China launches action plan for industries to decarbonize ahead of 2025 deadline

China's State Council launched an action plan late May 29 to help the power and industrial sectors accelerate decarbonization and meet the 2025 targets of cutting energy intensity by 13.5% and carbon intensity by 18% from 2020 levels.

Energy intensity measures energy consumption for each unit of GDP growth and carbon intensity measures carbon emissions for each unit of GDP growth. The targets were committed in China's 14th five-year plan, the overarching economic plan for 2021-2025. However, the country faces challenges in meeting these targets due to the pandemic, reduced GDP growths and increasing cases of extreme weather in the past three years.

The council released the action plan that sets out more detailed targets and guidance for individual sectors to address these challenges.

The energy intensity and carbon intensity must be cut by 2.5% and 3.9% in 2024 from the previous year's level, respectively, the State Council said. Notably, China needs to cut energy intensity by 2.7% and carbon intensity by 3.6% each year in 2021-2025 to be on track for meeting the 14th five-year plan targets.

The council required emissions-intensive sectors highlighted in this action plan to collectively reduce energy consumption by 50 million mt of standard coal equivalents and cut CO2 emissions by 130 million mt year on year, for both 2024 and 2025.

"We should make our maximum effort to meet the targets for energy conservation and carbon emission reduction in the 14th Five-Year Plan," the council said.

Power sector

China should have around 20% of energy consumption coming from non-fossil sources by 2025, and by the end of 2024, around 18.9% of energy consumption should come from non-fossil sources, the State Council said.

By 2025, China's pumped hydropower storage capacity should reach 62 GW and utility-scale battery storage capacity should reach 40 GW, up from 51.3 GW and 25 GW, respectively, in 2023, to provide buffer power supplies that can effectively tackle renewable's intermittency and boost renewables consumption, according to the action plan.

Non-fossil fuels should account for around 39% of China's total power supply by 2025, the council added.

In 2023, coal still accounted for nearly 60% of the country's electricity supply, according to a report by the government-backed industrial association China Electricity Council.

Metals

China will continue to control crude steel output in 2024, prohibiting disguised capacity additions in the name of manufacturing machineries or ferroalloys and preventing the resurgence of "low-quality steel" capacity, the action plan showed.

By the end of 2025, the State Council called for increasing the share of crude steel produced from electric arc furnaces to 15%, adding that 300 million mt of scraps should be recycled and reused.

The council's action plan required the iron and steel industry to reduce its energy consumption by around 20 million mt of standard coal equivalent and cut CO2 emissions by 53 million mt during 2024-25.

For non-ferrous metals, the State Council called for strictly controlling additions of copper smelting and aluminum production capacities. Notably, it required the electrolytic aluminum sector to use renewables for at least 25% of power consumption.

The non-ferrous industry should reduce energy consumption by around 5 million mt of standard coal equivalent and cut CO2 emissions by 13 million mt during 2024-25, the action plan showed.

Refining and petrochemicals

Crude distillation units with refining capacities of no more than 40,000 b/d will be completely mothballed, and the primary refining capacity shall be capped at 20 million b/d by end 2025, the action plan showed.

The State Council also called for strict controls over capacity additions for refining, calcium carbide, ammonium phosphate and yellow phosphorus.

By 2025, over 30% refining capacities and production capacities of ethylene, synthetic ammonia and calcium carbide should outperform their industry-wide energy efficiency benchmarks. Capacities that underperform these benchmarks should either be retrofitted or phased out eventually.

The refining and petrochemicals industry should reduce energy consumption by around 40 million mt of standard coal equivalent and cut CO2 emissions by 110 million mt during 2024-25, the council said.

It also encouraged the use of green hydrogen to substitute coal in refining and petrochemicals production. Nuclear energy is also encouraged to supply steam and heat in large-scale refining and petrochemicals parks.

Construction and transportation

The cement industry should keep its clinker production capacity within around 1.8 billion mt/year by 2025, the action plan showed. Earlier in 2024, China initiated a consultation to enroll cement clinker producers into the country's compliance carbon market.

The action plan required the whole building material industry to reduce energy consumption by around 10 million mt of standard coal equivalent and cut CO2 emissions by 26 million mt during 2024-25.

The council has directed the transportation sector to cut its carbon intensity by 5% from the 2020 levels by 2025, calling for lifting of restrictions on purchasing electric vehicles and accelerating electrification of cargo trucks and ships on inland waterways.

The decarbonization push in transportation and construction sectors and accelerated electrification will increase demand for copper and aluminum, sources said.