China greenhouse gas trajectory key to global energy transition

China continues to dominate energy markets not only in the Asia-Pacific region but globally. The world’s most populous country is also its largest crude oil exporter and the third largest gas user behind the US and Russia.

It imported some 10.6 million bpd of crude oil in October, despite economic headwinds from Covid-19 lockdowns in much of the country. China is also the world’s largest coal user, accounting for 56% of total usage in 2020. As such, it’s the world’s largest greenhouse gas emitter.

China has also been the world’s main source of emissions growth over the past two decades, while its emissions trajectory is one of the key determinants of the success of the global energy transition, the Centre for Research on Energy and Clean Air (CREA) says in its new report, “China’s Climate Transition: Outlook 2022.”

The report shows that a comparison of China’s current emissions targets with global pathways consistent with Paris Agreement goals indicates it’s “crucially important for China to not just meet but exceed the targets by 2030.” It adds that after 2030, “extremely rapid emission reduction will be needed.”

Sense of urgency

The report has a sense of urgency since China’s share of global emissions rose from less than 10% in 1990 to more than 27% in 2019, while accounting for around 18% of the world’s population and GDP.

China was responsible for 60% of the increase in global CO2 emissions from 2010 to 2019 and is the only major polluter to increase emissions after the beginning of the Covid-19 pandemic, due to a rapid and carbon-heavy recovery from the initial lockdowns, the report adds.

The report also breaks down China’s leading emitters according to industry and sector, finding that the country’s high emissions relative to GDP are due to a number of factors, including what it calls “coal-heavy energy structure” and “energy-intensive economic structure that relies heavily on construction and smokestack industries.”

Adding to the quandary for Beijing energy planners, China’s fossil Co2 emissions are led by electricity production and heat by a ratio of more than two to one over iron and steel, the second most polluting sector.

China’s massive energy demand, growing at an average of 3.5% per year over the past five years, keeps the country heavily reliant on fossil fuels, including coal, natural gas and increasing amounts of LNG imports.

Some, particularly within China, defend the country’s so-called clean energy transition by pointing out that it leads the world in renewables development. However, when placed in context of its population of nearly 1.5 billion people, it’s still growing energy demand and fossil fuels used for that demand, including coal, these factors mitigate much of those renewables gains in China in terms of total greenhouse gas emissions.

The CREA report also addresses this dynamic, claiming that the country’s “emissions growth rates are much faster than projected in the transition pathways, which is the main reason that China’s energy-related C02 emissions have kept increasing despite world-leading investment in clean energy.”

The CREA complied a range of climate transition scenarios to help assess whether China’s emissions and energy trends in key sectors aligned with the climate transition scenarios and the Paris Agreement.

The list of climate transition scenarios is multi-faceted however, along with national and international institutions, including the International Energy Agency (IEA), advisor on energy policy to most developed nations, ex-China; Climate Action Tracker (CAT); Tsinghua University; North China Electric Power University (NCEPU); Peking University (PKU); the School of Environment and Natural Resources, Renmin University (SENR-RMU) and several others.

Replacing fossil fuels with clean power

CREA noted that in all of the scenarios presented, the basic formula for decarbonizing China’s energy system is to replace much of the fossil fuels used in industry, transport, and households with electricity, and to produce that electricity from clean energy sources.

“This, in turn, requires an enormous expansion of clean energy,” it says, adding that “the majority of this expansion is delivered by wind and solar.” All scenarios however project only a modest expansion in gas-fired capacity.

Each scenario also offers different projections of total energy demand growth, and the role of various fuel choices, including nuclear power, carbon capture and storage (CCS), biomass, natural gas, and coal-fired power.

However, contrary to other scenarios in the study, the NCEPU and SENR found that CCS applied to fossil emissions as one of the routes to decarbonize. Notably, there’s an absence of green hydrogen development examined in the Chinese prepared scenarios.

The SENR scenario also expects a significant role for natural gas outside the power sector in the next decade, with gas consumption continuing to grow at the same rate as in the past few years until 2030.

The IEA scenario, not surprisingly, projects a sharp slowdown in gas consumption growth already over the 2020s.

Reducing, then eliminating, natural gas as part of China’s overall energy mix however will be more difficult to achieve than the different scenarios seem to indicate.

The role of gas

Until recently, Beijing had placed much of its clean energy transition on gas, it’s so-called coal-to-gas pivot. China increased both natural gas imports and domestic production in 2021. That year, despite continued economic slowdown due to Covid-19, China consumed an average 35.5 bcf/d, more natural gas than in any previous year, according to the US Energy Information Administration (EIA).

More than half of the gas consumed in China in 2021 came from domestic production, but it also imported record amounts of natural gas by pipeline and as LNG, the EIA report added.

“Government policies promoting coal-to-natural gas switching to reduce air pollution and meet emissions targets have been a major factor in the rapid growth of both domestic natural gas production and natural gas imports in China,” the EIA says.

Moreover, in March Beijing released its 14th Five-Year Plan (2021–25), which sets the domestic natural gas production target at 22.3 bcf/d by 2025, or 3 bcf/d more than domestic production in 2021.

However, others  are already projecting the decline of gas, citing Chinese President Xi Jinping’s goal made at the COP26 summit last year to reach net zero emissions by 2060, albeit ten years later than other developed countries.

Gas, for its part, will continue to be controversial for both China and the world, with opponents claiming that it’s still a fossil fuel and as such a major polluter, whose emissions are at least 50-60% that of coal, the dirtiest burning fossil fuel, when used for power production.

Gas proponents, for their part, often use the same data, arguing that since gas emits only around half of the emissions of coal, it should be considered part of the clean energy transition.