China is cleaning up
Friday, 22 May 2020
The IEA's data on China suggests that there has been minimal growth in its carbon emissions since 2011. Advocates of wind, solar and nuclear like to claim this as a triumph for their technologies, but they are actually an insignificant component. Climate sceptics point at the continued growth of coal-fired generation and assume that China's emissions must still be increasing. The truth is more interesting. China appears to have been moving its industry away from coal towards gas, allowing the leeway to increase coal-fired generation without increasing overall consumption. In the process (and, one assumes, the key driver), they are probably significantly improving their notoriously-poor air quality, as the coal-fired power stations are likely to be equipped with much better back-end cleanup equipment than small/old industrial coal burners. The competence and pragmatism of the Chinese approach compared to the incompetence and dogmatism of Western decarbonisation policy suggests lessons for the developed world.
This was going to be a piece on the futility and self-harm of Western decarbonisation plans, if China continues to increase its carbon emissions whilst undercutting our manufacturers, prompted by this article in The Economist.
Except, China isn't apparently increasing its carbon emissions. They have been nearly static since 2011.
You go where the data take you. So this is now a piece on how China is cleaning itself up, in a more rational way than the West's decarbonisation efforts. It doesn't fit as well with my Western prejudices and doesn't offer any gotcha conclusion, but hopefully that makes it more real.
My first thought on seeing this chart was: they must be fiddling the data. How could they be increasing their coal-fired generation capacity and imports of gas, replacing bicycles with internal combustion engines, and building god knows how many airports and high-speed rail lines, and yet prevent their carbon emissions from rising? But when I looked into the data, they are at least consistent (a) internally and (b) with some things we know about how China has tried to direct its development recently. They may still be false, but I have no evidence to doubt them.
IEA statistics
The International Energy Agency (IEA) provides a useful energy-data browser by country or region.
Natural Gas
Gas is straightforward. Consumption has increased significantly since 2011, by about 75%. But these are relatively modest amounts compared to the use of coal. The 2017 figure is equivalent to around 146,000 ktoe (thousand tonnes of oil equivalent). The increase since 2011 is around 62,000 ktoe. Their coal usage appears to be in the region of 2,000,000 ktoe.
Oil
Oil is also straightforwardly upwards since 2011, by a smaller proportion (around 1/3) than gas, but by a larger absolute amount (around 123,000 ktoe). It's still small beer compared to coal, though.
Coal
China's final consumption of coal has fallen significantly since 2011. This might appear to be the end of the story: falling coal consumption set against rising consumption of the lower-carbon fossil fuels (oil and gas). But final consumption doesn't tell the whole story. For instance, how does falling coal consumption fit with their increasing coal-fired generation capacity? Are they really building power stations to use them less?
Final consumption does not include electricity generation. The IEA's data browser doesn't offer figures for the amount of coal consumed in electricity generation. But they do tell us how much electricity is produced from coal (and other technologies). We can guesstimate the coal consumption by assuming an electrical conversion efficiency of around 35%.
At first sight, this is the original suspicions confirmed. Coal-fired generation is still increasing strongly. If this offsets the reduction in final consumption of coal, then rising gas and oil plus flat or rising coal must mean rising carbon emissions.
The increase in the electricity-generation chart from 2011 to 2017 is around 774 TWh, or 66,578 ktoe. At 35% conversion efficiency, that is around 190,000 ktoe of coal. That is very similar to the decline in the final consumption of coal since 2011. In other words, overall coal usage is indeed flattish.
We can get at the coal usage another way. The IEA offer figures for coal production, imports and exports. Barring changes in stock levels:
Production + Import - Export (aka Supply) ≈ Consumption
This is how coal supply compares with final consumption (every 5 years from 1990, then every year from 2010). You can see how supply dwarfs final consumption. You can also see how supply is marginally down since 2011. But marginal differences on such large amounts can signify. The reduction in supply since 2011 is 42,000 ktoe, and since the peak in 2013 is 133,000 ktoe.
That still leaves a net increase between coal, oil and gas, but (a) coal is more carbon-intensive, so a small fall in coal weighs more heavily than larger increases in gas and oil, and (b) the IEA carbon figures do show small increases since 2011, but they are insignificant proportionately. In the same way, a change of a few tens of thousands of ktoe is insignificant against a baseline of 2,000,000 ktoe of coal consumption.
So how do we square increasing coal-fired generation with slightly declining coal consumption? It's not just that final consumption has fallen. If we assume that the difference between supply and final consumption is largely coal used for electricity generation, the movements in coal consumption for generation since 2011 are insignificant relative to the increased in coal-fired output.
My inference from the above is that the new coal-fired generators are (a) more efficient and (b) cleaner than the old generators, and even more so than the industrial coal-burners whose replacement (probably mainly with gas) are reflected in the declining final consumption of coal. China is managing to get more output for each unit of input, and in the process improving its air quality. The old generators are probably relegated to the bottom of the merit order, providing occasional balancing services.
Low-carbon (renewables and nuclear)
So what about the supposed decarbonisation of China through its investment in wind, solar and nuclear?
Firstly, they aren't even the main forms of low-carbon energy in China. For electricity, that's hydro, by a country mile.
