Coal kicks on: Why China’s emissions have not yet peaked

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Wind, solar PV and Nuclear have gained electricity market share in China, but because of another downturn in hydro, coal generation continues to grow.

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Summary: CO2 emissions likely to rise >5% this year

Access to China’s statistics has greatly improved in the past couple of years. The mark of a good analyst, economist or statistician is to know what statistics to focus on, and of course they are all released with a lag.

Looking at the numbers suggests that:

  1. CO2 emissions will rise in China by more than 5% in 2018 due to the pull through impacts of China construction growth;
  2. China coal consumption will rise this year keeping coal prices high even if domestic production increases;
  3. Wind, PV and Nuclear have gained electricity market share, but because of a hydro down turn, the second one in the past few years, thermal electricity share is at least as high as 3 years ago.
  4. As long as this state of affairs continues, coal-fuelled electricity plants are unlikely to feel excessive profit pressure. Capacity utilization will likely stay around 50% this year.

It’s beyond obvious that China arguably holds the fate of global of warming in its hands. China is more or less the place where about 30% of annual carbon emissions originate.

The arguments around  responsibility are more subtle, since China exports huge amount of product and its share of cumulative emissions are smaller.

In the end, though these arguments about blame are pointless. If the world is to limit warming, emissions sourced in China will have to fall sharply.

Because China has a command economy, one where the commands seem to be effective, it can be argued that if China wants to, it will be able to implement an effective policy. It just comes down to where it fits in = Xi Jinping’s priority list.

China emissions in context
Figure 1: China emissions in context. Source: Global Carbon Project

Energy efficiency is not really much of a topic for China, household consumption is already energy efficient. China’s electricity consumption is very largely devoted to industry.

China’s carbon emissions are sourced largely from electricity production but also from the more than 2 billion tonnes of cement produced each year and emissions from various other industrial processes. China’s car fleet is increasing rapidly and so oil related emissions are also increasing.

Nevertheless, just like Australia, it is coal-fired electricity that is the villain in the piece and also the one where in theory it’s most easy to achieve change. In practice, as the stats show, the trend progress is arguably been overcome by the growth cycle.

The most important driver, in my opinion, of everything that happens in China is real estate construction, most of the steel, cement and many other products goes into either residential or commercial real estate and the infrastructure, eg roads, rail required to support it.

China has something between 15-20 m housing starts a year. That makes it say 10-15 times as big as the USA, you can see this easily in the cement statistics.

More importantly to us electricity and decarbonization nerds electricity consumption is, and I don’t prove this here, closely related to the construction cycle.

The chart below shows that floor space started is growing about 8% per year, not so much in the big, so-called Tier 1 cities, but out in the boondocks in regional China.

You don’t have to be Charlie Munger to see that in 2014 when China’s real estate market slowed down, was also when it looked like electricity consumption growth had paused, and coal-fired electricity plant average capacity utilization fell below 50%.

Figure 2: Three month moving average. Source data.stats.gov.cn

Since then it’s picked up again and the traditional China property love affair has got back into full swing.

Is this a familiar tune? Your author believes all real estate booms end badly, but clearly in China we are going to have to wait for another series before this popular show comes to an end.

The consequence has been a pick up in electricity consumption which is growing 8% per year more or less.

electricity consumption china
Figure 3: Year on change in electricity consumption. Source China stats bureau

Although wind has grown fast than coal, the fact that hydro production has fallen away means coal-fired electricity has still grown steadily

Monthly growth in electricity production by fuel china
Figure 4: Monthly growth in electricity production by fuel. Source: China stats bureau

The overall share of coal in the mix is higher now than two years ago. This chart is a 3 month average, and the time frames don’t overlap, so  I may be missing some seasonality.

Wind share has gone to 6% and solar at 1%, nuclear has picked up 1% but this has all been at Hydro’s expense over this time period.

If hydro picks up then maybe coal will fall away. In the meantime the world can only keep watching the data and help China to recognize and take even more of a lead than it has so far done.

Bottom line here is we expect China’s carbon emissions to be up over 5% in 2018 compared to 2017.

Electricity fuel shares, today and 3 years ago china
Figure 5: Electricity fuel shares, today and 3 years ago. Source: China Stats Bureau

David Leitch is principal of ITK. He was formerly a Utility Analyst for leading investment banks over the past 30 years. The views expressed are his own. Please note our new section, Energy Markets, which will include analysis from Leitch on the energy markets and broader energy issues. And also note our live generation widget, and the APVI solar contribution.

Note: This story is a restored version of the original which was lost in circumstances as yet unexplained by our web host company. Apologies if earlier comments are missing.

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13 Comments
  1. Tom 5 months ago

    You can’t use the land argument the way people use it against renewables.
    CSG and wind both use a small portion of the land.

    • Hettie 5 months ago

      Did you read the article? Did you even glance at the graphic?

      • Tom 5 months ago

        Naturally. That’s why I’m commenting.
        The graphic over-exaggerates the land use of CSG just like people say that wind farms take up huge areas. Have a look on google at southern QLD and you’ll see gas wells spread over the land looking just like a wind farm (maybe slightly more dense).

        • Andrew Roydhouse 5 months ago

          The difference with a wind farm is it does not poison aquifers.

          Multiply fracking proposed areas by the Great Artesian Basin and you cover more than 22% of Australia.

          • Tom 5 months ago

            That’s water use. You could halt groundwater use and the land would be fine.
            My point is that we need to be 100% honest when attacking CSG.

          • Andrew Roydhouse 5 months ago

            Tom to get the CSG involves the injection under huge pressure of a combination of carcenogenic chemicals to cause the fracturing of the strata and to dissolve the heavier organic matterials to allow the gas to escape.

