exports and industrial output, resulting in a highly energy- and carbon-intensive recovery seen in the chart below.

Emissions first exceeded their pre-Covid-19 level in the second quarter of 2020, but growth soon cooled. The string of three consecutive quarters of falling emissions – starting in the third quarter of 2021 – is the longest in at least a decade.

Year-on-year change in China’s quarterly CO2 emissions from fossil fuels and cement, %. Emissions are estimated from National Bureau of Statistics data on production of different fuels and cement, China Customs data on imports and exports and WIND Information data on changes in inventories, applying IPCC default emissions factors and annual emissions factors per tonne of cement production until 2019. Monthly values are scaled to annual data on fuel consumption in annual Statistical Communiques and National Bureau of Statistics annual Yearbooks. Chart by Joe Goodman for Carbon Brief using Highcharts.

So far, so good. China has a habit of stimulating growth by turning on the construction tap. So as growth recovers in China, we can expect emissions from cement and steel manufacture to recover back to previous peaks.  But the really interesting factor in the current emissions decline is the behaviour of the electricity sector:

The economic statistics for April report a steep drop in thermal power generation: output from thermal power plants fell 12% year-on-year. This is the largest reduction since December 2015, eclipsing the drop seen during the 2020 Covid-19 lockdown even though electricity demand fell more at that time.

The sharp reduction in thermal power output this April was due to a combination of weak demand – down 4% year-on-year – combined with strong growth of clean energy.

Half of the reduction was due to lower electricity demand, one quarter was due to strong growth in wind and solar output, and one quarter due to good hydropower operating conditions. Power generation from wind and solar increased 15% and 25% year-on-year respectively, while hydropower output jumped 17%.

Wind, solar and nuclear combined will almost certainly overtake hydropower for total generation this year, which is remarkable given the size of China’s hydropower industry.

This development is also positive for the growth of China’s clean energy output overall, as these technologies have very large growth potential, whereas the potential for hydropower expansion has largely been exhausted, as seen in the limited increase projected in long-term energy scenarios for China.

Electricity demand will recover, hydro generation will fluctuate depending on rainfall, but wind and solar will go on growing.  If expansion of wind and solar is replacing an additional 3% a year of demand for electricity, overall trend emissions from electricity will decline.   

If the growth rate in wind and solar is sustained, assuming growth in electricity demand remains at ±3% p.a., this decline in emissions from electricity will start by 2025.  And even if electricity demand starts to accelerate because of China's rapid roll-out of electric cars, the expansion in renewables will indirectly be replacing oil consumption.  

This is very good news.  China is responsible for 25% of global CO2 emissions.  Her emissions need to stabilise and then fall.