China’s Climate U-Turn

Contributed by Robert Lyman © 2019

Robert Lyman is an Ottawa energy policy consultant, former public servant of 27 years and former diplomat for 10 years prior.

The Global Warming Policy Foundation has just published a report by Patricia Adams entitled The Road from Paris: China’s Climate U-Turn. It is an account of the changes in China’s energy policy since the signing of the COP21 Climate Change Agreement in Paris in December 2015. The full version of the report, including its sources, can be found here:

https://www.thegwpf.org/content/uploads/2018/12/China-U-Turn.pdf

This article provides a summary of the report.

Overview

China’s signature of the Paris Climate agreement was hailed by the press as evidence that the world was fully committed to moving towards a non-carbon dioxide future. As the world’s largest source of greenhouse gas (GHG) emissions, China was viewed as a global leader that would add momentum to the emissions reductions called for by the United Nations.

A series of events have served to end China’s image as the “climate savior”. Most importantly, China has had to come face-to-face with how it will meet its own energy needs and assure its security of supply. Further, the clear lack of progress in the funding of the Green Climate Fund, to which OECD countries were expected to contribute at least $100 billion per year by 2020 and from which China hoped to benefit has signaled that the UN climate apparatus is unlikely to serve China’s financial objectives.

China’s Energy Needs

In the emissions reduction plan it submitted to the UN in 2015, China committed to “peak” its GHG emissions by 2030 and to progressively improve the energy intensity of its economy. Instead, the country has found itself scrambling to find ever more sources of energy to support its economic growth. Demand for energy has increased sharply, as much as 15% for natural gas over the past year. China’s “Belt and Road” (BRI) development initiative has focused on increasing energy supply through building pipelines, power facilities and ports in more than 70 countries, with a heavy emphasis on oil and natural gas, LNG and nuclear energy. China has quickly expanded its fleet of nuclear facilities and now has 45 operating reactors and 15 under construction.

Coal remains the mainstay of China’s electricity generation system, even though it aims to reduce its reliance on coal over time to improve local air quality. China is already the world’s largest coal producer and consumer. According to Bloomberg and Wood Mackenzie,  it plans to add more mines, perhaps as much as 400 million tons of capacity by 2020. In terms of coal consumption, satellite imagery shows that many coal-fired power plants that were formerly halted have quietly been restarted. In total, 4.7 gigawatts (W) of new and restarted coal-fired power plant construction are either generating power or will soon be operational, expanding capacity by 4%. In other countries, China is involved in 240 coal-fired power projects in 25 BRI countries with a total installed capacity of 251 GW.

China’s Local Air Quality Needs

China’s planners had placed great hopes on increased use of wind and solar electricity generation to replace coal-fired generation and thus reduce local air pollution. As a result of large investments, the country now has the largest wind and solar generation capacity in the world. However, according to reports from the U.S Energy Information Administration, wind and solar account for only 2.7% and 0.5%, respectively, of China’s actual generation. This is partly because Chinese curtailment rates are the worst in the world (Bloomberg New Energy Finance).

When several western countries abandoned the subsidies to solar and wind power and enforced anti-dumping policies on imports of Chinese equipment, Beijing responded with new subsidies that increased domestic installations. The subsidies, however, were so large and the market so undisciplined that the Ministry of Finance is now left with a subsidy backlog (money it owes the industry) of US $18.71 billion.

The subsidy regime is now ending. At the same time, China is introducing a renewable energy quota system, which will require each province or energy retailer to source a certain percentage of electricity from renewables or to buy green energy “certificates” from renewables developers who are unable to bring their power to market, in effect downloading the cost of renewable power onto market actors, such as power networks and electricity suppliers and ultimately onto electricity consumers.

The Chinese government last year ordered centralized district-heating plants in 28 northern cities to burn natural gas instead of coal, only to discover that the infrastructure to deliver and use the gas did not exist. This year, it has changed course, allowing coal consumption as needed in the northern cities, but banning new smog-producing industrial facilities in key cities and permitting increased coal-burning and smog pollution in parts of the country where air quality is a lower political priority. The average levels of pollution for the country as a whole remain 72% higher than guidelines set by the World Health Organization.

Carbon Dioxide Emissions

China’s GHG emissions increased by 1.7% in 2017 and are projected to grow by 4.7% in 2018. China’s carbon market has been scaled back and is now “low key”.

The Green Climate Fund, which was supposed to receive at least $100 billion per year in contributions from the “Annex II” (i.e. mostly, OECD) countries, has received only a small portion of the promised commitments, and the withdrawal of the United States from the Paris Agreement virtually assures that it will not receive anything close to what the developing countries, including China, had hoped they could access. The fund is now beset with internal conflict and has approved only a relatively small number of projects. China thus is losing much of its motivation to keep up the pretense that it is committed to its emissions reduction plan. The failure of the Green Climate Fund gives China (and other countries that submitted emissions reduction plans to the UN) an “out”. All that will be left is the propaganda.

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Related:  “Where will the UN get its climate money now? ” Insights on the Green Climate Fund

https://blog.friendsofscience.org/2017/06/04/where-will-the-u-n-get-its-climate-money-now/