(The author is a Reuters market analyst. The views expressed
are his own.)
By Gerard Wynn
LONDON Aug 7 China's renewal last week of its
commitment to a domestic 2020 carbon target, under a new energy
saving and emission-reduction investment plan, backs up
forecasts of weakening growth in carbon emissions and coal
But the target also suggests that emissions and coal
consumption will continue to rise through the 2020s, even though
at a slower rate, barring a major intervention including a shift
to cleaner burning gas from coal.
The future trajectory for Chinese carbon emissions has
implications both for the timing of new policies including a
possible national cap and trade scheme, and for coal demand in
the world's biggest importer.
China often misses domestic targets, intended as guidance:
GDP growth in the past two years has turned out much faster than
envisaged under its present five-year plan from 2011-2015.
It also looks likely to miss various energy and carbon
targets under the five-year plan.
Its carbon emissions target for the end of the decade can
therefore be treated with some scepticism.
But it may have more force than other goals, given it was
pledged under an international climate accord in 2009 which
world leaders, including former Chinese Premier Wen Jiabao,
committed to stand behind.
The country remains committed to the goal, according to
local media reports last week of a plan to invest 2.3 trillion
yuan ($376 billion) through 2015 in energy saving and carbon
China has an official goal to cut the carbon intensity of
its economy by 40-45 percent by 2020 compared with 2005 levels.
Carbon intensity is a measure of emissions per dollar of
The lower end of the target range implies an average annual
cut of 3.3 percent over the 15-year period, but actual carbon
intensity was unchanged from 2009 to 2011, energy and GDP data
from BP and the World Bank show, leaving the country adrift of
the goal. (See Chart 1)
That implies steeper annual cuts now required to get back on
As a ratio, the outlook for carbon intensity depends both on
China's carbon emissions and GDP.
Assuming an average annual GDP growth through the rest of
the decade of 7 percent, which China's leadership has said it
can accept, then hitting the intensity target would see carbon
emissions rise at only about half the annual rate seen in the
last decade (3 percent versus 6 percent). (Chart 2)
The lower the rate of GDP growth, the slower the rise in
carbon emissions required.
The implication is that growth in CO2 emissions has peaked.
Chart 1: link.reuters.com/sed32v
Chart 2: link.reuters.com/ted32v
Chart 3: link.reuters.com/ved32v
Growth in coal consumption and carbon emissions are almost
perfectly correlated in China, reflecting the domination of coal
in the country's energy mix and high carbon emissions from
burning the fossil fuel.
Actual annual fossil fuel carbon emissions and coal
consumption since 1965 have a correlation of 0.9997, according
to BP energy data.
In line with meeting the carbon intensity target, therefore,
annual coal demand can be expected to rise at the same pace as
carbon emissions, or by just over 25 percent from 2012 to 2020,
using the same assumption for GDP growth.
That is much slower than in the past decade, but remains
faster than the earlier, long-term trend. (Chart 3)
Such number crunching allows a number of observations.
First, meeting the carbon intensity target will require a
significant change in trajectory for carbon emissions and coal
Second, the country is presently on track to miss it.
And third, evidence that growth in coal demand has peaked in
no ways means a peak in consumption.
Even under a trend which meets the intensity target, it
would appear extremely difficult to halt growth in either carbon
emissions or coal demand before the mid-2020s, which may then
mark the earliest date for the launch of a cap and trade market
in emissions allowances.
(Editing by Keiron Henderson)