China highlights capacity control in energy and chemicals industry for carbon reduction

The State Council of the People's Republic of China released the Action Plan for Energy Conservation and Carbon Reduction during 2024-25 on the evening of May 29 Wednesday, putting forward specific requirements concerning different industries to reduce China's carbon emission.

Regarding the energy and chemicals industry, it is highlighted that from 2024 to 2025, the energy and chemicals industry shall save the energy consumption by about 40 million tonnes of standard coal and reduce the carbon dioxide emissions by around 110 million tonnes.

The specific rules are as follows:

1. The policies and requirements for the energy and chemicals industry shall be enhanced, with definite limits for capacity expansion and layout.

The capacity expansion of oil refining, calcium carbide, ammonium phosphate, yellow phosphorus and other industries shall be strictly controlled, and no new capacity of polyvinyl chloride and vinyl chloride using mercury shall be approved. The scale of new delayed coking capacity shall be within limit.

The newly built, renovated, and expanded energy and chemical projects must reach the benchmark energy efficiency and A level environmental performance. And the capacity to be replaced must be shut down and dismantled in a timely manner as required.

Lastly, the CDUs with a capacity below 2 million tonnes/year shall be phased out completely. And by 2025, China's combined CDU capacities shall not exceed 1 billion tonnes/year.

2. The energy-saving and carbon-reducing transformation of the energy and chemicals industry shall be accelerated, with measures like energy system optimization, recycling and utilization of high-pressure and low-pressure steam, purge gas, waste heat and pressure, as well as the promotion of energy-saving equipment such as large-scale high-efficiency compressors and advanced gasifiers.

By the end of 2025, the capacity above the benchmark energy efficiency in the oil refining, ethylene, ammonia, and calcium carbide industries will account for more than 30% of the total, and those failing to reach the benchmark level shall either complete technological transformation or be eliminated.

From 2024 to 2025, the energy and chemicals industry shall save the energy consumption by about 40 million tonnes of standard coal and reduce the carbon dioxide emissions by around 110 million tonnes.

3. The energy and chemical industry process shall be upgraded, such as new generation ion membrane electrolyzers. The substitution of renewable energy shall be promoted, including the R&D and application of renewable energy to hydrogen technology, green hydrogen refining and chemical projects, with the purpose of gradually reducing the coal-based hydrogen production in the industry.

In addition, the steam drive shall be transformed towards electric drive in an orderly manner, and the large energy and chemical industrial parks are encouraged to explore the use of nuclear energy to supply steam and heat.

OilChem expects that the energy sector will be less significantly influenced by the new Action Plan than the chemicals sector.

First, the new refining-chemicals integrated independent refineries projects under construction are mostly large ones with an energy efficiency above the benchmark level. In addition, though the CDUs with a capacity below 2 million tonnes/year shall be fully eliminated, it is insignificant compared with the entire industry, especially when few of these refineries are equipped with chemicals facilities.

On the contrary, the chemicals industry is likely to go through major changes during the carbon reduction process.

According to the 2025 target, the coal-based production capacity in the methanol, coal-based MEG, urea, and caustic soda fields all have a proportion of above 20%, which will be gradually phased out, potentially resulting in a supply crunch. In addition, there are still some small PX and ethylene production capacities (PX 600,000 tonnes/year, ethylene 300,000 tonnes/year) that need to be transformed or eliminated.

Written by Aggie Hu, huchenying@mysteel.com

Edited by Navy Liu, liuchuanjun@mysteel.com