COVID-19 China Energy Impact Tracker - ANALYSIS - DECEMBER 2020 - Agora Energiewende
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COVID-19 China Energy
Impact Tracker
How is China’s energy sector faring in the
economic recovery?
ANALYSIS
DECEMBER
2020 #2Agora Energiewende | COVID-19 China Energy Impact Tracker A publication by Agora Energiewende Kevin Jianjun Tu Zhou Yang Please cite as: Agora Energiewende (2020): COVID-19 China Energy Impact Tracker: How is China’s energy sector faring in the economic recovery? Issue 2. 199/08-A-2020/EN Version 1.0, December 2020 2
Preface
The novel coronavirus (COVID-19) pandemic has China’s ambitious plan will help move the climate
precipitated the most severe global recession since agenda forward in developed and developing country
the 1930s. On October 7, the International Monetary blocs. In addition, China’s unique status as the first
Fund projected that the global economy could hybrid superpower in the modern era means that
contract by 4.4 percent year-over-year (YOY) in Beijing can play an important bridging role between
2020. Though China witnessed the first ever the blocs, especially when it comes to “common but
economic contraction in more than four decades differentiated responsibilities.”
during the first quarter (Q1) of 2020, a subsequent
speedy recovery is set to make China the only major Agora Energiewende’s COVID-19 China Energy
economy to grow this year — a 2.0 percent increase Impact Tracker provides quarterly updates on how
relative to 2019, according to Agora’s most recent the COVID-19 pandemic has affected China’s energy
estimate. This is a 0.3 percentage point lower than in sector, from energy supply and consumption to
the previous issue of this COVID-19 impact analysis. carbon emissions and other key indicators. It also
features a series of reports to better inform the
The European Union’s December 2019 pledge to international community and Chinese audiences
achieve climate neutrality by 2050 briefly put Europe alike about COVID-19’s effects on the Chinese energy
at the forefront of climate action. But in September economy.
2020, China announces a carbon neutrality agenda
for 2060. Since then, Japan, South Korea, and Canada Dr. Patrick Graichen,
have rolled out climate neutrality pledges for 2050. Executive Director
The USA is expected to follow soon after President- Agora Energiewende
elect Joe Biden is inaugurated in January 2021.
Key findings at a glance:
1
Chinese President Xi Jinping’s pledge on September 22 that the country would reach peak national
carbon emissions before 2030 and achieve carbon neutrality before 2060 sent positive shock waves
through the climate policy world.
As both current and future Chinese administrations will need to take President Xi’s climate pledge
seriously, the announcement is expected to make a real difference in China’s energy transition, especially
in the long run.
2 Clean energy and climate targets set for the 14th Five Year Plan (FYP) period between 2021 and 2025 are
expected to be more ambitious than would otherwise be the case in the absence of a carbon neutrality
pledge.
The Chinese energy policy community’s recent revisions to draft 14th FYPs for energy and climate indicate
that the impacts are likely to be not only positive but also substantial.
3 The short-lived COVID-induced climate benefits call for greener 14th FYPs for energy and climate.
China’s monthly carbon emissions have exceeded pre-crisis levels. Greener 14th FYPs for energy and
climate are urgently needed to steer the Chinese energy economy in a more sustainable direction.
3Agora Energiewende | COVID-19 China Energy Impact Tracker Content 1| 2020 climate neutrality 5–12 1| New climate pledge 6–7 2| 2020 Outlook: Economy 8–9 3| 2020 Outlook: Carbon emissions 10–11 4| Summary 12 2| Economy & the power sector 13–21 1| Q3 2020: Economy 14–15 2| Q3 2020: Power sector 16–20 3| Summary 21 3| Fossil fuel energy 22–30 1| Q3 2020: Coal 23–27 2| Q3 2020: Oil and natural gas 28–29 3| Summary 30 4| Concluding remarks 31–33 5| References 34–36 4
1 | 2060 climate
neutrality
1 | New climate pledge 6–7
2 | 2020 Outlook: Economy 8–9
3 | 2020 Outlook: CO2 10–11
4 | Summary 12
5Agora Energiewende | COVID-19 China Energy Impact Tracker
New climate pledge
Figure 1 | China is the first hybrid superpower in the modern era
Lower-middle
income Upper-middle
3.5
income
3.0
2.5
Population (billions)
2.0
China Advanced economies
1.5
Low
income
1.0
Lower-high income
0.5
10.4
0.0
0 2 4 6 8 10 12 14 16 18 20 22 24 26 28 30+
GNI per capita (thousands of USD)
Source: Adapted from Benoit and Tu (2020)
China’s phased climate pledge needs to unprecedented, the equivalent of
be understood from its unique status as decarbonizing the entire French economy
the first “hybrid superpower” in the annually for 30 consecutive years.
modern era. China’s economic recovery since Q1 2020
China aims to reach peak national carbon has been coal- and carbon- intensive. But
emissions before 2030 and achieve China is planning a greener and cleaner
carbon neutrality before 2060. 14th FYP, and the recent carbon neutrality
The amount of carbon reduction required pledge is likely to help.
for China to fulfill its climate pledge is
61 | 2060 climate neutrality
New climate pledge (cont.)
