June 19, 2025 • 31 mins
When exactly China’s emissions peak will make a big difference to the fate of the planet. That moment has come, according to Lauri Myllyvirta, co-founder of the Centre for Research on Energy and Clean Air. A combination of factors – including a huge deployment of renewables and electrification of transport – has put China’s emissions into a structural decline. This week on Zero, Akshat Rathi asks Myllyvirta how confident he is that this really is a peak? What’s behind the decline in emissions? And how will the trade war with the US affect China’s climate and energy policies in the years to come?
Explore further:
- Analysis: Clean energy just put China’s CO2 emissions into reverse for first time - Carbon Brief
- China Set to Reach Peak Emissions Before 2030, Ex-Official Says - Bloomberg
- China’s Solar Industry Gathers as Gloom Deepens Over Demand — Bloomberg
Zero is a production of Bloomberg Green. Our producer is Oscar Boyd. Special thanks to: Jess Beck, Eleanor Harrison-Dengate, Sommer Saadi, Mohsis Andam and Siobhan Wagner. Thoughts or suggestions? Email us at zeropod@bloomberg.net. For more coverage of climate change and solutions, visit https://www.bloomberg.com/green.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
Welcome to zero. I'm Akshatrati. This week, have China's emissions speaked?
Everything about China tends to be big, including its planet
(00:22):
heating impact. China is, after all, the world's largest consumer
of coal and produces nearly a third of global carbon
dioxide emissions, and that's why what China does makes a
big difference to the world's climate trajectory, even more so
than what the US does. In recent years, China's actions
have tended more towards clean energy than fossil fuels. It
(00:46):
deploys more solar power than the rest of the world combined,
and about half of all new cars sold in the
country are electric. But the conversation about China tends to
miss a lot of nuance. With the US under President
Ronald Trump taking big steps to reverse climate policies, it's
even more important to understand what China is doing. That's
(01:07):
why this week we're speaking to Louriy mulawirta co founder
of the Center for Research on Energy and Clean Air
and one of the foremost experts on all things climate
and energy in China. He recently published an analysis for
Carbon Brief that says China's emissions have peaked and they're
going into reverse, not because of a financial crisis or
(01:30):
the pandemic, but because there are structural reasons for it.
And it's the kind of good news on the climate
front that has become rare these days. Calling the peak
is not easy, whether that's oil consumption or COOTO emissions.
Often you can only be sure years after the peak
has passed. So how confident is Lowry that this really
(01:52):
is the peak? What's behind it? And how will the
trade war affect China's climate and energy policies in the
years to come. Larry, welcome to the show.
Speaker 2 (02:07):
Thank you.
Speaker 1 (02:08):
Let's start with the big picture and situate the listener
on where China is. Obviously, it's a big manufacturing powerhouse.
For the last three decades of the missions have been
growing really quickly. It is now the world's second largest economy.
But what are its climate targets?
Speaker 2 (02:26):
So China's been pledging climate targets since the Copenhagen Climate Conference,
which was more than fifteen years ago now. So the
first quantititive targets that they pledged were for twenty twenty,
and then another set of targets was set for twenty thirty.
That's the current target year for China. The targets were
(02:49):
announced in twenty twenty one. The headline target that China
has been setting is carbon intensity so CO two emissions
from the energy sector per unit of GDP, which, when
your GDP is growing fast, is of course a flattering
way of setting targets because even if your emissions are
(03:10):
going up let's say five percent in a given year,
if you clock ten percent GDP growth, then you can
say that you got a reduction in your carbon intensity.
So the target for twenty thirty is to reduce CO
two intensity by more than sixty five percent from the
two thousand and five levels, so over a period of
(03:30):
twenty five years, to make that a bit more tangible.
When the target was set in twenty twenty one, it
looked like it would allow pretty much businesses usual CO
two emissions growth of one to two percent per year
until twenty thirty. What happened, though, is that during the
zero COVID period, China's economic strategy shifted towards emphasizing manufacturing
(03:56):
very heavily, which caused a spiking emissions. And now that
twenty thirty target is in fact very meaningful, if not challenging, one,
So from the current level, emissions will have to fall
in absolute terms out to twenty thirty in order to
meet that target.
Speaker 1 (04:14):
And then it does have an absolute target two, which
is to try and peak carbon emissions by twenty thirty.
So if it does both things, then China may be
on track, but right now it is quite off track
now in terms of where things are. Specifically, over the
past year, You've done an analysis looking at china CO
(04:36):
two emissions and they've been down by a significant percentage,
and that tends to only happen during times of financial crisis.
Is China in a financial crisis and is that why
the emissions are Down't just talk us through what have
you seen over the past year?
Speaker 2 (04:53):
For sure, So, as I said, China's emissions went up
rapidly during the zero COVID years from twenty twenty out
to twenty twenty three. But at the same time, China's
clean energy industry is boomed because of the emphasis of manufacturing,
because of government drive togel kinds of projects and investment moving,
(05:14):
because of a shift of investment from real estate to
the clean energy industries. And so because of all of that,
China's clean energy additions have reached a level that no
one really expected. The past twelve months were the first
time that all of the growth in electricity demand was
(05:36):
covered by clean energy, while electricity demand grew above average rates.
So this is the first time that power sector emissions
and total emissions have gone down without the cause being
the global financial crisis, zero COVID, something else that would
lead to a drop or slowdown in electricity demand. There are,
(05:57):
of course economic headwinds in related to the trade war,
related to the long tail of the economic impacts from
zero COVID, and so on. But the key point is
that over the past twelve months, electricity demand growth was
still above average, so whatever was happening in some sectors
of the economy didn't result in a slowdown in edage
(06:20):
demand or electricity demand.
