China’s emissions fall when the economy is hit by the downturn in real estate

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Carbon dioxide emissions in China have decreased for the first time since last year’s shutdown, the latest signal of the downturn in the real estate sector and energy shortages have hit industrial demand in the world’s second largest economy.

Emissions decreased by about 0.5 percent in the three months to the end of September, according to data published by Carbon Brief, a climate research and news service.

“The reasons [for the decline] is the cut in rampant mortgages, which results in a sharp reduction in steel and cement production and sky-high coal prices, says Lauri Myllyvirta, analyst at the Center for Research on Energy and Clean Air, an independent research group based in Helsinki.

However, Myllyvirta also believes that the recent reduction in emissions from the world’s biggest polluters “could mark a turning point and an early peak in China’s emissions” – years before Beijing’s target for 2030.

The reduction in emissions during the third quarter of this year follows the sharpest increases in a decade as Chinese factories, construction and heavy industry roared back to life last year, riding on a wave of pandemic stimulus spending.

In early 2020, Chinese industrial activity came to a halt in response to the corona crisis that first erupted in Wuhan, causing emissions to fall.

China’s real estate sector, which is estimated to account for as much as a third of total economic activity, has been hit by a liquidity crisis. A connection of indebted developers – including Evergrande with $ 300 billion in debt – folds on bankruptcy, raises concerns about systemic risks and financial contagion.

Beijing eases credit controls to stop the sector from collapsing. Nevertheless, there are few signs that such measures are encouraging a lasting recovery in industries such as steel and cement. And Carbon Brief data also suggested that downward trends would only get steeper in the last quarter.

The emissions trend also reflects China’s recent months coal consumption decreased in the midst of record high commodity prices and supply shortages.

Paralyzing energy deficiency led to power rationing over parts of the country, including the northeastern industrial areas and the high-tech manufacturing facilities in the south.

“One thing to watch out for is whether the industries that still see strong demand will increase production to make up for lost time when electricity rationing eases,” said Myllyvirta.

The country’s per capita emissions are about half that of the United States. But as the world’s plant accounts for about 30 percent of global greenhouse gases, Beijing’s emissions reduction plan is seen as crucial to winning the battle against climate change.

The data was released as the international debate is raging on China’s role in responding to climate change. President Xi Jinping has set a goal of carbon neutrality by 2060. The task is enormous, with fossil fuels accounting for 85 percent of the country’s energy mix.

At the UN COP26 summit in Glasgow this month, China, along with India, was criticized for weakening efforts to stop coal power and fossil fuel subsidies. Critics, including the US government, are urging Beijing to act faster.

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