Figure 2 | Wedge analysis of China’s potential path to carbon neutrality
10
Reference emissions trajectory
8
6
Developing country Superpower
mentality mentality
GtCO2
4
Carbon neutrality pathway
2
0
2020 2025 2030 2035 2040 2045 2050 2055 2060
Source: illustrated by the authors
The Chinese energy economy is full of “hybrid superpower,” a unique status
contradictions. For instance, though the between a developing and developed
size of the Chinese economy is larger country.
than the world’s third, fourth, and fifth Because the current generation of
largest economies (i.e. Japan, Germany, decision-makers still has the mentality of
and United Kingdom) combined, nearly growing up in a developing country,
one in three of the country’s population China has only agreed to ensure that
lives in a household without access to carbon emissions peak before 2030.
clean cooking technologies. Beyond 2030, a rising superpower
While China is not yet an advanced mentality among younger generation
economy, it is debatable whether it is still leadership is expected to make China’s
a developing country. In fact, it would be climate ambitions increasingly compatible
more accurate to call China a with those of advanced economies.
7Agora Energiewende | COVID-19 China Energy Impact Tracker 2020 Outlook: Economy Figure 3 | China’s projected economic growth in 2020 8
1 | 2060 climate neutrality
2020 Outlook: Economy (cont.)
Figure 3 | China’s projected economic growth in 2020 (cont.)
Source: Tu (2020a), National Bureau of Statistics (NBS, 2000-2019), World Bank (2020), IMF (2020), et al.
Forecasters significantly downgraded China is in the process of bringing its
their growth projections for China’s economy back to life.
economic growth after the COVID-19 To adapt to an increasingly unstable and
outbreak. hostile outside world, the Chinese
After the release of China’s economic economy has decided to take a “dual
data from Q2 and Q3, the International circulation” approach. Starting from Q3
Monetary Fund (IMF) and the World Bank 2020, Beijing plans to place more focus
have since revised their forecasts of on the domestic market instead of
China’s GDP growth in 2020 to 1.9 and 2.0 international trade.
per cent, respectively.
9Agora Energiewende | COVID-19 China Energy Impact Tracker
2020 Outlook: Carbon emissions
Figure 4 | Monthly carbon emissions from fossil-fuel combustion, 2019 vs. 2020
10% 1000
6.1% 6.4%
5.2%
4.3%
5% 2.2% 2.5% 900
Mt CO2
0% 800
-5% 700
-3.7% -4.4%
-6.2%
-10% 600
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
YOY growth rate 2019 YOY growth rate 2020 2019 2020
Source: Authors’ estimation
Figure 5 | Quarterly carbon emissions from fossil fuel combustion, 2019 vs. 2020
12000 8%
10000 4.7% 6%
4.2% 2.8% 4%
8000 1.6%
2.2%
Mt CO2
1.4% 2%
6000
1.5% 0%
4000 -0.3%
-2%
2000 -4%
-4.8%
0 -6%
Q1 Q2 Q3 Q4
2019 cumulative 2020 cumulative
Quarterly growth rate 2019 Quarterly growth rate 2020
Cumulative growth rate 2020 Authors’ estimation
Source: Authors’ estimation
Since April 2020, China’s monthly carbon China’s carbon emissions rebounded
emissions from fuel combustion have along with its economic recovery, an
exceeded 2019 levels. indication that China’s economic growth
The coal-intensive economic recovery in and carbon emissions are still tightly
Q2 and Q3 has led to a strong uptick in interlinked.
national carbon emissions. With the current recovery trend, China’s
In Q3, the growth rate of cumulative national carbon emissions are estimated
carbon emissions flipped positive, to increase by about 2 per cent YOY in
offsetting earlier reductions caused by 2020.
the coronavirus crisis.
101 | 2060 climate neutrality
2020 Outlook: Carbon emissions
Figure 6 | Breakdown of energy-related carbon emissions by fuel type, 2019 vs. 2020
2019 2020 as of September
Gas Gas
6% 6%
Oil Oil
16% 15%
Coal
78%
Coal
79%
Source: Authors’ estimation
Figure 7 | Breakdown of energy-related carbon emissions by sector, 2019 vs. 2020
2019 2020 as of September
5% 4%
7% 8%
7% 7%
7% 50% 7% 49%
8% 9%
16% 16%
Power and heating Coking coal Ferrous metal
Chemicals Non-metallic mineral products Others
Non-ferrous metal
Source: Authors’ estimation
Despite the fact that the COVID-19 Reduction in carbon emissions in Q1 was
pandemic drastically reduced carbon caused more by the coronavirus-induced
emissions during the nationwide economic slowdown than by structural
quarantine in Q1, emissions have since economic change.
rebounded faster than expected. The industry-led recovery made Q2 and
The primary reason is that both the Q3 more carbon-intensive than the same
national energy structure and coal period last year.
consumption patterns have not differed
significantly from 2019 to 2020.
11Agora Energiewende | COVID-19 China Energy Impact Tracker
2060 climate neutrality
Speaking via video link to the United to reach peak national carbon emissions within the
Nations General Assembly on 22 14th Five Year Plan (FYP) period (2021 and 2025). If so,
September 2020, Chinese president Xi the overall economic and social costs of achieving
Jinping announced that China aims to carbon neutrality in China might increase
reach peak national carbon emissions significantly. Translating the 2060 carbon neutrality
before 2030 and achieve carbon goal into tangible climate actions in the short term is
neutrality before 2060. the stickiest issue Chinese leaders need to tackle.
