Decarbonization

In September of 2020, the PRC government announced China’s commitment to peak carbon emissions by 2030 and to reach carbon neutrality by 2060 while striving to double the size of China’s economy by 2035.  China’s most recent Five-Year Plan also set an 18 percent reduction target for CO2 intensity and a 13.5-percent reduction target for energy intensity from 2021 to 2025. These initiatives provide opportunities for U.S. companies in sectors that intersect with China’s industrial and environmental goals. Whether China can meet its decarbonization goals largely hinges on the ability of policymakers and industry to reduce the country’s dependence on coal. Over the last decade the percentage of energy consumption accounted for by coal fell from 68.5% to 56% according to figures published by the China National Bureau of Statistics. Recently, however, a combination of power rationing and droughts affecting hydropower production have caused policymakers to take a more cautious approach to phasing out coal power.

In addition, according to the U.S. Energy Information Administration (EIA), petroleum and other liquids make up the second-largest fuel source, accounting for 19% of the country’s total energy consumed in 2021. Although China has diversified its energy supplies and has replaced some oil and coal use with cleaner burning fuels in recent years, hydroelectric sources (8%), natural gas (9%), nuclear power (2%), and non-hydro renewables (7%) accounted for relatively small shares of China’s energy mix. However, natural gas, nuclear power, and renewable energy consumption are steadily increasing.

Natural Gas

Natural gas is China’s fastest-growing primary fuel which saw demand quadruple in the past decade. Growing the natural gas sector is critical in China’s efforts to reduce reliance on coal.  According to EIA, China was the world’s third-largest natural gas consumer and the largest importer in 2021. In 2050, the EIA expects China to consume nearly three times as much natural gas as it did in 2018, which was 280.30 b/cm.  China’s natural gas consumption accounted for 9% of its total energy mix in 2021.  According to the Energy Production and Consumption Revolution Strategy published by NDRC, China anticipates boosting the share of natural gas as part of total energy consumption to 15% by 2030.  To fill the widening gap between China’s domestic natural gas production and demand, both pipeline and liquefied natural gas (LNG) trade have increased. According to EIA, China, already the largest natural gas importer in the world, also became the largest LNG importer in 2021, surpassing Japan.  In 2019, China raised the tariffs on LNG imports from the United States from 10% to 25%. However, following the Phase One trade agreement several long-term contracts to purchase LNG from the United States were signed in 2021, including a 20-year contract between Sinopec and U.S. Venture Global LNG to purchase 194 billion cubic feet (Bcf) of LNG annually.  LNG imports from the United States grew and reached 1.2 Bcf per day in 2021. The United States was also the largest spot LNG supplier to China in 2021. However, increased global demand for natural gas following the Russian invasion of Ukraine has led price-sensitive Chinese buyers to substitute Russian-produced gas for imports from the United States and other countries. Although this trend is likely to persist in the short term as international energy prices remain volatile, recent PRC policies and diplomatic initiatives have emphasized diversification of supply to bolster energy security. With the international community increasingly scrutinizing new builds of unabated gas-fired generation, it is anticipated that there will be a huge demand from the natural gas industry for design and equipment related to abatement and CCUS (see below).

Carbon Capture, Utilization, and Storage (CCUS)

CCUS is still an emerging technology, which has yet to be fully commercialized due to economic scalability challenges. According to China CCUS Annual Report 2021, under the carbon neutrality goal, China’s CCUS emission reduction demand in 2030 is 200 million to 408 million tons, with a market size exceeding 100 billion yuan, and the output value scale is expected to reach 330 billion yuan by 2050. While most CCUS efforts come from capturing carbon from CO2-dense flue gasses at fossil fuel plants, direct air capture (DAC) CCUS is promising because of its ability to be deployed anywhere. Currently, the most profitable application of CCUS is selling captured CO2, which is pressurized and then pumped into oil wells to enhance oil recovery. Reports estimate that for the world to reach its carbon goals by 2050, 2,000 CCUS facilities must be built to capture CO2. There will be a massive need for China to construct CCUS facilities in the coming decades. The 2021 China CCUS Report forecasts demand for carbon reduction through CCUS (see chart below).

unit: 100 million tons per year

In addition, the report says the technical cost per ton of carbon dioxide is expected to decrease from the current 310–770 yuan to 140–410 yuan by 2060 as related technologies advance (1 yuan ≈ 0.15 USD as of August 2021).

Trade Events

• China International Petroleum and Petrochemical Technology and Equipment Exhibition (CIPPE)—Beijing  
• International Exhibition of Electric Power Equipment and Technology—Shanghai
• Nuclear Industry China

Additional Resources

• Clean Tech Top Export Market Ranking
• China Intellectual Property Rights Resources
• The China IPR Toolkit