            Yes, they mix these with groundwater prior to injection (not always) but the chemicals are what flows through the acquifers subsequently causing the poisoning.

          • Mike Westerman 5 months ago

            Andrew relatively little CSG production in Australia requires fraccing because of the nature and location of our coal seams. In most cases, on the contrary, great efforts are taken to avoid damage to the sediments otherwise you end up, as some leases have found, that you can’t dewater the coal to release the gas. CSG is in this regard quite different to shale gas seams where fraccing is essential. That Australia has vast coal measures has meant the pricing has largely not been there to exploit tight shale seams. The bigger issues with CSG are water disposal and furtive emissions, the latter also being a major issue with coal mining. If we want to make the biggest dent in furtive emissions we should stop coal mining. Gas use is readily displaced on a price basis domestically but internationally in countries like Japan and Korea, this is less potential to displace it with RE – that’s a challenge but hopefully where over time solar synthesis of LNG or ammonia could be a solution.

          • Andrew Roydhouse 5 months ago

            What you say about not needing the chemicals may well be true in theory but every project application/proposal that I have read the docs for used these chemicals. Every one without exception.
            Some did not detail the chemical cocktail (most actually) and calls to find out exactly what they proposed to use were dismissed as commerical in confidence information as we do not want to disclose our proprietary information.

          • Mike Westerman 5 months ago

            Andrew you misunderstand me: very few CSG wells are fracced. Wells that are not fracced don’t use fraccing chemicals by definition.

  2. Joe 5 months ago

    Its a fracking disgrace. Oh christ, and we the ‘Fanta’ ( James Fazzino ) from Manufacturing Australia weighing in again.

  3. Adrian Ingleby 5 months ago

    Great article Sophie. Santos say they will produce 200 terajoules of gas a day! It will no doubt, be sold in South East Asia. No Farmland = No future. No groundwater = No future. There is no gas shortage in Australia. The Federal political deception was clearly outlined by Waleed Aly in his article in the SMH on 16.03.2018, titled, “Phoney Gas Crisis,” it is well worth a read. https://www.smh.com.au/opinion/phoney-energy-crisis-merely-a-ploy-to-access-offlimits-gas-20170316-guz8pb.html

    NSW Nationals State MP John Barilaro wrote an article in the Daily Telegraph of l2.10.2017 where he said, “We’re not fracking idiots. Don’t blame limits on gas extraction for high prices. Look instead at greedy exporters.” He also said, “Both the gas companies and the federal Government have gone to great lengths to blame NSW and Victoria for this so-called crisis, demanding we allow coal seam gas exploration and fracking on our food-producing prime agricultural land. Let me tell you, NSW does not have a ban on coal seam gas or any other gas. We have sensible restrictions that protect prime agricultural land and water catchment areas from coal seam gas mining.” https://www.dailytelegraph.com.au/news/opinion/john-barilaro-there-is-no-gas-shortage-just-a-shortage-of-good-will/news-story/8a351b2742c0b1dfeb6b09157f61c301

    This Turnbull Federal Government is a good chance of fossil fuelling itself into opposition and they can only blame themselves. They have wilfully chosen to ignore Climate Change [Adani mine & rail line] and the Renewable Energy Innovation Revolution [REIR] which could save planet earth.

    The Illawarra Knitting Nannas Against Greed [IKNAG] are awake to the political tomfoolery afflicting our pollies who seem to be blind to the multi-trillion dollar renewable energy market which is here now.

    On Monday, 14.05.2018 the “nannas” had a “Knit-in” outside the State Labor electoral office of Anna Watons MP at Shellharbour, NSW., They asked her to place some issues on the agenda at the NSW Labor Conference on 30th June, 2018. Those issues being taking positive action against climate change, reducing carbon emissions, scaling down coal and coal seam gas and taking strong action re a transition towards 100% renewable energy. Glady’s B would also be wise to take note. The IKNAG “nannas” regularly have “Knit-Ins” outside the offices of our state and federal politicians as do the nannas in the Northern Rivers.

    • Hettie 5 months ago

      The market will get them, and sooner, not later.
      The gas cos, I mean, not the nannas. Nannas rock.

  4. Peter F 5 months ago

    Thermal includes gas and biomass both of which are increasing rapidly so it is unclear how much coal is increasing, it may have been be 3-4% unlikely to be any more, as total thermal generation increased by 6.9%. However total thermal share in Q1 2018 was 77.5% a fraction down from 77.8% in 2017.
    While nuclear installations are only growing slowly, solar is accelerating, almost 10 GW in Q1, wind is continuing as is biomass. There was a relative lull in wind investment because too much was installed in remote provinces, however China still installed 4 GW in Q1, slightly higher than last year’s rate. However large investments are planned in offshore wind, the latest plans are revised up by a factor of 3 on plans from just 2 years ago. Taller large diameter land based turbines are now becoming economical in the southeast close to demand therefore that market is starting to pick up. Thus the combined effects of SE wind and offshore might see 15-20 GW per year over the next few years and solar will continue at around 50 GW while biomass/solar thermal will be around 2-5 GW but hydro will fall fairly rapidly.
    Thus it is quite likely that by next year almost all the increase in power demand can be supplied by non-fossil sources.
    As for concrete, the multiplying number of ghost cities and almost stagnant population must soon start to depress demand for new real estate so I would predict a flattening and then decline in the next few years.
    The rapid electrification of transport should bring growth in oil demand down fairly quickly too.
    In summary I suspect China’s CO2 emissions will plateau in the next year or two then start to fall because a bus powered from 60% coal based HELE power plants still emits less CO2 than a diesel bus

Comments are closed.