Much attention is given to decarbonizing power and transportation systems in China and beyond as a means for driving carbon neutrality by the middle of this century. While these efforts are essential, it is likewise imperative that China and other major economies steadily decarbonize carbon intensive industrial sectors such as steel, cement, aluminum and chemicals. The fundamental characteristics of these sectors and their greenhouse gas emission reduction options make decarbonization uniquely challenging.

On 3 November 2021 the Asia Society Policy Institute hosted a panel discussion, ‘Industrial Decarbonization in China and Beyond’, at COP26 in Glasgow. The session, moderated by ASPI Senior Advisor and Duke University Senior Fellow Jackson Ewing, explored industrial decarbonization challenges and assessed promising policy tools for addressing them, such as emissions trading systems (ETS) and carbon capture, utilization and storage (CCUS).

Tareq Emtairah, Director of Energy at the United National Industrial Development Organization, shared experience on sustainable transitions for industrial sectors. He elaborated upon growing momentum around the linkages between decarbonization and energy use in industry. As more countries pay attention to competitiveness dividends of efficient industrial production and industrial processes, these systems become greener. What remains a pervasive challenge is to establish links between industrial abilities to pursue these efficiency gains as a business solution and energy pricing structures that do not always incentivize such actions. He also shared insights on decarbonization technologies rife for scaling-up.  

Professor Xi Liang of University College London highlighted how industrial stakeholders in China view decarbonization in their overall priority list, particularly in light of the country’s recent carbon peaking (by 2030) and carbon neutrality (by 2060) goals. Leading companies in cement, steel, and petrochemicals are actively working on decarbonization road maps and vetting different technologies – from cleaner energy inputs to efficiency gains to CCUS – that can get them there.

ASPI’s Director of Asia-Pacific Sustainability Alistair Ritchie provided insights into China’s national ETS including challenges for its expansion to industrial sectors. These include development of consistent and ambitious GHG emission benchmarks for allocation of allowances, and creating carbon prices sufficient to drive investment in advanced large-scale decarbonization technologies and fuel switching from coal to renewables. This will require an ambitious cap aligned to the net zero GHG emission pathway, high levels of auctioning (and revenue recycling for GHG mitigation projects), reflection of carbon costs in power station dispatch and electricity prices, and effective carbon leakage mitigation measures.