China issues sectoral guidelines for industrial carbon peaking by 2030

China's Ministry of Industry and Information Technology (MIIT) on Aug. 1 released its carbon peaking action plan for industrial sectors and confirmed that industrial sectors are required to peak their total carbon emissions by the end of 2030.

China had launched its all-inclusive carbon peaking action plan in October 2021, which pointed out that industrial sectors heavily impact the nation's efforts to reach peak carbon emissions. These sectors jointly accounted for 23% of the nation's CO2 emissions as of 2021, S&P Global Commodity Insights data showed.

As a follow-up, the newly launched action plan developed a tailored set of guidelines for the related authorities and companies in different industrial sectors, pointing out what needs to be done by each party to ensure both efficient decarbonization and sustainable economic growth.

The action plan was jointly developed by China's top economic planner National Development and Reform Commission (NDRC), MIIT, and Ministry of Ecology and Environment. The plan also listed the tasks that come under the purview of government agencies like the National Energy Administration, Ministry of Commerce, Ministry of Finance, People's Bank of China, and other related authorities.

Government's to-do list

The government authorities were expected to tighten control over projects of low quality but which have high energy consumption and emission levels, strictly limit the number of new project approvals, and close non-compliant projects, the plan stated.

It called for close monitoring of industries with saturated capacities, and substituting inefficient, emission-intensive capacities with new, advanced capacities. Steel, cement, plate glass, and electrolytic aluminum are highlighted in the plan as industries with excessive capacities.

The plan also required the government to make better use of market forces to accelerate decarbonization.

Key industrial sectors are expected to be gradually enrolled into China's compliance emission trading scheme. In particular, the plan emphasized to tighten energy intensity benchmarks for key industrial products and accelerate the development of sector-level emission accounting standards.

The strategic role of power market reform is also recognized in the plan, highlighting the need to enhance the differentiated electricity pricing scheme to motivate energy saving, especially in steel, building materials, refining, chemicals, and non-ferrous metal sectors.

The plan also called for the government agencies to systematically catalogue low-carbon technologies as references for broader applications, ensure sufficient financial supports to these low-carbon technologies, and promote low-carbon industrial products for Belt and Road projects.

Sector-level targets

The plan encouraged companies in the industrial sectors to establish captive solar PV power plants equipped with energy storage capacities, boost hydrogen usage in industrial decarbonization, and use natural gas to replace coal for power, heating, and as raw material.

Companies in steel, building material, refining and petrochemical sectors must accelerate the deployment of Carbon Capture, Utilization and Storage (CCUS) facilities; and state-owned companies must be the first mover for developing and deploying advanced technologies, and to make voluntary decarbonization commitments beyond the government's compulsory targets.

For refineries and petrochemical plants, the plan called for enhancing their ability to process feedstocks with less carbon content, such as natural gas, ethane, and propane, while limiting production capacity from coal to gas and oil. It also encouraged producing ethylene from crude oil, which oil major Sinopec has developed the technology and set to apply.

Moreover, greenfield integrated projects are required to lower their oil product yield to below 40% to significantly "reduce oil product while increase petrochemical output" by 2025.

For steel suppliers, the proportion of steel produced from electric arc furnace or EAF is expected to exceed 15% by 2025 and 20% by 2030, according to the plan.

For cement clinker suppliers, the energy consumed per unit of output needs to be cut by over 3% by 2025, the plan required.

For electrolytic aluminum suppliers, by 2030, 30% of their electricity consumption needs to come from renewable energy, the plan said.

For the electric vehicle sector, in 2030, vehicles powered by clean energy (i.e. electric, hydrogen-fueled and LNG-fueled vehicles) are expected to account for about 40% of new vehicles delivered in that year. Besides, by 2030, it required the CO2 emission intensity of new passenger vehicles and commercial vehicles to be cut by more than 25% and 20%, respectively from the 2020 level.