Challenges of Decarbonization Polices andTechnological Innovation toward Carbon
Neutral Society in China
Jun PANG

School of Environment and Natural Resource,Renmin University of China
24 September,2021

Contents
1 China’s Carbon Neutrality target
2 Pathway for China to achieve Carbon Neutrality
3 China’s Climate Change Strategies and Actions

4 Challenges of Polices toward Carbon Neutrality in China
5 Challenges of technological innovation toward Carbon Neutrality in China

1. China's Carbon Neutrality Targets➢ On 22 September, 2020, President Xi
Jinping announced to the world on behalf ofthe Chinese government at the United
Nations General Assembly that China iswilling to contribute more to the fightagainst climate change, as it aims to bringcarbon emissions to a peak by 2030, andachieve carbon neutrality by 2060 withmore forceful policies and measures.

2. Background of China's Carbon Neutrality Targets
104 tce

China's Total Energy Consumption and Its Composition (2010-2019)500000100%

40000080%

30000060%20000040%

100000

20%

00%
2010

2011

2012

2013

2014

2015

2016

2017

2018

CoalPetroleum

Natural Gas

Primary Electricity and Other Energy

2019

Total Energy Consumption

China's Carbon Emission Structure 2018

China's Carbon Emission

China's Power Structure 2010-2020

Commercial andpublic services
2%
Residential
4%

10000

100%

9500

60%

9000

MtCO2

80%

40%
20%

Agriculture
1%

Transport
10%

8500

Electricity andheat producers
51%

8000

0%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Hydropower

Thermal power

nuclear power

wind power

Solar energy

OthersFinalconsumption notelsewhere
specified1%

Industry
28%

7500
7000
2010

20112012

2013

2014

2015

2016

2017

2018

Other energy
industries
3%（ Data sources: China Statistical Yearbook 2020, China Energy Statistics Yearbook 2020,China Electricity Council, IEA ）2. Background of China's Carbon Neutrality Targets（Source: https://www.doc88.com/p-94861765759452.html; China 2050: A Fully Developed Rich Zero-Carbon Economy, Rocky Mountain Institute, 2021）

3. Time of Carbon Peak and Carbon Neutrality in Major Countries
CountryCarbon PeakCarbon Neutrality

UK

After reaching its peak in the early 1970s, UK has been in a plateau
period for a long time. At present, its carbon emissions havedecreased by about 40% relative to the peak level.

2050

Germany

After reaching its peak in the late 1970s, Germany has been in aplateau period for a long time. At present, its carbon emissions havedecreased by about 35% relative to the peak level.

2050

USA

After reaching its peak in 2007, the United States has showed a slow
downward trend. At present, its carbon emissions are about 20%
lower than the peak level.

2050

JapanJapan reached the peak of carbon emission in 2013, and its futureemission trend remains to be observed

2050

Korea

Carbon peak not reached

2050

China

2030 (Expected)

2060

4. Challenges for China to Achieve Carbon Neutrality Targets
EconomicTransition

Energy consumption per unit of GDP is 1.4 times the world
average and 2-3 times that of developed countries .

EnergyTransformation

Coal consumption still accounts for more than 50% of total energy
consumption. Carbon intensity per unit of energy consumption isabout 30% higher than the world average.

Short Time
Heavy Task

Many developed countries have reached carbon peaks, so they
have 50-60 years to achieve carbon neutrality, but China has only
about 30 years from carbon peaks to carbon neutrality.

Contents
1 China’s Carbon Neutrality target
2 Pathway for China to achieve Carbon Neutrality
3 China’s Climate Change Strategies and Actions

4 Challenges of Polices toward Carbon Neutrality in China
5 Challenges of technological innovation toward Carbon Neutrality in China

1. Stages of Carbon Neutrality in China
Stage One (2021-2030): Reach Carbon Peak
• Improve energy efficiency and gradually replace coal for power
generation and industrial coal consumption with clean energy.
• Promote the substitution of new energy vehicles for traditional fuelvehicles and guide residents' low-carbon consumption.

Stage Two (2031-2045):Rapidly Reduce Carbon Emissions• To achieve comprehensive electrification of the transportation sector.
• Increase the use of CCUS, BECCS and other negative carbon emission
technology. Complete the transformation of emission reduction inprimary industry.

Stage Three (2046-2050): Deep Decarbonization• Commercial use of renewable energy, energy storage, hydrogen energy,CCUS, BECCS and other related technologies.
• For those that cannot achieve zero carbon emissions, carbon neutrality
can be achieved through negative carbon emission technologies such ascarbon sinks, CCUS and BECCS.

