China's structural shift means emissions likely to peak by 2025

At the APEC summit last November, Presidents Xi and Obama jointly announced their two countries' new climate change commitments. China's commitment is to peak its CO2 emissions around 2030, and to use its best efforts to peak earlier than that.

We are beginning to see the fruits of China's efforts. In a new Policy Brief published by the Grantham Research Institute at the London School of Economics, Lord Stern and I analyse sectoral and policy trends in China and conclude that China's emissions are likely to peak by 2025. They could well peak earlier than that.

This earlier than expected peak is the product of a fundamental structural shift occurring in China's economy and in central government policy. China's old model of growth — based on enormous investment in heavy industries like steel, cement, and coal-fired power — is no longer sustainable. It is giving way to a 'new normal' of lower but better-quality growth, involving a rise in domestic consumption, a reduction in investment, and an industrial pivot toward services and higher-tech manufacturing. This means China's energy-use will grow much more slowly than in the previous decade, as we have begun to see over the last year. Further, China is embarking on a transformation of its energy supply, cutting its coal use in industry and power generation, and rapidly expanding its supplies of renewable, gas, and nuclear electricity.

This important shift in China gives the world a fighting chance of avoiding catastrophic climate change. [fold]

As the leaders of the G7 group of nations correctly acknowledged this week, achieving the internationally agreed goal of restraining global average temperature increases to within 2°C above pre-industrial levels will require 'a decarbonisation of the global economy over the course of this century' — the first high-level political acknowledgement that tackling climate change requires phasing out greenhouse gases, and hence fossil fuels, entirely.

Clearly, China has a big task ahead to phase out fossil fuels completely. But our report finds it has turned a corner, with coal use falling over the last year, and likely to plateau or fall further over the next few years before falling more strongly throughout the 2020s.

The challenge now for China is to lay the foundations, in the 13th five-year plan, to bring about strong reductions in its emissions, post-peak. China could do this by: tightly controlling new coal developments through regulation; levying a tax on coal; creating new financial sector rules and institutions to shift investments from dirty to clean industries; changing fiscal and governance arrangements for cities in order to discourage urban sprawl and encourage compact and sustainable cities; and investing strongly in clean technology innovation.

This suite of reforms would not only help to phase down China's greenhouse gas emissions after they peak, it would also help China to improve the liveability and attractiveness of its cities, greatly reduce air pollution and reliance on imported energy, and reorient its economy toward innovation-driven growth and prosperity.

Photo by Flickr user The Danish Wind Industry.

Fergus Green