Summary:

The Chinese government’s efforts to decarbonize industry continue apace in 2022. After the Two Sessions, the State Council assigned directives for decarbonization work this year to ministries, state-owned enterprises (SOEs), and other stakeholders. There will be growing opportunities for MNCs to form “green partnerships” with central SOEs as these are ordered to play a leading role in decarbonizing China’s economy.

New plans have been released to flesh out the decarbonization roadmap at the national and sectoral levels, including a comprehensive 14^th five-year plan to cut emissions and implementation guides for 17 key energy-intensive sectors to improve energy efficiency.

The National Development and Reform Commission (NDRC) issued the Medium- and Long-Term Development Plan for Hydrogen Industry (2021-2035), signaling a growing role of hydrogen in decarbonizing various sectors. 

The State Standardization Committee formed a standardization group for decarbonization, and the China Petroleum and Chemical Industry Federation (CPCIF) formed a special standardization group for the petrochemical industry.

Key developments:

14FYP to save energy and cut emissions sets new chemical-related targets

On January 24, the State Council released the 14^th Five-Year Comprehensive Work Plan for Energy Conservation and Carbon Emissions Reduction. It sets targets for 2025 to cut total chemical oxygen demand and emissions of ammonia nitrogen, nitrogen oxides, and VOCs by 8%, 8%, >10%, and >10%, respectively compared to the 2020 levels. To this end, the plan lays out ten major projects for various sectors. New projects and targets for 2025 include:

• VOC control: The proportion of solvent-based industrial coatings and ink will be reduced by 20 percentage points and 10 percentage points, respectively. The amount of solvent-based adhesives will be cut by 20%.

• Green industrial transformation: More than 30% of data centers and the production capacity of key sectors (e.g., ethylene) should reach the benchmark level for energy efficiency through the implementation of green initiatives. 

Ministries release guides for energy conservation and carbon reduction

On February 11, four ministries including NDRC and MIIT released implementation guides for energy conservation and carbon emissions reduction for 17 energy-intensive sectors, including ethylene, construction, and the modern coal chemical industry.

The guides cover key tasks in four areas: 1) guide enterprises that do not meet energy efficiency benchmarks to improve efficiency via advanced technologies, 2) make technological breakthroughs by leveraging the force of research institutions and industry associations, 3) promote concentrated development by guiding key enterprises to carry out centralized planning and construction of large-scale, integrated production bases, and 4) accelerate the phase-out of outdated facilities by strictly implementing policies such as the Catalogue for Guidance on Industrial Restructuring.

NDRC signals growing role for hydrogen in China’s decarbonization drive

On March 23, NDRC released a plan for the long-term development of China’s hydrogen industry through 2035. It sets goals to produce 100,000–200,000 tons of hydrogen from renewables each year, deploy 50,000 fuel cell electric vehicles (FCEVs) with associated refueling stations by 2025, and to significantly raise the proportion of green hydrogen in energy consumption by 2035.

To achieve this, the plan calls to scale up and commercialize hydrogen technologies in the transport, energy storage, power and industrial sectors, particularly in metallurgy and chemicals. It also aims to increase innovation capacity, master core technology and manufacturing processes, and promote international cooperation with industry leaders.

The targets set in this plan are relatively conservative, given that it is estimated that China’s existing hydrogen production capacity has already reached around 100,000 tons. Still, the plan represents a coordinated push across central ministries, local government, and industry to make China a leader in this emerging field.

China outlines key ministries and stakeholders for decarbonization

On March 25, State Council assigned work to implement the 2022 Government Work Report approved at the Two Sessions, including tasks in fields such as clean energy, green buildings, and decarbonizing industry. NDRC will lead in carrying out carbon peaking action plans. The following responsibilities were assigned to central agencies.

• NDRC, MOST, MIIT, NEA: promote China’s energy transformation, efficient use of clean coal, and biomass energy development.

• NDRC, MOST, MIIT, MEE, MOHURD, MOT: promote green and low-carbon tech R&D and application, strengthen energy conversation in transport and buildings, and strictly limit “two high” projects.

• NDRC, MEE, NBS, etc.: enhance carbon sinks and develop green finance. 

In addition to the national-level Workgroup for Statistical Accounting of Carbon Emissions, on February 15, SAC established the Carbon Peak and Carbon Neutrality Standardization Group to advise on the formulation of related standard systems. The group includes a list of 43 NGO experts. CPCIF formed a corresponding standardization group for the petrochemical industry, which includes 38 industry experts, to give advice on standardization for decarbonization for the industry.

Central SOEs keen for green cooperation as they are charged with driving decarbonization

More opportunities for “green partnerships” with central state-owned enterprises (SOEs) are expected as these entities are called on by the central government to play a leading role in decarbonizing China’s economy.

On December 30, the government issued guidance on decarbonization work for central SOEs. In addition to cutting their own emissions, SOEs are expected to “lead market players” in low-carbon development through project cooperation, building alliances, building green supply chains, and other market approaches. SOEs are also instructed to expand the application of new materials and spur the development of emerging low-carbon industries and technologies in sectors such as new energy, NEVs, new materials, aerospace, and marine equipment.

As carbon-related metrics acquire more weight in SOE KPIs, these firms are seeking solutions and partnerships to lead the way in decarbonizing their respective industries. For example, as of December 2021, Sinopec has signed agreements with LONGI New Energy to build 147 solar-panel-equipped gas stations.