China energy and emissions trends: August 2023 snapshot

The steel and cement industries are the largest CO2 emitters in China, when emissions from their electricity use are included. They are also bellwethers of real estate, infrastructure and other fixed asset investment which play an outsize role in Chinaʼs emissions and economy.

● Both blast furnace (coal-based) and electric arc steelmaking grew in July but electric arc has gained share.● Output of rebar and wire rod, mainly used in construction,remains muted and capacity utilisation has fallen to very lowlevels, indicating overcapacity in this part of the steel industry.

● Industrial electricity demand picked up on paper, accelerating from 2% year-on-year growth in June to 6% in July, but this is against 0% growth in July2022, rather than a sign of a major shift in trend.● Solar and wind power registered sharp increases and record output levels, while nuclear had a relatively weak month.● Hydropower output collapsed further (17% year-on-year in July) due to drought and pressure to save water for generation during peak demand season.● As a result of the hydropower collapse, coal and other thermal power increased sharply, by 7%.● The hydropower plunge will stop affecting year-on-year numbers next month, as the drought began in August 2022.

● Domestic coal output growth ground to a halt, continuing the slowdown and showing that the domestic coal mining push has run out of steam. Furthermore, domestic coal quality has declined, resulting in further demand for imports which jumped 67% in July.● Crude oil imports and oil products output continued to grow in July, driven by an increase in oil products demand (re-opening ofeconomy).● Fossil gas imports fell back to trend after a jump in June.

● The strong growth in EVs is making a dent in gasolinedemand for the first time. The share of EVs of all vehicles on theroad increased from 4.5% a year ago to 7.5% now, shavingapproximately 3%-points off gasoline demand growth.● The increase in output of oil products has been mostly drivenby diesel, which is used for freight and heavy vehicles.● Gasoline and kerosene have shown a modest rebound due tothe re-opening of the economy.

● Strong wind and solar installations continue, with a whopping 78 GW of solar and 23 GW of wind installed in January–June.● Hydropower and nuclear power additions have slowed after the jump in 2021–22.● Six new reactors were permitted in August, making progress to the target of having 30 GW under construction by 2025.● Commissioning of thermal (coal) power plants accelerated in May and June, with additions in the first half of the year close totopping 2016 record. This is due to coal power projects being started or restarted in 2020 entering operation, showing the urgent pace of construction.

● Solar power installations are led by Shandong, Hebei and Henan, which have ambitious rooftop solar policies (known as “whole-county distributed solar”), striving to meet rooftop solarinstallation targets by the end of 2023.● Inner Mongolia leads in wind development, aiming for full operation of its large-scale clean energy bases by year-end.● Thermal (coal) power additions accelerated in Inner Mongolia, Shaanxi, Anhui and Xinjiang, which are aiming to export power to eastern demand centres. However, eastern provinces have started a large wave of new coal power projects, leading to redundancy once plants a completed in a few years.

● Solar cell production in the past 12 months reached 454 gigawatts, growing explosively and predicting rapid growthin global solar power installations

● EV production continues to grow rapidly, with over 8 million vehicles produced in the past 12 months, representing more than 30% of all vehicles produced● Chinaʼs export volume of EV continues to soar, securing its position as global leader● Local governments issued a new round of policies supporting EV industry; central government rolled out EV promotion policy in rural areas

● Beijingʼs PM2.5 levels increased 19% year-on-year in the first half of 2023, putting the city at risk of violating the national airquality standards this year, after meeting them for the first time in 2021.● PM2.5 fell strongly in winter 2017–18 as a result of a last-minute push to meet national targets. Another campaign was carried outto clean up the air for the Winter Olympics in early 2022 but those gains were quickly undone. PM2.5 pollution has returned to2021 levels, indicating little progress at the moment.

● Ozone pollution shows a long-term increasing trend with little sign of success in curbing the growth. China has not set targets for ozone concentration, hoping that policies for controlling precursor pollutants would do the trick.

● North and Northwest China had the worst PM2.5 levels in July.Tianjin, the megacity neighbouring Beijing to the east rose to the top.● The worst ozone levels were still measured in the capitals ofHebei, Tianjin, Shanxi and Shandong, all in the Beijing keyair pollution control region.● Lanzhou, capital of Ningxia, ranked worst in NO2 levels.

● Emissions of PM2.5-forming pollutants increased across the Beijing region, including Beijing itself, and in northwestern and northeastern China.● Shenyang, Changchun, Harbin and many other northern cities saw increases in ozone-forming emissions

Our analysis projects the influence of weather conditions on air pollution levels using a machine-learning model trained on actual data for each city. The variation that cannot be explained by weather conditions is attributed to changes in emissions.

● Industrial output, power generation and power capacity additions, as well as fuel imports and exports are based on Chinese government data, through Wind Financial Terminal. Some of the data is not included in public releases.● Measured air quality data is compiled from Chinese government air quality monitoring stations. Weather-controlled air quality is derived from CREAʼs deweathering algorithm.