Lauri Myllyvirta’s Post

Recent policy from China's central planners calls for "speeding up the construction of strategic bases for coal-to-oil and coal-to-gas production". This is substituting oil products and fossil gas with coal-based synthetic fuels that have far higher carbon footprints than even fossil oil and gas. My analysis of China's CO2 emissions in the second quarter of this year flagged this industry as the main remaining source of growth in CO2 emissions, even as total emissions fell thanks to drops in power sector and building materials production emissions, as well as oil consumption. It's also the sector where China's policy priorities of energy security and emission reductions are most directly at odds. The main factor that could put a stop to the expansion of this industry is lower oil and gas prices, as the costs of the synthetic fuels are quite high - that's what happened the previous time that the industry was in a gung ho mood.

Germany's energy transition is progressing as planned in terms of adding renewable energy and closing down nuclear. In terms of everything else, not so much. Coal power and emissions are in fact plummeting much faster than the plans assumed. The energy transition plan was built with some implicit assumptions. The obvious one was Russian gas as a "transition fuel" that would power industry and power plants for decades as the transition was completed. The other one was that coal power would stay economically competitive and its phase out would have to be managed gradually and with compensation to power plant owners. Even the critics of the nuclear phase out were mainly warning of coal power staying on for longer because the assumption that German manufacturing industry and lignite would stay competitive was unshakeable. Instead, Germany got a Russian invasion of Europe, Putin cutting off the gas and coal power falling out of money faster than anyone thought. The result is that emissions have fallen faster than expected, Germany's industrial output has fallen sharply, reducing power demand and yet the country has gone from a net electricity exporter to an importer. There are obviously other reasons for the decline of Germany's industrial output, but the gas price shock undeniably played a role especially with energy-intensive industries which are responsible for a small share of value-added but for the majority of energy consumption. We can argue forever about whether the country should have increased renewables much faster or kept the nuclear plants on for longer, or of course, ideally, both. But two things stand out as something everyone should be able to agree on: failure to tackle massive structural dependence on Russian gas outside the power sector, and imagining coal will be around forever unless self-important committees agree to close it.

I'm predictably getting replies to this post about China's emissions targets suggesting that the targets don't really matter because China will always under-promise and over-deliver. This is a persistent myth. China tends to smash wind and solar capacity targets, but has at times struggled to meet other targets. The energy intensity target for 2010 was missed. The carbon intensity target and several other targets for 2025 will almost certainly be missed. This is notwithstanding the fact that the targets allowed emissions to grow and lacked ambition. As I keep repeating, people who touted the "early achievement" of the 2030 target for wind and solar capacity are not to be taken seriously, as this target was never a serious planning target but rather a bit of PR. It was always clear that China needs far more wind and solar to meet the carbon intensity and non-fossil energy targets for 2030, and these targets matter far more for emissions than the capacity target. Here's a detailed look at the 2025 targets: https://lnkd.in/dDwqcx-r

ICYMI: Great article on FT Chinese on China's emission trajectory and upcoming climate targets, building on my research. If China follows the policymakers' current plan of peaking emissions just before 2030 and then reducing them very gradually, postponing steep emission cuts beyond 2035, China alone would use up 90% of the global carbon budget for 1.5 degrees. This means that China is in the unique position of being able to single-handedly derail the global climate goals set in the Paris agreement. That's why it's so important that China's emissions peak without further delay and that the country achieves substantial emission reductions of at least 30% over the next ten years, by 2035. By JIANG Yifan. https://lnkd.in/gU9iDEfw

We were tracking solar cell output in China through last year and seeing eye-popping growth rates - now we're seeing the same growth in installations while component production growth has stalled. As installations catch up, there will be space for manufacturing to grow again. https://lnkd.in/duhwBm69

I had not realized coal power has plummeted like this in Germany. See the two jumps from ~2009 to 2013 and 2020 to 2022? That's the only times that developments on coal in Germany were widely reported on... the coal industry hype machine is doing a lot better than the rest of the industry. And to be clear this includes both hard coal and lignite; my first reaction when seeing this was it cannot include both.

Finland's new parental leave policy seems to be creating a massive cultural shift. Now it's not uncommon to see more dads than moms at a playground, at least in our progressive neighborhood. There's a long way to go though - only about a fifth of all paid parental leave is used by men at the moment, despite the fact that you lose out financially if you don't use it - either the mother will be at home on an allowance that is a tiny fraction of the income she'd make at work, or you're paying for daycare instead of being at home with full pay. But the cultural norm against guys taking care of kids is so strong that a lot of guys will still take a financial loss rather than spend time with their kid which I think is tragic. I think it takes at least one guy at every workplace and circle of friends doing it and telling others about how they got to chill ourdoors and goof around while the others toiled.

Incredibly, my six-month paternity leave is over. It's been an enormous privilege to spend time with our little one and follow her development. Over this period, our crawling baby has turned into a running toddler. Above all, we've had so much fun. We've spent time in the best parts of Helsinki - forests, shores, islands. She loves exploring new places, dancing, looking at trams and buses, pressing buttons, waving at people, petting dogs, throwing balls and so on and so on, so going with her just about anywhere is great fun, and allows you to see things in a new way too. Combining very part-time work, a couple of hours per day when the kid is sleeping, with full-time parenting has worked really well. It's amazing how productive you are when working short hours, as your brain has plenty of time to sort out problems and come up with ideas while you're doing other things. During my break, I've published seven in-depth articles with one more about to come out, along with several presentations and private briefing notes to different clients. I did dozens of media interviews using voice messages at playgrounds, making use of moments when the kid was playing happily and didn't need my attention. Another thing I've really enjoyed is that I've run more, spent more time outdoors and listened to more audiobooks than I have in years. A running buggy converts the child's naptime into running time for the parent. I also proactively invested into building up a small gym in the basement of our apartment block where the kid can play while I lift. I'll be returning to work at CREA on Monday, as a senior advisor, and continuing my fellowship with ASPI. For the next nine months, I'll work half day and look after the kid half day, so I'll have a lot more time to get work done but will still get to spend plenty of time with the child, which I'm really happy about.

Chinese policymakers finally reacted to the economic slowdown. The size of the stimulus package isn't huge by China's standards but the policy signals suggest that quite a lot more could be in store. The package announced this week is clearly thought-through and coordinated, so it gives a good look into how the top policymakers are planning to address the economic headwinds. Direct income transfers which have been a hot topic for the past couple of years are finally tried out. I've highlighted for a long time that stimulating household spending, instead of energy-intensive manufacturing and construction, would enable China to grow in a much less energy and carbon intensive way. However, the sums allocated to income transfers are very small in relation to the size of the whole package. Much more money will be spent on subsidies to car and white goods purchases. This will free up household cash for other types of spending, but it also directs spending in the most energy-intensive direction. Most of the stimulus is still directed through the well-worn routes of local government borrowing and bank lending, which tend to go into industrial and infrastructure projects. There is no explicit green component to this stimulus, which is regrettable. Quite a bit of it will flow to clean energy-related investments simply because those have been so dominant in China's investment flows recently, but there is no further push in that direction.