Speaker 1 (06:22):
How much have emissions fallen by?
Speaker 2 (06:24):
Yeah, so you have transmissions over the past twelve months
are down by about one percent. So it's significant enough,
especially compared with the rapid road of several percent per
year in the past few years, to mark a change
in the trend. But it also means that if there
is a surprise like severe drought and heat wave over
the summer, that could still cause a spike that would
(06:47):
cause emissions to top the previous peak.
Speaker 1 (06:50):
How certain are we that this peak might be the
peak and we might not just see a rise next year.
Speaker 2 (06:57):
I think it's quite certain that the key trends driving
this structural reduction emissions will continue this year for the
next few years. There are two key uncertainties. The first
one is will the clean energy growth continue, so trying
to change the price is paid to a new renewable
(07:19):
power projects earlier this year. The change is kicking in
in the summer of this year, and so the industry
has been quite optimistic that they can keep the development going,
but it does create uncertainty. So that's one thing that
we need to be mindful of. The other one is
what happens with energy demand growth, and so the expectation
(07:43):
would be that if China's aim of weathering the current
trade tensions and so on by stimulating consumption is successful
and so on, then energy mind growth would be at
or even below the historical trends. But of course, if
there is another decision to reserve to constructions Team Most,
for example, then we could see faster energy de mind growth,
(08:04):
and that could also upset that big.
Speaker 1 (08:07):
Before we get into the details of how exactly China
came to this point, Let's just talk about how reliable
these numbers are. You know, how do you know whether
we can trust China's carbon accounting, its renewables figures, it's
coal deployment, and what are the big holes that are
still there in the data? Right?
Speaker 2 (08:28):
So I would really point to do things in terms
of how to think about China statistical data. So one
of them is that there are always uncertainties for a
big country with a complex, rapidly changing economy, and simply
in terms of the quality of the statistics, China statistics
are much better than many other emerging economies. The other
thing is intentional statistical manipulation, which does happen in China,
(08:54):
and it does happen in China more than just about
or let's say most other kind is simply because China
set so many quantitative targets, So whenever there's a quantitative
target to do something, the statistical statistics tend to show
that it happened, whether or not it did. So the
quality of the statistics has been improving. This kind of
(09:15):
statistical manipulation has gotten harder to do and less blatant.
Than it used to be, but it's something that one
always has to be mindful of. So the way I
evaluate the robustness of different statistics is looking at okay,
so have these statistics shown trends that the government wouldn't
(09:35):
want to display? Electricity statistics are famed for doing that,
so they're one of the indicators that we know that
China's policy makers themselves have used when economic numbers have
looked too good to be true, and so they've shown
slowdowns when the government wouldn't like there to be a slowdown,
(09:58):
or they've shown rapid growth the government wouldn't like there
to beat rapid growth. That said, over the past twelve months,
there has been very little with any pressure on China's
provinces or enterprises to do actually show that emissions are
going down, So there isn't much of a reason to
think that there would be that kind of distortions.
Speaker 1 (10:17):
Right now, let's look at what is causing the decline
and emissions. You talked about the large amount of solar
and wind power and battery capacity that China is installing.
How much renewables is it? In numbers?
Speaker 2 (10:32):
The numbers are pretty hard to get your head around,
so we're talking more than three hundred gigawottes of wind
and solar per year. The US has less than two
hundred gigawatts of solar installed in total, so China's additions
in one year exceeded that. And last year was a
record year for solar in the US as well, with
(10:52):
fifty k coasttas so turned it almost five times. In
terms of power generation, the amount of solar and wind
added in twenty twenty four was enough to generate the
entire electricity consumption of the UK, and so most importantly,
we're talking about five percent of China's own electricity demand
added in clean power generation the year, which is the
(11:16):
average historical growth rate of electricity demand. So that crossover
where these last editions start to actually cover electricity demand
growth is what makes a turnaround in emissions possible. And
in terms of evs, they're approaching fifty percent of all
passenger vehicles sold, also gaining share rapidly in heavier commercial vehicles,
(11:42):
where the next breakthrough is expected. The same is happening
now for electricity storage. So there's almost two hundred gigawads
of pumped hydro storage in operation and under construction and
Just last year, about thirty gig awards of battery storage
was added in China. So to put things into scale,
(12:05):
China's peak demand is just over one thousand gig awads,
So when we start to talk about a few percent
of that in battery storage added per year, then that
starts to definitely make a dent in how much gus
or coal fired power you need to cover those peak demands.
Speaker 1 (12:24):
So is this just a power sector story, then that
emissions are falling because electricity consumption is getting cleaner with
all the solar and wind and energy storage that is
coming online.
Speaker 2 (12:38):
The other big thing that's happening in China besides clean
electricity generation is electrification, and that's happening. Of course, we
already talked about transportation, but it's also happening in industry.
It's also happening in buildings. So that means that for
quite a while already all of the growth in emissions
has been coming from the electric this sector because you
(13:01):
get growth energy demanding the other sectors, but they're shifting
to electricity, so the use of direct use of fossil
fuels in the other sectors has been falling. The third
thing that has been happening is a dramatic slowdown in
the construction sector. So construction, especially real estate and construction
(13:24):
and infrastructure have been a massive source of GDP growth
and emissions growth for China over the past couple of
decades because those are very energy and carbon intensive sectors,
so all of the cement and steel consumed by those
sectors has been a major driver of emissions. Cement production
(13:47):
has come down by more than twenty percent of its
peak in twenty twenty one, so that has been a
major part of this story in emissions starting to come down. Simply,
the process emissions from cement made up almost ten percent
of China's C two emissions ad it speak. And for
the steel sector, the trends are slightly more confusing because
(14:09):
manufacturing has started to use more steel, but steel consumption
for construction has come down dramatically, and overall steel consumption
looks like it's splittawed or starting to come down, and
there's a huge opportunity to shift to more steel recycling,
which would reduce the energy demand for steel making significantly,
(14:30):
even if total production stays flat.
