China Briefing: Quarterly emissions fall; Power shortages’ impact; China-Russia energy cooperation

China’s carbon dioxide (CO2) emissions fell by around 0.5% in the third quarter of 2021 compared to a year earlier, according to new analysis by Carbon Brief’s guest contributor, Lauri Myllyvirta. The article said that “the drop in emissions could mark a turning point and an early peak in China’s emissions total, years ahead of its target to peak before 2030”.

Meanwhile, Chinese experts have said that the country’s recent power shortages were not likely to have a “substantial” impact on its medium-to-long-term energy policy, but the outages showed that coal-fired power would continue playing a “dominant role” in guaranteeing the nation’s energy security in the next five to 10 years. Caijing had the story.

Elsewhere, China’s president Xi Jinping has emphasised the importance of bolstering China-Russia energy cooperation. State media reported that Beijing “is willing to work with Russia to build an even closer partnership on energy cooperation, maintain energy security and respond to the challenges of global climate change together”, according to Xi.

WHAT: China’s CO2 emissions have decreased by around 0.5% in the third quarter of this year compared to the same period last year, Carbon Brief’s new analysis has found. This is the first time the country has recorded a quarterly emissions decline since construction and heavy industrial activity bounced back in a post-lockdown economic recovery, according to the article. It added that the year-on-year emissions decrease was “a marked turnaround” from China’s emissions in the first six months of 2021, which registered a 9% year-on-year increase. The analysis is written by Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air (CREA). He is the author of a series of quarterly Carbon Brief updates on China. Read his previous pieces here.

WHY: Although the causes of the emissions drop are varied and complex, the analysis found two main factors: a “dramatic” decline in demand for construction materials and a coal “crunch”. The former was caused by Beijing’s policies to cool down the property market, which had slowed down construction activity and caused steel and cement output to fall “rapidly” from July, the article said. (The steel and cement sectors are the two largest CO2 emitting sectors after coal power in China.) The latter was the cause of the recent power shortages, which had affected industrial and manufacturing activity, the piece added.

WHEN: Based on preliminary data, the declining trend “steepened into September”, with CO2 emissions falling by an estimated 2.3% during the month, according to the analysis. It added that the trend looked “set to deepen further” in October, with the output of crude steel and cement falling by 23% and 17% year-on-year, respectively. On Tuesday, the Chinese Bureau of Statistics released new data, which showed that China’s manufacturing activity increased “slightly” in November to “just above the threshold that separates expansion from contraction”, the Financial Times reported.

MEDIA REACTION: A host of media outlets have reported on the new analysis. The Financial Times wrote that the quarterly emissions decline was “the latest signal the property sector downturn and energy shortages have hit industrial demand in the world’s second-biggest economy”. Reuters said that the fall was “partly as a result of a clampdown on property development and widespread coal shortages”. AFP – reported via France24 – cited Myllyvirta’s words that “if the Chinese government injects further construction stimulus to boost its economy, emissions could rebound once again, before peaking later this decade”. The South China Morning Post featured the analysis in a report titled “China’s housing market slump, power crisis lead to first drop in carbon emissions since Covid-19 economic recovery”. VOA said that “experts claim this would mark a turning point of China’s carbon emissions”, referring to the third-quarter emissions drop.

WHAT: At an industry forum last Wednesday, some of China’s most influential experts, executives and policymakers of the power sector discussed the future of coal-fired power following widespread electricity shortages, according to Caijin, a Chinese financial publication. While some speakers’ opinions varied, a general consensus was that the power cuts would not likely yield a “substantial” impact on the nation’s medium-term and long-term plans for its electricity industry. However, the episode underlined the importance of prioritising energy security, they said. Caijing added that, as the speakers noted, coal-fired power would continue playing a “dominant role” in guaranteeing the nation’s energy security in the next five to 10 years, with its demand expected to grow. Below is a selection of comments from the speakers. A video of the event can be found here. S&P Global Platts also reported on the forum.

14FYP: The power shortages would not have a “big impact” on China’s 14th five-year plan (14FYP) for the energy sector – which is under government review prior to publication – because it was caused by high coal prices, not a lack of installed capacity, said Xu Xiaodong, a senior consultant at China Electric Power Planning and Engineering Institute, a state-affiliated consultancy. Xu admitted that it would be very hard to replace all existing coal-fired power units before 2030 because China’s electricity consumption was still expected to grow by 300 to 400 terawatt hours (TWh) every year between now and then. Speaking of coal-fired power, Xu said: “Like it or not, [we] cannot get rid of it, but hopefully the time will be as short as possible.” He projected China’s demand for coal, oil and natural gas to peak at around 2025, 2030 and 2040, respectively. 

RENEWABLE: Huang Shaozhong, a researcher at China Energy Research Society, a state-affiliated thinktank, agreed that the power cuts would not affect China’s 14th FYP, its energy transition plan or its determination to fulfil President Xi’s pledge of peaking emissions before 2030 and achieving carbon neutrality before 2060. He stressed that to build a “new power system”, China must increase its utilisation rates of renewable power generation and avoid curtailing wind and solar power resources – a problem that has occurred before. Huang called on the government to address the randomness, volatility and intermittency of renewable energy so as to enhance grid security.

