Can China decouple emissions from economic growth?

Many Western countries have decoupled emissions from GDP growth. Can China follow?

Polly Bindman September 14 2023

Since the first known use of coking coal in blast furnaces in early 18th-century Britain, prompting the start of the Industrial Revolution, the growth of Britain’s economy, and later the rest of the world’s, has been closely correlated with the growth of carbon dioxide (CO₂) emissions. In more recent years, coinciding with the birth of climate consciousness, economists have pondered the question of how to ‘decouple’ economic growth from emissions. 

Broadly speaking, decoupling can be defined as either ‘absolute’ decoupling, where CO₂ emissions are stable or decreasing while per capita gross domestic product (GDP) is growing, or ‘relative’ decoupling, when the growth rate of the CO₂ emissions is positive but less than the growth rate of per capita GDP.

As the below chart shows, a number of countries (in the lower right quadrant), have achieved, at least from 2008–18, ‘absolute’ decoupling.

Decoupling emissions from GDP in China 

China is the country that arguably has the biggest stake in the decoupling discussion, as the world’s largest emitter both in terms of consumption and production, while pursuing simultaneous strategies of aggressive growth and decarbonisation. 

During the 20th National Congress of the Chinese Communist Party last October, President Xi Jinping reiterated his plans to raise China’s per capita GDP to the level of “medium-level developed countries” by 2035. At the same time, China aims to reach net-zero emissions by 2050, with emissions peaking before 2030. 

“[China's emissions] have tended to depend a lot on the speed of economic growth, or more so the growth of overall energy demand, because their economy is quite energy intensive,” says Jan Ivar Korsbakken, senior researcher at the Centre for International Climate Research. 

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Indeed, China’s fossil energy consumption has fairly consistently accounted for more than 90% of its total energy consumption, according to a 2022 research paper published in the Journal for Cleaner Production

The paper notes that China (along with other countries like India, Brazil and Vietnam) is in the process of “rapid urbanization and industrialization”, which will require a huge amount of energy. Therefore it “urgently needs to find effective and efficient ways to reduce carbon emissions to achieve a win-win situation between carbon emissions reduction and economic development”. 

Yet China is already in the process of a ‘partial’ decoupling, given that per capita its emissions are growing at a slower pace than its GDP. 

"So really, the difference between China and Western countries is one of degree, because China is just growing faster… If China’s economy were growing at only the same rate as Western economies, then probably emissions and energy consumption wouldn’t be growing so much, if at all,” Korsbakken says. 

China’s emissions have plateaued in recent years, and according to the Journal for Cleaner Production paper, while there was a “weak decoupling relationship between economic growth and carbon emissions during 2000–17”, in some “brief periods”, for example between 2013 and 2016, it was possible to even perceive a “strong decoupling”.

This was in part thanks to a “series of solid energy-saving and emission-reduction measures” in China during this period, the paper says, “such as the establishment of a carbon trading market and the promulgation of the Air Pollution Prevention and Control Action Plan”. 

Read more from this author: Polly Bindman

The strong decoupling observed during 2013–16 “shows that [...] a green and low-carbon development path with low-energy consumption can also achieve high economic growth”, it concludes.

According to one paper, China even achieved a comparatively rapid pace of decline in the emissions intensity per unit of GDP between 2000 and 2021, at an average annual rate of 2.8%, compared with an average annual rate of 2.4% in OECD countries. It is likely that shifting economic structures have contributed to China’s decoupling; for example, the growth of its ‘tertiary sector’ (commercial services) as a share of GDP, which has swelled from less than 10% of the total at the start of the millennium to 54% of the economy in 2019. 

However, the paper contends that as the sector is still in a “state of low-level development and high energy consumption”, simply increasing the proportion of the service industry in the short term is “not conducive to reducing emissions”. 

Limits to decoupling

Few believe that all countries will ever be able to achieve an absolute decoupling from GDP and emissions. Korsbakken tells Energy Monitor that if we use the “strictest definition” of decoupling, where “energy or emissions growth isn’t correlated with economic growth at all”, then “[no] country is really at that point”. 

Even in Western countries, he adds, “overall energy demand and emissions tend towards going down, but if you have years of particularly strong economic growth, then [both] do tend to go either up or down slightly more than they [would] do in a typical year, or vice versa”.

In addition, decoupling alone does not always equate to sufficient progress on decarbonisation: as Julia Steinberger, professor of ecological economics at the University of Lausanne, notes, those countries that have already decoupled tend to be wealthy, highly industrialised countries that have “extremely high emissions” to begin with. 

