Plus: New energy and emission statistics, and China’s changing approach to coal plants at home and abroad
“OBTAIN CALORIES AND PROTEIN FROM PLANTS,” China’s leader Xi Jinping said in a meeting on March 6 during the “Two Sessions.” Laying out his “comprehensive view on food security,” Xi listed food sources ranging from nature — forests, rivers, lakes, and seas — to bio-tech. He explicitly talked about developing bio-industries and obtaining calories and protein from plants, as well as from microorganisms.
Xi’s speech covered all three types of “new protein” (“alt-protein”): cell-based protein (“cultivated meat”), plant-based protein (such as “Beyond Meat”), and fermentation. According to Shanghai-based consultancy Lever Foods, the speech signals a shift from a food structure that “exclusively relies on animal products” for calories and protein to a higher-quality, more efficient, and cleaner food structure, which provides “enormous room” for innovation and entrepreneurship.
China has a long and widespread tradition of consuming soybean-based proteins, such as tofu and “vegan meat.” Meanwhile, Chinese people’s intake of animal protein has been steadily increasing (and is projected to continue doing so). In 2020, China consumed 26% of the world’s meat. Its per-capita meat consumption is now significantly higher than the world average — but still less than half that of the U.S.
In China, the alt-protein industry has only recently begun to be seen as a solution to food security and climate mitigation. Last year saw the publication of the first association standards on plant-based meat products (which are purely voluntary and do not have any legal power in China) and the first mention of “cultivated meat” and “future foods” in the government’s five-year plan on agricultural technology development.
The Good Food Institute, an advocacy group for alt-proteins, previously found “encouraging evidence” that suggests “Chinese leaders understand the massive benefits” of making meat from plants or cells. The institute also expressed that, if China can apply the same assertive approach to alt-proteins as it has done for clean energy, it could lead to a “dramatically safer and more efficient global food system.” (More on agriculture and climate here.)
In the last few years, international coverage of China’s meat consumption habits, trends, as well as its impacts on the environment and climate through the global supply chain, have triggered waves of heated discussion in China. For example, state-owned newspaper Global Times published an article last year that called such reporting “hypocritical,” considering the average Westerner still consumes more meat than the average Chinese person.
Surprisingly, Xi’s comments didn’t garner a lot of media attention. Among the limited coverage, Green Queen, a Hong Kong-based outlet that focuses on sustainability, put the speech in the context of ensuring food security in times of the African Swine Fever outbreak, the COVID-19 pandemic, and the war in Ukraine. Similar to the general strategy on securing energy supply, Beijing has repeatedly expressed its wish to increase self-reliance so that the “rice bowls of the Chinese people are filled with Chinese grain.”
New Emissions and Energy Statistics
HOW MUCH DID CHINA EMIT? A new dataset released by the International Energy Agency last week suggests China emitted 11.95 gigatons (Gt) of carbon dioxide in 2021, a 4.8% increase from 2020. IEA’s new estimate is higher than the 11.07Gt of emissions at a 4% increase rate as calculated by the Global Carbon Project, a widely cited emissions database, likely the result of a difference in methodologies. China has not published an official accounting of the country’s annual emissions since the “2014 Greenhouse Gases Inventory” but its most recent official statistics indicate a 4% increase in CO2 emissions in 2021. (More 2021 energy statistics here.)
DRIVING GLOBAL EMISSIONS REBOUND. China is the only major economy to increase its emissions both years since the start of the COVID-19 pandemic. IEA finds that the emissions increase in China “more than offset” the aggregate decline elsewhere over 2019-2021. As a result, global CO2 emissions in 2021 rebounded to a slightly higher level than in 2019.
BIGGER SHARE IN GLOBAL EMISSIONS. The IEA dataset also suggests that China accounted for nearly one-third of global CO2 emissions and 31% of global energy greenhouse gas (GHG) emissions — both 1.9 percentage point increases from 2019’s pre-pandemic levels. Before China’s emissions started to spike in the 1990s, the country was responsible for only 7.9% of global emissions, less than a quarter of today’s figure. Since 2005, it has been the world’s largest emitter.
COAL POWER PUSHED EMISSIONS HIGHER. IEA says coal — in particular greater coal use in the power sector — contributed 70% to the increase in emissions in China. Coal was “called on” to answer slightly more than half of China’s annual rise in electricity demand, resulting from “rapid GDP growth” and “additional electrification energy services.” China’s additional electricity consumption in 2021 — 10% more compared to 2020 — is equivalent to the total consumption in all of Africa, according to IEA. In 2021, China consumed 4.6% more coal and generated 8.6% more electricity from coal compared to 2020. (More 2021 energy statistics here.)
PER-CAPITA MILESTONE. Since 2020, the average Chinese person has started to emit more CO2 than the average citizen of all advanced economies, according to IEA. In 2021, per-capita emissions in China reached 8.4 tons of CO2. This figure is 40% lower than that for the U.S., and 40% higher than that for the EU. Over the past two decades, per-capita CO2 emissions in China tripled, while the average in advanced economies decreased by more than one-fifth. (Although China is the world’s largest emitter today and the second-largest since 1850, it doesn’t make it to the list of the top 20 cumulative per-capita emissions. Read more here.)
CARBON INTENSITY STILL ABOVE AVERAGE. Compared to 40 years ago, China now emits just a quarter of the CO2 to produce the same value of GDP. Despite such significant progress, China’s carbon intensity is still well above the world’s average, at more than twice the figure for the U.S. and three times the figure for the EU. IEA says China’s high carbon intensity is a result of its coal-heavy energy mix and industry-heavy economic structure. Last year, China pledged to lower its carbon intensity by over 65% by 2030 from the 2005 level.
