China's changing economy: implications for its carbon dioxide emissions

Abstract

As China's government unveils the country's 13th Five Year Plan for economic development (2016–2020), this article takes stock of recent changes in China's economy and energy system since the turn of the century, and looks ahead to the likely trajectory of China's emissions over the next decade. It is now clear that the period 2000–2013 was a distinct and exceptional phase in China's developmental history, during which the very high levels of GHGs emitted were linked closely with the energy-intensive, heavy industry-based growth model pursued at that time. China is currently undergoing another major structural transformation – towards a new development model focused on achieving better-quality growth that is more sustainable and inclusive – and it is also grappling with the economic challenges associated with this transition. Data from 2014 and the first three quarters of 2015 illustrate the extent of these changes. Based on analysis of this data in light of the underlying changes occurring in China's economy and policy, this article provides an updated forecast of the Kaya components of energy CO₂ emissions (GDP, energy/GDP and CO₂/energy) over the next decade to 2025. It concludes that China's CO₂ emissions from energy, if they grow at all, are likely to grow at a much slower rate than under the old economic model and are likely to peak at some point in the decade before 2025.

Policy relevance

The article suggests a number of important areas of Chinese policy that should be focused on to mitigate the risks and challenges that might otherwise delay the date for peak CO₂ emissions. Our analysis and conclusions also have more general implications for Chinese and international climate policy. They suggest that China's international commitment to peak emissions ‘around 2030’ should be seen as a highly conservative upper limit from a government that prefers to under-promise and over-deliver. They also reinforce the virtue of a ‘dynamic’ approach to international climate cooperation, as envisaged under the Paris Agreement, whereby countries’ targets and policies are regularly updated in light of new information. The importance of macroeconomic analysis for emissions projections and climate policy development is also highlighted.

Keywords:

• Carbon dioxide
• China
• coal
• economy
• emissions
• energy
• GDP

Acknowledgements

We are grateful to Tim Buckley, Athar Hussain, Thomas Spencer and Dimitri Zenghelis for helpful discussions on China's economy in the course of preparing the present article, to Isabella Neuweg editing assistance, to four anonymous referees who provided helpful comments and suggestions, and to members of WRI's ChinaFAQs network who provided feedback on a presentation of this material. We are also grateful to the following people for input into an earlier Grantham Research Institute Policy Brief on which the present article is partly based: Ehtisham Ahmad, Rodney Boyd, Ben Caldecott, Shenghao Feng, Ajay Gambhir, Ross Garnaut, Sam Geall, Himanshu Gupta, Karl Hallding, Guoyi Han, He Jiankun, Neil Hirst, Frank Jotzo, Lauri Myllyvirta, Felix Preston, Qi Ye, Morten Rossé, Ligang Song, Teng Fei, Shane Tomlinson, Wang Jianliang, Renfeng Zhao, and members of the Grantham Research Institute Policy Group. Any errors or omissions are our own.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 These data take into account the significant statistical revision of Chinese coal data from 2000–2013 following the five-yearly economic census completed in 2014.

2 See remarks made by President Xi (quoted in Anonymous, 2013) and Premier Li (quoted in Anderlini, Mitchell, & Wildau, 2015).

3 This summary definition of the new normal concept is based on Stern's discussions with Chinese leaders and policy makers at the China Development Forum in March 2015. These four sub-themes are also apparent from key documents produced under China's new leadership over the last two years, such as those cited in the previous paragraph (compare Hu, 2015).

4 See the average of forecasts by experts using alternative methods produced by Consensus Economics (cited in Wolf, 2015).

5 Ross Garnaut (personal communication, March 12, 2015).

6 The figures cited here take into account the upward revisions to China's historical coal consumption made by China's statistical agencies following the once-in-five-year economic census, which took place in 2013. The census put China's coal data on a surer footing. China's NBS (2015a) reported an increase of less than 0.06% in the consumption of coal in Standard Coal Equivalent (SCE) terms in 2014 compared with 2013. This increase in SCE consumption at the same time as the fall in physical coal consumption reflects an increase in the average quality (hence energy content) of coal burned in China in 2014. Preliminary statistics from China's NBS had earlier (NBS, 2015b) estimated a 2.9% decline in coal consumption in SCE terms in 2014, before changes in average energy content were factored in.

7 This figure assumes slower growth in inventories over this period in 2015 compared with 2014. The fall may have been lower when measured in terms of energy content, depending on changes in the average quality of coal consumed.

Additional information

Funding

Support from the Grantham Foundation for the Protection of the Environment and the UK's Economic and Social Research Council via the Centre for Climate Change Economics and Policy is gratefully acknowledged.