PEAKING: However, Chen Zongfa, deputy general-counsel at China Huadian Corporation, a state-owned electricity-generating enterprise, gave differing opinions. He believed the power shortages would have “a relatively big impact” on the development plans for energy and electric power. He said that there had already been some “adjustments and reflections”, including an uplift of the projected peak level of coal-fired power capacity. He explained: “Previously, we estimated that the scale of coal-fired power would not exceed 1,200[gigawatts, GW]. But now, in the national plan, [the level] is likely to be 1,250 or 1,300[GW]…In the past, we were forced to dismantle [retired] coal-fired units. But now the policy says they can be halted but not demolished to remain as backups.” 

LESSONS: The power shortages brought about two lessons, according to Jiang Liping, deputy director of State Grid Energy Research Institute, a research organisation run by China’s State Grid. Jiang said that first of all, “relations of production” – in this case, the relations between electricity generators, raw materials and customers – was as important as productivity. Secondly, the establishment of a “new power system” would require an overhaul of the entire energy system, not just the electricity industry, Jiang noted. She added that the concept of coal-fired power capacity must be decoupled from that of coal-fired power output, meaning a decrease in capacity should not be equated to a decrease in output. 

MARKET: Xia Qing, director of Energy Internet Research Institute of Tsinghua University, pointed out that the market should play a bigger role in the future planning of the energy sector. He said that government planning should be replaced by medium-to-long-term market-based contracts to stabilise prices, demand and supply. He noted that the authorities must also encourage consumers, such as companies, to buy and use renewable energy to drive up the demand. 

XI: China’s state broadcaster CCTV reported that energy cooperation is an “important direction for pragmatic cooperation” between China and Russia, according to Chinese president Xi. In a congratulatory letter to a China-Russia energy forum on Monday, Xi praised the “notable achievement” the two nations had accomplished through collaboration in the energy fields, CCTV said. He called for both sides to pursue “an even closer partnership on energy cooperation” and work together to maintain energy security and respond to climate change, the channel added.  

PUTIN: In a congratulatory letter to the same forum, Russia’s president Vladimir Putin said that the two countries’ energy cooperation had “developed quite significantly in recent years”, according to TASS, a Russian news agency. Putin said that Russia and China were working together in several ways, including coal and electricity supplies from Russia to China and the production of liquefied natural gas in the Arctic, the report said. “The construction of new units of Russian design has begun at two Chinese nuclear power plants,” Putin was quoted saying in his address. 

AFRICA: Xi highlighted that China and Africa should join hands in “promoting green development” while giving a virtual address at the eighth ministerial conference of the forum on China-Africa cooperation on Monday. He said that the two sides “need to advocate green and low-carbon development, actively promote solar, wind and other sources of renewable energy, work for effective implementation of the Paris Agreement on climate change and keep strengthening our capacity for sustainable development”.

COAL: China’s state economic planner, the National Development and Reform Commission (NDRC), has met with “experts, coal-fired power enterprises and coal enterprises” in consecutive meetings in a bid to improve the pricing mechanism for the domestic coal market, according to China National Radio. The discussions found the need to establish a “long-term mechanism” to “guide coal prices to operate within an appropriate range”, the report said. China has taken a series of steps, such as boosting production, to cool coal prices. A Reuters comment article said China’s coal prices “are still too high” despite the government’s efforts.

ELECTRICITY: NDRC announced on Wednesday that the electricity supply of five provinces and regions overseen by China Southern Power Grid – namely Guangdong, Guangxi, Hainan, Guizhou and Yunnan – was “stable and improving”. The authority noted that coal-fired power plants in those areas had enough coal stock to last more than 20 days on average, with Guangxi and Guizhou’s stock surpassing 30 days. It added that the production efficiency of coal-fired power units had been “effectively lifted” and power supply had been “vigorously guaranteed”. 

WIND POWER: China’s grid-connected installed capacity for wind power has exceeded 300GW, doubling its 2016 year-end level, according to the state energy regulator, the National Energy Administration. In an announcement on Tuesday, the authority said that China’s grid-connected wind power installed capacity had ranked number one globally for 12 consecutive years. It added that wind power currently accounts for 13% of the country’s total installed power capacity.

HYDROGEN: Sinopec – a major state-owned oil and gas company from China – has launched a £350m hydrogen project that aims to produce around 20,000 tonnes of green hydrogen annually using electricity generated by solar panels. The project will see a solar power plant with installed capacity of 300 megawatts (MW) being constructed in Xinjiang’s Kuqa city. According to the plan, the plant will generate 618 gigawatt hours (GWh) of electricity every year on average when it starts operating in June 2023. China Daily reported the story. Carbon Brief’s in-depth Q&A has analysed how hydrogen could help the world avoid dangerous climate change.