President Xi’s climate neutrality pledge needs to be China is the world’s largest energy producer and
taken seriously by current and future Chinese consumer, the biggest power generator, and the
administrations. It will require significant carbon leading importer of coal, oil, and natural gas.
reductions – the equivalent of decarbonizing the Achieving carbon neutrality before 2060 will require
entire French economy annually for 30 consecutive an unprecedented deployment of clean energy
years. In view of the enormity of the undertaking, technologies at a massive scale, and some of the
Chinese decision-makers urgently need to address needed technology is not yet market-ready. Another
two critical challenges. related critical challenge is whether the Chinese
government can create an appropriate regulatory and
First, the pledge is not yet a legally binding investment framework that encourages domestic
international commitment yet. China has only innovations to make the Chinese economy more
marginally increased its climate commitment under knowledge-oriented and protect intellectual property
the Paris Agreement: peak national carbon emissions rights while maintaining the competitiveness of its
before 2030 instead of around 2030. Beijing may manufacturing industry.
thus be tempted not to take immediate climate action
122 | Economy and
the power
sector
1 | Economy 14–15
2 | Power sector 16–20
3 | Summary 21
13Agora Energiewende | COVID-19 China Energy Impact Tracker
Q3 2020: Economy
Figure 8 | Quarterly YOY GDP growth rates, China vs. the world, 2015–2020
8% 6.0% 4.9%
4%
0%
-4% -3.2%
-8% -6.8%
China World Trend line
Source: NBS online database, IMF (2020)
Figure 9 | China’s cumulative GDP YOY growth rates, 2016–2020
8% 6.8% 6.9% 6.8% 6.1%
4%
0% Jan-Sep, 0.7%
Jan-Jun, -1.6%
-4%
Jan-Mar, -6.8%
-8%
2016 2017 2018 2019 2020
Source: NBS online database, NBS (2020)
China’s GDP grew by 4.9 per cent YOY in Q3 is an important turning point, with
Q3. China has mounted a V-shaped several key economic indicators flipping
recovery with a steadily-growing second positive for the first time in 2020.
leg. It is expected to complete the The recovery has moved the cumulative
rebound in the first half of 2021. GDP growth into positive territory, at 0.7
Assuming that GDP growth rises to 5.4 per cent YOY, despite the fact that the
per cent YOY in Q4, the size of the recovery in Q3 was lower than the
Chinese economy is expected to increase market expected.
by 2.0 per cent YOY in 2020. Because the pandemic remains out of
With many parts of the world still control in large parts of the world, Beijing
suffering from the coronavirus outbreak, has proposed a dual circulation economy
China faces risk of infection from to spur domestic demand and reduce
contaminated imported goods, especially dependence on overseas markets and
frozen food and packaging during the technology in the long term.
winter season.
142 | Economy and the power sector
Q3 2020: Economy
Figure 10 | Breakdown of economic growth by sector
Secondary industry Tertiary industry
Transportation Leasing &
Retail & , storage, Accommodation & business
Manufacturing Construction wholesale &postage catering IT service
20% 15.9%
0.5% 2.0%
0%
-4.2% -2.2%
-8.1%
-20%
-19.1%
d
-40%
Q1 2020 Q1-Q2 2020 Q1-Q3 2020
Source: NBS (2020)
Figure 11 | Contribution to the economy by industry
100%
32.7%
75% 44.2% 45.4%
61.9% 59.7% 61.5% 55.0%
Tertiary industry
50% Secondary industry
60.8%
53.9% 47.7% Primary industry
25% 36.9% 39.2%
36.3% 34.4%
0% 1.8% 3.4% 4.1% 5.7%
2.0% 6.6% 6.9%
2019-Q1 2019-Q2 2019-Q3 2019-Q4 2020-Q1 2020-Q2 2020-Q3
Source: NBS online database
Major sub-sectors of the secondary tertiary industry, though the rebound of
industry finally flipped into positive Chinese industrial activity has been
territory in Q3, while growth of four sub- carbon-intensive.
sectors in the tertiary industry still In Q3, the contribution of the tertiary
remains negative. industry returned to a level similar to Q1,
COVID-19’s impact on the tertiary industry which indicates that consumer confidence
remains the most severe. in China is recovering – along with the
The secondary industry has waded carbon intensity of the Chinese energy
through the pandemic better than the economy.
15Agora Energiewende | COVID-19 China Energy Impact Tracker
Q3 2020: Power sector – demand
Figure 12 | YOY growth of monthly power consumption, 2019 vs. 2020
12%
7.5% 7.7%
8% 7.2%
5.8% 6.1%
4.6% 5.0% 4.7% 5.0%
4.5% 4.4%
5.5% 3.6%
4% 2.7%
0.7%
2.3% 2.3%
0%
-4.2%
-4%
YOY growth rate of power consumption 2019
-7.8% YOY growth rate of power consumption 2020
-8%
Jan-Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Source: China Electricity Council (CEC, 2019 & 2020)
Power consumption has been growing In the first three quarters, Chinese
steadily YOY since April. cumulative power consumption grew by
Since May 2020, China’s monthly power 1.3 per cent YOY.
consumption has grown faster than the Assuming a 6.5 per cent YOY growth in
previous year except for July. Q4, China’s national power consumption
is expected to increase by around 2.6 per
cent YOY in 2020.
