Good News: China's Dropping Coal Consumption Is Putting the Brakes on Global Carbon Emissions

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New analysis finds that China holds the key to achieving the 2 degree Celsius global climate goal reaffirmed by 195 countries last month in Paris. According to research by Barclays Bank, China accounts for 33-40 percent of the carbon emissions gap between current trends and a 2 degree Celsius pathway. This is not surprising, since China was responsible for over one-quarter of the world's carbon emissions in 2014, more than the U.S. and the European Union combined.

The good news is that China is moving forward much faster than anyone expected to cut its coal use and CO2 emissions, with enormous implications for public health, the environment, and climate. These trends are expected to continue. In fact, China is now on a path to achieving its Paris climate commitments well before its 2030 target date.

China's physical coal consumption, after increasing at an annual rate of 8.8 percent from 2000-2013 and falling by 2.9 percent in 2014, dropped an additional 5 percent in 2015, even while the economy continued to grow. China's coal imports also fell by a whopping 30 percent in 2015, including a 35 percent year-on-year reduction in December alone compared to the previous December. These reductions are extremely important because coal is responsible for about 83 percent of China's fossil fuel-related CO2 emissions and 50-60 percent of the most damaging form of air pollution choking China's cities.

As a result of the drop in China's coal consumption, analysis suggests that China's CO2 emissions from fossil fuel consumption dropped by a record-breaking 2 percent in 2015, equivalent to about 200 million tons of CO2, more than the total for entire countries like Argentina, Venezuela or Poland. That is roughly equal to the cumulative emissions from the 100 countries with the lowest emissions. This decline is striking given the fact that China's annual emissions had been growing by an average of 6.7 percent per year over most of the last decade.

Moreover, thanks in large part to China's decreasing coal use, global CO2 emissions are estimated to have declined by about 0.6 percent in 2015. If this is confirmed, it will be the first-ever drop in global CO2 emissions during a period of economic growth.

The drop in China's coal consumption is not just a statistical error. Many other measures confirm that China's coal industry has been on a downward spiral for the past two or three years. China's coal mining industry has about 1.5 billion tons of surplus production capacity, with over 80 percent of China's coal mining companies operating at a loss. Job losses are mounting in the coal industry, and coal exporting countries like Australia have been hit hard as Chinese imports of foreign coal fell.

The news that China's coal consumption is dropping may be somewhat confusing, given the fact that China recently revised its historical coal consumption statistics upward. Yet this revision only applied to the 2000-2013 time period, and should not overshadow the fact that the Chinese coal industry has experienced a dramatic downturn since then, and actually may have peaked in 2013-2014. Moreover, as the PBL Netherland Environmental Assessment Agency noted, all national emission inventories are subject to uncertainty, and the considerable effort China put into revising its energy statistics has "definitely resulted" in better estimates of real fossil fuel consumption - which should also help to make future estimates more reliable.

Source: PBL Netherlands Environmental Assessment Agency, Trends in Global CO2 Emissions: 2015 Report (The Hague, 2015).

So why did China's coal consumption and CO2 emissions drop?

It's not just due to China's economic slowdown, as some have speculated. Rather, it is being driven by the political imperative to tackle air pollution (which first sparked major public outrage in 2013), concerns about climate change, and the recognition that an economic model focused on heavy industry is no longer sustainable. As a result, China has now adopted a different economic model, focused on slower but higher-quality growth, with positive results for the climate. As the Netherlands Environmental Assessment Agency explained in its 2015 report:

The main reason for the curbing of global CO2 emissions is the change in the world's fossil-fuel use due to the structural change in the economy and in the energy mix of China over the past three years...towards a less energy-intensive service sector and a high value-added manufacturing industry that is focused more on domestic consumption, with more energy efficiency, and towards a low-carbon energy mix.

These structural changes are not accidental: China is taking decisive action to curb its reliance on coal, massively scale up non-fossil energy, phase out heavy industry, and cut energy demand through greater efficiency. Here's how:

Curbing Coal:

