China’s Slippage on Energy Targets Puts Climate Goals at Risk
(Bloomberg) — For nearly two decades, China has graded the economy by monitoring the amount of energy it consumes to deliver growth. That is set to end this year — far short of official targets.
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Power demand has been increasing at a hefty pace thanks to expanding manufacturing of everything from metals and petrochemicals to solar panels and electric vehicles, plus other growing contributors, like air conditioning and data centers — even as construction and other traditional industries slow.
The current five-year plan calls for energy use per unit of gross domestic product to fall 13.5% by the end of 2025. If Beijing does end up hitting that target, it will be because it became easier to achieve, after the definition of what counts as energy was narrowed.
There are myriad reasons for China’s slippage, from a push on exports to help the economy recover from the pandemic, to an emphasis on high-end manufacturing. It illustrates an economy that is still struggling to rebalance and transition to new growth drivers.
A second target related to carbon intensity has not done much better. While emissions per unit of GDP fell 3.4% in 2024, the National Bureau of Statistics said Friday, the lack of success in previous years means an historic decline is required in 2025 to deliver an 18% cut from 2020 levels.
The implications of the failure cut across policy areas, from climate targets to industrial profitability. As the government gathers in Beijing next week for the annual National People’s Congress, one key question for its leaders is whether they’re willing to force China back onto a more efficient growth track.
Energy and emissions intensity targets are among the most prominent signals Beijing sends to reinforce its longer term objectives of peaking emissions by 2030 and reaching net zero by 2060. China, the world’s largest greenhouse gas emitter, has remained steadfast in those goals, even as the US under President Donald Trump begins to undermine global efforts to fight climate change.
“The 2025 targets are going to be very hard to achieve,” said Belinda Schäpe, an analyst at the Centre for Research on Energy and Clean Air in London. “The pressure is really going to be on to deliver something more in the next five years.”
Beijing began assessing energy intensity in 2006. Emissions intensity was added five years later. The idea was to steer the economy in ways that would increase society’s wealth without destroying the environment or depleting natural resources. So far, those targets have been hit.
Intensity reductions can be made by more efficient production methods, or by shifting the economy to areas that use relatively less energy, like technology and services.
That’s been a problem in recent years. Tech hasn’t expanded as much as it might because of political pressures, while consumer spending has been depressed since the Covid lockdowns. That’s left economic growth reliant on industrial sectors like petrochemicals and manufacturing.
“Since the beginning of this decade, there’s this view that, politically, sectors providing hard materials and industrial products have been given the priority,” said Li Shuo, director of the China Climate Hub at the Asia Society Policy Institute. “All those sectors deliver GDP growth but they also consume a lot of energy and emit a lot of carbon.”
But much of that growth has come at the expense of profitability. Overcapacity across several sectors, from solar panels to steel, has also led to falling prices, which reduces the value of goods even though it takes the same amount of energy to make them.
The upshot is, assuming 5% GDP growth, hitting the five-year target would require overall emissions to drop by about 6% in 2025, according to Asia Society forecasts.
That would be the largest decline since China’s industrial rise began in the 1990s, made even more challenging by the country’s continued reliance on coal for its power plants, steel mills and cement factories.
Shifting Goalposts
The energy intensity goal is more confusing. In late 2022, China changed its calculation so that it no longer took account of renewables or energy used as industrial feedstock, such as coal converted into chemicals. That reduced how much energy was counted, making the target easier to reach.
“It’s a classic example of bureaucratic creativity,” Asia Society’s Li said. “If you’re having a hard time meeting a goal, then change the definition of the goal.”
For example, in 2023 total energy consumption grew 5.7%, faster than GDP growth of 5.2%. But energy consumption per GDP under the new formula actually fell 0.5%.
Figures for 2024 show a similar story. Energy consumption rose 4.3% last year, versus a 5% rise in GDP, according to the statistics bureau. But by the new measurement, energy consumption per unit of GDP fell by a robust 3.8%.
Starting next year, energy intensity will no longer be measured in any case. Instead, for the 15th five-year plan from 2026, the main objective will be reducing emissions intensity, with a secondary goal for overall emissions. From 2031, overall emissions will become the primary target, with emissions intensity secondary.
Backsliding over the current period means China’s leadership will need to set more aggressive targets in the next five-year plan to meet its commitments. Take the goal set at the United Nations of reducing emissions by 65% by 2030 from 2005 levels. At the current rate, that would require at least a 22% contraction in emissions intensity from 2026 to 2030, said CREA’s Schäpe.
There are signs the government wants to change course, from official comments about reining in overcapacity to re-embracing its tech giants. But with the economy so fragile, it’s unclear how hard it’s willing to push.
“There’s still pressure for the government to hit these targets,” said Schäpe. “The question is, is that something they’re willing to commit to?”
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