China Energy Gain Based on Doubted Data

An analysis by Michael Lelyveld
2016-10-24
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A coal-fired power plant in Dangyang, central China's Hubei province, Aug 12, 2016.
A coal-fired power plant in Dangyang, central China's Hubei province, Aug 12, 2016.
AFP

China has won high praise from the International Energy Agency (IEA) for its efficiency efforts despite continuing concerns about the accuracy of its claims.

In a study released this month, the Paris-based IEA commended China for its progress in improving energy efficiency, crediting the country with a leading contribution to global gains.

"Progress in the People's Republic of China ... over the last decade has made it the world's energy efficiency heavyweight," said the IEA in its 142-page Energy Efficiency Market Report.

Between 2000 and 2015, China reduced energy intensity—the amount of energy used per unit of gross domestic product (GDP)—by 30 percent, the study said.

The measure of energy savings or waste is seen as a key to controlling pollution, greenhouse gas emissions and climate change.

In 2015 alone, China improved its energy intensity by 5.6 percent, beating the country's average annual reduction of 3.1 percent over the previous decade, the IEA said.

The strong performance in a year of low energy prices and economic transition was seen as a critical factor in limiting climate impacts.

In a press release, the IEA noted that last year's improvement in world energy intensity had increased from 2014 "in spite of lower oil prices, which generally dampen the enthusiasm for energy savings." Much of the credit went to China.

"Without Chinese energy efficiency gains, the global energy efficiency improvement would have been only 1.4 percent, instead of 1.8 percent," the IEA said.

The favorable outcome was made possible by low growth in China's primary energy demand of just 0.9 percent while its gross domestic product rose 6.9 percent, according to the report.

The report made clear that China still has a long way to go before it matches the efficiency of the IEA's 29 member countries, which are all members of the Organization for Economic Cooperation and Development (OECD). But progress has been substantial.

From 2000 to 2015, China lowered its energy intensity from 65 percent more than IEA countries to 50 percent more, the agency estimated. China's energy savings in 2014 were greater than the total primary energy supply of Germany, the report said.

Curbs on coal-fired industry

There is little doubt that China's efficiency has improved as the country curbs its reliance on coal-fired heavy industry for GDP growth. But how much may be debatable, as China's GDP and coal figures have both been open to question in the past.

Since energy intensity is a ratio of energy consumption to GDP, last year's 5.6-percent improvement, as reported by China's National Bureau of Statistics (NBS), may reflect either a jump in efficiency or an exaggeration of GDP, or perhaps a bit of both.

Some economists have argued that the low 0.9-percent rate of energy demand growth is more likely to be a sign that GDP has been overstated. Experts like Thomas Rawski, a University of Pittsburgh professor of economics and history, have estimated China's true GDP growth rate last year was in the range of 4 percent or less.

Criticism of China's official figures escalated last week with the release of third-quarter estimates that GDP expanded by 6.7 percent from a year earlier, exactly matching the growth rates for the two previous quarterly periods.

"In economics, stability like that is remarkable—and usually not to be believed," said a New York Times report.

"Many investors have come to treat these figures as massaged at best, and a joke at worst," said The Wall Street Journal in its "Heard on the Street" column.

"The official GDP figures remain too stable to tell us much about the performance of China's economy," said Julian Evans-Pritchard, China economist at Capital Economics in Singapore, as reported by Reuters. The analysts estimated China's growth rate at around 5 percent.

In its economic report for the third quarter, the NBS said that energy use per unit of GDP fell 5.2 percent from a year earlier in the first nine months of this year.

Much of last year's efficiency gain is reflected in a 3.7- percent drop in coal consumption, according to NBS data, which may only suggest the depths of the industrial slide.

But official coal figures have been notoriously unreliable, subject to under-reporting by as much as 17 percent in the past.

At a pre-release press briefing for the report, an IEA official was asked whether the agency had been able to verify the accuracy of China's official statistics, which were used in the report.

"Of course, questions have been raised in the past about Chinese data," said Brian Motherway, head of IEA's efficiency division.

But he told RFA that IEA works "to ensure that the statistics are the best quality we can make them." Motherway also voiced confidence in China's efficiency improvements, citing first-hand observations.

"We know the work is being done, and we know that energy efficiency is being taken very seriously," he said.

china-high-voltage-cable-anhui-province-may22-2014-400.jpg
Chinese workers mount high-voltage cables over massive fields in Fengyang county of Chuzhou city in eastern China's Anhui province, May 22, 2014. Credit: ImagineChina
Data falsification problems

Questions about the size and significance of the improvement remained, however.

China's government has acknowledged problems with data falsification and made several attempts to address the problems over the past decade.

But a statement from a high-level Communist Party meeting chaired by President Xi Jinping on Oct. 11 suggests that the problems remain unresolved.

The party's reform leading group ordered officials to "prevent and punish counterfeit statistics" according to law and party discipline, Reuters reported, citing the official Xinhua news agency.

Officials were told to "ensure statistics are truthful, accurate, complete and timely," the group said.

While the new warnings did not specify which statistics have been found wanting, they may do little for confidence in the official reports.

David Fridley, staff scientist for the China Energy Group at the U.S. Department of Energy (DOE) Lawrence Berkeley National Laboratory, said the official estimate of last year's GDP growth is "difficult to believe."

"I am not able to reconcile that figure with the change in electricity consumption," Fridley said in an email message, noting that such a low sensitivity of GDP growth rates to changes in power use had never been achieved before.

Last year, electricity consumption rose only 0.5 percent, according to the National Energy Administration (NEA).

"So, if GDP is overstated, then certainly the economic energy intensity change is overstated as well," Fridley said.

He also argued that declines in energy use and carbon emissions last year had come almost entirely from the slumping steel, cement and thermal power industries.

Since these are not particularly high value-added industries, the effect of lower energy use could be seen as an improvement in "economic" energy intensity, "even if actual physical energy efficiency had not improved," Fridley said.

'Energy intensity can improve'

A similar distinction was also drawn by the IEA report.

"It is important to note that energy intensity in these sectors can improve without efficiency investments," the study said. "If firms become more profitable with the same energy-using equipment, for example by reducing other input costs, their energy intensity improves."

But the IEA argued that efficiency due to investment has been advancing since 2006.

The limitations of measuring efficiency in terms of economic performance make it hard to chart China's progress in relation to developed countries.

"Comparing China's economic energy intensity trends against IEA countries tells you very little of substance, particularly since the denominator is GDP," Fridley said.

Energy efficiency improvements are important for controlling emissions, but they only indicate how much may have been saved rather than a country's total emissions growth.

The IEA study estimates that China's energy efficiency increased by more than 19 percent since 2000, but its economy grew 260 percent between 2000 and 2014.

Over the same period, China's carbon dioxide (CO2) emissions rose 184.5 percent, according to data from the Global Carbon Project, an international research group.

China's share of global energy use more than doubled in that time, increasing from 10.4 percent to 22.8 percent, based on estimates from annual editions of the BP Statistical Review of World Energy.

CH. 1: MANDARIN | CANTONESE

CH. 2: VIETNAMESE | BURMESE | KOREAN

CH. 3: KHMER | LAO | UYGHUR

CH. 4: TIBETAN

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