Speaker 1 (14:32):
And so that is an interesting story because we typically
hear of the renewable story in China of the electric
car story in China, but just put the steel sector
in context here and what this move towards recycling steel,
which is mostly driven by electricity, and this electricity is
becoming cleaner could do two not just speaking which might
(14:56):
have happened, but the decline that has to happen afterwards,
because China has to meet not just as twenty thirty goals,
but it has the goal to reach common neutrality by
twenty sixty. So it must start to decline pretty quickly.
Speaker 2 (15:09):
Right, So, first of all, the steel sector in China
is of course massive. China makes more than half of
the world's steel, and energy use for the steel making
is the largest source of emissions if you include the
electricity use. Even without the electricity use, it's almost a
fifth of China's emissions. And so the opportunity here is
(15:30):
that as long as China's steel demand was growing rapidly,
the only way to meet that demand was to produce
a lot of primary steel. Because if your demand is
going up five ten percent per year, then whatever vehicles
and buildings and so on that are coming to the
end of their life so built decades ago, our a
(15:51):
tiny fraction of your current demand. But once demand plateaus
and a lot more buildings and and so and start
to come to the end of their life, the amount
of scrap steel available for recycling or potentially available for
recycling starts to go up fast as a percentage of
(16:12):
your steel demand. That shift hasn't really happened in China yet.
The share of electric arc steel making, so the kind
of steel making that uses scrap as the primary input,
has stagnated and is in fact missing the target for
this year. And that's because it's too cheap or too
cost competitive in China to make steel out of iron
(16:34):
ore and coking coal. But that's something that I expect
to be fixed because, as I said, the target for
this year is being missed and it clearly needs a
further push.
Speaker 1 (16:46):
There's also just the electrification story of China, which has
been remarkable. So over this century, China has almost tripled
the share of energy that it consumes coming from electricity
about ten percent to nearly thirty percent now, and in
that same period, Western economies have largely remained flat at
(17:08):
about eighteen to twenty percent of their energy coming from electricity.
With the trajectory that you have outlined in terms of
deployment of wind and solar, but also some coal, and
we should talk about that. And all this electrification of
transport even now industry that might happen with steel. Are
(17:30):
we starting to see China becoming an electro state.
Speaker 2 (17:34):
I've been a bit skeptical of that broad categorization because
there are still at least pockets of industry where electrification
trend isn't clear. But electrification is certainly a big part
of the strategy for transportation for industry. So there was
a time that shifting from coal to GAUS fossil gas
(17:57):
was a big part of the strategy, especially for addressing
air pollution. But because of energy security concerns, the emphasis
on shifting to cars has declined, and also because of
economic considerations, and so I think electrification will become even
more clearly the focus.
Speaker 1 (18:16):
And so what makes you pause if all the numbers
are pointing towards electrification, and this is not just in
the transport sector, but also in buildings and also in industry,
and the fact that even steel, which is a liguard,
might start to catch up, why do you think the
electro state thesis is not yet one that is the
(18:40):
trajectory China is ticking.
Speaker 2 (18:42):
I think that's the trajectory for everyone. It's quite obvious.
It's just that it's not clearly stated as a policy
end point. But certainly China has been moving much faster
than just about everyone else.
Speaker 1 (19:06):
We'll be back with more of my conversation with LOURR.
Mulwerta after this short break. And hey, if you're enjoying
this episode, please take a moment to rate and review
the show on Apple Podcasts and Spotify. Your feedback really
matters and helps new listeners discover the show. Thank you.
(19:29):
So far, we've looked at the good story, which is
renewables are helping power emissions decline and things electrifying, so
that means emissions will decline on other sectors. But when
you look at the numbers, there are currently sectors where
emissions are growing. What are those.
Speaker 2 (19:47):
The main sector with a clear expectation that coal consumption
and emissions will go up is the chemical sector. China
has this long standing program of building a coal to
chemicals industry, which is basically petro chemicals industry using coal
as the feedstock to produce synthetic gas, synthetic liquid fuels,
(20:12):
and chemicals industry outputs, and this is incredibly carbon intensive.
It's even more much more intensive than making the same
stuff out of crude oil. So this is an area
where a massive amount of capacity is being built to
process coal into chemicals. The utilization of that capacity has
(20:32):
remained quite low because it's struggling with profitability. The posy
makers are quite clear that this is an energy security
play or CITYPM White goal planning for extreme scenarios, so
basically making sure that China has the capacity to keep
its economy working if maritime transportation of oil and gas
(20:56):
is blocked as part of a major conflict with the US.
Speaker 1 (21:00):
Given the macroeconomic situation right now, which even before Trump
came to power was the case where the Chinese economy
was slowing down, plus the Chinese population has started to decline,
is there some contribution to the speaking of emissions that
is coming from these two factors.
Speaker 2 (21:23):
You can always talk about the counterfactual, which is if
we were still seeing seven percent ten percent GDP growth
like two decades ago, then of course even the current
massive clean energy additions would fall way short of covering demand.
But overall, the slowdown of the economy is something that
(21:46):
has been expected for a long time, so slowing down
to maybe five percent GDP growth in the first half
of this decade and towards four percent in the second half.
China does have target or seating Pin maybe personally has
a target of doubling GDP per capiture from twenty twenty
(22:07):
to twenty thirty five, which means you have to maintain
over four point five percent GDP growth for the remainder
of the period. That's very clearly the red line for
the policy makers, and that's why they stuck with an
around five percent GDP target for this year as well.
