Comment: rapid changes in China offer the hope of falling global emissions, years ahead of schedule
The future of our climate depends on what happens in China. This one country now emits 27% of global carbon emissions and its share is rising fast, making up half of the total growth in global emissions up to 2040.
If China does not change direction, global emissions cannot fall. Yet, on International Energy Agency (IEA) projections, China’s emissions will not start falling until the 2030s.
This is the source of deep gloom in the climate policy community. As the IPCC report recently confirmed, to keep temperature rises to the borderline ‘safe’ level of 2°C carbon emissions must peak by 2020 and then fall rapidly.
The central IEA scenario projects rising global carbon emissions up to 2035. This would make the 2°C target look impossible without heroic assumptions about international government action on climate change. Few are optimistic about this, hence the gloom.
But a surprising new source of hope is emerging. As we describe in a new research note, China watchers in the investment community are starting to point to three big changes in China’s economy, which together could mean its emissions start falling by 2020 and so bring 2°C back within reach.
The first change is that growth is slowing. GDP growth fell from over 10.8% in 2010 to an estimated 7.5% this year, and could fall to 4% by 2020 according to some analysts. Some even foresee a ‘hard landing’ and a ‘lost decade’.
This kind of slowdown happens to all economies as they develop – and it is frequently a bumpy ride. In China’s case it may be accelerated by unusual demographics: its one-child policy means the workforce is already starting to shrink.
Second, the structure of China’s economy is changing. Instead of relying on investment in new infrastructure and heavy industry, China is switching to a consumer economy more like ours. Growing your economy by selling smart-phones and consumer services uses far less energy per unit GDP than growing it via building new cities, highways and factories.
The upshot of lower growth and less energy intensive growth is that China is now close to having all the generation capacity it needs to power its economy. After a decade of famously building ‘two new coal power stations each week’, China can stop.
Actually, China is going to go a big step further. It’s going to start closing them down. Beijing’s pollution levels last winter were 20 times the WHO safe limit. It was dangerous for children to play outside. Aging coal power stations are the major source of this pollution. China has set aggressive goals to shut them down.
In their place China is massively expanding nuclear, hydroelectric, wind and solar. China plans to invest $294 billion in renewables up to 2015, much more than Europe and the US. These new technologies look set to grow explosively, and should fill the gap left by coal.
According to recent reports from Bernstein and Citi, two leading investment research firms, these three factors together mean that coal demand in China could peak before 2020. Bernstein forecasts coal demand will starting falling in 2016 at a rate of 3% per year. This trend would take Chinese coal power generation 60% lower than IEA forecasts by 2035, lopping billions of tons annually off global carbon emissions.
To put it another way, the IEA says that in order to get onto a 2°C climate trajectory, coal use needs to start falling by 1.8% a year, globally, by 2020. So a 3% annual fall in China – alone responsible for half of global coal demand – plus the lower than expected emissions now seen in the US and India – would put 2°C back within reach.
Some caution is needed. While massive structural change is expected in the Chinese economy, its pace and GDP implications are hotly debated. Nevertheless, a ‘low carbon China’ scenario is a real possibility and deserves to be considered alongside the more familiar pessimistic alternatives.
At the very least, the existence of a credible scenario in which 2°C can still be achieved is a blast of light in the gloom, particularly if you doubt the political will exists for an ambitious global climate deal.
After a decade of moving us rapidly in the wrong direction, the changing shape of the global economy might at last be starting to work powerfully in our favour. Instead of requiring a wrenching and politically unlikely departure from business-as-usual, achieving 2°C might instead require a stretching but achievable acceleration of our existing commitments.
Dr. Craig Mackenzie is Head of Sustainability at Scottish Widows Investment Partnership and a member of the Centre for Business and Climate Change at the University of Edinburgh Business School. An extended version of this article is available here.