(Source: Report on Carbon Neutrality of China by2060, Global Energy Interconnection Developmentand Cooperation Organization,2021)

2. China's Carbon Neutrality Transformation Path

(Source: China’s Long-Term Low- Carbon Development Strategies and Pathways Comprehensive Report. 2021, Tsinghua University)

Contents
1 China’s Carbon Neutrality target
2 Pathway for China to achieve Carbon Neutrality
3 China’s Climate Change Strategies and Actions

4 Challenges of Polices toward Carbon Neutrality in China
5 Challenges of technological innovation toward Carbon Neutrality in China

1. China’s Climate Change Strategies➢

2011, Twelfth Five-Year Plan for National Economic and Social DevelopmentBy 2015, the proportion of non fossil energy in primary energy consumption will reach 11.4%, and the carbon emission perunit of GDP would be reduced by 17% than the level of 2010.

➢2014, National Climate Change Plan（2014-2020）
By 2020, the carbon emission per unit of GDP would be 40% ~ 45% lower than that in 2005, and the proportion of non
fossil energy in primary energy consumption will reach about 15%.

➢2015, Strengthening Climate Change Action- China ' s National Independent Contribution
By 2030, carbon emissions will peak around 2030 and strive to reach the peak as soon as possible; Carbon emissions perunit of GDP decreased by 60% - 65% compared with the level of 2005. The proportion of non fossil energy in primaryenergy consumption will reach about 20%.

➢2016, Thirteenth Five-Year Plan for Controlling Greenhouse Gas Emissions
By 2020, the proportion of non fossil energy must reach 15%, and the carbon emission per unit of GDP will be reduced by18% than the level of 2015.

➢2020, Carbon Neutrality Target – 2021 National Emission trading system launch
By 2030, China's CO2 emissions per unit of GDP will be more than 65% lower than that in 2005, the proportion of non fossil
energy in primary energy consumption will reach about 25%. Carbon emissions will reach the peak by 2030 and carbon
neutrality will be achieved by 2060.

2. China’s Actions for Mitigating Climate Change➢

Industrial structure adjustment : transformation and upgrading ofpetrochemical, power, coal, steel and other industries. Eliminating backward
production capacity with high energy consumption and environmentalprotection.

➢

Energy efficiency improvement: promoting energy-saving technologies andproducts in industrial, construction, transportation and public sectors.

➢Energy structure optimization: promoting clean utilization of fossil energy,
promoting clean heating in northern China and developing non-fossil energy.

➢Controlling of non-carbon dioxide greenhouse gas emissions: agriculture,
waste, industry.

➢Increasing ecosystem carbon sink: Forest carbon sink, grassland carbon sink,wetland carbon sink, agricultural soil carbon sink.

➢Promoting low-carbon pilot projects in selected provinces and cities: In
2010, China launched a national "low-carbon province and low-carbon city"
experimental project in five provinces and eight cities.

3. Review Current ETS of China
Pilot Project Stage(2011-2014)

2011
The NDRC approved two
provinces and five cities aspilots of carbon emission
trading (Beijing, Tianjin,Shanghai, Chongqing, Hubei,Guangdong and Shenzhen)

National ETS Operations Stage(2021- )National ETS Preparation Stage(2015-2020)

2015
Interim Measures for
the Administration ofCarbon Emissions
Trading2020

2017
National carbon emissions
trading market construction
plan ( power industry ).
National ETS construction
startedMRV System,
Allowance Distribution system……

National Carbon Emissions
Trading Management
Measures (forImplementation) (DraftSolicitation Comments)

Allowance Trading SystemRegistration System…..

2021
On the 16th July, thenational ETS covering
2,162 key emission units inthe power generationindustry has been launched.
It covers about 4.5 billion
tons of carbon emissions
and becomes the world's
largest carbon market.

4. Future developments of ETS toward carbon neutral policies➢ Carbon allowances will be allocated according to carbon emission amount rather thancarbon intensity of enterprise.
➢ It is expected to cover 8 high carbon-intensity industries: power generation,
petrochemical, chemical industry, building materials, steel, non-ferrous metals,papermaking and domestic civil aviation.
➢ Auction will be adopted in the allowance allocation of national ETS.
➢ Chinese Certified Emission Reduction(CCER) will be allowed to buy and sell in thenational ETS, but will also have some strict restrictions on the amount.
➢ More finance policy instruments will be introduced in the ETS.
➢ Carbon tax is probably be imposed on the industries and enterprises that haven’t been
covered by the national ETS as a supplementary policy tool.

