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The recent shift in Chinas economy has been one of dramatic speed

and scale. The first decade of the 2000s saw Chinas economy grow
at a startling rate and consume increasing quantities of fossil fuels in
doing so. Over the last two years, the nature of this growth has
changed entirely. This has seen coal consumption flip from strong
year-on-year growth to declines close to 4%, as seen in 2015[1].
Consequently, Chinas energy-related CO2 emissions declined by
1.5% in the same year[2]. This March, China released a draft of its
13thFive Year Plan (FYP) for 2016-2020 it sends signals that the
Central Government intend to continue moving away from domestic
and international coal consumption.
Energy targets show no sign of a slowing transition
One could be forgiven for thinking that energy consumption and carbon emissions
targets in the 13th FYP might be less aggressive than previous plans as gains become
gradually more difficult to obtain. But the plan to 2020 does nothing of the sort. China
targets a fall in energy intensity of 15% to 2020, just 1% lower than the previous FYP
target[3]. This is another significant step towards decoupling energy demand from the
economy, which itself is expected to grow by an average 6.5% each year. Decoupling
CO2 emissions from economic growth is also a priority for the Central Government. As
such, China has ramped up its carbon intensity ambitions by 1% on the previous FYP,
aiming for an 18% improvement to 2020[4].
Total CO2 emissions growth will slow drastically to 2020 under the 13 th FYP
In Figure 1 we combine these trends with forecasts from other institutions and plug
them into the Kaya Identity a formula utilised in our Lost in Transition report[5] and a
recent report from the London School of Economics[6] to illustrate how the 13th FYP
might translate into CO2 emissions. It concludes that while Chinas CO 2 emissions could
still grow to 2020, they will slow drastically from the 5.4% annual growth averaged over
the past 10 years.

Figure 1: CO2 emissions implied by Chinas 13th FYP, 2016-2020 (annual growth %)[7]
Overall, these drivers equate to total CO 2 emissions growing by approximately 2.1%
each year under the 13th FYP. This is a significant slowdown on the 5.4% CO 2 emissions
growth seen between 2005 and 2014 and confirms the conclusion of much recent
research that Chinas CO2 emissions are likely to peak earlier than the 2030 target[8].
As our recent Lost in Transition report highlighted, the assumption made for each
component of the Kaya Identity is a debated unknown. And what transpires in China
over the next five years is no different. For example, the report from the London School
of Economics is more aggressive in its energy intensity assumption for the 13 th FYP
and, as a result, sees CO2 emissions grow by only 1.24% per annum to 2020. This is
one example which reiterates that reducing domestic emissions does not rely on
reducing economy growth, but can be achieved through improving the energy efficiency
of an economy.
Chinas CO2 emissions could be much lower than expected
Data from the previous Five Year Plan suggests the assumptions of the 13 th FYP and
the LSEs calculations, which imply CO 2 emissions growth to 2020, could be overly
conservative. The IEA suggest that energy-related CO 2 emissions in China fell in 2014
and 2015 in response to successful efforts to decarbonise its electricity generation.
[9]Whether this downward trend continues through to 2020 is uncertain, but many feel
that China is well on the way to exceed the 13 th FYP energy targets. The NRDC says it
is very likely China will overachieve on its 40-45% carbon intensity reduction target for
2020 compared with 2005 levels[10]. Furthermore, China outperformed their 12 th FYP
targets, with energy intensity decreasing by 18.2%, against a 16% target, and carbon
intensity by 20.2% against a 17% target. If the drivers of Chinas falling CO 2 emissions
over the past 24 months prove to be more structural than mere annual variations,
Chinas CO2 emissions could very well plateau at current levels.

Coal will not supply CO2 emissions growth

There are a number of signals in the 13 th FYP to believe coal demand in China will not
increase again:

Economic transition is affecting power demand: In 2015, China derived half of its
GDP from the service sector. This represents a rapid shift away from the energy
intensive industrial sector which used to drive Chinas economic growth. This was a key
driver of total power generation in China falling for the first time in decades last year. In
the 13th FYP China aims to derive 56% of its GDP from services[11]. This is likely to
result in even greater falls in power generation in China and, therefore, less demand for
coal. Data from January and February 2016 suggests thermal power generation fell by
4.3% on the previous year and this is dominated by coal in China[12].

Renewable energy sources take coals market share: An upsurge in low-carbon

power generation is the likely reason for the falling relative contribution of coal in
thermal generation. China exceeded its 12 th FYP target by increasing its non-fossil
energy share to 12% in 2015[13]. The 13th FYP places an absolute limit on energy
consumption by 2020 and China aims for 15% to be supplied by non-fossil sources.
Specifically, targets have been put in place to raise installed nuclear power to 58GW,
solar PV to between 150-200GW (43GW in 2015) and wind power to 250GW (145GW
in 2015), all by 2020[14].

Air quality remains a top priority: The 13th FYP is the first to include specific
targets on particulate matter a major cause of air pollution. Chinas cities are now
expected to be rated good or better for air quality at least 80% of the time by 2020, up
from 76.7% in 2015. This will be achieved by reducing emissions of PM2.5 by 25%[15].
Any increase of coal consumption, especially near urban areas, will make these targets
very difficult to hit.
Coal production in January and February 2016 fell by 6.4% on last year[16], suggesting
the trends highlighted in this blog are strengthening Chinas move away from coal
consumption, not reversing it. The worlds coal exporters, and their investors, should
see Chinas 13th FYP as another signal that the worlds largest economy is permanently
moving away from coal. This is likely to see Chinas CO 2 emissions peak much earlier
than the 2030 target outlined at the Paris COP21 and could even plateau at current
Luke Sussams, Senior Researcher, Carbon Tracker Initiative

[7] The final component of the Kaya Identity is CO 2 intensity of energy supply. China
does not set this target, only for CO2 intensity of its economy. However, the London
School of Economics estimated recently that based on policy and market trends, China
CO2 intensity of energy supply could fall by approximately 1.0% each year to 2020. This
is used in Figure 1.