162 | Economy and the power sector
Q3 2020: Power sector – demand
Figure 13 | Breakdown of power consumption by industry
100%
14.2% 19.0% 18.7% 17.6% 16.6% 15.9% 15.6% 15.5% 15.7%
16.4% 16.1% 15.8% 15.9% 16.1% 16.4% 16.5%
18.9% 16.7%
Residential
Tertiary industry
68.3% 61.0% 63.5% 65.3% 66.5% 67.1% 67.1% 66.9% 66.5%
Secondary industry
Primary industry
0%
Jan-Mar
Jan-Dec
Jan-Feb
Jan-Apr
Jan-May
Jan-Sep
Jan-Jun
Jan-Jul
2019 2020 Jan-Aug
Source: CEC (2019 & 2020)
Figure 14 | Breakdown of power consumption by secondary industry as of September 2020
Industry, 98% of the secondary industry
Secondary industry, 66.5% of total
Manufacturing sector, 76% of industry
Four energy-intensive industries*，
56% of the manufacturing sector
Source: CEC (2020)
* Four energy-intensive industries include ferrous metal, construction materials, chemicals and non-ferrous metals
China’s power consumption structure is Working from home and virtual meetings
becoming increasingly service-oriented. are expected to remain common in the
Despite the coronavirus-caused post-coronavirus world, with profound
disruption, shares of both the service and implications for transport and power
the residential sector in the national consumption patterns.
power consumption mix have rebounded The secondary industry remains the
and are now above pre-pandemic levels. largest power consumer. Its four energy-
With YOY power demand growing by 26.5 per intensive sectors are key driving forces
cent in the first three quarters, the IT industry is underlying China’s ongoing economic
a key contributor to the power consumption recovery.
growth of the tertiary industry.
17Agora Energiewende | COVID-19 China Energy Impact Tracker
Q3 2020: Power sector - demand
Figure 15 | YOY growth of power consumption by key industrial sectors, 2019 vs. 2020
10%
3.4%
1.7% 2.2% 2.1%
0.9% 0.9%
0%
-1.0% -0.4% -0.6%
-3.2% -3.2%
-5.0% -4.4%
-5.7%
-10%
-18.9%
-20%
Four energy- Ferrous
Ferrous metal
Metal (Steel) Construction Chemical Non-ferrous Metals
Non-Ferrous metals
intensive industries materials
Q1 2019 Q1 2020 Q1-Q2 2019 Q1-Q2 2020 Q1-Q3 2019 Q1-Q3 2020
Source: CEC (2019 & 2020)
YOY growth of cumulative power the only sector with negative YOY
consumption by four key energy- cumulative power demand growth.
intensive industries turned positive in Q3. Non-ferrous metals is one of the sectors
Among the four energy-intensive least affected by the coronavirus.
industries, the chemical industry is so far
182 | Economy and the power sector
Q3 2020: Power sector – supply
Figure 16 | Breakdown of power generation by fuel type, 2020
Total Thermal Hydro Nuclear Wind Solar
30% 22.8% 23.2%
20%
11.3%
10% 5.3% 6.1% 7.1% 7.4% 4.0%
1.9%
0.2%
0%
-0.7% -0.6%
-10%
-20%
Jan-Feb Mar Apr May Jun Jul Aug Sep
Source: CEC (2020)
Figure 17 | YOY growth rate and share of renewable power generation, 2020
Growth of hydro Growth of wind Growth of solar
Share of hydro Share of wind Share of solar
30%
20%
10%
0%
-10%
-20%
Source: CEC (2020)
Variable renewables, wind in particular, lost production during the previous
have performed better during the months.
pandemic. Growth of hydropower generation has a
Despite a sizable addition of coal-fired strong positive correlation with its share
power capacity during the first half of in the national generation mix.
2020, the growth of thermal power Despite the better-than-expected
generation was negative in July, performance of both solar and wind,
indicating both weak demand and more non-hydro renewables have not
competition among different generation significantly increased their share in the
types. national power mix. This can be
Hydro generation increased sharply in explained largely by the relatively small
September, which could be largely share of solar and wind power supply
explained by preferential dispatch during within China’s gigantic power system.
the rainy season in order to make up for
19Agora Energiewende | COVID-19 China Energy Impact Tracker
Q3 2020: Power sector – supply
Figure 18 | Thermal and renewable capacity addition by month, 2020
Thermal Wind Solar
10000
7500
MW
5000
2500
0
Mar
May
Mar
May
Apr
Oct
Apr
Oct
Jan-Feb
Sep
Jan-Feb
Sep
Jun
Jul
Jun
Jul
Aug
Nov
Aug
Nov
Mar
May
Apr
Oct
Jan-Feb
Sep
Jun
Jul
Aug
Nov
Source: CEC (2020)
Figure 19 | Thermal and renewable capacity addition by year, 2015–2020
Thermal Wind Solar
80
60
41
GW
40 32
28 26 27
18
20 13 16
13
0
2015 2016 2017 2018 2019 2020 (as of September) 2019 (as of September)
Source: CEC (2015–2020)
As of September 2020, additions to that it must nearly double the amount of
greenfield power capacity seem to be added annual solar and wind capacity
disrupted less by the pandemic than by compared with the 2016–2020 period to
power generation and demand. achieve carbon neutrality.
