Top Polluter China’s Shrinking Emissions Put Carbon Peak in Play

(Bloomberg) -- China’s carbon dioxide emissions are on track for a first annual decline since 2016, a signal the world’s top polluter may have already peaked its output of greenhouse gases.

Coal use for power generation plunged last month, while oil consumption contracted in the second quarter as renewable energy output and adoption of electric vehicles increases, strengthening expectations the nation’s emissions will contract this year.

A shift in China’s economy away from emissions-intensive sectors, and a tentative retreat of fossil fuels, raises the prospect that any decline could be sustained and mean carbon pollution topped out last year, well ahead of President Xi Jinping’s 2030 target.

For data on China’s emissions and climate targets, click here 

“We are at a moment where clean energy growth is larger than demand growth,” said Bernice Lee, research director at international affairs think-tank Chatham House. “If it is true that real estate is no longer seen as the engine for growth, then it is likely you could see emissions projections going down.”

A long-term decline in China’s emissions — which add more than 11 billion tons of carbon dioxide to the atmosphere — will need authorities to resist turning to heavy industry to spur sluggish economic growth, and require new solutions for grid constraints that threaten to hamper clean energy.

China accounted for more than 30% of the world’s emissions in 2022 and has for years driven the increase in the global total, meaning an early peak would ease the conditions for nations to succeed in limiting planetary warming.

Annual emissions in China are forecast to fall through 2050 and decline either 7.2% or 8.2% this year, researcher BloombergNEF said in its latest New Energy Outlook report, which modeled two global climate pathways.

Coal-fired electricity generation slumped for a second straight month in June and declined 7.4%, the biggest drop since May 2022 when Shanghai was in a Covid lockdown, according to data released Monday by China’s National Bureau of Statistics.

Oil demand in China slipped into a marginal contraction in the second quarter as weaker growth has dented consumption of transport and industrial fuels, the International Energy Agency said earlier this month.

Record installations of solar panels and wind turbines mean renewable energy generation is surging, and also helping to reduce reliance on more polluting sources even as power demand rises. 

If China’s rapid deployment of solar and wind continues, the country’s carbon emissions are “likely to continue falling, making 2023 the peak year,” Lauri Myllyvirta, senior fellow at the Asia Society Policy Institute, said in a report last week. 

China’s economy is also undertaking a structural shift amid a years-long deflation of the real estate sector. That’s resulting in lower output of materials like cement and steel, the two largest carbon-emitting activities outside of power. 

Yet the trajectory for China’s emissions will depend on the government’s response to a slowing pace of growth, and whether it’ll continue to pursue Xi’s long-term objective to prioritize higher-tech industries. “They could just say there’s another stimulus again,” Lee said.

Authorities will also have to reconfigure China’s electricity system to address grid limitations that mean a small but rising volume of wind and solar power is going wasted. About 3.3% of solar generation was curtailed this year through May, compared to 2% in the same period in 2023. Wind curtailment rose to 4.1% from 3.4%.

“There are real constraints that likely will eventually lead to rising problems integrating wind and solar,” said Anders Hove, senior research fellow at the Oxford Institute of Energy Studies

China is investing in new power lines and energy storage systems, and considering additional market-based reforms to ensure clean electricity generation is used efficiently. 

Even if the nation’s emissions have now peaked, the volume remains so large that it’ll be the pace of the decline that’s now critical to the world’s prospects of hitting net zero targets. Xi has pledged that China will achieve carbon neutrality before 2060.

©2024 Bloomberg L.P.