COLUMN-China CO2 growth has turned a corner: Gerard Wynn

Mon Jul 1, 2013 10:29am EDT

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(The author is a Reuters market analyst. The views expressed are his own.)

By Gerard Wynn

LONDON, July 1 (Reuters) - The relentless growth in China's carbon emissions looks to have peaked and started to slow, in part simply because of a cooling economy but also the result of new targets to curb pollution and climate change.

China alone emitted more than a quarter of global carbon dioxide last year, and in the past decade has accounted for two-thirds of the net annual growth in global emissions.

Scientists says that has strained the earth's climate.

It has also intensified local pollution levels because most CO2 is from burning coal which produces soot and smoke.

The world's top carbon emitter will miss goals which would directly and indirectly curb carbon under its latest five-year plan, spanning 2011-2015, given that it is already halfway through the period and lagging far behind.

Some targets were symbolic, such as to slow economic growth to an average 7 percent per year over the 2011-2015 period.

But the fact that China is behind partly reflects the plan's ambition and intent, which suggest a long-term downward trend.

A slowdown in emissions growth has implications for global climate change and for China's coal consumption, since these have long moved together in lock-step.

TARGETS

There are two sets of targets in China's five-year plan which require slower CO2 growth.

First, the plan aims for the country's economic expansion to be slowed, and for a cut in the amount of carbon emissions per unit of GDP (called carbon intensity).

The targets for 2011-2015 were for average annual economic growth of 7 percent; annual falls in carbon intensity of 3.7 percent (a 17 percent cut in 2015 vs 2010); implying annual CO2 emissions growth of 3.1 percent.

The corresponding, average annual figures so far from 2011-12 have been for economic growth of 8.5 percent; a fall in carbon intensity of 0.7 percent; and carbon emissions growth of 7.7 percent.

Second, the plan calls for a cap on energy consumption in 2015, involving slower energy demand growth, which has generally led CO2.

The energy cap was only confirmed this year and implied average annual growth in energy consumption from 2012-2015 of 3.5 percent.

Actual growth in 2012 was 7.7 percent.

So China is far behind both goals with only two and a half years remaining, meaning the current targets are unlikely to be met in 2015 - and if they were, annual growth in CO2 emissions and coal consumption would have to slow to around 0.2 percent.

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Chart 1: link.reuters.com/neq39t

Chart 2: link.reuters.com/peq39t

Chart 3: link.reuters.com/req39t

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INTENT

But the targets do show intent.

Coupled with recent trends, the impression is that China has turned the corner in carbon emissions growth, and by implication growth in coal consumption, the biggest contributor to CO2.

Carbon intensity has fallen year on year since 2004, carbon emissions and GDP data from BP and the World Bank show (see chart 1).

That follows the country's official target to cut the carbon intensity of the economy by 40-45 percent by 2020 compared with 2005 levels, which China pledged under an international climate treaty four years ago.

And annual growth in GDP, carbon emissions and energy consumption have fallen year on year since 2010 (see chart 2).

Of course two years is too short to represent a full trend, but the country's longer-term targets, including carbon intensity, plus the heightened focus on air pollution suggest China cannot return to former growth in coal and CO2.

TREND

If China misses these current five-year plan targets, what is a more realistic outcome?

The market expects economic growth this year of 6.5-7.5 percent, compared with 7.8 percent last year.

As Beijing said last week it can maintain a future growth of 7 percent, that can be assumed as the new norm.

Regarding carbon intensity, it seems reasonable to expect China to return to steeper annual falls of 3.5 percent, as seen in recent years; as only that would bring the country back into line with its 2020 international pledge.

That would see emissions growth fall to 3.3 percent annually, and a total of around 10.2 billion tonnes of CO2 emitted in 2015 - a very optimistic but just about achievable scenario (see chart 3) - meaning China's emissions could peak by the end of the decade.

Given the country's outsize contribution to global CO2, that in turn could put the world on track to deal with climate change, but only with the most optimistic reading of climate science, and assuming ambitious carbon cuts by other countries. (Editing by David Evans)

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