China is adding renewable energy capacity faster than any other country in the world, and is approaching peak emissions, even if it remains heavily dependent on coal-fired power stations to power its economy.

China's rapid adoption of clean energy positions the country to surpass its goal of reaching peak carbon dioxide emissions before 2030, Capital Economics said in a paper. However, the initial pace of decline is expected to be slow, as significant emissions reductions in other key sectors will take time to materialise. Faster progress in lowering emissions is anticipated in the 2030s and 2040s.

“Our long-term emissions forecasting framework combines our macroeconomic and energy outlooks and is consistent with China’s emissions falling back by 2050 to levels last seen in the early 2000s,” Joe Maher, an assistant economist at Capital Economics said.

However, the precise timing of when China's emissions will start to decline remains unclear. Given that the government targets a peak before 2030 and that China accounts for over 30% of global carbon dioxide emissions, this is of significant symbolic and practical consequence.

The expansion of China's clean power capacity suggests that emissions from the power sector are nearing their peak and may have already done so. This sector accounts for almost 40% of China’s total emissions and over 10% of global emissions. According to the China Electricity Council, installed wind and solar power capacity is expected to account for 40% of China’s overall power capacity this year, overtaking coal power capacity for the first time.

“As we have argued before, we think thermal coal demand is set to fall this year,” Maher stated. Although electricity demand is still growing, and coal remains a cheap and reliable energy source, China will continue to demand coal power on a significant scale. However, as coal-powered electricity generation declines, emissions should also decrease.

Emissions from the transport sector are not expected to peak as soon as those from the power sector, but the increasing share of electric vehicles (EVs) in the car stock will eventually contribute to reducing transport emissions.

“The strong positive relationship between motorisation rates and GDP per capita suggests the number of cars in China will continue to grow,” Maher explained. “But China is nearer than most countries to the point when the majority of new cars are EVs.”

In contrast, the trajectory of China’s industrial emissions, which account for 35% of total emissions, is less clear. The recent drop-off in construction activity, which has affected steel and cement production, has helped limit industrial emissions.

“The slump in construction activity has much further to run,” Maher said. However, the wider impact on emissions will be partially offset by a boom in manufacturing activity. “On balance, we suspect that the structural shift away from property will help to reduce emissions over time in China, but any effect may not be huge and will probably only be most visible later this decade.”

Overall, the surge in China’s clean energy capacity and shift away from coal is likely to push emissions into decline, possibly as soon as this year, well ahead of the government’s 2030 target. “For context, China’s total emissions growth has been subdued in 2024 so far,” Maher noted. However, the emissions-reducing benefits from the EV rollout and structural shift away from the property sector will only gain momentum in the second half of this decade.

“If you look at solar companies' annual output figures and multiply them by 22, which is the average operating life of a solar panel, and compare this with big oil companies' annual output figures (and don't multiply this by anything given that once oil is burned it can't be re-used) then you realise that the major solar companies – which are all Chinese – already today produce annually vastly more energy generation potential for the world than big oil companies!” China watcher Arnaud Bertrand said in a post on social media.