Speaker 1 (22:25):
And what about China's population, given has been falling by
about a million people each year for the past three years,
is that contributing to a decline in emissions?
Speaker 2 (22:35):
Where that definitely comes in is the real estate and
infrastructure sector. So if you had a lot of population
growth contributing to needing more real estate and more infrastructure
and so on, then of course that would be a
different situation.
Speaker 1 (22:50):
And then if you look at the trade war that
is ongoing right now, there is something that we can
learn from the past where in the first Trumpet minutustration,
China responded to the tariffs that were deployed by the
US by increasing its manufacturing capacity to try and offset
(23:11):
the decline that it would have in exports to the
US by sending those exports to other countries. Do you
expect China to have a similar trajectory, given this time
around the tariffs are even higher.
Speaker 2 (23:26):
A big part of the response during the first Trump
administration was in fact domestic steamulus to the construction sector,
very much unannounced and only really visible after the fact.
This time, what Chinese policy makers are saying is that
they want to stimulate consumption so household spending power, instead
(23:49):
of relying on these kind of stimulus which has been
dubbed low quality by the Saging administration. And this is
also very much a lines with CIEs overall economic guidelines
of common prosperity, aiming for a large middle class and
so on. So there is a happy development here that
(24:13):
could take place where this in fact pushes along China's
own ambitions for changing the structure of the economy. If
you're used to the environmentalist messaging of consumption is the
root of all evil, it might sound a terrible idea
to increase consumption, but the point here for emissions is
that household consumption is in fact much less carbon intensive
(24:35):
than the construction and manufacturing industries, which have been driving
growth in the past. So if more of the spending
power in the economy was directed to households, they would
spend much more of that on services like healthcare or
range of other services. And even the manufacturing that caters
(24:56):
to households is much less energy intensive then the manufacturing
that caters to the construction sector, for example.
Speaker 1 (25:04):
And what about China's climate diplomacy Given the past decade,
we've seen the US flip every time there's been a
change in the president, but there have been moments where
US and China have cooperated. But now that the US
is firmly with the Trump administration not going to be
(25:25):
part of climate diplomacy and maybe even play the role
of spoiler, how is China responding to this moment?
Speaker 2 (25:34):
I think two things have changed. If you think to
Obama's announcement in twenty fourteen, where the two leaders announced
their new climate targets together, so one of them is
the entire political dynamic in both countries. It's very hard
to see that there would be any kind of political
(25:56):
upside for seeing in the current atmosphere from anouncing something
like this together with a US president, because that would
be just seen as caving and being weak. So China
has been very clear that their ambition is unchanging, is
not influenced by pressure from others. And the other thing
that has really changed is that clean energy industry, including exports,
(26:20):
has become such a key driver of China's economy that
China has a much stronger self interest now in also
keeping a global and transition going. So just in the
past few years, China has made a massive investment in
manufacturing capacity for solar, for batteries for evs and so on,
(26:42):
and if the global transition styled, that would mean that
quite a bit of that capacity would go unused and
cost financial distress. That said, this hasn't really translated into
multilateral diplomacy from China yet, So China, for example, didn't
put its weight behind the target of drippling renewables and
(27:05):
doubling efficiency. So this is where China still needs to
get more comfortable with taking the initiative and in fact
persuading other countries to do more. And I think here
things are really going to change once China's leaders are
secure in thinking that they've turned the shape on emissions,
(27:27):
They're going to be a lot more comfortable because they
don't have to be defensive about their emission's growth anymore.
Speaker 1 (27:34):
If this is the peak, how quickly will we see
a decline or will it be a slow plateau like
it has been for coal consumption over the past decade.
Speaker 2 (27:46):
There's certainly a risk of China getting stuck at pretty
much current levels of emissions in the absence of setting
ambitious emission reduction targets for twenty thirty five. I think
one key concern is that wants the coal industry starts
to see their demand go down in absolute terms, especially
(28:09):
as they've been investing in new coal mines, new coal
fart power plants recently. That could generate a lot of pushback.
But at the same time, keeping emissions at a plateau
would mean upsetting the growth ambitions of the cleaner engine industry,
So there's going to be pushed from both sides. So
(28:29):
the targets that China's going to set this year, first
in its new Paris Commitment and then in the five
year plan that is due to be released next year,
will be key in calibrating that level of ambition.
Speaker 1 (28:43):
And finally, What do people in China think about the
US right now, which is the world's largest producer of
oil and gas, has a ton of fossil fuels still
available for it to burn, but it is not really
deploying electricity technologies which are more efficient and economically cheaper. Instead,
(29:04):
it is doubling down on fossil fuels, especially under this administration.
Do they see the US losing out on the future
of energy, even as it might be currently the global
energy superpower.
Speaker 2 (29:20):
I was in fact in Beijing when the US election
results were coming in, and I can say that in
a room full of Chinese people, I was the only
one who was trying to check my phone under the
table for the results, So people weren't paying as much
attention as Americans might expect. And also when under the
(29:42):
Biden administration the US was starting to actually make an airport,
I think the reaction from Chinese experts was one of skepticism,
or at least one of wait and see, like see
whether the US is again actually pull this off, because
(30:03):
there is a sense that the US is so far behind,
especially in terms of manufacturing, and it just doesn't have
the kind of ecosystem and the let's get it done
spirit that China has. So currently, I think Chinese experts
and Chinese policymakers are very comfortable and secure in thinking
that they have the lead in these markets and technology areas,
(30:28):
and it would actually be really good to get some
more competition. So if there was more of a sense
that others are at least making an effort to catch
up and put up some competition, that would keep China
moving faster.
