Puzzle Over China Data and Rising Smog

An analysis by Michael Lelyveld
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Tourists visit the Bund in Shanghai amid heavy smog on Dec. 5, 2013.
Tourists visit the Bund in Shanghai amid heavy smog on Dec. 5, 2013.

China's recent energy reports have posed a puzzle for those seeking to understand the connections between slower economic growth and rising urban smog.

Ordinarily, a slowdown in growth would be expected to result in reduced rates of emissions, but China's worst air pollution in its modern history seems an exception to the rule.

Official economic and energy reports for 2013 have pointed in conflicting directions.

Last year's gross domestic product (GDP), the broadest measure of economic activity, rose 7.7 percent, matching the growth level of 2012 as the lowest since 1999.

Growth in industrial output of 9.7 percent also weakened from the 10-percent pace of 2012, the National Bureau of Statistics (NBS) said.

Yet power consumption climbed 7.5 percent in 2013, considerably more than the 5.5-percent gain a year earlier, according to the National Energy Administration (NEA).

Electricity use is often cited as a more reliable indicator of economic activity than official GDP, suggesting China's performance last year may not have been as lackluster as it appeared, The Wall Street Journal said on Jan. 20.

Confusing indicators

But it is unclear whether China produced more economic value last year or simply used more electricity.

The question is complicated by other ambiguous indicators.

Implied oil demand rose just 1.6 percent, the weakest yearly rate in more than two decades, Reuters reported.

According to state-owned China National Petroleum Corp. (CNPC), the growth in apparent oil consumption was 1.7 percent, which it called the smallest in 13 years.

The oil figures seem to conflict with the more bullish implications of electricity use and the rise in urban smog.

But the results reported by the coal industry are even more curious.

The China National Coal Association (CNCA) reported that growth in coal consumption slowed to 2.6 percent last year, reaching 3.61  billion metric tons.

The rate is slightly more than the 2.5-percent growth reported by he NBS for 2012, but still seemingly at odds with the 7.5-percent rise in electricity use, since coal is China's main fuel for power.

'A difficult question'

Philip Andrews-Speed, a China energy expert at National University of Singapore, said the question of conflicting reports is "a really difficult one."

"Why so much extra electricity with so little extra coal?" Andrews-Speed asked.

China has made great strides in renewable energy sources like solar and wind power, as well as natural gas, but probably not enough to account for the discrepancy between power and coal consumption growth.

According to the 2013 World Energy Outlook of the Paris- based International Energy Agency, coal supplied 88 percent of China's electricity demand in 2011, suggesting consumption should have advanced on parallel tracks.

Between 1990 and 2011, the share of coal consumption accounted for by power generation doubled from 26 to 52 percent, Andrews-Speed said.

Slumping coal prices for most of last year might also have been expected to encourage consumption. China's five major power companies reported an 18-percent jump in combined profits last year thanks to low coal prices, the official Xinhua news agency said.

The difficulty posed by China's data is compounded by the fact that it comes from such a variety of sources, including the NBS, the NEA, and industry, while official GDP figures are frequently criticized as unreliable.

A Xinhua report on Jan. 23 noted that the sum of provincial-level GDP figures for last year exceeded the national total by 2 trillion yuan (U.S. $330 billion), even before three of the 31 provincial governments had submitted results.

Common inconsistencies

Such inconsistencies in NBS estimates have been common over the past decade.

"One plus one equals two. But it's not always the case when you are talking about the calculating of local and national GDP data in China," Xinhua said, calling the addition error "a somewhat peculiar math problem."

But Andrews-Speed said 2013 was not unique in its apparent conflicts with energy data. Over the past 13 years, China has recorded similarly large and unexplained gaps in growth rates between power and coal consumption during the periods 2000-2002 and 2007-2008.

Andrews-Speed said the answer to the puzzle may be contained in research by China energy expert Kevin Jianjun Tu, formerly of the Carnegie Endowment for International Peace in Washington.

In a 2011 paper for Stanford University, Tu found that the sum of coal consumption figures from the provinces has frequently topped national totals by as much as 500 million tons annually for the past decade. The excess is suspected to be a sign of illegitimate trade in coal.

Andrews-Speed noted that the biggest discrepancies in reporting correspond to the years with the greatest gaps in consumption growth between coal and power.

The correlation suggests that China may be burning far more coal than estimated in the industry reports, Andrews- Speed said.

If so, that could explain the big difference between growth rates in coal and power consumption last year and, more importantly, the big increase in urban smog.





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