China’s coal conundrum

China’s revised energy data shows a commitment to greater transparency, say policy specialists
<p>A coal-fired power plant in China&#39;s Henan province (Image by&nbsp;V.T. Polywoda)</p>

A coal-fired power plant in China's Henan province (Image by V.T. Polywoda)

The New York Times has recently carried two important stories on China’s coal consumption, indicating that the situation is even more serious than previously appeared to be the case. On November 3 the NYT carried a front page report that China has revised its estimates of how much coal it has been burning, and concluding that its carbon emissions have been higher than had been previously reported and assumed.
This was then widely taken up, with the emphasis always on the “new fact” that China’s coal burning is higher than previously reported. Then on November 11 the NYT carried a second story concerning a glut of new coal-fired power plant approvals. This second story followed similar reports from both Deutsche Bank and from Greenpeace East Asia. Given the global significance of energy data from China, we explore some of the causes and implications of these developments.
Firstly, let’s consider the revision of China’s coal burning estimates from past years. It is true that China’s statistical agencies have revised upwards their data for primary energy consumption (measured in terms of coal-equivalent) and for raw coal consumption. These revisions were contained in the China Energy Statistical Yearbook 2014, which was published on August 1 2015, and some of the revised data first appeared in the China Statistical Abstract 2015 which was issued in May 2015 without fanfare by the Chinese or any international comment by the NYT or anyone else.
According to the National Bureau of Statistics (NBS) of China, the revised data are based on the results of the 2013 National Economic Census which better captured economic data from the country, especially data from small and medium-sized enterprises. This was only the third such census carried out since 1949 after the country decided to combine previous sector-based censuses into comprehensive national economic censuses. The first National Economic Census was carried out in 2004 and the second one in 2008.
Several questions have been the subject of speculation in the international media, such as, the NYT, as well as, the research community since the new data emerged regarding the discrepancies between the original and revised energy data.
First, did the Chinese government deliberately conceal or fabricate the energy data previously?  Second, what are the implications of the new data for statistical analysis of Chinese emissions including the extent to which previously published analysis requires revision? And third, to what extent do the new data assist in understanding the extreme level of pollution threatening China, especially its cities which have suffered from yet another wave of smog over the past few days.
 ‘Hidden’ data
We suggest the data discrepancy was more likely to be a result of poor quality control in collecting and compiling energy data at the national, provincial and local levels, an issue that has long been noticed by both Chinese and international researchers and is widely viewed as a systemic problem within Chinese data collection.

On the positive side, however, the revision is a strong indication that the Chinese government is prepared to let the less favorable data be published without hindrance.

The Chinese government seems prepared to release data more clearly indicative of the dimensions of the problem of curbing greenhouse gas (GHG) emissions. One could think of this as having the effect, for example, of strengthening both domestic and international forces for curbing GHG by revealing that pollution levels were higher than previously reported even as renewables provided an increased share of energy production.

Our view on this is reinforced when one considers that the same revision of energy data also carries an upward estimate of non-fossil energy consumption (in terms of coal-equivalent), of a magnitude in fact greater than that for coal in percentage terms.

This means that had the Chinese been ‘concealing’ their bad coal consumption data, by under-reporting levels of coal consumption, they would at the same time have been under-reporting their usage of renewable energy sources – hardly plausible if political correctness had been the goal. It is interesting that the NYT and other Western reports focused exclusively on under-reported coal consumption and ignored the underreporting of renewable sources.

The substantial revision of energy use data in those energy-intensive industries would likely be a result of the previous underreporting of capacity additions in those industries.  For example, the documentary ‘Under the Dome’ released early this year suggests that a large number of small steel mills and coal mines in China were built without official approvals. Consequently they are unlikely to report their energy usage properly, if at all. On the other hand, with the enforcement of environmental laws as well as the economic slowing down, many of those industries recently faced significant declines. In the steelmaking industry, for example, one of us has argued that the crisis facing the industry reflects a structural change, and that is has passed its production peak.

Coal consumption
The real interest of the NYT, and of everyone else, is in the upward estimates of raw coal consumption, which we indicate in Fig. 1. This shows raw coal consumption in its original form as the blue line, and revised coal consumption data as the black line. The increased estimate of raw coal consumption for 2012 adds up to a figure of 4.1 billion tonnes – as compared with the original figure of 3.5 billion tonnes of raw coal consumption. This is how the NYT arrived at its figure of an upward revision of 600 million tonnes of coal burnt in the same year (the difference between 3.5 Gt and 4.1 Gt). Thus we agree with the NYT on the scale of China’s correction for its coal consumption.

Fig. 1. Revised coal consumption data (in tons) in China and the 2020 target

Source: authors based on China Energy Statistical Yearbook 2013 and China Energy Statistical Yearbook 2014. Note that the 2014 figure is estimated by the authors based on a statement in the 2014 National Economic and Social Development Statistics Bulletin released in Feb 2015 that “the coal consumption in 2014 decreased by 2.9% from the 2013 level”. While the statement needs to be taken with caution given the revision of the energy data, we believe the information is still indicative especially given that the compilation of the data in the Bulletin appears to have taken the latest results from the 3rd Census into account.

Keeping on track

The official target for coal consumption which has been set at a maximum of 4.2 billion tonnes by 2020, would still seem to be eminently achievable if the falling trend continues.

In closing, we have always emphasised that China’s energy production and consumption patterns with the current dependence on fossil fuels (largely coal) is a large ship that will take considerable time to turn around. But turning is what the ship is doing – as disclosed by the greening at the margin, where net additions to generating capacity, to new investment and to electricity generated all reveal green sources outranking the black. China has every incentive to pursue such a course grounded in enhancing its energy security and in reducing levels of particulate pollution that create unbearable smog.

The new data on China’s past coal consumption levels mean that the black picture we have always painted has been even blacker than we imagined. But it would be quite mistaken to project these data revisions as meaning that China has been ‘found out’ in seeking to minimise its past coal consumption.

On the contrary it reveals a greater openness and preparedness to allow the data to be published, irrespective of what it shows; indeed the new data encourages greater pressure to be brought to bear on major GHG-emitting industries to reform their practices. And we note that the new data reveal not only that coal consumption was underreported – but also that dependence on renewable sources (hydro, wind, sun) has been under-reported as well – a boon for China and the world.

It is China’s preparedness to be more open and transparent in its energy data that gives us greater confidence that the reported trends towards a greening of the system are real trends and not just statistical artefacts.