Decoupling is the "predictable and expected result of transitioning to lower-carbon energy sources", says ‘degrowth’ scholar Jason Hickel, who also argues in a recent paper that the absolute decoupling that occurred for 11 high-income countries between 2013 and 2019 should not be perceived as ‘green growth’. 

Hickel and his co-author Jefim Vogel find that for each of these countries to deliver their "fair share" of the Paris Agreement, their average decoupling rates would need to increase by a factor of ten by 2025; currently, it would take more than 220 years on average for them to reduce their emissions by 95%. As such, they conclude that "green growth" is "not occurring and indeed appears out of reach for high-income countries".

The authors argue that policymakers should take steps to shift away from economic growth as a "core objective" and instead prioritise "equity, human wellbeing, and ecological sustainability", through measures like scaling down "less-necessary" forms of production and consumption such as fast fashion and cruises; reducing wealth inequality to "curtail" the purchasing power of wealthier classes; improving public transit systems and energy efficiency in buildings, along with measures for improving well-being that can be achieved independently of economic growth, like introducing a public job guarantee, living wages and affordable housing.

“Switching the focus of economic activity away from private overconsumption... and public investment towards efficient, low-carbon and public services is [a] way to invest without growth,” Steinberger told Energy Monitor, echoing this argument. 

China’s economic slowdown

China is currently facing a period of economic slowdown, with exports falling by 12.4% year-on-year in June, according to ratings agency Fitch, which finds that the “sector outlook remain[s] clouded by weak global demand prospects”, while “housing construction also remains very weak”.

While this is likely to reduce emissions in the short term, it could also lead to China investing more in energy-intensive industries as a means of boosting growth. As Qi Qin and Chengcheng Qiu, analysts at the Centre for Research on Clean Energy and Clean Air (CREA) tell Energy Monitor, “a recurring pattern we have seen is when economic growth in China falls short of expectations, government stimulus will be released to inflate the real-estate market and boost construction”. 

Following the end of Covid-19 restrictions at the end of last year, China’s government said it would pursue a consumption-led economic recovery. “[However,] this recovery does not seem to be materialising, with retail sales only increasing 2.5% year-on-year in July,” say the analysts. Plans from April this year show Chinese provinces intend to increase spending on major construction projects by 17% this year. 

Qi Qin and Chengcheng Qiu add: “The type of economy-boosting strategy the government adopts will largely decide what emission trends will look like in the future.”

In addition, although China has seen investment in and production of renewable technologies “grow at a staggering pace”, research published by CREA at the end of August shows China is also embarking on a coal power “spree”. It has started constructing 37GW of new coal power capacity, permitting 52GW, announced 41GW of new projects and revived 8GW of previously shelved projects, all in the first half of 2023. 

“If new rounds of carbon-intensive stimulus measures continue to pour in, the positive contribution of China’s green growth to overall decarbonisation could be jeopardised,” the analysts say.

China’s CO₂ emissions grew 10% year-on-year in the second quarter of 2023, rising “approximately 1% above the record levels seen in 2021”, finds a recent article from Lauri Myllyvirta, lead analyst at CREA, published in Carbon Brief

Myllyvirta notes that the rebound in emissions was driven by major increases in coal-fired power and transportation, which in turn is due to weather. Without heatwaves and drought, resulting in hydropower shortages, coal-fired power generation “would remain below its peak”. He concludes that “if low-carbon capacity growth meets forecasts, it would be sufficient to cover expected electricity demand growth and could even put China on track to peak its emissions within two years”. 

Qi Qin and Chengcheng Qiu tell Energy Monitor that for China to “peak early and decouple GDP from emissions growth”, efforts must be “pivoted towards developing a more flexible grid system and integrating a higher percentage of renewable energy into the system”.

They add that “faced with the pressures of global economic slowdown and rising geopolitical risks, China needs to transition towards a more balanced economic growth model, emphasising domestic demand and shifting from heavy industry to high-value services for a transition from high-carbon to low-carbon growth”.

While the Chinese Government has already taken steps to adjust its economic growth model to be driven by consumer-led growth – for example, in sectors such as dining, tourism and electric vehicles – “efforts should continue to promote developments in areas like education, vocational training and financial services to enhance economic confidence”.

“Increasing investments in research and technology would also be a key to accelerate the transition, which needs to be guided by core policies to promote applying research results better to the market, like the US and UK have done,” they say.

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