China emissions fall as EVs cut oil demand after Iran war

China emissions fell 1% from a year earlier in the second quarter, CREA said, with oil rather than coal driving the drop. Oil use fell 9% on that basis.

The Centre for Research on Energy and Clean Air analysis said higher crude prices after the Iran war coincided with faster adoption of cheaper electric transport. Researchers attributed the shift to electric vehicles, rail, public transportation and electric equipment, rather than to a decline in mobility.

Oil decline overtakes coal

The second quarter marked a change in the source of China’s emissions decline, according to CREA. Previous drops had been tied mainly to coal, but the latest fall came even as power-sector emissions rose 3% from a year earlier.

Electric vehicles displaced 36 million tons of oil in the first half of 2026, the analysis said, a volume it described as larger than the UK’s oil consumption over six months. EVs accounted for about one-third of the fall in Chinese oil demand during the period.

The pace increased in the second quarter, when electric vehicles replaced 19 million metric tons of oil, up 50% from a year earlier, according to CREA. Electric trucks were the fastest-growing contributor, with alternative fuel use in trucks rising 90% year on year in January through June.

Power coal complicates the decline

CREA estimated that lower oil use helped China avoid 35 million tons of carbon dioxide in the second quarter. That equaled 1.3% of total emissions for the period after accounting for the electricity used to charge electric vehicles.

The analysis also pointed to slower growth in chemicals and the replacement of diesel machinery with electric equipment in construction and mining. First-half emissions were still slightly higher than a year earlier, since January and February came before the late-February start of the Iran war and the subsequent rise in crude prices.

Coal-to-chemicals producers have reported stronger profits since the Strait of Hormuz blockade, CREA said. The analysis added that output was already near full capacity, limiting room for a further rise in production.

Paris role meets property drag

The analysis set the emissions drop against China’s role as the world’s largest annual carbon dioxide emitter. It also noted that the US remains the second-largest annual emitter and the largest on a historical basis, after leaving the Paris Agreement aimed at limiting global warming.

CREA said China’s emissions are on track to fall over 2026 if oil demand keeps shrinking and the property downturn continues to curb construction-linked demand. Slower growth in coal-to-chemicals output would add a second restraint, since that sector has limited spare capacity to expand.

If elevated oil prices continue to favor electric transport, the mechanism would be lower crude demand, weaker transport emissions and more pressure on refiners. For the global economy, that path would reduce one source of oil demand growth; for China, it would strengthen the link between electrification and emissions control; for automakers and battery suppliers, it would support higher utilization.

If crude prices ease or renewable power curtailment remains high, the emissions path would be less clear. CREA said power-sector emissions could reverse in the second half if wasted renewable output is brought under control and wind conditions improve, leaving oil demand, coal-fired power and property activity as the main variables for the rest of 2026.