The Guardian is celebrating that according to official figures, Chinese coal consumption fell in 2014. But is this fall in consumption structural, or is it simply a symptom of China’s growing economic problems?
China’s coal peak hailed as turning point in climate change battle
Study by economists say achievement by world’s biggest polluter may be a significant milestone, rather than a blip.
The global battle against climate change has passed a historic turning point with China’s huge coal burning finally having peaked, according to senior economists.
They say the moment may well be a significant milestone in the course of the Anthropocene, the current era in which human activity dominates the world’s environment.
China is the world’s biggest polluter and more than tripled its coal burning from 2000 to 2013, emitting billions of tonnes of climate-warming carbon dioxide. But its coal consumption peaked in 2014, much earlier than expected, and then began falling.
The economists argue in a new paper on Monday that this can now be seen as permanent trend, not a blip, due to major shifts in the Chinese economy and a crackdown on pollution.
“I think it is a real turning point,” said Lord Nicholas Stern, an eminent climate economist at the London School of Economics, who wrote the analysis with colleagues from Tsinghua University in Beijing. “I think historians really will see [the coal peak of] 2014 as a very important event in the history of the climate and economy of the world.”
The team’s analysis, published in the Nature Geoscience journal, concludes that China’s coal peak “may well be an important milestone in the Anthropocene and a turning point in international efforts to [cut] the emissions of climate-altering greenhouse gases”.
The abstract of the study;
Slowing GDP growth, a structural shift away from heavy industry, and more proactive policies on air pollution and clean energy have caused China’s coal use to peak. It seems that economic growth has decoupled from growth in coal consumption.
Read more (paywalled): http://nature.com/articles/doi:10.1038/ngeo2777
The problem with the claim that growth has decoupled from coal, is China currently appears to be on the verge of a debt implosion – all that “growth” may have been an illusion created by the excessive availability of cheap credit.
Burbank Sees U.S. Recession, China Devaluation Within Year
China to enter liquidity crisis, he tells clients in letter
`We think this is a time full of peril and repositioning’
John Burbank, the hedge fund manager who in 2015 warned of a China-led global economic slowdown, said he expects a “major” Chinese currency devaluation and a U.S. recession within the next year as debt levels rise and central banks are stymied on monetary policy.
China will enter a liquidity crisis with the largest sum of non-performing debt in the world, Burbank, the founder of $4.1 billion Passport Capital, said in a May 5 investor letter. The U.S. economy will contract at a time when the Federal Reserve has the fewest options in history to cut interest rates, he said.
“For both it will be a normal ending after decades of extending their booms,” Burbank said in the letter obtained by Bloomberg. “We think this is a time full of peril and repositioning that heralds either the start of a new market reality, i.e. inflation and too much liquidity, or the beginning of the liquidation.”
Burbank, who bet against U.S. housing a decade ago, is among the U.S. macro investors to sound the alarm on global markets. Billionaire Stan Druckenmiller said last week that the U.S. equities bull market has “exhausted itself” and George Soros contends China resembles the U.S. slump of 2007-08. Sluggish global growth is calling into question the effectiveness of central-bank stimulus especially in the U.S. where investors are concerned the Fed will be slow to tighten monetary policy.
How did this disastrous situation arise? China seems to have been running its domestic interest rates way too low, for a very long time, which in turn appears to have created the mother of all asset bubbles. In a low interest rate environment, people who make bad decisions don’t lose their shirts, they just borrow more money. An illusion of economic growth and prosperity, built on the back of the personal savings of China’s workers.
There’s a dangerous bubble growing in China’s economy
China might be growing itself right into a bubble.
Based on Friday’s GDP report, which came in at 6.7% for the first quarter, it seemed that the country is growing at the pace many expected (depending on what you think of the country’s statistics).
The problem, however, wasn’t the headline number but instead the way that the country grew, according to Wei Yao and Claire Huang at Societe Generale.
“This looks like an old-styled credit-backed investment-driven recovery, which bears an uncanny resemblance to the beginning of the ‘four trillion stimulus’ package in 2009,” the economists wrote in a note Friday. “The consequence of that stimulus was inflation, asset bubbles and excess capacity.”
Nowhere is this asset bubble more apparent, than with the Chinese “ghost city” phenomenon. When a Western asset bubble goes too far, an obvious symptom is deserted housing estates, built by over optimistic developers endowed with an excess of easy credit. China has gone one better – they have been building entire cities which nobody wants.
China’s ghost city: Kangbashi, Ordos full of brand new, empty buildings
IT WAS created and hailed as a bustling city utopia with glistening buildings and state-of-the-art facilities.
But more than a decade after the northern Chinese city of Kangbashi, Ordos, was built and open for people to move in, it remains mostly vacant.
When the Chinese Government built the inner-Mongolian town of Kangbashi, a district of Ordos, it estimated it could accommodate well over a million people.
However, just 100,000 or so moved in, which today results in an urban ghost city, an “urban failure” considering its billion-dollar construction cost.
All this information is publicly available – economists have been warning of Chinese economic imbalances for years. But greens seem so desperate to see evidence of “decoupling”, between coal and prosperity, in my opinion they are happy to gloss over substantial evidence of severe economic problems and a credit driven mirage, to claim their “decoupled” success.