China’s Carbon Blackout: How New Calculations Mask Emission Surges

Stay informed with free updates

Simply sign up to the Climate change myFT Digest — delivered directly to your inbox.

China’s revised method for reporting carbon emissions may have effectively erased half of the recorded rise in levels over the past five years, according to new research. This development sends a ripple of concern through global financial markets, challenging the transparency and reliability of climate progress tracking by the world’s biggest emitter and a critical player in the green transition.

Under Beijing’s newly revised calculation for carbon intensity — the measure for the amount of CO₂ per unit of economic output — in the world’s second-biggest economy, the figure reportedly rose by just 7 per cent from 2020 to 2025, as reported by the Centre for Research on Energy and Clean Air (CREA), a European think-tank.

This revised figure stands in stark contrast to earlier projections, which indicated a rise twice as large. The resulting gap amounts to approximately 700 million tonnes of carbon – a staggering volume equivalent to the annual emissions of major manufacturing economies such as Germany or South Korea. For investors focused on climate transition risk and opportunity, this discrepancy is not merely an academic point; it fundamentally alters the perceived trajectory of China’s decarbonization efforts and, by extension, the global fight against climate change.

At present, independent analyses generally conclude that China is not on track to meet its ambitious goal of carbon neutrality by 2060. This is largely attributed to a significant rise in coal consumption necessary to meet its burgeoning energy demands, despite Beijing’s undeniable, world-beating efforts to electrify energy generation and transport infrastructure. However, under this revised carbon accounting methodology, Beijing would ostensibly appear to be on course to meet its international climate pledges, including President Xi Jinping’s promise to reduce carbon intensity by 65 per cent below 2005 levels by 2030. This apparent shift in trajectory, achieved through statistical redefinition rather than operational change, poses a dilemma for investors trying to gauge genuine progress.

“While China has never officially defined how it measures carbon intensity, it has now made what appears to be a retrospective change, with the effect of making targets easier to meet,” CREA stated in its analysis. “The change in the definition of carbon intensity has the effect of weakening China’s climate targets and introducing more uncertainty into tracking progress.” For financial institutions increasingly allocating capital based on environmental, social, and governance (ESG) criteria, such an opaque recalculation introduces significant due diligence challenges and heightens the risk of greenwashing at a national level.

The findings directly challenge Beijing’s carefully cultivated claim on global climate leadership, a position strengthened by its booming renewable energy industry and the rapid electrification of vast swathes of its transport system. This narrative has often been contrasted with perceived backsliding in other major economies, such as the US. Even UN climate chief Simon Stiell recently lauded Beijing as a “leading light” in climate multilateralism, while gently urging faster decarbonization. While China’s massive investment in renewables is critical to global efforts, the credibility of its overall climate performance is now under intense scrutiny, directly impacting investor confidence in its green finance instruments and climate-linked projects.

CREA analysts previously noted they could accurately reproduce China’s carbon intensity data by combining estimates of fossil fuel emissions with official GDP growth data. Under this established methodology, China’s carbon intensity had fallen by 12.4 per cent from 2020-2025 — implying that an earlier 18 per cent target would be missed. The new definition of carbon intensity has not been publicly disclosed, creating a significant knowledge gap for economists and investors. However, revised data published as part of China’s latest five-year plan in March surprisingly stated that the country had cut its carbon intensity by 17.7 per cent – a figure achieved only by this unexplained methodological adjustment. This suggests a systemic approach to data management that prioritizes reported compliance over transparent disclosure.

According to the analysis, Beijing now appears to be calculating carbon intensity by incorporating industrial process emissions and potentially excluding non-energy uses of fossil fuels. Such a reclassification, if confirmed, fundamentally alters the scope of what constitutes carbon emissions for reporting purposes, making it exceedingly difficult for international bodies, investors, and trading partners to accurately benchmark China’s performance against global standards or its own stated commitments. This lack of comparability can distort market signals and misallocate capital destined for genuine decarbonization efforts.

This revision to emissions data also highlights an escalating issue of worsening opacity across multiple official data series emanating from China. This pattern has become a growing concern for international investors and economists seeking to model and forecast China’s economic trajectory and assess market risks. In 2018, Beijing notably ceased publishing sectoral breakdowns of fixed asset investment by value and retrospectively revised down historic totals for growth rates. Three years later, it discontinued a price series that had previously been widely used by economists when adjusting for inflation, hindering accurate real growth calculations. Then, in 2023, it controversially discontinued data showing property developers’ purchases of land, a critical indicator for the distressed real estate sector, while also suspending youth unemployment data before releasing revised figures that painted a less bleak picture. This consistent pattern of data withholding and revision erodes trust and complicates fundamental analysis, increasing the perceived risk premium for investing in the Chinese market across all sectors.

For global investors, this broader trend of data opacity, now extended to critical climate metrics, translates into higher uncertainty and increased risk. It challenges the ability of financial models to accurately assess the impact of climate policies on Chinese industries, from heavy manufacturing to renewable energy. This could lead to a reassessment of valuation multiples for Chinese companies, particularly those exposed to carbon-intensive sectors or reliant on government climate incentives, as the true underlying policy environment becomes less predictable.

Additional reporting by Thomas Hale in Shanghai

**Market Impact**

The ramifications of China’s carbon reporting adjustments are far-reaching for global markets. **ESG funds and green bond markets** will face increased scrutiny regarding their exposure to Chinese assets, potentially leading to divestments or a widening of greenium spreads for Chinese issuers as investors price in higher transparency risk. **Commodity markets** could see sustained demand for coal and other fossil fuels if China’s actual energy transition is slower than reported, impacting prices for energy producers and related industries. Conversely, the long-term outlook for **critical minerals** vital for renewables might be tempered if the pace of China’s build-out is less aggressive than official data implies. For **multinational corporations** with significant supply chain exposure to China, the risk of future carbon border adjustment mechanisms (like the EU’s CBAM) could rise, necessitating urgent re-evaluation of sourcing strategies and potential carbon liabilities. Lastly, the broader trend of **data opacity** elevates the political risk premium for foreign direct investment into China, making it harder for analysts to forecast economic growth, assess sectoral health, and accurately value companies, thereby dampening overall investor appetite and potentially redirecting capital to more transparent emerging markets.