China’s readiness to put businesses back on track amid coronavirus disruptive effects worries environmentalists.

The one-off reduction of emissions could become as rare as comets in the future.

Originated in the Chinese Hubei province’s capital Wuhan, coronavirus – or as scientists dubbed it covid-19 – rapidly spilt out of China’s borders. At the moment, the virus has hit no less but 170 countries around the world. Governments have increasingly adopted restrictive measures, and some were forced to put their population into lockdown in a bid to contain the diffusion. The global economy has shrunk quite massively, and financial markets have been suffering major turmoils since mid-January. However, in China, authorities believe the economy shall rump up promptly once the spread is contained and restrictions are lifted. To get businesses back on track, the restoration of sound energy demand is a key condition. How China is going to tackle the slowdown is likely to affect longer-term initiatives concerning energy transition and the achievement of its Paris-inspired emissions curtailment targets.

In 2019, according to CarbonBrief analysis, China’s CO2 emissions increased some 1.7-2 per cent as a result of still rising coal demand (0.7 per cent), oil (6.8 per cent) and natural gas (8.6 per cent) (CarbonBrief, 2020). Ahead of the outbreak of covid-19, China was looking confident about the achievement of a widely expected economic growth which would double 2010’s GDP. Moreover, in the last quarter of 2019, both manufacturing and industrial production had expanded, and the “Phase One” deal signed with the US was indeed boosting investments in fixed assets. Nevertheless, it is astonishing how the outlook for China has changed in the span of two month-time. On January 23, the Central People’s Government announced lockdowns had been imposed over Wuhan and other cities in the Hubei province. The decision came alongside celebrations for the Lunar New Year had already witnessed millions of people travelling across the country on vacation.

Market in Wuhan. The city is on lockdown since January. Source: Wikipedia

As a consequence, the Chinese economy remained almost standstill for at least 3 to 4 weeks, thus taking a significant toll on energy demand (Meidan, 2020b). The tightening of travel restrictions has further exacerbated the slump in energy consumption. The Civil Aviation Administration of China reported losses of US $3 billion in February, due to 84 per cent reduction in total passengers and 21 per cent drop in cargo volumes (China NBS, 2020). Chinese carmakers – the bulk of which is comprised within the virus-incubator Hubei province – also underwent massive cuts in sales and output levels, for not less than 60 million people were imposed to stay home. In January-February 2020, exports dropped 17,2 per cent while imports let up 4 per cent thus marking a trade deficit worth $7.10 billion (CEIC, 2020). It is the fifth time since 2000 that China records a trade deficit. 

Cargos have been reportedly deferred in order not to overload ports. In particular, as Chinese oil buyers who, prior the outbreak, had been stocking up crude products as they usually do ahead of New Year holidays, were forced to cancel shipments either by refusing cargos or declaring force majeure. A report from the OIES suggests China’s oil demand hit a 1 million bbl/day loss in February which may result in a Q1 2020 oil demand decrease by at least 500’000 bbl/day compared to Q1 2019 (Meidan, 2020b). Even though official data has not been released yet, it is likely to expect the most affected sectors will be: automotive, tourism and travels as well as the pharmaceutical one. The temporary blow to industrial activities also caused coal consumption at power plants and oil refining to drop 30-35 per cent, China’s National Bureau of Statistics reports. From January to February, the growth rate of coal output declined 6.3 per cent year on year. Losses were partially made up of coal imports which on the contrary increased by 33.1 per cent compared to the same period in 2019. 

Growth rate of Industrial Raw Coal Output. Source: National Bureau of Statistics

The decline in energy consumption along with restrictive measures and travel bans had the flip-side effect of giving cleaner air back to Chinese people for an unusually long time. The relief was particularly evident in pollution-chocked megacities whose NO2 and PM2.5 indexes both fell between 30-50 per cent up to March 1 (Hook L., Shepherd C, 2020). From an environmentalist point of view, the outbreak may have happened just on time. Satellite images gathered from NASA and ESA satellites showed the Chinese sky has been getting brighter and brighter as the reduction of people movements took in. Reportedly, China has cut the equivalent of the UK’s carbon emissions over six months, or some 200 million tonnes of CO2 (25 per cent lower than the same period in 2019). However, analysts caution that the dip in pollution is likely temporary as a vigorous economic policy response is already set out.

Before the outbreak, China was gradually diversifying away from coal (11 per cent lower from 2012-2017). Whereas natural gas is seen as the transitional fuel for electricity generation and heating purposes (demand has grown 16-17 per cent for two consecutive years), China is also trying to “green” its energy mix by adding up to wind and solar total installed capacities. Moreover, it has been expanding its nuclear power and hydropower generation (both increased 15 and 5 per cent respectively from 2012-2017) (BP,2017 and Meidan, 2020b). In China’s latest Five-years Plan (13th FYP 2016-2020), the government highlighted the key objectives of its Renewable Energy Development. Most interestingly:

• Increase the share of non-fossil energy in total primary energy consumption to 15% by 2020 and to 20% by 2030
• Increase installed renewable capacity to 680 GW by 2020
• Increase installed wind capacity to 210 GW
• Lead renewable energy technological innovation (National Development and Reform Commission NDRC, 2016)

NASA satellites show decreases in air pollution over the Chinese mainland as a consequence of travel bans to counter cover-19 outbreak. Source: NASA

Furthermore, throughout the last decade, China has implemented several environmental regulations to curb air pollutants as, according to a 2017 official report, 75 per cent of its cities were failing to meet national air-quality standards (Haitao Y et al., 2019). These measures are regionally structured. The primary goal is that of reducing harmful emissions in key economic areas. However, the lack of transparency and the prioritisation of economic growth over regulation enforcement by local governments have mostly undone ambitions. 

Analysts, or at least those who cheered for the decline in emission indexes and brighter sky, now fear that as production resumes, Chinese authorities may halt progress towards climate mitigation. Particularly, by relaxing emission curbs, and turning a blind eye to high carbon-intense activities in order to boost national recovery (Bloomberg, 2020). Such measures would likely cast uncertainties around China’s fulfilment of climate commitments just ahead of the long-awaited 14th Five-Year Plan. In its latest bulletin, the National Bureau of Statistics assures “the resumption of work and production accelerate” as well as that the disruptive short-term effects of the outbreak of covid-19 will be manageable. Accordingly, the China Electricity Council forecasts that energy consumption will increase 4-5 per cent and that non-fossil energy installed capacity will nonetheless match the 13th FYP target. Meanwhile, several industries in the hard-hit Hubei province have resumed production as for the first time in four months no new cases have been registered. Just as it happened in the aftermath of the 2002-2003 SARS outbreak, China is likely to adopt expansive measures to get businesses back on track as quick as possible. However, due to mounting pressures both internally and externally, the Central People’s Government may opt for a more relaxed approach so as not to thwart achievements and prevent emission cuts from becoming as rare as comets. 

This article was also posted on Times International. Check it out for more contents.

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