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China Improves Energy Intensity Amidst Indications of Structural Change

A study from the University of East Anglia has found that China may have already met its Paris Agreement pledge more than a decade early. Under the Paris Agreement, the country had pledged to reach peak emissions in 2030. News that the world’s largest emitter could have achieved its peak in 2013 acts as a positive indicator for early decarbonisation of the global economy.

China’s emissions reduced by 4.2% between 2013 and 2016 as a change in the energy mix and an economic transition, away from heavy industries and towards the services sector, reduced the country’s energy intensity. Not only is electricity demand now less correlated with economic growth, but the carbon intensity of energy consumed is also decreasing as the country moves away from its reliance on coal. The report highlighted a clear structural break around 2015.

However, while the structural change is seen as positive, the trend reported should be treated with caution as recent statistics from BP show an upward tick in China’s CO2 emissions in 2017. Despite this, energy demand growth was significantly lower than its ten-year average, and energy intensity continued to decline. Global emissions are heavily related to output from China due to its high demand for energy and should, therefore, be monitored closely. The BP Statistical Review reported that China accounted for 23.2% of global energy consumption and 33.6% of global energy consumption growth in 2017. However, the share of coal in China’s primary energy mix declined to 60.4% in 2017 from 62.0% in 2016. Meanwhile, solar power consumption grew by 76%.

China’s emissions and pollution reduction policies will be influential given the centralised economy. The country must focus on clean energy in order to provide clean air as demand for electricity continues to grow. The IEA predicts that by 2040, an average Chinese household will consume nearly twice as much electricity as in 2017. New targets were recently published under China’s extended anti-air pollution action plan that will force industries in certain parts of the country to comply with new pollution restrictions. While renewables will play their part, China is heavily increasing gas consumption to meet its targets and is set to become the world’s top importer of natural gas next year.

At the end of 2017, China launched an emissions trading scheme that just covered power generation. More recently, a trading scheme to encourage fuel efficiency improvements among car manufacturers has also been launched, although it is expected to be oversupplied in the early years.

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Nikki Wilson

(PIEMA), Carbon Management Consultant at Alfa Energy
Nikki joined Alfa Energy in September 2015 as a Carbon Management Consultant where she advises clients on legislation, compliance, and the implementation of carbon management schemes. She is a Practitioner member of IEMA, has a postgraduate diploma in Environmental Decision Making, and has over 15 years’ experience in energy consultancy.

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Nikki Wilson

Nikki joined Alfa Energy in September 2015 as a Carbon Management Consultant where she advises clients on legislation, compliance, and the implementation of carbon management schemes. She is a Practitioner member of IEMA, has a postgraduate diploma in Environmental Decision Making, and has over 15 years’ experience in energy consultancy.