BEIJING – China is under-performing on one of its main climate goals – cutting the amount of energy needed for economic growth.

Getting back on track is likely to be a focus at the National People’s Congress that starts in Beijing this week. But to do so will require an ambitious target to reduce energy intensity for 2024. While a change to how the target is calculated will make it easier to reach, effectively calibrating economic and environmental objectives remains one of the biggest challenges facing policymakers. 

In its five-year plan that began in 2021, China set out to reduce the amount of energy consumed for each unit of gross domestic product (GDP) by 13.5 per cent. When it announced the aim, the mathematics is simple – energy used and GDP are calculated in the government’s annual statistical bulletin, so simple division was all that was needed to arrive at a ratio for energy intensity.

But the rules were changed in late 2022, after global energy costs soared and China had suffered a series of embarrassing power outages. Neither renewables nor any energy source used as a feedstock – such as coal converted into chemicals – would be counted.

The impact became clear in 2024, the first in which the new formula was used in the annual bulletin. Energy consumption jumped 5.7 per cent, more than the 5.2 per cent increase in GDP, so energy intensity should have risen. Instead, the new maths showed China reporting a 0.5 per cent drop. 

The move doesn’t completely exculpate China from its short-term climate goals. The five-year plan also includes a goal of reducing carbon emissions per unit of GDP by 18 per cent, which is unaffected by the new calculation. China’s emissions intensity was basically unchanged in 2023, according to the bulletin.

Sharp reductions

But both measures of intensity are still tracking well below Beijing’s targets, indicating it will need sharp reductions by 2025 to meet them, according to the Centre for Research on Energy and Clean Air (Crea).

Committing to hit the goals could have a big impact on President Xi Jinping’s international climate pledges, making it “more likely that China’s CO2 emissions will peak before 2025 – far earlier than its target of peaking ‘before 2030’,” Crea said.

That has implications for China’s economic growth targets, and how it decides to meet them, which will be the main focus of the party congress. Too high a target and the promise of a massive burst of carbon-heavy infrastructure investment, for example, would be difficult to square with cutting energy and emissions intensity.

ANZ Group Holdings thinks that economic concerns may need to give way. The bank expects Chinese growth to be lowered to 4.5 per cent to 5 per cent, from 5 per cent in 2023, accompanied by an aggressive 4 per cent cut to the energy intensity target, according to a note last week.

On the wire

China is set to announce its 2024 growth target and outline its strategy for supporting the slowing economy at the nation’s most high-profile annual political gathering this week.

China’s trade data for the first two months of 2024 are likely to show small year-on-year expansions in imports and exports, buoyed by favourable base effects.

China would be barred from buying oil from the United States’ emergency stockpiles under a provision included in must-pass government funding legislation unveiled on March 3. BLOOMBERG