A spate of recent news seems to indicate that China is making progress on environmental issues.
Air Quality Improves
Greenpeace recently released its China air quality survey for the first quarter of 2016 and the results indicate improvements in most parts of the country (Yang, 2016). PM 2.5 levels across 355 Chinese cities surveyed fell 9 percent as compared to the same period in 2015. Of the cities surveyed, the majority saw double digit improvements while 91 saw worse air pollution year-on-year. The worst-affected were in China’s centre and west, in which 69 cities had their air pollution increase an average of more than 20 percent.
Among the key cities, Beijing improved its air quality with PM 2.5 falling 28 percent year-on-year, while Shanghai had a 12 percent fall.
At a press conference during the National People’s Congress in March, the minister for environmental protection, Chen Jining, said that the environment in China during the first quarter was “affected by adverse weather conditions … such as deceasing wind speed compared to previous year,” otherwise improvements in air quality would be quite noticeable. It is well known that China is improving its electricity generation mix and coal accounts for a 73 percent of power generation in 2015 as compared to 82 percent in 2011. Big cities’ restrictions on coal usage are particularly tough, and aside from shifting local power generation from coal to natural gas, or the import of electricity through high tension power lines from remote power plants, thousands of small heat generating coal stations were shifted to natural gas. Winter in northern China is usually the most polluted period of the year, and as this year’s weather was particularly harsh, the drop in Beijing’s and Shanghai’s air pollution as measured by PM 2.5 levels under such an intense heat requirement bodes well for the air quality in the coming months and, hopefully, will prove the minister right.
Increased Green Bond Issuance
Another item of encouraging news comes from a report by Moody’s, which announced that in the first quarter of 2016, Chinese institutions issued USD 7.9 billion of green bonds, almost one half of the global issuance of USD 16.9 billion. This is way ahead of the second place issuer, the US, which issued USD 3.4 billion in green bonds (Xinhuanet.com, 2016).
The green bond is an innovative financing method which is used to direct financial resources to environment protection projects with private and public participation. The majority of issued green bonds are in the area of renewable energy and energy efficiency improvement projects. There has also been a recent increase in the funding of projects in clean transportation and climate change adaptation and abatement.
CO2 Emissions Might Plateau
A recent report that China’s CO2 emissions may have peaked in 2014 was another piece of encouraging news (Channel NewsAsia, 2016). Data compiled from the European Commission and the Netherlands’ Environment Assessment Agency showed China accounting for almost 30 percent of global CO2 emission in 2014, having discharged 10.54 billion tons of CO2, which was almost twice the quantity of the second placed US at 5.334 billion tons. However, on a per capita discharge basis, China’s emissions were still less than half of that of the US.
At the 2014 APEC summit in Beijing, the US and China committed to a deadline to reverse the growth in greenhouse emissions from China. The deadline was set at 2030 and environmentalists hailed the commitment from China as a significant breakthrough in globally coordinated efforts to control climate change. The explicit temperature target set was two degrees Centigrade above preindustrial levels, a goal that is considered a difficult but critical for stopping catastrophic environmental consequences.
Based on a paper from two British researchers, Fergus Green and Nicolas Stern in the journal Climate Policy, there are a good number of climate researchers now saying that carbon emissions from China may have fallen from 2014 onward, after climbing rapidly since 2001 when China joined the World Trade Organization (WTO) (Green and Stern, 2016). Central to their argument is the possibility that China is undergoing a structural change that will move the economy to a less energy intensive growth model. Their argument is also based on reports that coal use in China has dropped over the last two years (Wong, March 2, 2016). The coal production and transportation figures for first quarter of 2016 which indicate a high single digit drop further substantiates their argument.
Another interesting study by Angello Chan and Xiaobing Wang, analysts from Bank of America Merrill Lynch, shows that economic growth projections of China will bolster the camp of the optimists. They noted that the energy intensity of the Chinese economy was dropping, reflecting Premier Li Keqiang’s announcement in 2015 that China’s target is to cut energy intensity in GDP by 60-65 percent in the 2020s from its 2005 level (Chan and Wang, 2016).
Merrill Lynch’s projection of power capacity indicates that coal capacity as a percentage of power generation capacity will drop from 66 percent in 2015 to 60 percent in 2020 after a drop from 72 percent in 2011. Power generation from coal will drop to 65 percent in 2020 from 73 percent in 2015 and 82 percent in 2011. The most notable feature of this projection is that China’s absolute thermal power generation will drop from 4,197 trillion watts per hour (TwH) in 2013 to 3,988 TwH in 2020. Combine with higher efficiency from the shift to the supercritical 600 MW-1000 MW generating set, coal consumption in the power sector can easily drop more than 20 percent between 2013 and 2020.