FEWER FOSSIL FUEL IMPORTS. According to the National Bureau of Statistics, coal, crude oil, and natural gas imports in Jan-Feb 2022 decreased 14%, 4.9%, and 3.8% year-on-year, respectively. At the same time, the domestic production of all three fossil fuels accelerated. The increases in domestic coal and gas production cover the export decreases over the same period, but the oil balance shows a deficit. Though the exact causes are probably myriad, these changes fall in line with China’s national strategy on securing energy supplies — in other words, holding the control of energy supplies “in its own hands.” (More on how China balances climate ambition with energy security in last week’s newsletter.)
ENERGY-INTENSIVE INDUSTRIES RETREAT. In Jan-Feb 2022, electricity consumption grew by 5.8% year-on-year. The industry sector, which accounts for 61.3% of China’s electricity consumption, only consumed 3.6% more. In particular, electricity consumption from manufacturing grew by just 0.5%, and the most energy-intensive industries — building materials, ferrous metals, and non-ferrous metals — saw a negative increase in both electricity consumption and industrial output. Last year, these sectors also experienced a quarterly decline in energy consumption and terminated the fourth quarter of 2021 with a negative growth rate year-on-year. But overall speaking, the National Bureau of Statistics believes China’s economic recovery is “better than expected.”
Coal Policy Updates
COAL PLANTS GRANTED SECOND LIVES. According to financial magazine Caixin, two coal-fired power plants in northwest China’s Gansu province which have been shut down for years will resume operation this fall as “supporting units” to accommodate renewable energy. The province, which has one of the biggest wind and solar installations and one of the cleanest electricity mixes in China, plans to permit nearly 10 gigawatts (GW) of new coal power capacity to “adapt to the rapid development of new energy,” Caixin reports.
In 2020, non-fossil fuels generated half of Gansu’s electricity, almost double the national average. The province aims to quadruple wind and solar power generation and increase the share of non-fossil power generation capacity from 59% to 72% during the 14th five-year plan (14 FYP) period (2021-2025). It also plans to double its outbound electricity.
Like other electricity exporting provinces, Gansu struggles with inadequate regulatory capacity in its grid, leading to high curtailment rates of wind and solar electricity. State-run newspaper Economic Information Daily previously reported that if shelved and suspended coal power plants cannot go online on time, the province would face a 4.7 to 15.6GW gap in peaking regulatory capacity during the 14FYP.
China’s power system, like that of most countries, was designed for the predictable output of fossil fuel, nuclear, and hydropower plants, and requires upgrades to handle the emergence of renewable energy that cannot respond to changes in demand. One way to solve the problem is to match renewable facilities with flexible resources — such as retrofitted coal plants that can quickly ramp up or lower their output.
According to Caixin, one of the plants to be restarted has 660MW of power generation capacity. Though details are scarce, Caixin’s phrasing suggests the plant will operate at a floor capacity of 260MW, leaving space on the grid for 400MW of renewable energy.
Other ways to tackle this problem include changes to the supply side, to the demand side, as well as to the grid. For example, a recent paper concludes that compared to the “marginal improvements” in renewable utilization offered by retrofitting coal power plants, connecting larger power generation areas into so-called balancing areas and more dispersed renewable energy generation could best enhance grid flexibility in a future, renewable-dominant power system in China.
While the country is rapidly developing various solutions such as storage and interprovincial markets to improve grid flexibility, it has also decided to prioritize retrofitting, to transform its massive in-flexible coal power fleet into flexible generators that can accommodate variability in the “new power system.” (More content in a previous newsletter.)
The reopening of the two plants is unlikely driven by economic factors, but rather by the political priority of meeting the mandatory responsibility on absorbing renewable energy. An anonymous source told Caixin that the plants will “still lose money” after resuming operation, which was the reason why they were shut down several years ago in the first place. A series of technology upgrades to meet requirements on pollution discharge and power dispatch shall be carried out, at a price tag of 400 million yuan ($63 million) for one plant.
FINANCING FOREIGN RETROFITS. State-owned policy bank Export-Import Bank of China (Exim Bank) will provide financing for energy-saving and carbon-reducing technology transformations and upgrades for existing coal power plants abroad, Hu Xiaolian, the chairwoman of the bank, said in an interview with state wire service China News Agency during the recent “Two Sessions.”
Exim Bank is the second-largest public source of China’s global energy finance, after China Development Bank (CDB), the world’s largest development finance institution. According to a new policy briefing published this week, both banks made zero new commitments on energy development finance in 2021. This hasn’t happened in over two decades.
Hu confirms in the interview that the bank will no longer provide financial support for new coal power projects abroad, echoing Xi Jinping’s earlier announcement that “China will not build new coal-fired power projects abroad.” (For more context of the announcement, read my analysis here.)
She adds that China will continue increasing its financial support for green projects such as clean energy and ecological conservation. This, too, echoes comments by Xi that China would “step up support” for green and low-carbon energy development.
It is “promising” to see the bank “explicitly supporting the green ambitions” of the Belt and Road Initiative (BRI), the Green Finance & Development Center at FISF Fudan University wrote in a recent policy brief.
Hu’s statements have not yet been officially announced as bank policy, but they align with the new policy development outlined in the “2022 Plan on National Economic and Social Development.” The overarching planning document, adopted by the National People’s Congress last week, says China will “help” with the green and low-carbon transformation of energy-intensive and highly polluting facilities abroad, “such as coal-fired power plants.” (More context in last week’s newsletter.)
The article is written by Hongqiao Liu and edited by Kevin Schoenmakers. It was firstly published in the "Shuang Tan" newsletter on 17 March 2022.