Speaker 1 (30:43):
Thank you, Laurie, thank you so much, and thank you
for listening to zero. Now for the sound of the week.
(31:06):
That was the sound of a bucket wheel excavator used
for open pit coal mining, and it's essentially a shovel
as big as a skyscraper. If you liked this episode,
please take a moment to rate and review the show
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(31:27):
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is composed by Wonderly Special. Thanks to Jessica Beck, eleanor
Harrison Dengate, Samersadi, Moses Andam and Shawan Wagner, I'm Makshatrati
back soon
Welcome to zero. I'm Akshatrati. This week, have China's emissions speaked?
Everything about China tends to be big, including its planet
(00:22):
heating impact. China is, after all, the world's largest consumer
of coal and produces nearly a third of global carbon
dioxide emissions, and that's why what China does makes a
big difference to the world's climate trajectory, even more so
than what the US does. In recent years, China's actions
have tended more towards clean energy than fossil fuels. It
(00:46):
deploys more solar power than the rest of the world combined,
and about half of all new cars sold in the
country are electric. But the conversation about China tends to
miss a lot of nuance. With the US under President
Ronald Trump taking big steps to reverse climate policies, it's
even more important to understand what China is doing. That's
(01:07):
why this week we're speaking to Louriy mulawirta co founder
of the Center for Research on Energy and Clean Air
and one of the foremost experts on all things climate
and energy in China. He recently published an analysis for
Carbon Brief that says China's emissions have peaked and they're
going into reverse, not because of a financial crisis or
(01:30):
the pandemic, but because there are structural reasons for it.
And it's the kind of good news on the climate
front that has become rare these days. Calling the peak
is not easy, whether that's oil consumption or COOTO emissions.
Often you can only be sure years after the peak
has passed. So how confident is Lowry that this really
(01:52):
is the peak? What's behind it? And how will the
trade war affect China's climate and energy policies in the
years to come. Larry, welcome to the show.
Speaker 2 (02:07):
Thank you.
Speaker 1 (02:08):
Let's start with the big picture and situate the listener
on where China is. Obviously, it's a big manufacturing powerhouse.
For the last three decades of the missions have been
growing really quickly. It is now the world's second largest economy.
But what are its climate targets?
Speaker 2 (02:26):
So China's been pledging climate targets since the Copenhagen Climate Conference,
which was more than fifteen years ago now. So the
first quantititive targets that they pledged were for twenty twenty,
and then another set of targets was set for twenty thirty.
That's the current target year for China. The targets were
(02:49):
announced in twenty twenty one. The headline target that China
has been setting is carbon intensity so CO two emissions
from the energy sector per unit of GDP, which, when
your GDP is growing fast, is of course a flattering
way of setting targets because even if your emissions are
(03:10):
going up let's say five percent in a given year,
if you clock ten percent GDP growth, then you can
say that you got a reduction in your carbon intensity.
So the target for twenty thirty is to reduce CO
two intensity by more than sixty five percent from the
two thousand and five levels, so over a period of
(03:30):
twenty five years, to make that a bit more tangible.
When the target was set in twenty twenty one, it
looked like it would allow pretty much businesses usual CO
two emissions growth of one to two percent per year
until twenty thirty. What happened, though, is that during the
zero COVID period, China's economic strategy shifted towards emphasizing manufacturing
(03:56):
very heavily, which caused a spiking emissions. And now that
twenty thirty target is in fact very meaningful, if not challenging, one,
So from the current level, emissions will have to fall
in absolute terms out to twenty thirty in order to
meet that target.
Speaker 1 (04:14):
And then it does have an absolute target two, which
is to try and peak carbon emissions by twenty thirty.
So if it does both things, then China may be
on track, but right now it is quite off track
now in terms of where things are. Specifically, over the
past year, You've done an analysis looking at china CO
(04:36):
two emissions and they've been down by a significant percentage,
and that tends to only happen during times of financial crisis.
Is China in a financial crisis and is that why
the emissions are Down't just talk us through what have
you seen over the past year?
Speaker 2 (04:53):
For sure, So, as I said, China's emissions went up
rapidly during the zero COVID years from twenty twenty out
to twenty twenty three. But at the same time, China's
clean energy industry is boomed because of the emphasis of manufacturing,
because of government drive togel kinds of projects and investment moving,
(05:14):
because of a shift of investment from real estate to
the clean energy industries. And so because of all of that,
China's clean energy additions have reached a level that no
one really expected. The past twelve months were the first
time that all of the growth in electricity demand was
(05:36):
covered by clean energy, while electricity demand grew above average rates.
So this is the first time that power sector emissions
and total emissions have gone down without the cause being
the global financial crisis, zero COVID, something else that would
lead to a drop or slowdown in electricity demand. There are,
(05:57):
of course economic headwinds in related to the trade war,
related to the long tail of the economic impacts from
zero COVID, and so on. But the key point is
that over the past twelve months, electricity demand growth was
still above average, so whatever was happening in some sectors
of the economy didn't result in a slowdown in edage
(06:20):
demand or electricity demand.
Speaker 1 (06:22):
How much have emissions fallen by?
Speaker 2 (06:24):
Yeah, so you have transmissions over the past twelve months
are down by about one percent. So it's significant enough,
especially compared with the rapid road of several percent per
year in the past few years, to mark a change
in the trend. But it also means that if there
is a surprise like severe drought and heat wave over
the summer, that could still cause a spike that would
(06:47):
cause emissions to top the previous peak.
Speaker 1 (06:50):
How certain are we that this peak might be the
peak and we might not just see a rise next year.
