Both China and India have experienced robust economic growth in recent years, considering the impacts of pandemic lockdowns in both countries and the property sector disruption in China. From 2019 to 2023, GDP growth averaged 4.6% in China and 4.1% in India. In 2023, the two countries registered 5.2% and 6.7% GDP growth respectively.

However, in both countries - but especially in China - the economic recovery during the period impacted by the Covid-19 pandemic has been quite energy- intensive. In the decade to 2019, China saw energy intensity improvements of around 3.3% per year, while India achieved improvements of around 2.8% per year. Both countries, however, experienced a slowdown in energy intensity improvements after the pandemic, and China even saw a deterioration of its energy intensity in 2023.

Yearly variations in energy intensity need to be analysed with caution, as one-off effects, including weather, can play an important role. However, the broader, multiyear slowdown in energy intensity improvements is clear. A key driver in this trend appears to be the structure of economic growth in both countries after the pandemic. In China, the share of investment and net exports - both more energy-intensive than household consumption - in GDP growth increased from slightly more than 40% in the period 2015-19 to 45% in the period 2019-23. Continued investment in infrastructure, manufacturing capacity and real-estate has been a major driver of Chinese growth, pushing up energy intensity. In the case of India, the share of investment in GDP growth increased from around 35% from 2015-19 to nearly 50% in the period 2019-23, as the government has pushed investment in much-needed infrastructure to compensate for relatively weaker consumption growth.

China’s CO₂ emissions grew 565 Mt in 2023 to reach 12.6 Gt. This represents an increase of 4.7%, as emissions from energy combustion increased 5.2% while those from industrial processes stayed broadly stable. This occurred despite China’s overwhelming lead in the global clean energy economy. In 2023, China contributed around 60% of the global additions of solar PV, wind power and electric vehicles. From 4% in 2015, the share of solar PV and wind in total electricity generation reached 15% in 2023, close to the level of advanced economies (17%). China’s share of EVs in total car sales was more than double the level of advanced economies in 2023.

However, the growth in clean energy was not sufficient to keep pace with surging energy demand, which increased by around 6.1% - a percentage point more than GDP. Since the pandemic, China’s GDP growth has been driven by energy-intensive sectors: from 2015 to 2019, services value added accounted for two‑thirds of GDP growth; from 2019 to 2023, that fell to around half. Fixed asset investment in infrastructure and manufacturing capacity grew on average 7.1% and 6.4% in 2023, above the rate of GDP growth; and although investment in new real estate projects fell, 2023 construction activity was higher than in 2022 as developers worked to clear a large backlog of already started projects. According to data from China’s National Bureau of Statistics, total floorspace completed was 4% above the 2019 level in 2023, and 16% above the 2022 level, even as new floorspace started was 30% below 2022 and 60% below 2019 levels.

Alongside these structural drivers, China’s emissions were also pushed up by cyclical factors. After the reopening from Covid-19 lockdowns, highway passenger kilometres increased nearly 50% and aviation passenger kilometres by more than 160% in 2023. However, they both remain below the 2019 level. This cyclical recovery pushed up China’s emissions by around 100 Mt. The shortfall of hydropower generation pushed up emissions by a further 115 Mt. Milder weather reduced both heating and cooling demand, pushing down emissions by around 35 Mt. Taken all together, clearly identifiable cyclical factors accounted for around one-third of China’s emissions growth.1

India’s economy saw rapid growth in 2023, expanding by 6.7%. The country’s emissions grew faster than GDP, at slightly more than 7%, rising around 190 Mt to reach 2.8 Gt. However, India’s per capita emissions remain very low, at around 2 tonnes, less than half the world average of 4.6 tonnes. The large increase in India’s total emissions was driven by the continued rapid recovery in economic activity from the lows of the Covid-19 pandemic. Steel and cement output both soared – in both cases faster than GDP. Electricity demand also grew rapidly. However, closer examination of the data reveals some important cyclical drivers.

The Indian summer monsoon occurs between the months of June to September, and sometimes into October. In 2023, electricity demand in the monsoon months grew at four times the rate of electricity demand in the non-monsoon months, when compared to 2022 (12% versus 3% year-on-year). The monsoon affects electricity demand by driving up demand for agricultural pumping, with the agricultural sector accounting for nearly one-fifth of electricity consumption. Due to a poor monsoon in 2023, India also lost a substantial amount of hydropower output, which fell nearly 15%, an absolute decline of around 25 TWh. Considering the impacts of a poor monsoon on both electricity demand and hydropower supply, we estimate that it contributed nearly 60% of the increase in India’s electricity sector emissions in 2023. In turn, the electricity sector accounted for more than half of the increase in India’s total emissions, implying that cyclical weather-related events accounted for around one-quarter of the total emissions increase.