Coronavirus-induced supply chain Additions of thermal power capacity are
disruptions, especially in overseas market, growing faster than those of variable
have had a negative impact on the renewables.
supply of key components and Starting in September 2020, incremental
equipment, delaying installation of some additions of thermal power capacity have
solar and wind projects until 2021. exceeded those of both wind and solar
Though China is the world’s largest by 11 per cent during the same period in
renewable market, researchers at 2019.
Tsinghua University recently estimated
202 | Economy and the power sector
Economy and the power sector
In Q3 2020, the growth rates of China’s consumption has generally followed economic
cumulative GDP and national power growth. A strong rebound was witnessed in August,
demand finally flipped positive. with a YOY growth rate of 7.2 per cent, exceeding last
year’s record. Similarly, the power demand growth in
The 4.9 per cent YOY economic growth in Q3 was the secondary industry also reached a record level
largely driven by a continued rebound in this year. More than 40 per cent of power
manufacturing and construction, together with a consumption by the secondary industry comes from
surge of foreign trade. The tertiary industry (i.e. four key energy-intensive sectors – ferrous metal,
services), where small- and medium-sized construction materials, chemicals, and non-ferrous
enterprises were hit the hardest, finally started to metal industries. Save for the chemical industry, the
catch up in Q3. power consumption growth in the other three
energy-intensive industries was positive in
Prior to the COVID-19 outbreak, with sustained efforts September.
on economic restructuring, the Chinese economy had
become more service-oriented. The share of the On the power supply side, generation is showing
secondary industry was surpassed by that of services increasing growth. Of them, hydro and wind
for the first time in 2012. The coronavirus-induced performed the best in Q3. While wind has enjoyed
economic downturn changed the pattern of growth. rapid growth since May, solar power encountered
The contribution made by services to economic growth seasonal fluctuation in the summer, including the
shrank to 30.5 per cent in the first three quarters, a unprecedented floods in southern China. By contrast,
level last seen in the 1990s. hydro power benefitted from the exceptionally rainy
season. A rapid YOY surge of 22.8 per cent in hydro
China’s National Bureau of Statistics (NBS) reports that power generation in September depressed thermal
the service production index has growing constantly power output by five percentage points in the
over the past few months. The contribution made by national power generation mix.
services to economic growth rose to 45.4 per cent in
Q3, up from 32.7 per cent in Q2. Though rebounding at In China’s coal-dominated power system, hydro is
a slower pace than the secondary industry, the service the most important source of clean power. Despite
sector is expected to pick up the pace. The Golden record wind power generation, its share in the
Week national holiday (early October) saw a surge in national power mix still pales in comparison with that
domestic tourism, which brought October’s service of coal power, and more thermal power capacity has
production index up to 2019 levels. The normalization been commissioned each month throughout the
of the service-oriented economy structure has pandemic.
reduced the carbon intensity of the Chinese economy.
In general, economic recovery in Q3 is less carbon- In sum, while the COVID-19 pandemic has created
intensive than in Q2. changes in the Chinese power sector, they have not
produced the structural adjustments needed for a
When it comes to the energy-intensive sectors, clean transformation of the power sector. As a result,
power consumption is always a revealing indicator. concerted efforts should be made by the Chinese
Due to increasingly high levels of electrification government to encourage investment in low-carbon
across the Chinese economy, monthly power technology.
21Agora Energiewende | COVID-19 China Energy Impact Tracker
3 | Fossil fuel
energy
1 | Coal 23–27
2 | Oil and natural gas 28–29
3 | Summary 30
223 | Fossil fuel energy
Q3 2020: Coal – supply
Figure 20 | Monthly YOY growth of coal production and imports, 2019 vs. 2020
40% 33.1%
22.4%
18.6%
20%
9.6% 6.0% -0.1%
0% -1.2%
-3.7% -0.1% -0.9%
-6.3%
-20% -6.6%
-19.7% -20.6%
-40%
-37.3% -38.3%
-60%
-80%
Jan-Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Coal production 2019 Coal production 2020
Coal imports 2019 Coal imports 2020
Source: NBS online database
Coal imports plunged by 37.3 per cent China’s newly announced “dual
YOY in August 2020, followed by a more circulation” approach tends to favor
pronounced dive in September and domestic supply.
October. The major driving forces were as Rising China-Australia trade tensions:
follows: China's coking coal imports from Australia
Restrictions imposed on coal imports slumped in October to 26 per cent of
since May have not been eased. total imports, compared with 30 per cent
in September and 78 per cent in March.