Speaker 2 (06:57):
I think it's quite certain that the key trends driving
this structural reduction emissions will continue this year for the
next few years. There are two key uncertainties. The first
one is will the clean energy growth continue, so trying
to change the price is paid to a new renewable
(07:19):
power projects earlier this year. The change is kicking in
in the summer of this year, and so the industry
has been quite optimistic that they can keep the development going,
but it does create uncertainty. So that's one thing that
we need to be mindful of. The other one is
what happens with energy demand growth, and so the expectation
(07:43):
would be that if China's aim of weathering the current
trade tensions and so on by stimulating consumption is successful
and so on, then energy mind growth would be at
or even below the historical trends. But of course, if
there is another decision to reserve to constructions Team Most,
for example, then we could see faster energy de mind growth,
(08:04):
and that could also upset that big.
Speaker 1 (08:07):
Before we get into the details of how exactly China
came to this point, Let's just talk about how reliable
these numbers are. You know, how do you know whether
we can trust China's carbon accounting, its renewables figures, it's
coal deployment, and what are the big holes that are
still there in the data? Right?
Speaker 2 (08:28):
So I would really point to do things in terms
of how to think about China statistical data. So one
of them is that there are always uncertainties for a
big country with a complex, rapidly changing economy, and simply
in terms of the quality of the statistics, China statistics
are much better than many other emerging economies. The other
thing is intentional statistical manipulation, which does happen in China,
(08:54):
and it does happen in China more than just about
or let's say most other kind is simply because China
set so many quantitative targets, So whenever there's a quantitative
target to do something, the statistical statistics tend to show
that it happened, whether or not it did. So the
quality of the statistics has been improving. This kind of
(09:15):
statistical manipulation has gotten harder to do and less blatant.
Than it used to be, but it's something that one
always has to be mindful of. So the way I
evaluate the robustness of different statistics is looking at okay,
so have these statistics shown trends that the government wouldn't
(09:35):
want to display? Electricity statistics are famed for doing that,
so they're one of the indicators that we know that
China's policy makers themselves have used when economic numbers have
looked too good to be true, and so they've shown
slowdowns when the government wouldn't like there to be a slowdown,
(09:58):
or they've shown rapid growth the government wouldn't like there
to beat rapid growth. That said, over the past twelve months,
there has been very little with any pressure on China's
provinces or enterprises to do actually show that emissions are
going down, So there isn't much of a reason to
think that there would be that kind of distortions.
Speaker 1 (10:17):
Right now, let's look at what is causing the decline
and emissions. You talked about the large amount of solar
and wind power and battery capacity that China is installing.
How much renewables is it? In numbers?
Speaker 2 (10:32):
The numbers are pretty hard to get your head around,
so we're talking more than three hundred gigawottes of wind
and solar per year. The US has less than two
hundred gigawatts of solar installed in total, so China's additions
in one year exceeded that. And last year was a
record year for solar in the US as well, with
(10:52):
fifty k coasttas so turned it almost five times. In
terms of power generation, the amount of solar and wind
added in twenty twenty four was enough to generate the
entire electricity consumption of the UK, and so most importantly,
we're talking about five percent of China's own electricity demand
added in clean power generation the year, which is the
(11:16):
average historical growth rate of electricity demand. So that crossover
where these last editions start to actually cover electricity demand
growth is what makes a turnaround in emissions possible. And
in terms of evs, they're approaching fifty percent of all
passenger vehicles sold, also gaining share rapidly in heavier commercial vehicles,
(11:42):
where the next breakthrough is expected. The same is happening
now for electricity storage. So there's almost two hundred gigawads
of pumped hydro storage in operation and under construction and
Just last year, about thirty gig awards of battery storage
was added in China. So to put things into scale,
(12:05):
China's peak demand is just over one thousand gig awads,
So when we start to talk about a few percent
of that in battery storage added per year, then that
starts to definitely make a dent in how much gus
or coal fired power you need to cover those peak demands.
Speaker 1 (12:24):
So is this just a power sector story, then that
emissions are falling because electricity consumption is getting cleaner with
all the solar and wind and energy storage that is
coming online.
Speaker 2 (12:38):
The other big thing that's happening in China besides clean
electricity generation is electrification, and that's happening. Of course, we
already talked about transportation, but it's also happening in industry.
It's also happening in buildings. So that means that for
quite a while already all of the growth in emissions
has been coming from the electric this sector because you
(13:01):
get growth energy demanding the other sectors, but they're shifting
to electricity, so the use of direct use of fossil
fuels in the other sectors has been falling. The third
thing that has been happening is a dramatic slowdown in
the construction sector. So construction, especially real estate and construction
(13:24):
and infrastructure have been a massive source of GDP growth
and emissions growth for China over the past couple of
decades because those are very energy and carbon intensive sectors,
so all of the cement and steel consumed by those
sectors has been a major driver of emissions. Cement production
(13:47):
has come down by more than twenty percent of its
peak in twenty twenty one, so that has been a
major part of this story in emissions starting to come down. Simply,
the process emissions from cement made up almost ten percent
of China's C two emissions ad it speak. And for
the steel sector, the trends are slightly more confusing because
(14:09):
manufacturing has started to use more steel, but steel consumption
for construction has come down dramatically, and overall steel consumption
looks like it's splittawed or starting to come down, and
there's a huge opportunity to shift to more steel recycling,
which would reduce the energy demand for steel making significantly,
(14:30):
even if total production stays flat.
Speaker 1 (14:32):
And so that is an interesting story because we typically
hear of the renewable story in China of the electric
car story in China, but just put the steel sector
in context here and what this move towards recycling steel,
which is mostly driven by electricity, and this electricity is
becoming cleaner could do two not just speaking which might
(14:56):
have happened, but the decline that has to happen afterwards,
because China has to meet not just as twenty thirty goals,
but it has the goal to reach common neutrality by
twenty sixty. So it must start to decline pretty quickly.
