Asia booming

 This chart shows the average (GDP-weighted) PMI for Asia, i.e., Japan, China, India, Indonesia, Taiwan, Korea, Malaysia.  Still to add Thailand and Vietnam to the calculations.

Asia (+-30% of the world economy) is picking up nicely, rebounding from the impact of draconian Chinese covid lockdowns.

The implications for Central Bank policy are obvious.  

Asia's PMI trend still up

While the US and Europe seem to be sliding into recession, Asia is still strengthening, despite a couple of countries (Taiwan and Korea) being quite weak.  My calculation includes China, India, Indonesia, Japan, Korea, and Taiwan, and is GDP-weighted, making up ±26% of world industrial production.

A strong Asia will offset the weakness in Europe and the US, helping mitigate the global downturn.

Economic importance of Asia keeps on rising

 Industrial production of Asia continues to grow faster than the industrial production of the world.  Different countries have led the way over the years: Japan, then SE Asia, then China.  But on the whole (there are one or two exceptions, these days including Japan) most economies in this region have higher growth rates than Europe or America.  

This is to be expected:  as economies move from undeveloped to developed, trend growth rates fall, eventually reaching the long-term limits set by technological advance and population growth.  So Japan, which grew by 10-15% a year in the 1950s, now manages just 1-2% a year.  Chinese trend growth has already started to slow, and over the next decade, Asian growth as a whole will continue to trend lower.  

As the chart is plotted on a log scale, you can see how the relative growth rate is slowing as the slope of the line diminishes.

Note the impact of the 1998/99 Asian crisis.  

The data shown are from my calculations.

Ten Asian solar markets have 1GW+ pipelines

 From PV-Tech

Asia boasts a growing number of markets with solar development pipelines in excess of 1GW, a new report by Fitch has found, with the region dominating the consultancy’s project database analysis this year.

While solar development in Asia is of course dominated by China, Fitch noted that ten markets in the continent hold solar project development pipelines in excess of 1GW.

In total, Fitch expects Asia’s total solar development pipeline to stand at 137.5GW, equivalent to 42% of the world’s total. However the consultancy also notes that its figure for China is underrepresented due to a lack of visibility, so Asia’s total pipeline – and therefore market share – is expected to be far greater.

Asia is trailed by Latin America and Fitch’s North America and Western Europe (NAWE) region, with the US possessing the single largest national solar pipeline outside of Asia at 40.9GW. Fitch said it expected further upside as the Biden administration looks to push through its legislative agenda, which includes a prospective ten-year extension of the investment tax credit for solar projects.

Brazil and Chile, at 34.5GW and 17.3GW respectively, are the solar development powerhouses within Latin America.

A floating solar project in Singapore developed by Sunseap

Electric 2- & 3-wheelers disrupting oil

From Teslarati:

The world’s oil companies are taking a hit due to electric modes of transportation and their increasing popularity in today’s world. Studies from BloombergNEF indicated that EVs are taking around one million barrels of oil consumption away from the world. Although this figure is only 1% of the 100 million barrels per day consumption rate from 2019, it is still something.

It must be highlighted that most of the impact of oil consumption is coming from something other than electric cars. In fact, two and three-wheeled vehicles powered by electric batteries are affecting commercial oil use on a larger scale more than any different mode of sustainable transportation currently.

Bloomberg’s Nathaniel Bullard stated that electric bikes, trikes, and scooters are disrupting global oil consumption on a massive scale. In 2020, this category of transportation has accounted for around 60% of avoided oil consumption. According to further estimates from BloombergNEF, it will continue to lead in oil consumption until 2030.

Interestingly enough, scooters and other small-scale forms of transportation are displacing more oil and contributing to positive environmental awareness on a larger scale than luxury electric cars.

In previous analyses, BNEF highlighted that electric 2- and 3-wheelers already have sticker prices close to or equal to their petrol equivalents.  This is because they are much lighter than cars, and so new much smaller batteries than EVs.  Also they need less range.  They aren't designed for long-distance travel.  Like the Microlino in Europe.

Many of these 2- and 3-wheelers are produced and sold in Asia.  India is the world's largest producer and exporter of 3-wheelers.  I got these images from Walk Through India.

Bajaj Auto, India (and the world's) largest manufacturer of 3-wheelers

Piaggio Ape (= bee).  Italian name but Indian manufacturer.

Emissions flat in 2019

From the IEA:

Global energy-related CO2 emissions flattened in 2019 at around 33 gigatonnes (Gt), following two years of increases. This resulted mainly from a sharp decline in CO2 emissions from the power sector in advanced economies, thanks to the expanding role of renewable sources (mainly wind and solar PV), fuel switching from coal to natural gas, and higher nuclear power output.

Global CO2 emissions from coal use declined by almost 200 million tonnes (Mt), or 1.3%, from 2018 levels, offsetting increases in emissions from oil and natural gas. Advanced economies saw their emissions decline by over 370 Mt (or 3.2%), with the power sector responsible for 85% of the drop. Milder weather in many large economies compared with 2018 had an important effect on the trends, reducing emissions by around 150 Mt. Weaker global economic growth also played a role, moderating the increase in emissions in major emerging economies such as India.

Emissions trends for 2019 suggest clean energy transitions are underway, led by the power sector. Global power sector emissions declined by some 170 Mt, or 1.2%, with the biggest falls taking place in advanced economies where CO2 emissions are now at levels not seen since the late 1980s (when electricity demand was one-third lower).