23Agora Energiewende | COVID-19 China Energy Impact Tracker
Q3 2020: Coal – demand
Figure 21 | Quarterly coal consumption, 2019 vs. 2020
Q1 Q2 Q3 Q4
10% 1.200
5% 1.100
0% 1.000
Mt
2.3% 1.3% 2.2% 3.8% 2.0%
-5% 5.7% 5.2% 900
-5.3%
-10% 800
2019 YOY growth rate 2020 YOY growth rate Authors’ estimation
2019 (right) 2020 (right)
Source: Authors’ calculation and estimation based on data from NBS
Figure 22 | Cumulative energy and coal consumption in 2020
Q1 Q1-Q2 Q1-Q3 Q1-Q4
4% 2.0%
2% 0.3% 0.9%
0%
-2% -0.2%
-4%
-6%
-5.2% -5.3%
Energy consumption Coal consumption Authors' estimation
Source: Authors’ calculation and estimation based on data from NBS
Monthly coal consumption exceeded 2019 We estimate that national energy and
levels in Q2 and has continued to grow coal consumption will see positive
ever since. growth in 2020.
Cumulative coal consumption in 2020 To reverse the upward coal demand
flipped positive by the end of Q2. trajectory over the past several years,
National coal consumption in the first China must keep the YOY growth rate of
nine months exceeded the levels of the national coal consumption in Q4 below -2
same period last year. per cent, which seems impossible.
In the first three quarters of 2020, YOY Our projections come with the caveat
growth rates of national coal demand are that statistical reporting for coal will not
estimated to be -5.3, 5.7, and 5.2 per cent, undergo significant revision in the near
respectively. future. Nevertheless, as suggested by the
Q2 has been the most carbon-intensive first issue of this serials of trackers, we
quarter by far, with a YOY growth rate of expect that NBS needs to substantially
coal consumption more than four times adjust China’s historical coal statistics
that of 2019 levels. again.
243 | Fossil fuel energy
Q3 2020: Coal – demand
Figure 23 | Monthly thermal power generation, 2019 vs. 2020
900 9.0% 10%
800 8%
700 6.2% 6%
5.4%
600 4%
-0.7 2%
500 1.2%
TWh
0.2% 0%
400
-2%
300 -4%
200 -6%
100 -7.5% -8%
-8.9%
0 -10%
Jan-Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Thermal power generation 2019 Thermal power generation 2020
YOY growth rate 2019 (right) YOY growth rate 2020 (right)
Source: CEC (2019 & 2020)
Figure 24 | Monthly YOY growth rates of power consumption and thermal power generation, 2020
10%
5%
0%
-5%
-10%
Jan-Feb Mar Apr May Jun Jul Aug Sep
YOY growth rate of power consumption 2020
YOY growth rate of thermal power generation 2020
Source: CEC (2020)
Since April, China’s thermal power wider than that of national power
generation has exceeded 2019 levels for demand, possibly because more and
every month except September. more grid operators prefer the flexibility
Thermal power generation generally of coal-fired power plants so as to
follows power demand. But the accommodate more variable renewables.
amplitude of thermal power generation is
25Agora Energiewende | COVID-19 China Energy Impact Tracker
Q3 2020: Coal – demand
Figure 25 | YOY output growth of selected coal–intensive industrial products in 2020
10 types of non-
Cement Crude steel ferrous metals Ethylene Coke
20%
10.90% 12.6%
10% 8.40% 6.40% 7.3%
3.1% 4.50% 3.10% 5.6%
2.2% 2.6%
0%
-10% -4.30% -5.50% -4.2%
-20%
-30%
-29.5%
-40%
Jan-Feb Mar Apr May Jun Jul Aug Sep
Source: NBS online database
Figure 26 | Downstream demand-side recovery of steel and cement manufacturing in 2020
Steel Steel & cement
General Special
equipment equipment Automotive Fixed asset Infrastructure Real estate
manufacturing manufacturing manufacturing investment investment investment
10% 5.1% 4.4%
2.6% 6%
1% 0.2%
0%
-10%
-20%
-30%
2020 Q1 2020 Q1-Q2 2020 Q1-Q3
Source: NBS online database, NBS (2020)
Monthly output growth rates of selected The reduction of coking coal output in the
key coal-intensive industries all turned first seven months is inconsistent with
positive in Q3. Among them were the the steel production trend. The continued
ethylene and coke manufacturing decline of coking coal output could be the
industries, which saw continued output outcome of policy enforcement in key
contraction in the first half of 2020. provinces as part of supply-side reform,
As of September 2020, the growth rates which might contribute to another round
of key downstream sectors of steel and of coal statistical under-reporting across
cement manufacturing all turned positive. China.
263 | Fossil fuel energy
Q3 2020: Coal – demand
Figure 27 | Monthly output and inventory of crude steel
100
90
80
70
60
50
Mt
40
30
20
10
0
Sep 19 Okt 19 Nov 19 Dez 19 Jan 20 Feb 20 Mrz 20 Apr 20 Mai 20 Jun 20 Jul 20 Aug 20 Sep 20
Inventory of steel Output of crude steel
Source: National Development and Reform Commission (NDRC, 2019 & 2020)
Figure 28 | Quarterly output and YOY growth rate of cement, 2019 vs. 2020
Q1 Q2 Q3 Q4
0% 800
-4.8%
-5% -1.1% 700
-10% 600
-15% 500
Mt
-20% 400
-25% 300
-23.9%
-30% 200
YOY growth rate 2020 (cummulative) Cement output 2019 (right) Cement output 2020 (right)
Source: NBS online database
Steel inventories reached a record high in control measurements in Q1. Construction
March due to weak demand during the activities were interrupted again by
nationwide lockdown. unprecedented floods in the summer,
Since April, steel output has grown reducing demand for cement.
steadily and inventories have started to With the end of flooding season and the
fall again, indicating a rebound in recovery of construction activities, the
downstream demand. cement industry expects demand to
In the first three quarters, cumulative grow in Q4.
cement output was nevertheless lower The annual cement production growth
than 2019 levels. rate is expected to turn positive by the
The cement industry was hit hard by end of 2020.