Speaker 2 (15:09):
Right, So, first of all, the steel sector in China
is of course massive. China makes more than half of
the world's steel, and energy use for the steel making
is the largest source of emissions if you include the
electricity use. Even without the electricity use, it's almost a
fifth of China's emissions. And so the opportunity here is
(15:30):
that as long as China's steel demand was growing rapidly,
the only way to meet that demand was to produce
a lot of primary steel. Because if your demand is
going up five ten percent per year, then whatever vehicles
and buildings and so on that are coming to the
end of their life so built decades ago, our a
(15:51):
tiny fraction of your current demand. But once demand plateaus
and a lot more buildings and and so and start
to come to the end of their life, the amount
of scrap steel available for recycling or potentially available for
recycling starts to go up fast as a percentage of
(16:12):
your steel demand. That shift hasn't really happened in China yet.
The share of electric arc steel making, so the kind
of steel making that uses scrap as the primary input,
has stagnated and is in fact missing the target for
this year. And that's because it's too cheap or too
cost competitive in China to make steel out of iron
(16:34):
ore and coking coal. But that's something that I expect
to be fixed because, as I said, the target for
this year is being missed and it clearly needs a
further push.
Speaker 1 (16:46):
There's also just the electrification story of China, which has
been remarkable. So over this century, China has almost tripled
the share of energy that it consumes coming from electricity
about ten percent to nearly thirty percent now, and in
that same period, Western economies have largely remained flat at
(17:08):
about eighteen to twenty percent of their energy coming from electricity.
With the trajectory that you have outlined in terms of
deployment of wind and solar, but also some coal, and
we should talk about that. And all this electrification of
transport even now industry that might happen with steel. Are
(17:30):
we starting to see China becoming an electro state.
Speaker 2 (17:34):
I've been a bit skeptical of that broad categorization because
there are still at least pockets of industry where electrification
trend isn't clear. But electrification is certainly a big part
of the strategy for transportation for industry. So there was
a time that shifting from coal to GAUS fossil gas
(17:57):
was a big part of the strategy, especially for addressing
air pollution. But because of energy security concerns, the emphasis
on shifting to cars has declined, and also because of
economic considerations, and so I think electrification will become even
more clearly the focus.
Speaker 1 (18:16):
And so what makes you pause if all the numbers
are pointing towards electrification, and this is not just in
the transport sector, but also in buildings and also in industry,
and the fact that even steel, which is a liguard,
might start to catch up, why do you think the
electro state thesis is not yet one that is the
(18:40):
trajectory China is ticking.
Speaker 2 (18:42):
I think that's the trajectory for everyone. It's quite obvious.
It's just that it's not clearly stated as a policy
end point. But certainly China has been moving much faster
than just about everyone else.
Speaker 1 (19:06):
We'll be back with more of my conversation with LOURR.
Mulwerta after this short break. And hey, if you're enjoying
this episode, please take a moment to rate and review
the show on Apple Podcasts and Spotify. Your feedback really
matters and helps new listeners discover the show. Thank you.
(19:29):
So far, we've looked at the good story, which is
renewables are helping power emissions decline and things electrifying, so
that means emissions will decline on other sectors. But when
you look at the numbers, there are currently sectors where
emissions are growing. What are those.
Speaker 2 (19:47):
The main sector with a clear expectation that coal consumption
and emissions will go up is the chemical sector. China
has this long standing program of building a coal to
chemicals industry, which is basically petro chemicals industry using coal
as the feedstock to produce synthetic gas, synthetic liquid fuels,
(20:12):
and chemicals industry outputs, and this is incredibly carbon intensive.
It's even more much more intensive than making the same
stuff out of crude oil. So this is an area
where a massive amount of capacity is being built to
process coal into chemicals. The utilization of that capacity has
(20:32):
remained quite low because it's struggling with profitability. The posy
makers are quite clear that this is an energy security
play or CITYPM White goal planning for extreme scenarios, so
basically making sure that China has the capacity to keep
its economy working if maritime transportation of oil and gas
(20:56):
is blocked as part of a major conflict with the US.
Speaker 1 (21:00):
Given the macroeconomic situation right now, which even before Trump
came to power was the case where the Chinese economy
was slowing down, plus the Chinese population has started to decline,
is there some contribution to the speaking of emissions that
is coming from these two factors.
Speaker 2 (21:23):
You can always talk about the counterfactual, which is if
we were still seeing seven percent ten percent GDP growth
like two decades ago, then of course even the current
massive clean energy additions would fall way short of covering demand.
But overall, the slowdown of the economy is something that
(21:46):
has been expected for a long time, so slowing down
to maybe five percent GDP growth in the first half
of this decade and towards four percent in the second half.
China does have target or seating Pin maybe personally has
a target of doubling GDP per capiture from twenty twenty
(22:07):
to twenty thirty five, which means you have to maintain
over four point five percent GDP growth for the remainder
of the period. That's very clearly the red line for
the policy makers, and that's why they stuck with an
around five percent GDP target for this year as well.
Speaker 1 (22:25):
And what about China's population, given has been falling by
about a million people each year for the past three years,
is that contributing to a decline in emissions?
Speaker 2 (22:35):
Where that definitely comes in is the real estate and
infrastructure sector. So if you had a lot of population
growth contributing to needing more real estate and more infrastructure
and so on, then of course that would be a
different situation.
Speaker 1 (22:50):
And then if you look at the trade war that
is ongoing right now, there is something that we can
learn from the past where in the first Trumpet minutustration,
China responded to the tariffs that were deployed by the
US by increasing its manufacturing capacity to try and offset
(23:11):
the decline that it would have in exports to the
US by sending those exports to other countries. Do you
expect China to have a similar trajectory, given this time
around the tariffs are even higher.
