In 2023, China’s economy expanded by 5.3%. This would have been an impressive number worth celebrating for any other country. For China, however, the number was widely seen as a disappointment—even though it exceeded analyst expectations.
As a result of these apparently disappointing developments, analysts expect Beijing to lean heavily on stimulus this year. And this would mean higher emissions.
The link between economic growth and cheap energy is one that does not get much public attention since that attention tends to be focused strictly on emissions. Yet, this is a link that is hard to overlook.
Last year, Germany saw its emissions decline to the lowest in 70 years. Germany also slipped into a recession in 2023. The UK, which is at least as ambitious in the climate change department as Germany, is also expected to report an economic contraction for 2023, although it has been less fortunate with emissions. But it’s trying.
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China is also trying, still leading in terms of wind and solar generation capacity. Yet China is also building a lot of new coal capacity, which the government says will be used as backup for the intermittent renewables. Before that, however, coal is expected to be used as the fuel of the economic stimulus—and lead to higher emissions.
Reuters columnist Gavin McGuire wrote this week that the stimulus measures analysts expect the Chinese government to deploy could include things like direct loans to businesses and tax cuts. This, McGuire noted, would lead to a boost in business activity, and that boost will, in turn, lead to higher energy consumption.
Despite having the largest wind and solar capacity in the world, China is still heavily reliant on coal-generated electricity, so this would likely increase if the stimulus measures work as planned. And coal generation output might just break last year’s record of 5,760 TWh. With it, emissions will rise, even as wind and solar installations continue to grow and fast.
Last year, China installed 217 GW of solar and 76 GW of wind capacity. That was a 55% annual increase in solar additions, and in wind, China installed more new capacity than the rest of the world combined.
The Wall Street Journal cited analysts as saying that together with new nuclear and hydro additions, the above covered all of China’s new demand for power in 2023. And yet coal generation hit a record high—quite likely because the country’s economy expanded by 5.3%.
The Wall Street Journal report suggested that thanks to the massive additions of wind and solar, emissions in China could peak ahead of schedule. Yet the Reuters column makes a different suggestion, despite expectations of weaker economic growth this year. Perhaps it won’t be so much weaker with stimulus. And it will lead to higher coal – and gas – generation even as wind and solar continue to expand.
The conclusions that this situation prompts do not exactly support arguments about the capability of wind and solar to entirely replace hydrocarbons as power generation fuel. If anything, they destroy those arguments with the evidence from China.
That evidence, by the way, also gets support from data from Europe. Wind and solar generation in Europe has been shattering records—but economic growth has been stalling, and energy demand has been weakening because of price inflation. One could perhaps put it all down to coincidences and correlation not equaling causation.
Yet, given the fundamental importance of affordable energy for economic growth, coincidence and correlation rather than causation might not cut it as an explanation. If you want economic growth, there will be emissions.
By Irina Slav for Oilprice.com