From AGD 2016: China and Moving Beyond Coal

Is China looking to move away from coal as an energy source? Qi Ye shares his thoughts on this during a Parallel Breakout Session on Growth Beyond Numbers, a discussion dedicated to discussing the possibility of measuring growth in ways other than GDP. 

A Dirty Obsession

China accounts for about half of the world’s coal consumption every year, and it is no surprise that so many of its people suffer as a result of this. The semi-official estimate within China is that about half a million people die prematurely every year as a result of the pollution caused by coal burning. Beijing alone has smoggy weather most every day of the year.

We know that coal is the single largest source of greenhouse gas emissions. For instance, in 2011, coal-burning accounted for 70 per cent of the global total of fossil fuel combustion; China accounted for 20 per cent of that total. So whatever happens to coal consumption in China has huge implications for sustainability worldwide.

When reform and opening up began in the late 1980s, more than 70 per cent of China’s energy came from coal. In 2015, it dropped to nearly 66 per cent. That may be a huge decline in the overall energy mix, but it’s still a huge share.

Rays of Hope

However there is reason to believe that China might have already seen its coal consumption peak. In 2000, China burnt about 1.36 billion tonnes of coal. By the 2013, that number grew (by three times, to 4.26 billion tonnes. But the good news is that in 2014, there was a drop in coal consumption by almost 3 per cent. In 2015, there was a further cut of another 5 per cent in coal consumption. This itself is interesting, because the consensus was that coal consumption in China would not peak until after 2020.

At the Paris Climate Change Conference in 2015, China agreed to reach its peak carbon emissions by around 2030. If its coal consumption peaked in 2013, there is a good possibility that the decline in total greenhouse emissions from China will come a bit earlier than 2030.

A Coal-Fired Economy?

Coal is very important to economic growth. China has depended so heavily on coal in the last 35 years that it might be considered “coal-fired growth”; but this era may have already ended. Perhaps we are seeing the decoupling between GDP growth and coal use, and if this is indeed the case, there must be some real fundamental change in China’s economic development model.

What factors brought about the decline of coal use? One is the economic slowdown everyone has been talking about. In 2015, the official GDP growth figure was 6.9 per cent – the first time in 25 years we have had something below 7 per cent. This economic slowdown has resulted in much less demand on energy, and on coal in particular.

The second factor, which is also very important, is Chinese government policy regarding environmental protection and climate change. 2013 was the year the government took the smog issue very seriously – not only as an environmental or health issue, but as a political issue. They recognized this as an important issue that threatens political legitimacy. They made the promise to give people the good life, but the smog prevented them from delivering on that.

Investing in the Future

In 2009 China became the world’s number one investor in renewable energy, and has been leading ever since. By 2015, roughly one-third of the world’s clean energy came from China. This has made a difference. In developed economies like Europe and the US, coal is normally substituted for other fossil fuels, such as oil and gas. But in China, coal is being directly substituted with renewable energy – wind, solar, what we call non-fossil fuel energy.

The economic slowdown China is experiencing is a long-term trend, what the Chinese government calls the “new normal.” It is new, and we would rather believe that it is normal growth. This means moderate growth, and a transformation of the country’s economic development model. China certainly sees the opportunities in what it calls a revolution in energy consumption and energy production.

In 2015, China’s President Xi and US President Obama made a commitment to decarbonize the economy by the latter part of this century. If this is the direction that China wants to head, and moving away from coal is a path towards that potential, then this goal is probably within reach.