Speaker 2 (23:26):
A big part of the response during the first Trump
administration was in fact domestic steamulus to the construction sector,
very much unannounced and only really visible after the fact.
This time, what Chinese policy makers are saying is that
they want to stimulate consumption so household spending power, instead
(23:49):
of relying on these kind of stimulus which has been
dubbed low quality by the Saging administration. And this is
also very much a lines with CIEs overall economic guidelines
of common prosperity, aiming for a large middle class and
so on. So there is a happy development here that
(24:13):
could take place where this in fact pushes along China's
own ambitions for changing the structure of the economy. If
you're used to the environmentalist messaging of consumption is the
root of all evil, it might sound a terrible idea
to increase consumption, but the point here for emissions is
that household consumption is in fact much less carbon intensive
(24:35):
than the construction and manufacturing industries, which have been driving
growth in the past. So if more of the spending
power in the economy was directed to households, they would
spend much more of that on services like healthcare or
range of other services. And even the manufacturing that caters
(24:56):
to households is much less energy intensive then the manufacturing
that caters to the construction sector, for example.
Speaker 1 (25:04):
And what about China's climate diplomacy Given the past decade,
we've seen the US flip every time there's been a
change in the president, but there have been moments where
US and China have cooperated. But now that the US
is firmly with the Trump administration not going to be
(25:25):
part of climate diplomacy and maybe even play the role
of spoiler, how is China responding to this moment?
Speaker 2 (25:34):
I think two things have changed. If you think to
Obama's announcement in twenty fourteen, where the two leaders announced
their new climate targets together, so one of them is
the entire political dynamic in both countries. It's very hard
to see that there would be any kind of political
(25:56):
upside for seeing in the current atmosphere from anouncing something
like this together with a US president, because that would
be just seen as caving and being weak. So China
has been very clear that their ambition is unchanging, is
not influenced by pressure from others. And the other thing
that has really changed is that clean energy industry, including exports,
(26:20):
has become such a key driver of China's economy that
China has a much stronger self interest now in also
keeping a global and transition going. So just in the
past few years, China has made a massive investment in
manufacturing capacity for solar, for batteries for evs and so on,
(26:42):
and if the global transition styled, that would mean that
quite a bit of that capacity would go unused and
cost financial distress. That said, this hasn't really translated into
multilateral diplomacy from China yet, So China, for example, didn't
put its weight behind the target of drippling renewables and
(27:05):
doubling efficiency. So this is where China still needs to
get more comfortable with taking the initiative and in fact
persuading other countries to do more. And I think here
things are really going to change once China's leaders are
secure in thinking that they've turned the shape on emissions,
(27:27):
They're going to be a lot more comfortable because they
don't have to be defensive about their emission's growth anymore.
Speaker 1 (27:34):
If this is the peak, how quickly will we see
a decline or will it be a slow plateau like
it has been for coal consumption over the past decade.
Speaker 2 (27:46):
There's certainly a risk of China getting stuck at pretty
much current levels of emissions in the absence of setting
ambitious emission reduction targets for twenty thirty five. I think
one key concern is that wants the coal industry starts
to see their demand go down in absolute terms, especially
(28:09):
as they've been investing in new coal mines, new coal
fart power plants recently. That could generate a lot of pushback.
But at the same time, keeping emissions at a plateau
would mean upsetting the growth ambitions of the cleaner engine industry,
So there's going to be pushed from both sides. So
(28:29):
the targets that China's going to set this year, first
in its new Paris Commitment and then in the five
year plan that is due to be released next year,
will be key in calibrating that level of ambition.
Speaker 1 (28:43):
And finally, What do people in China think about the
US right now, which is the world's largest producer of
oil and gas, has a ton of fossil fuels still
available for it to burn, but it is not really
deploying electricity technologies which are more efficient and economically cheaper. Instead,
(29:04):
it is doubling down on fossil fuels, especially under this administration.
Do they see the US losing out on the future
of energy, even as it might be currently the global
energy superpower.
Speaker 2 (29:20):
I was in fact in Beijing when the US election
results were coming in, and I can say that in
a room full of Chinese people, I was the only
one who was trying to check my phone under the
table for the results, So people weren't paying as much
attention as Americans might expect. And also when under the
(29:42):
Biden administration the US was starting to actually make an airport,
I think the reaction from Chinese experts was one of skepticism,
or at least one of wait and see, like see
whether the US is again actually pull this off, because
(30:03):
there is a sense that the US is so far behind,
especially in terms of manufacturing, and it just doesn't have
the kind of ecosystem and the let's get it done
spirit that China has. So currently, I think Chinese experts
and Chinese policymakers are very comfortable and secure in thinking
that they have the lead in these markets and technology areas,
(30:28):
and it would actually be really good to get some
more competition. So if there was more of a sense
that others are at least making an effort to catch
up and put up some competition, that would keep China
moving faster.
Speaker 1 (30:43):
Thank you, Laurie, thank you so much, and thank you
for listening to zero. Now for the sound of the week.
(31:06):
That was the sound of a bucket wheel excavator used
for open pit coal mining, and it's essentially a shovel
as big as a skyscraper. If you liked this episode,
please take a moment to rate and review the show
on Apple Podcasts or Spotify, Share this episode with a
friend or with a China skeptic. This episode was produced
(31:27):
by Oscar Boyd. Bloomberg's head of podcast is Sage Bowman
and head of Talk is Brendan newnham. Our theme music
is composed by Wonderly Special. Thanks to Jessica Beck, eleanor
Harrison Dengate, Samersadi, Moses Andam and Shawan Wagner, I'm Makshatrati
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