Some other policies will also significantly reduce the share of coal in China’s energy consumption mix down the road. First, China has submitted proposals to cut greenhouse gas emissions to the UN Framework Convention on Climate Change. The blueprint includes green energy rules to increase renewable energy in overall power consumption, and it also includes goals for improving the energy efficiency of green buildings, among others. The National Energy Administration (NEA) announced last month that the non-hydro Renewable Portfolio Standard (RPS) has set a target of non-hydro renewable energy to account for 9 percent of China’s total energy consumption by the end of 2020, compared with just 4 percent in 2015. Second, China and the US are developing new heavy-duty vehicle fuel efficiency standards. The new standards will be finalized in 2016 and implemented in 2019 to minimize greenhouse gas emissions from the transport sector. Third, Chinese President Xi Jinping announced in Washington DC in September 2015 that China will start a national emissions trading system by 2017 which will cover key industrial sectors such as iron and steel, power generation, chemicals, building materials, paper making, and non-ferrous metals. Since 2011, China has been experimenting with cap-and-trade programs in seven major cities, including Shenzhen, Beijing, and Shanghai. Creating a national market and putting a price on greenhouse gas emissions will lift clean energy production capacities and help achieve emissions reduction goals.
However, it is difficult to judge when China’s carbon emissions have peaked and have started to decline. Scientists measure emissions by extrapolating from official energy data and can only provide rough estimates of emissions from individual countries. Conclusions about whether a country’s emissions have peaked are definitive only years after the fact. Even then, changes in economic conditions later might cause a resurgence in emissions.
Problems with the accuracy of Chinese data makes it particularly challenging to figure out what is really happening there. Published in the journal Nature Climate Change, a paper titled “Uncertainties around reductions in China’s coal use and CO2 emissions” warns that preliminary energy statistics from China are unreliable, and that “the most easily available data are often insufficient for estimating emissions” (Korsbakken, Peters and Andrew, 2016).
While the current reduction of coal consumption reflects to some extent the economic new normal of President Xi which saw China’s GDP growth drop to a sub 7 percent level, the reduced energy intensity and active substitution of clean and renewable power for cheap coal energy also play an important role.
The debate over whether China’s carbon emissions peaked in 2014 is expected to last for a few more months at the least (Wong, April 3, 2016). China will release figures for 2015 energy consumption in the third quarter of 2016, and hopefully more convincing figures to determine the trend will be available. From the power generation data of 2015 that was already released, chances are very high that China’s carbon emission had peaked in 2014. Even at a sub 7 percent GDP growth rate, China generates almost USD 800 billion of new GDP a year, and whether its declining energy intensity combined with increasing renewable energy usage will offset the power usage growth associated with increasing urbanization and economic growth will be closely watched and it will probably take one or two more years before the question is answered.
In the case that China’s greenhouse gas emissions have indeed peaked in 2014, this would have happened more than a decade earlier than expected. The world will be energized to consider a more aggressive and active program to control greenhouse gases. The argument that a country should not make ambitious climate commitments because China is the world’s main climate villain will be weakened. Let us hold our breath to see whether China can indeed play a more active role over global climate change.
Chan, A., & Wang, X. (n.d.). PRC utilities & clean environment – Reform, ROIC reset & potential surprises (Rep.). Bank of America Merrill Lynch.
China becomes top green bond issuer: Moody’s. (2016, April 21). Xinhuanet. Retrieved from http://news.xinhuanet.com/english/2016-04/21/c_135299893.htm
China CO2 emission may have peaked in 2014-study. (2016, March 7). Channel NewsAsia. Retrieved from http://www.channelnewsasia.com/news/asiapacific/china-s-co2-emissions-may/2578836.html
Green, F & Stern, N. (2016). China's changing economy: implications for its carbon dioxide emissions. Climate Policy, doi: 10.1080/14693062.2016.1156515
Korshakken, J., Peters, G., & Andrew, R. (2016, March 28). Uncertainties around reductions in China’s coal use and CO2 emissions. Nature Climate Change, doi:10.1038/nclimate2963
Wong, E. (2016, April 3). China's carbon emission may have peaked, but it's hazy. The New York Times. Retrieved from http://www.nytimes.com/2016/04/04/world/asia/china-climate-change-peak-carbon-emissions.html?_r=0
Wong, E. (2016, March 2). Statistics from China say coal consumption continues to drop. The New York Times. Retrieved from http://www.nytimes.com/2016/03/03/world/asia/china-coal-consumption-down.html?mtrref=undefined&gwh=DB7F0933CA50940014018533054E9009&gwt=pay
Yang, Y. (2016, April 20). China's air pollution lifts coastal cities, but drift inland. Financial Times. Retrieved April 22, 2016, from http://www.ft.com/intl/cms/s/0/e56af72c-06b1-11e6-96e5-f85cb08b0730.html#axzz47Y0YkMlC