China key to drop in energy demand

China played a critical role in the slower growth of global energy demand and consumption as well as the nearly flat growth of carbon emissions in 2016, according to the latest BP world energy report.

The report says that a relentless drive to improve energy efficiency is causing global energy consumption to decelerate. The energy mix is shifting toward cleaner, lower carbon fuels, driven by environmental needs and technological advances.

Global energy consumption grew slowly again in 2016 - the third consecutive year in which demand has grown by 1 percent or less - much weaker than the rates of growth over the previous 10 years or so, according to the report, 2017 BP Statistical Review of World Energy.

The weak growth in energy demand, combined with a continuing shift toward lower-carbon fuels, meant global carbon emissions from energy consumption were estimated to have been essentially flat in 2016, for a third consecutive year, which the report calls a substantial improvement.

"From a global level, much of this improvement can be traced back to the pronounced changes in the pace and pattern of economic growth and energy consumption within China," BP Group CEO Bob Budley said in the report.

Energy consumption in China grew by just 1.3 percent in 2016. Its growth during 2015 and 2016 was the lowest over a two-year period since 1997-98, according to the report. China, however, remained the world's largest growth market for energy for a 16th consecutive year.

Spencer Dale, BP Group chief economist, cited a Chinese government policy launched in 2016 to reduce coal production.

"For those of you interested in the Chinese policy, it's magnificent," he said on Thursday at the Atlantic Council in Washington.

China was the key driver of the growth of global renewable energy last year, accounting for more than 40 percent of the growth in renewable power, more than that of the entire Organization for Economic Cooperation and Development. China also overtook the US as the largest producer of renewable power.

Dale said he thinks China is the key to understanding the flat growth of global carbon emissions and whether that trend is structural or just temporary.

Some structural changes happening in China include slower economic growth, a change in the structure of economic growth away from energy-intensive industrial sectors toward the consumer and service sectors, and a shift in the fuel mix away from coal toward more renewable energy, nuclear power and natural gas, according to Dale.

"Those trends are structural trends and are likely to persist," he said.

He also pointed out that the fall of China's energy demand was also due to the weakness reflected in the iron, steel and cement industries, which together account for a quarter of China's energy demand.