Power Out in China?

Why can't China afford to burn coal any longer?

The house of cards built by China has begun to fall apart. Last week it was Evergrande and now, it is the power industry. 

The country began to reform its economy in 1978 and its GDP growth has averaged almost 10% a year since then. But its processes have been resource-intensive, making it the largest emitter of greenhouse gases. China has finally reached a point where it simply cannot continue with its exploitative techniques any longer. 

So, it is now cutting down power supplies for its industries. Not just that, on September 21, 2021, Chinese president, Xi Jinping, announced at the United Nations General Assembly that China won’t build any new coal-fired power plants abroad. 

There are also other reasons for China to cut down on the industrial power supplies. 

First, many factories failed to meet the emission targets that Beijing set for them.

Second, coal prices are shooting through the roof (rising 137% from a year ago), and the country is being forced to shut down its industries to preserve enough coal for when winter comes. 

Also, China is to host the Winter Olympics, and it doesn’t want its smog-filled skies to give a bad impression to the world.

But, isn’t China’s efforts to curb pollution a good thing? Why are we calling it a crisis?

Well. Putting curbs on industries is impacting production. This will lead to a shortfall in its output. As per a Morgan Stanley report, a prolonged power curb could cost China 1% GDP growth in the final quarter of the year. And this shortfall won’t just impact China, it will impact the whole world. Afterall, it’s the biggest exporter. 

But, what option does China have? 

You see, coal generated 63% of the energy in China in 2020. The economy heavily depends on coal. If it has to meet its climate targets, it has only two options: either cut short the emission at the source or magically increase electricity output from the renewable energy source.

Even if the power curbs will hurt in the short run, it is unnecessarily evil in the long run. Parallelly, China has also been working on strengthening its infrastructure for renewable energy. In fact, it is currently the world’s largest producer of wind and solar energy and the largest domestic and international investor in renewable energy.

Yet, there is no denying that China’s break-neck pace of growth has started catching up. Maybe it will solve the demons of its growth in the longer run. But in the near future, the country seems to be facing a really tough time.

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