27Agora Energiewende | COVID-19 China Energy Impact Tracker
Q3 2020: Oil and natural gas – supply
Figure 29 | Monthly YOY growth of oil production and imports, 2019 vs. 2020
60%
50%
40% 34.4%
30% 25.0%
19.5% 17.6%
20% 12.6%
10% 5.2% 4.5%
0.9%
0%
3.7% -0.1% 1.3% 0.7% 0.6% 2.3% 2.4%
-10%
-7.5%
-20%
Jan-Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Oil production 2019 Oil production 2020
Oil imports 2019 Oil imports 2020
Source: NBS online database
Figure 30 | Monthly YOY growth of natural gas production and imports, 2019 vs. 2020
30%
14.3% 12.7% 13.2%
15% 11.5%
8.0% 11.2%
7.6%
4.2% 11.3% 4.8%
2.8% 1.3%
0.3% 5.5%
0% 3.7%
-6.4%
-15%
Jan-Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Gas production 2019 Gas production 2020
Gas imports 2019 Gas imports 2020
Source: NBS online database
Oil imports started to fall from their With the heating season approaching, the
record high in June. surge in natural gas demand is expected
Monthly YOY growth rate of oil imports in to be met with growth in domestic
Q3 is still higher than similar level in 2019. production as well as overseas imports.
283 | Fossil fuel energy
Q3 2020: Oil and natural gas – demand
Figure 31 | Quarterly oil demand in 2019 and 2020
1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20
16
Million barrels per day
14.6 14.9
15
14.3
14 14.1
13.9
13 13.5
12
11
13.1 13.7 14.5 12.7 13.7 14.1
10
2019 annual 2020 annual
OPEC IEA adjusted* US EIA
Source: OPEC (2020), IEA (2020), and U.S. EIA (2020)
*Data was adjusted by authors based on IEA’s Oil Market Report – September 2020
Figure 32 | Estimated apparent natural gas consumption in 2019 and 2020
35 20%
29.65%
30 25.8% 25.95% 26.47% 24.7% 24.6% 25.62% 25.08% 15%
25 23.05%
9.1% 10%
20
bcm
8.9%
15 3.4% 3.8% 5%
10 4.0% 3.9% 2.4% 0%
5 0.6%
-1.9%
0 -5%
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov
2019 2020 YOY growth rate 2019 (right) YOY growth rate 2020 (right)
Source: NDRC (2019 & 2020), authors’ calculations based on NDRC data
Oil consumption in Q3 rebounded, China’s oil stockpiling reporting.
reaching 2019 levels. Natural gas consumption has steadily
Estimations by OPEC, IEA, and U.S. EIA all increased, and is expected to be the fossil
expect China’s oil consumption in Q4 to fuel with the fastest annual growth in
exceed 2019 levels. 2020.
Estimates for annual oil consumption in China Natural Gas High Quality
2020 ranges from -4 per cent YOY (OPEC) Development Report (2020) projects
to slightly higher than 2019 (IEA). The national natural gas consumption in 2020
wide range indicates the importance of to expand to 320 billion cubic meters
further improving the transparency of (bcm).
29Agora Energiewende | COVID-19 China Energy Impact Tracker
Fossil fuel energy
Against the current backdrop of difficult the worldwide economic slowdown. In general, China
international relations and in particular aims to find a balance between the international
the growing Sino-US trade tensions, the market and its domestic economy in order to
Chinese energy economy and its vast strengthen its resilience against external risks. As for
fossil fuel industry are facing an the energy sector, the “dual circulation” strategy
increasingly uncertain future. means more emphasis on energy self-reliance and a
pick-and-choose approach when it comes to
In the supply segment, cumulative national coal selecting trading partners.
output during the first three quarters has already
returned to 2019 levels. By comparison, amid rising In the demand segment, continuous growth in coal
concerns for energy security, Chinese authorities consumption accompanied the economic uptick in
have increasingly favored domestic oil and natural Q3. We estimate that coal demand growth in Q3
gas production, leading to a 1.7 and 8.7 per cent YOY slowed relative to that of Q2. Over the first three
increase of oil and natural gas output, respectively. quarters, cumulative national coal consumption was
estimated to be higher than in 2019, while oil
In the energy trade segment, monthly coal imports consumption is still recovering. NBS might report
have been declining as China has favored domestic either a YOY demand growth or contraction for coal
production, leading to a 4.4 per cent reduction of and oil in 2020, the actual numbers are rather
cumulative coal imports during the first three uncertain to tell, and will largely depend on China’s
quarters. By contrast, China, attracted by depressed real oil stockpiling levels and efforts made by NBS to
international oil prices, has imported 420 Mt of crude fix inconsistencies in statistical reporting for coal.
oil during the same period, the equivalent of 17.6 per Otherwise, the discrepancy between supply- and
cent YOY growth. Meanwhile, cumulative natural gas demand-based estimations of China’s national coal
imports reached 73.7 Mt, 3.7 per cent higher than in consumption in recent years cannot be easily
2019. resolved. By contrast, national natural gas
consumption in 2020 is estimated to grow by around
China’s “dual circulation” strategy, announced in 4 per cent YOY.
