Column: Peak emissions hopes to be tested as China & Europe crank output

Power emissions may worsen before they improve due to the synchronized recovery of economic activity in China and Europe this year, even though renewables are undoubtedly gaining market share at a record pace in every relevant power sector.

  REUTERS BY GAVIN MAGUIRE, EDITING BY GERMÁN & CO

LITTLETON, Colorado, April 12 (Reuters) - An upbeat report this week by think tank Ember revealed that a record 12% of global electricity was generated by renewable sources in 2022, and declared that fossil fuel emissions may soon steadily decline as more renewable supply capacity emerges.

Climate trackers have cheered the report, which was based on deep dives into power generation trends across several major economies, and incorporated detailed solar and wind capacity development pipelines in all key regions.

Yet while there is no question that renewables are gaining market share at a record pace in every power sector that matters, power emissions may still get worse before they get better thanks to the synchronised revival of economic activity in China and Europe this year.

Industries in both regions were impaired in 2022 by repeated COVID-19 lockdowns in China and a power crisis in Europe, which resulted in sharp cuts to their combined industrial output.

Even so, China and Europe still lifted fossil fuel power emissions of carbon dioxide (CO2) to a record 5.99 billion tonnes in 2022, Ember data shows, which is a testament to their combined polluting heft even during times of economic distress.

In 2023, the economies of China and Europe are expected to return to growth paths as factories and production lines dial up output from the subdued levels of last year, resulting in higher overall energy use.

With global natural gas markets still disrupted following Russia's invasion of Ukraine last year, power producers in China and Europe are likely to struggle raising electricity generation totals without resorting to the increased use of coal.

That may lift emissions even higher, and confound expectations for drops in fossil fuel pollution levels going forward.

CLIPPED BY COVID

China's protracted lockdowns to stem the spread of COVID-19 resulted in the Chinese economy expanding by only 3% in 2022, which was well short of the government target of around 5.5% and the second-weakest growth rate since 1976.

Strict movement curbs and distancing requirements forced capacity reductions in factories, offices and industrial plants throughout the country, which in turn resulted in a decline in industrial energy demand in the world's top polluter.

However, that trend is expected to reverse in 2023 after Beijing eased movement restrictions and unveiled a slew of stimulus measures aimed at reviving economic activity.

Signs are emerging that the revival is already underway, with the latest domestic air travel volumes jumping to their highest since mid-2021, and international travel numbers to their highest since early 2020.

Output of a slew of key industrial inputs, including resins, acids and ethylene, have also risen sharply in China in anticipation of greater demand from manufacturers and other downstream users.

To help feed this widespread revival in activity, China's imports of thermal coal climbed to new highs in the first quarter, which suggests increased coal emissions are likely over the coming months as the economy gathers further momentum.

GERMANY DRIVES EUROPE'S RECOVERY

Data on German industrial activity is also showing growth in early 2023, and is likely indicative of a broader revival in Europe's industrial momentum.

German production of steel, chemicals and fertilizers have all climbed in early 2023 after having fallen precipitously during 2022 when power prices surged.

German production of new cars - a bellwether metric of the industrial health of Europe's largest economy - has also risen from last year's lows, although total car output remains well shy of previous peaks.

European governments are trying to aid the recovery through supportive fiscal and monetary policies, which should spur growth through other parts of the economy in due course.

However, the region's power producers are likely to struggle to lift power generation totals from non-emitting sources due to stunted hydro and nuclear output totals so far in 2023.

That suggests that as industrial momentum gathers further steam, power producers may need to increase fossil fuel use alongside the record deployment of renewable energy supplies to keep up with the rising energy demand.

Alongside the increased coal burning fuelling the industrial recovery in China, more fossil-based power generation in Europe is likely to steer overall power emissions to new highs in 2023, providing a wake up call to those who hope that power sector pollution is primed to head lower from now on.

The opinions expressed here are those of the author, a columnist for Reuters.