China’s latest economic data for 2015 imply that China’s CO2 emissions from fossil fuel consumption fell around 3% last year, an amount equal to Poland’s total GHG output, according to a Greenpeace analysis.
The drop in emissions, a result of decreased thermal power generation and a slump in manufacturing, is likely to continue this year and puts China on track to peak its GHG emissions well ahead of the 2030 target deadline, according to the green group.
“The key drivers of the fall in China’s CO2 emissions will only intensify this year – 2015 was just the beginning,” Lauri Myllyvirta, a senior campaigner and coal expert with Greenpeace told Carbon Pulse.
“A lot of heavy industry companies have continued to operate despite lack of market demand and despite their production being clearly loss-making. Allowing these ‘zombie’ operations to wind down, termed ‘supply-side reform’ and ‘overcapacity reduction’ in Chinese political jargon, is the number one economic policy goal for 2016, and an unavoidable necessity in any case,” he said.
“Similarly, the growth in public and corporate debt continued to far outpace economic growth in 2015, as the government tried to stimulate the economy through credit expansion. This is a clearly unsustainable trend, and as China begins to deleverage its debt, another key policy goal set in the Economic Work Conference in December, energy-intensive investment spending will fall further and reduce energy demand.”
Other analysts backed Myllyvirta’s conclusion that 2015 was not just a blip for the world’s biggest coal consumer.
“Coal production and consumption has entered into a turning point since 2014. Even if it bounces back in the future, it would not be (a) big bounce. Declining is the long term trend,” said Li Junfeng, director general of the National Climate Change Strategy Research and International Cooperation Center, a government-run think-tank.
But while coal-fired generation is down, China kept building new coal-fired power plants in 2015, and investment in new thermal power grew 22%.
“The coal power industry faces a dilemma, where each new plant brought online in a stagnant demand environment hurts the returns of the existing fleet, but not bringing new plants online leads to falling market share and revenue for individual companies, most of which are state-owned,” said Anders Hove, director of research at the Paulson Institute.
“Notwithstanding new investment in grid infrastructure, without addressing current over-investment in coal plants and reforming the compensation structure for coal plants, China cannot achieve its policy objectives with respect to clean energy.”
According to Myllyvirta, the key challenges for energy policy decision-makers in China and overseas now are to set more ambitious targets to reflect the new reality, and ensure accelerating progress towards clean energy even as overcapacity in dirty energy industries suppresses prices.
By Stian Reklev – stian@carbon-pulse.com
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