  • In December 2014, China's National Development and Reform Commission (NDRC) and five other ministries jointly released a document titled Provisional Methods for Key Region Coal Consumption Reduction and Substitution (Chinese) that requires the key air pollution regions to set concrete coal consumption reduction targets. This includes Beijing, which is reducing its coal consumption by 13 million tons by 2017 compared to 2012 levels, as well as major industrial provinces like Hebei and Shandong, which will need to reduce coal consumption by 40 million and 20 million tons respectively. That means the reductions from these three places alone would reduce China's coal consumption by an amount equal to Canada's total coal consumption in 2012. The regulations also require coal consumption reductions in the industrial areas of Shanghai, Zhejiang, and Jiangsu, and the Pearl River Delta in Guangdong.
  • The Provisional Methods created a new government entity, the Regional Coal Consumption Reduction and Substitution Working Group, to oversee China's transition from coal to cleaner energy. Composed of personnel from key national and regional government bodies, the Working Group will evaluate the progress being made in regional coal consumption reduction plans and will have the power to do spot evaluations of each region's programs to check on their progress.
  • A follow-up government announcement in May 2015, titled Work Plan for Strengthening Coal Consumption Control in Key Air Pollution Management Cities (Chinese), took this enforcement system one step further, specifying that the 10 cities with the worst air pollution in China (eight cities in Hebei, as well as Tianjin, and Jinan, the capital of Shandong province) must set coal reduction targets and develop plans to reduce and replace coal. Their progress will be evaluated and publicly reported by an inter-ministry team led by the NDRC, China's central economic planning department, and one of the country's most powerful political bodies. Local governments may also conduct on-site evaluations of plant operations, and have the power to impose penalties like punitive energy price increases or closure of plants which exceed energy efficiency standards.
  • On the last day of 2015, China announced that it will not approve any new coal mine projects for the next three years and will close down a thousand small coal mines.
  • China has put removal of excess production capacity at the top of a list of five economic tasks for 2016. My colleague Yang Fuqiang notes that this will have a particularly strong impact on the coal industry, as well as coal-consuming firms such as producers of steel, concrete, and construction materials.

Scaling Up Clean Energy

  • China, already the world leader in wind and solar energy, boosted its investment in clean energy another 17 percent in 2015 to a record $110.5 billion, about equal to the combined investment of the United States and the European Union. China has also just surpassed Germany as the world's largest installer of solar panels.
  • China has been able to cover all of its growth in electricity demand since 2011 - a 20 percent increase - with non-fossil energy.
  • Between now and 2020, China plans to triple its grid-connected solar capacity to 100 gigawatts and double its grid connected wind capacity to 200 gigawatts, achieving grid price parity with coal power.
  • By 2030, China plans to install more wind (345GW) and solar (325GW) energy than exist in the world today, doubling the world's total capacity.
  • China has adopted a slew of policies to level the playing field for clean energy, including a priority dispatch policy for renewable energy and a national carbon trading program to be launched next year.

Improving Energy Efficiency:

  • China reduced its energy intensity (energy consumption per unit of GDP) by nearly 20 percent from 2006-2010, and is on track for another 16 percent reduction below 2010 levels by 2015.
  • China's mandatory Top 10,000 program covers two-thirds of China's total energy consumption. It is a comprehensive energy efficiency program targeting about 17,000 enterprises, and designed to save 250 million tons of coal equivalent by 2015.
  • In its 2015 international scorecard, the American Council for an Energy Efficient Economy ranked China first in building energy efficiency.
  • China is in the process of closing large numbers of inefficient and highly polluting small coal boilers in favor of larger and more efficient facilities.

As a result of all of these efforts to phase out coal, accelerate clean energy, and improve energy efficiency, as well as transition to a more service-oriented economy, China has actually begun to decouple its economic growth from electricity demand and reliance on polluting industries, a remarkable feat for any country. And according to Sophie Lu of Bloomberg New Energy Finance, "as electricity demand continues to slow, clean energy may be used more to replace dirtier capacity."

This trend is expected to continue. According to a Bloomberg report, the Chinese government announced this week that it will cut crude steel production capacity by as much as 150 million tons and make further "large-scale" reductions in coal output this year as part of major supply-side reforms designed to curb overcapacity and excess labor in state-owned industries. The China Academy of Sciences expects coal production to fall another 4 percent in 2016, the third straight year of decline. The Institute for Energy Economics and Financial Analysis projects that electricity demand will grow only 3-4 percent in 2016, but the planned 64 GW in additional zero carbon electricity capacity will be more than enough to meet total demand growth.

It remains to be seen just how quickly China will be able to achieve its Paris climate commitments - to peak CO2 emissions, meet 20 percent of its energy demand with non-fossil sources and cut carbon intensity by 60-65 percent below 2005 levels. These are far from easy tasks. The government still needs to tackle oil and gas consumption, reconsider plans to build new coal power bases, and coal chemicals plants in western China, and rein in local government officials, who approved 64 GW of effectively idle thermal power generating capacity last year, when electricity demand was essentially flat. It will also have to find ways to help workers and families hit hard by these massive economic reforms.

But one thing seems clear: China is turning away from coal faster than anybody expected. And that is very good news for the health of China's citizens and for the future of our planet.

This post was co-authored by my colleagues NRDC China Climate and Energy Project Director Alvin Lin, Princeton in Asia Fellow Colin Smith, and NRDC International Climate Advocate Han Chen.