Economic growth in advanced economies averaged 1.7% in 2019, but total energy-related CO2 emissions fell by 3.2%. The power sector led the decline and now accounts for 36% of energy-related emissions across advanced economies, down from a high of 42% in 2012. The average CO2 emissions intensity of electricity generation declined by nearly 6.5% in 2019, a rate three times faster than the average over the past decade. In absolute terms, an average emissions intensity of 340 grams of CO2 per kilowatt hour in 2019 is lower than all but the most efficient gas-fired power plants.

Generation from coal-fired plants in advanced economies declined by nearly 15% as a result of continued growth of renewables, coal-to-gas fuel switching, a rise in nuclear power and weaker electricity demand. The growth of renewables in electricity generation in advanced economies delivered 130 Mt of CO2 emissions savings in 2019. Wind accounted for the biggest share of the increase, with output expanding 12% from 2018 levels. Solar PV saw the fastest growth amongst renewable sources, helping to push renewables’ share of total electricity generation close to 28%. Coal-to-gas fuel switching for power generation avoided 100 Mt of CO2 in advanced economies and was particularly strong in the United States due to record low natural gas prices. Higher nuclear power generation in advanced economies, particularly in Japan and Korea, avoided over 50 Mt of CO2.

The United States saw the largest decline in energy-related CO2 emissions in 2019 on a country basis – a fall of 140 Mt, or 2.9%, to 4.8 Gt. US emissions are now down almost 1 Gt from their peak in the year 2000, the largest absolute decline by any country over that period. A 15% reduction in the use of coal for power generation underpinned the decline in overall US emissions in 2019. Coal-fired power plants faced even stronger competition from natural gas-fired generation, with benchmark gas prices an average of 45% lower than 2018 levels. As a result, gas increased its share in electricity generation to a record high of 37%. Overall electricity demand declined because demand for air-conditioning and heating was lower as a result of milder summer and winter weather.

Energy-related CO2 emissions in the European Union, including the United Kingdom, dropped by 160 Mt, or 5%, to reach 2.9 Gt. The power sector drove the trend, with a decline of 120 Mt of CO2, or 12%, resulting from increasing renewables and switching from coal to gas. Output from the European Union’s coal-fired power plants dropped by more than 25% in 2019, while gas-fired generation increased by close to 15% to overtake coal for the first time.

Germany spearheaded the decline in emissions in the European Union. Its emissions fell by 8% to 620 Mt of CO2, a level not seen since the 1950s, when the German economy was around 10 times smaller. The country’s coal-fired power fleet saw a drop in output of more than 25% year on year as electricity demand declined and generation from renewables, especially wind (+11%), increased. With a share of over 40%, renewables for the very first time generated more electricity in 2019 than Germany’s coal-fired power stations.

The United Kingdom continued its strong progress with decarbonisation as output from coal-fired power plants fell to only 2% of total electricity generation. Rapid expansion of output from offshore wind, as additional projects came online in the North Sea, was a driving factor behind this decline. Renewables provided about 40% of electricity supply in the United Kingdom, with gas supplying a similar amount. The share of renewables became even higher in the later part of the year, with wind, solar PV and other sources generating more electricity than all fossil fuels combined during the third quarter.

Emissions outside advanced economies grew by close to 400 Mt in 2019, with almost 80% of the increase coming from Asia. In this region, coal demand continued to expand, accounting for over 50% of energy use, and is responsible for around 10 Gt of emissions. In China, emissions rose but were tempered by slower economic growth and higher output from low-carbon sources of electricity. Renewables continued to expand in China, and 2019 was also the first full year of operation for seven large-scale nuclear reactors in the country.

Emissions growth in India was moderate in 2019, with CO2 emissions from the power sector declining slightly as electricity demand was broadly stable and strong renewables growth prompted coal-fired electricity generation to fall for the first time since 1973. Continued growth in fossil-fuel demand in other sectors of the Indian economy, notably transport, offset the decline in the power sector. Emissions grew strongly in Southeast Asia, lifted by robust coal demand.

It's clear that the energy transition in developed countries has started.   The growth in renewable generation is now enough to cut emissions from electricity.  If, for example, renewables make up 40% of generation, a 10% rise in renewables output will more than offset the rise in electricity demand.  And this is where most developed countries now sit.  Over the next few years, the rise in sales of cars with an electric engine will start eating into emissions from transport.  So emissions in developed countries should start to fall by respectable amounts, though still not fast enough.

The problem is China and SE Asia.  And here, the issue is diplomatic as much as economic.  Yes, the costs of renewables are falling, to the extent that renewables are as cheap as or cheaper than coal.  But costs are also affected by things like getting permits, policy uncertainty (which raises loan costs and required rates of return) and government support for fossil fuels, especially via subsidies.  It is critical that no more coal power stations be built, yet in SE Asia and China they still are.  This has to stop.  Somehow these countries must be persuaded to stop building coal power stations.  Because it's not enough for emissions to stabilise to stop global temperatures from rising.  They must fall to zero, as soon as possible.

World IP holding up despite Europe

World industrial production is holding up despite a very weak Europe. The US is strong and Asia has started to turn up again. Together they are more than 50% of World IP, enough to offset Europe at 20%.