If we were counting all energy, biofuels and waste are also well ahead.
In the grand scheme of things, this is all small beer compared to improving the efficiency and cleanliness of the coal combustion, and displacing the worst coal combustion with natural gas.
It tells us something about the realism of the Chinese approach. In the West, green evangelists (and gullible policymakers) would be arguing that we don't need those new coal-fired generators, as we can simply replace them with wind and solar, despite much higher market penetration already.
The Chinese government clearly recognises the different services that different types of generation provide. They are ramping up their dispatchable, frequency-stabilising, carbon-emitting generation, as fast or faster than they add low-carbon generation. To the extent that they are investing in low-carbon generation, hydro (especially) and nuclear are playing a larger role than wind and solar, because hydro and nuclear can provide load-following (the former) or baseload (the latter) power.
Economic impact
The pragmatism of Chinese energy policy has allowed them to continue their strong growth whilst halting the growth of their carbon emissions. Depending on the measure (with or without adjusting for PPP), their GDP has increased 60-80% in real terms since 2011.
Compare that with the effect of economic policies in the EU, UK and Japan. The UK has grown by 7%, the EU by 1% and Japan has shrunk by 19% in the same period (in current US$; growth was a little higher adjusted for PPP).
The sclerotic Western nations have decarbonised more, but was it worth it? China's emissions increased 4.8% from 2011 to 2017. Japan's shrunk by 4.4%. The EU (excluding the UK) cut emissions by 8.1%.
The UK did well with a carbon reduction of 24.8%, but the ONS notes that this excludes the embodied carbon in our imports. The UK has some of the highest levels of embodied carbon imports. The UK was more aggressive than most in moving from a manufacturing economy to a service economy. This was an effective way of reducing direct carbon emissions per unit of GDP, but a lot of what we cut by offshoring manufacturing, we re-imported embodied in the products. Was that a good trade-off?
China made a greater improvement than these nations in its CO2 intensity per unit of value added and in its energy intensity per unit of GDP, albeit starting from a much higher level. They are looking to expand their service sector and rely less heavily on exports and more on internal consumption, but they have not had to switch as strongly as the UK to a service economy in order to reduce their energy intensity.
Lessons for the West
The lesson for British (and Western) policymaking is simple: our policymakers aren't intelligent and informed enough to adopt a Chinese command-and-control approach.
And if they were, they nevertheless feel compelled by democratic pressures to a naivety to which China is immune. China shapes its policies to international pressures only so far as is compatible with its national interests. Sclerotic Western nations put virtue signalling ahead of the prosperity of their citizens. The decadent West steers its systems towards what it hopes will work and encourages research that justifies this hope. China's ambitions favour realism over optimism in the energy sector.
The prosperity of the West was built on the replacement of hierarchical coordination (feudalism) with decentralised coordination (the market). That is partly necessary because the Western "elites" are not true elites, but rather people who know how to play the politics well enough to get into positions of power.
They understood the limits of their competence in the eighteenth and nineteenth centuries. They understood that their interests coincided with the interests of the economy when they limited their role to the provision of the institutional framework for market discovery (Adam Smith's "peace, easy taxes, and a tolerable administration of justice"). They gradually forgot this during the twentieth century, partly from decadent arrogance, and partly under the pressure of expectation from a population (empowered by universal suffrage) whose miseducation led them to expect governments to make everything right.
The consequence is a system of governance that claims more responsibility (and a much greater share of GDP) than the Communist Party of China with a fraction of the intellectual and administrative competence. They pay lip service to the foundations of our prosperity and the lessons of the twentieth century by avoiding re-nationalisation of those parts of the economy that are not still owned by the state (though even that is crumbling). But they use indirect methods (euphemistically described as market mechanisms, though they are really market-distortion mechanisms) to steer, skew, target, micro-manage (etc) markets to the extent that their core discovery function is completely undermined. It takes a level of ignorance that is mainly achieved through the Oxbridge Lobotomy to believe that there is a virtue in markets whose price signals have been hopelessly obfuscated.
This does not work. A bugger's muddle of micro-managed capitalism is a recipe for rent-seeking, sclerosis and increasing inequality between the government's beneficiaries and the rest. Democracy is a lousy way of managing economic coordination.
Either go the whole hog (like China) and implement a hierarchical system largely immune from irrational democratic pressures. Or leave economic coordination to the market and insulate your economy from democracy through limited government whose main economic role is to provide an institutional framework that supports voluntary exchange and does not pick winners.
At times, the hierarchical, authoritarian system may seem to be doing better, because it can get things done. But that is the same power that enables China to impose itself on Hong Kong against the will of the people of Hong Kong and to suppress the truth about an epidemic, and enabled the catastrophic decisions of communist governments for the past 100 years.
So this may have seemed to be a paean to the Chinese Communist system, but it really isn't. The fact that they can sometimes get things right because they do not run their economy democratically does not outweigh the terrible things that such a system can also enable. The lesson is not to be more communist. The lesson is that, if you want to avoid the huge cost of communism and the scleroris of centrally-managed (crony) "capitalism", you need to coordinate your economic activity via the dollar vote, not the ballot box.