China coal-burning may have peaked, but emissions reductions are far off course

Rapidly-increasing demand for electricity coupled with drought conditions drove up China’s coal demand by 4.4 per cent in 2023, while the rebound from strict COVID-19 restrictions boosted oil consumption, leading to a 5.2 per cent increase in energy sector emissions. AFP photo by Greg Baker.

This article was published by The Energy Mix on March 21, 2024.

China may already have peaked its coal burning, even as it builds more coal-fired power plants, but will still need a record drop in its carbon dioxide emissions to meet its 2025 climate targets, two separate analysts concluded last month.

In her Sustainability By Numbers newsletter, data scientist Hannah Ritchie says the country is steadily using its coal plants less often, in spite of a continuing power plant building spree.

But on Carbon Brief, Lauri Myllyvirta, lead analyst at the independent Centre for Research on Energy and Clean Air (CREA), warns that rapidly-increasing demand for electricity coupled with drought conditions drove up China’s coal demand by 4.4 per cent in 2023, while the rebound from strict COVID-19 restrictions boosted oil consumption, leading to a 5.2 per cent increase in energy sector emissions.

That means the government’s ability to deliver on a promised 18 per cent reduction in carbon intensity by 2025 will depend on a “record fall” of 4 to 6 per cent by next year.

Myllyvirta’s own analysis late last year showed China’s emissions set to decline in 2024, thanks to a surge in clean energy investments that exceeded targets, Ritchie notes. And even the suggestion of a looming peak in coal use makes it “seem contradictory” that the country would build more coal plants.

Yet China built 50 gigwatts of new coal capacity in 2023—about equal to the installed capacity in Indonesia, Germany, and Japan—and shut down only 4 GW.

“China’s continued build-out of new coal plants doesn’t make much economic sense,” she writes. “Energy analysts see it as the symptom of poor planning; decisions that will lead to underused power plants and stranded assets.”

But Ritchie points to data on the capacity factors for Chinese coal plants that shows them operating less frequently. “In the first decade of the 2000s, plants were running around 70 per cent of the time. They’re now running around 50 per cent. If utilization rates continue to drop, China’s coal use could fall despite it adding more capacity.”

By 2050, analysts at S&P Global Insights see the plants operating at about 15 per cent capacity, Ritchie says. But as far back as 2018, high coal prices already had nearly of China’s coal plants operating at a financial loss, and “the economics of coal plants are only set to get harder. China is building huge quantities of solar and wind, which are essentially free to run once they’re installed. As renewables push down the cost of energy, coal will become less and less profitable,” even with capacity payments to keep the plants available to meet peak demand.

But it remains to be seen how well those shifts will translate into short-term emissions reductions, Myllyvirta says in his latest analysis. So far, the country is “severely off track” on all the major commitments in its 2021 Nationally Determined Contribution (NDC) under the Paris climate agreement.

“China’s economic growth during and after the COVID-19 pandemic has been highly energy- and carbon-intensive,” he explains, with carbon dioxide emissions growing by an average of 3.8 per cent per year in 2021-23, compared to 0.9 per cent a year in 2016-20. “Another year of rapidly rising emissions in 2023 leaves China way off track against its target of cutting carbon intensity by 18 per cent during the 14th five-year plan (2021-25).”

Low water levels in 2023 played a major role in boosting coal use, as “hydropower operating rates reached the lowest level in more than two decades due to a series of droughts,” he adds. “These operating rates are likely to recover towards average levels in 2024.”

As well, the energy-intensive processes behind the massive rise in China’s clean energy production accounted for about a 1 per cent increase in emissions—producing global climate gains that won’t show up in China’s national emissions inventory.

“Without the clean technology manufacturing boom, China’s CO2 emissions would have grown by around 4.2 per cent, instead of the 5.2 per cent estimated in our analysis,” Myllyvirta writes. “Nevertheless, the increase in manufacturing will result in a significant reduction in emissions in net terms, once the products are in use. About half of this reduction will be realized outside of China, as the products are exported.”

Visit Carbon Brief for Lauri Myllyvirta’s detailed analysis of China’s latest efforts to reduce emissions.

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