➢ Non-carbon dioxide greenhouse gas need to be taken into account under ETS in thelong run?

Contents
1 China’s Carbon Neutrality target
2 Pathway for China to achieve Carbon Neutrality
3 China’s Climate Change Strategies and Actions

4 Challenges of Polices toward Carbon Neutrality in China
5 Challenges of technological innovation toward Carbon Neutrality in China

1. Carbon Tax➢

Should carbon tax be a supplementary tool of ETS or themain GHGs mitigation policy tool in the future in China?

➢When and how to levy carbon tax? what is the optimalcarbon tax rate? How to coordinate the carbon tax withother existing tax?

➢What impact will the Carbon Border Adjustment
Mechanism(CBAM) of EU have on China’s carbon tax
policy design?

➢How to coordinate carbon tax with ETS?
• Should carbon tax be levied on those enterprises thathave been covered by carbon trading market?
• Should carbon tax be levied only on those enterprisesthat have not been involved in carbon trading market?
• Should the carbon tax be levied on the free carbon
allowance obtained by enterprises in ETS ?
• Carbon tax rate V.S. carbon price in ETS.

(Sources: carbon border regulation mechanism:
progress and prospect, green innovation
development program, 2021)

2. Renewable Energy Development Policy➢ In recent years, the renewable power has developed rapidly with the supportof subsidy policy. But it is also faced with problems such as, abandonmentof wind power and Photovoltaic power, shortage of renewable energy
subsidy funds and failure to receive subsidy funds in time.
➢ What is the impact of renewable energy subsidy retreat?
➢ What are the further incentive measures for renewable energy development?
➢ How to implement the tradable green certificate (TGC) mechanism and therenewable portfolio standard (RPS) system?
➢ How to coordinate TGC with ETS?

3. Total Coal Consumption Cap Strategy➢ Total Coal Consumption Cap Strategy is implemented in some key regions ofChina, which has synergistic effect on carbon emission reduction and air
quality improvement.
➢ In these key regions, although purchasing electricity power from outside caneffectively reduce local coal consumption, the carbon emission reduction
benefits depend on the power generation technology of purchased electricitypower (such as coal-fired power or renewable energy power).
➢ In addition, the reduction of coal may lead to the relocation of some local
industries with high coal demand, resulting in the risk of carbon emission
transfer.
➢ It is necessary to consider the availability and transportation cost oftransporting fuel from the western natural gas intensive area to the key
regions.

Contents
1 China’s Carbon Neutrality target
2 Pathway for China to achieve Carbon Neutrality
3 China’s Climate Change Strategies and Actions

4 Challenges of Polices toward Carbon Neutrality in China
5 Challenges of technological innovation toward Carbon Neutrality in China

1. Industrial Sectors➢ The clean hydrogen energy technology in the industrial field is still in theexperimental stage and has not been widely pervasive.
➢ Carbon capture technology has not been widely used in industrial sectors withhigh difficulty in reducing carbon.

➢ Due to the extremely high energy requirements of the cement production process,it is difficult to implement the electrification in the heating system.
➢ The use of alternative materials (such as magnesium oxide) beyond limestone isrestricted by the possible shortage of local mineral resources, and relatedtechnologies are still being tested.
➢ The deep decarbonization of the steel industry requires the advancement ofbioenergy and hydrogen energy technology.

2. Hydrogen Reduction in the Steel Industry➢ Carbon dioxide emissions in steelmaking process can be directly reduced by using hydrogen
instead of carbon monoxide as reducing agent, because its reduction product is water rather
than carbon dioxide.

➢ At present, there is no hydrogen production process that can meet both low cost and highyield. Hydrogen production from fossil fuels, which is cheaper but produces carbonemissions; Hydrogen production from industrial by-product is faced with the problem ofinsufficient supply of raw materials; Hydrogen production from electrolysis water is too
expensive, and the existing power supplies are struggling to meet its needs.
➢ Large-scale storage and transportation of hydrogen remains an industrial challenge.
➢ The specialized planning, policy system, standard system and safety specification ofhydrogen metallurgy in China lack top-level design.
➢ It takes time for a new technology of direct reduction process from being developed andtested to being applied on an industrial scale, and most of the relevant technologies in China
are in the development and testing stage.

