Has China’s coal use peaked? Hear’s how to read the tea leaves – Valerie J. Karplus

Assistant Professor Valerie Karplus

Assistant Professor Valerie Karplus

From The Conversation

As the largest emitter of carbon dioxide in the world, how much coal China is burning is of global interest.

In March, the country’s National Bureau of Statistics said the tonnage of coal has fallen for the second year in the row. Indeed, there are reports that China will stop construction of new plants, as the country grapples with overcapacity, and efforts to phase out inefficient and outdated coal plants are expected to continue.

A sustained reduction in coal, the main fuel used to generate electricity in China, will be good news for the local environment and global climate. But it also raises questions: what is driving the drop? And can we expect this nascent trend to continue?

It appears many of the forces that led coal use to slow down in recent years are here to stay. Nevertheless, uncertainties abound.

The future of coal in China will depend on economic factors, including whether alternatives are cheaper and whether a return to high oil prices will encourage production of liquid fuels from coal. Also crucial to coal’s future trajectory are the pace of China’s economic growth and the country’s national climate and air pollution policies.

Overcapacity

First, let’s consider how certain we are that the rise in China’s coal use has reversed course. Unpacking that requires understanding the context in which the data is produced.

China’s national energy statistics are subject to ongoing adjustments. The most recent one, in 2014, revised China’s energy use upward, mainly as a result of adjustments to coal use. The revisions follow the Third National Economic Census, which involved a comprehensive survey of energy use and economic activity that better represent the energy use of small- and medium-sized enterprises.

There is good reason to believe these revised figures better reflect reality, because they help to explain a well-recognized gap between previously published national totals and the sum of provincial energy statistics, and because these regular revisions capture more sources of energy consumption.

In short, the latest numbers show China is using more coal and energy than previously thought, but the last two years of data suggest China’s coal use may be peaking earlier than expected.

Read the full post at The Conversation.

Valerie J. Karplus is the Class of 1943 Career Development Professor and an Assistant Professor of Global Economics and Management at the MIT Sloan School of Management.

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