May, is meant to hedge against deglobalization and
304 | Concluding
remarks
31Agora Energiewende | COVID-19 China Energy Impact Tracker
Concluding remarks
The rapid spread of the coronavirus could make 2020 While the future of energy and climate policy action
a pivotal year in history. The effects of the pandemic looks bright in the long run, China’s economic
extend far beyond public health and economic recovery nonetheless gives some cause for concern in
development. It has sent shock waves around the the short term. The service sector shrank YOY in both
world, roiling national governments, international Q2 and Q3, while carbon emissions rose rapidly along
relations, social and culture coherence, and energy with coal demand, with the secondary industry
and climate policy. driving the economic rebound. To reverse the upward
coal demand trajectory over the past several years,
For China, 2020 is also particularly important as the China must keep the YOY reduction of national coal
last year that Beijing can take stock of its 13th FYP consumption in Q4 at -2 per cent at least, which
targets. Furthermore, 2020 will be the baseline year seems impossible. In other words, the climate benefits
for setting new targets for the 14th FYP. that China has seen due to the coronavirus pandemic
have been short-lived.
China’s prompt and relatively strong economic
rebound starting in Q2 is widely expected to make the China can still make a real difference in energy and
country the only major economy to see positive climate policy during the 14th FYP period. Above all,
economic growth this year. But how the Chinese China’s 2060 carbon neutrality goal is a powerful
economy rebounds – and what energy and climate impetus in triggering structural changes and is
decisions China makes – will have profound expected to make the 14th FYP for energy and climate
implications, not only for China’s energy transition more sustainable. For example, the 14th FYP target for
but also for the global climate agenda. coal-fired power capacity, which Beijing plans to
release in the winter of 2021/2022, is expected to be
On September 22, Chinese President Xi Jinping lower than it would have been without the carbon
announced that China aims to reach peak national neutrality pledge.
carbon emissions before 2030 and achieve carbon
neutrality before 2060. While the climate policy Another important decision by the Chinese
community has welcomed the news, it is still unclear government is its “dual circulation” economic
how China’s pledge will be translated into decisive strategy. Coupled with Beijing’s rising anxiety over
short-term climate actions. energy security, the strategy has profound
implications for China’s energy policy, especially
Nevertheless, there is reason to be optimistic. As the when it comes to domestic supply. China’s monthly
world’s largest clean-energy market, the country coal imports have decreased significantly since May
accounts for more than one-third of the global – a reflection of Chinese decision-makers new
installed wind and solar capacity and nearly half of preference for domestic energy.
global electric vehicles. Moreover, China’s impressive
record of scaling up clean-energy technologies in the Disruptive changes are often years in the making, but
past means that its net-zero emissions pledge is timely steps in the right direction are certain to help
likely to further boost the world’s low-carbon shorten the time needed for the Chinese economy to
revolution. For instance, if China raises its hydrogen depart from its carbon-intensive path. Consequently,
economy ambitions, the EU, the U.S., Japan, South economic recovery and the green transition must go
Korea, and other major advanced economies will in all hand in hand if China is to pursue both economic
likelihood follow suit in order to maintain their prosperity and environmental integrity.
competitive position in the global economy.
324 | Concluding remarks
As the turbulent Year of the Rat approaches its end, optimism and concern. The roll-out of coronavirus
preliminary numbers show that the Chinese energy vaccines and the inauguration of President-elect Joe
economy posted an annual growth of 2 per cent YOY Biden next year could partly reverse the
in GDP, 1.8 per cent YOY in primary energy deglobalization trends of 2020. And a less contentious
consumption, and 2.6 per cent YOY in power demand. U.S.-China relationship coupled with America’s
Not surprisingly, the upward trajectory of China’s return to the Paris Agreement is likely to help move
national carbon emissions has also continued in the global energy transition and climate agenda
2020, unlike most other parts of the world, which are forward, leading to renewed enthusiasm for
expected to see sizable reductions in emissions. international cooperation on issues of mutual interest
and global significance. Hopefully, the result will be
When it comes to creating a better world in the more integration instead of disengagement between
coming years and decades, there is reason for both China and the rest of the world.
33Agora Energiewende | COVID-19 China Energy Impact Tracker
5 | References
345 | References
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199/08-A-2020/EN
About Agora Energiewende
Agora Energiewende develops evidence-
based and politically viable strategies for
ensuring the success of the clean-energy
transition in Germany, Europe and the rest
of the world. As a think tank and policy
laboratory we aim to share knowledge with
stakeholders in the worlds of politics,
business and academia while enabling a
productive exchange of ideas. Our
scientifically rigorous research highlights
practical policy solutions while eschewing
an ideological agenda. As a non-profit
foundation primarily financed through
philanthropic donations, we are not
beholden to narrow corporate or political
interests, but rather to our commitment to
confronting climate change.
Agora Energiewende is a joint initiative
of the Mercator Foundation and the
European Climate Foundation.
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