New analyses by the International Energy Agency, Bloomberg New Energy Finance (BNEF) and other experts confirm what I explained in my last blog: that China's revised historical coal consumption figures for 2000-2012, while significant in absolute terms, will not affect long term trends or impact the upcoming climate negotiations. Nor should they overshadow the remarkable fact that China's coal consumption was essentially flat in 2014 and has been dropping steadily since then, leading some analysts to conclude that it is increasingly likely that China and global coal use have already peaked .
China national coal demand YOY% growth, comparing province data, pre- and post- revision central data
Source: Bloomberg New Energy Finance
What Went Up: China's 2000-2012 Coal Consumption
Detailed analysis by BNEF (paywall) shows that cumulatively, China's coal demand between 2000-2012 was revised upwards by 7% in physical terms and 11% in energy terms. This is less than the 17% increase reported by the New York Times, but the cumulative increase in coal tonnage is still roughly equivalent to the total coal consumed by China in 2005.
According to BNEF, the vast majority of the previously unaccounted for coal consumption came from small illegal miles that the Chinese government has tried (often unsuccessfully) to shut down, particularly during the 2004-2012 time period. Most of that coal was used by non-power industrial processes, which is harder to track than coal used in power plants.
In its new 2015 World Energy Outlook (WEO-2015) (paywall), the International Energy Agency welcomed China's revised coal data since it solves the statistical problem of unallocated coal demand in earlier analyses. David Fridley of Lawrence Berkeley National Laboratory explained this statistical problem to me:
Since 2009, the Statistical Error entry in the balances for coal has soared, from 55 Mt in 2009 to 274 Mt in 2012. That is, their energy balances accounted for more coal available for consumption than could be accounted for in the transformation and final consumption sectors.
This was one motivation for "deep diving" during the 2013 national economic census to gather data on energy consumption at the lowest local levels (prior to 2009, energy consumption below the county level was estimated). The revisions released this year sharply reduced this discrepancy, and for 2013, the difference between Primary Supply and Total Consumption was just 6 Mt. Given that this was their second "deep dive" below the county level on energy, I have a lot more confidence that they won't be facing a surprise the magnitude of this last one.
Impact on China's Historic Carbon Emissions
BNEF calculated that the revised coal data corresponds to a cumulative increase of 9.5% in China's carbon emissions from fossil fuel burning from 2000-2012. This is less than might otherwise be expected, since 80% of the additional industrial coal demand comes from sectors such as petrochemicals and textiles, whose emissions factors for coal use are lower in carbon intensity than other industrial processes. The revised historical coal demand data also contained a cumulative 6.3% decrease in coal demand from the power sector, which have a higher emissions factor.
While this increase in China's historic carbon emissions is also significant in absolute terms (the total cumulative increase is equal to all of China's carbon emissions in 2010), experts do not expect these data to have a major impact on future climate trends or affect the global climate negotiations. According to the IEA analysis:
While the latest energy data from the NBS is not reflected in WEO-2015, it is estimated that doing so would change the projections in the New Policies Scenario only a little: energy demand in China would be 0.9% higher in 2040, with a 2% decrease in coal demand, and a 1.7% increase in energy-related CO2 emissions in that year.
In addition to improving its energy data reporting, China is also working hard to improve its GHG data monitoring, reporting and verification (MRV) capabilities. In 2014, China announced a mandatory national GHG reporting program that would cover companies and organizations in key GHG emission industries. By the end of 2014, China had released draft GHG accounting guidelines to cover 14 key industries, and on November 12th, it issued draft rules and guidelines for tracking carbon emissions in ten more key industrial sectors.
The Good News: China's Coal Consumption is Now Dropping and May Already Have Peaked
All the discussion about China's revised historic coal consumption data seems to have overshadowed the good news: that China's physical coal consumption in 2014 actually fell by 2.9%, while its heat value coal consumption was flat. Even more important, China is on track in 2015 to register the largest drop in coal consumption in history. According to a new Greenpeace report, China's coal consumption fell by at least 2.3% and possibly as much as 4.6% in January-September 2015, compared to the same period a year ago.
This is consistent with a new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) showing that global coal consumption has likely peaked:
- China's coal production and consumption looks to have peaked in 2013;
- China's thermal coal imports peaked in 2013, having fallen 40% since then;
- World coal consumption peaked in 2013, declined 0.7% in 2014 and is on track to decline an additional 2-4% in 2015;
- Japan's thermal coal imports likely peaked in 2014; and
- Indian thermal coal imports likely peaked in mid-2015.
According to the IEEFA, "History could record 2013-2014 as showing that China coal production and consumption peaked, international coal imports peaked, and global thermal coal consumption peaked as well."
Why China's Coal Use is Dropping
China's falling coal use is not simply a result of its slowing economy. Rather, according to a recent study by the London School of Economics, it reflects China's fundamental shift to a new phase of economic development - a "new normal" - that is continuing to promote economic growth while driving down its greenhouse gas emissions.
China's new growth model focuses on shifting away from heavy industry towards consumption and services, promoting innovation, reducing inequalities and ensuring environmental sustainability. China's goal is to achieve better quality growth by promoting efficiency, clean energy and pollution control - all of which translate into lower coal consumption.
The authors of this report, Fergus Green and Lord Nicholas Stern, stated:
In our analysis of structural and cyclical trends in the electricity and industrial sectors, we conclude that China's coal use has reached a structural maximum and is likely to plateau over the next five years. Though there are some structural risks of coal use increasing over this period, there are possibilities, in our view more likely, that it will continue to decline.
They concluded that in light of China's fundamental economic and policy shifts, it is likely to peak its CO2 emissions by 2025 or even earlier, rather than by 2030 as it has pledged. This is consistent with the findings of the China Coal Consumption Cap Plan and Research Report: Recommendations for the 13th Five Year Plan.
China's transition away from coal to cleaner energy is of major importance, not only for the climate negotiators, but for all of us. As President Obama remarked at a press conference yesterday following a trip to Asia:
Sometimes, back home, critics will argue, there's no point in us doing something about getting our house in order when it comes to climate change because other countries won't do anything and it will just mean that we're in a less competitive position. Well, when I met with President Xi and China signed on to an aggressive commitment, that took a major argument away from those critics. We - now the two largest emitters -signed on. And it makes sense for us and the Chinese and the Europeans and others to help these countries, because, ultimately, if a country like India, for example, with over a billion people, is a major polluter, that's going to affect all of us. If, on the other hand, they're developing and growing in a clean way, that's going to be good for all of us.