3. Power Generation Sector➢ In China, current electric power structure is still dominated by coal-fired
power generation, the advanced coal-fired power generation technologies,
such as Integrated Gasification Combined Cycle(IGCC), and Carbon
Capture and Storage(CCS) need to be achieved technological breakthroughs.

➢ The development of Ultra-High Voltage(UHV) and distributed power
generation technology is needed to solve the space mismatch problem
because photovoltaic and wind power resource supply and demand regions
are inter-provincial mismatched in China.
➢ Large Scale Energy Storage Technology need to be achieved technologicalbreakthroughs.

➢ Smart Grid Technology also need be enhanced to meet the requirement oflarge scale utilization of wind power and PV.

4. Offshore Wind Power➢ Under the influence of the epidemic and the subsidy retreat, the cost is the main
constraint on the development of offshore wind power projects.
➢ The increasingly stringent marine environmental protection regulations have
gradually narrowed the development space of offshore wind resources,
hindering the large-scale construction of offshore wind power projects.
➢ The bottlenecks of core technologies need to be broken through, and thelocalization level of key components needs to be accelerated. The lack of coretechnologies makes the cost of offshore wind not only higher than onshore wind,
but also much higher than coal and gas.
➢ The reliability of offshore wind turbines has not been fully verified, theoperation and maintenance face huge challenges, such as long maintenancecycle, insufficient intelligent diagnosis ability, operation and maintenanceshould be made by use of transportation tools, with high cost and many userestrictions.

5. Transportation Sector➢ Decarbonization technologies for electric vehicles, commercial vehicles, andcivil aviation in the transportation sector are facing bottlenecks.

➢ Electric vehicles mainly replace traditional vehicles in the passenger car field.
There is a lack of commercialized mass-produced electrification technology inthe freight and commercial vehicle fields.
➢ The application of hydrogen energy in the transportation field needs to solve
technical problems such as low hydrogen energy conversion efficiency, highcarbon emissions in the hydrogen production process of hydrogen fuel cells,and difficulties in fuel storage and transportation.
➢ The current battery energy density of pure electric technology for electricvehicles is limited, which limits the endurance of trucks. The conventional
batteries are not suitable for long-distance driving of trucks.

6. Zero Emissions Transportation➢ The integrated charging station with photovoltaic and energy storage has
disadvantages such as high construction cost, low photovoltaic conversion
rate, and difficulty in commercial profitability.
➢ Producing Hydrogen from electrolysis water for fuel cell will increase thedemand for electricity. Fuel cell electric vehicles using hydrogen has
problems such as high cost, lack of infrastructure, and immature hydrogenstorage and transportation technology.
➢ The development of charging highway is limited by battery energy density.
➢ The cruising range and load capacity of electric vehicles are much lower
than those of fuel vehicles.
➢ The key issues in the decarbonization of long-distance air transportation are(1) the cost-effectiveness of bio-aviation fuel and synthetic aviation fuel, and(2) the sustainable supply capacity of biomass resources.

7. Construction Sector➢ Zero energy consumption building technology still needs improvement.
➢ Comprehensive electrification of energy consumption in the construction
sector is the key to reducing direct carbon emissions, especially the fullelectrification of building heating, cooking, domestic hot water and steam
energy consumption of special buildings in non central heating areas.

➢ Further strengthening of renewable energy heat pump technology is needed topromote the development of ultra-low energy consumption buildings.
➢ The technology of Building Integrated Photovoltaic(BIPV) System should beenhanced.

8. Carbon Capture, Utilization and Storage (CCUS)➢ Carbon Capture Technology : the first generation carbon capture (such as post-combustion
capture technology, pre-combustion capture technology and oxygen-enriched combustiontechnology) is becoming mature. The main bottlenecks are high cost and high energy
consumption. The second generation technology (such as new membrane separation technology,
new absorption technology, pressurized oxygen-enriched combustion technology, etc.) is still at
the stage of laboratory research or small-scale test.
➢ Conveying technology: tank car transportation and ship transportation are at commercial
application stage, but the submarine pipeline transportation is still at research stage.
➢ Utilization and storage technology: there are still some technical bottlenecks in the
combination of post-combustion CO2 capture system and chemical conversion and utilizationunit.
➢ Direct Air Carbon Dioxide Capture and Storage(DACCS): still at basic research stage, thetechnical maturity and economy need to be improved, and the emission reduction potential isdifficult to release in the short term.
➢ Bioenergy with Carbon Capture and Sequestration(BECCS): insufficient promotion ofsupporting technology and shortage of required biomass fuel supply.

Thanks for your attention