China sets 40pc CO2 intensity goal for industry

OREANDA-NEWS. China's manufacturing sector will be obliged to cut its CO2 intensity by 40pc over the next 10 years, according to a new 10-year action plan for industry, issued by the governing state council on 19 May.

The document, Made in China 2025, outlines a range of measures to be implemented over the next decade aimed at transforming and strengthening the country's manufacturing sector.

The plan decrees that the amount of CO2 emissions per unit of industry-generated GDP should be reduced by 22pc below 2015 levels by 2020 and by 40pc below the same baseline by 2025.

China has an existing national target to cut its overall carbon intensity — the amount of CO2 emissions emitted per unit of GDP — by 45pc below 2005 levels by 2020.

The new plan further stipulates that energy intensity — the amount of energy consumed per unit of industry-generated GDP — must be cut by 18pc below 2015 levels by 2020 and by 34pc below the same baseline level by 2025.

Chinese manufacturing is facing new competitive challenges because of a transformation of global industry as developed countries "re-industrialise" their economies while some developing countries accelerate their industrialisation. As a result, China's manufacturing sector is facing a "two-way squeeze" from both developed and developing countries. In addition, the sector is hampered by dwindling resources and tighter environmental limits, ever increasing labour and production costs, declining investment and slowing export growth.

China has not yet tabled a post-2020 economy-wide CO2 intensity target, but a Chinese negotiator at the UN climate summit in Lima, Peru, said that it will do so as part of its intended nationally determined contribution (INDC) under a post-Kyoto global climate deal to be agreed this year. The country will formally submit its INDC by mid-2015, lead climate envoy Su Wei has said.

China, as part of a joint announcement with the US, said in November that it would aim to peak its CO2 emissions by 2030 — and sooner, if possible. It was the first time that Beijing set a target date for its CO2 emissions to peak. China is aiming to increase the share of non-fossil fuels in its primary energy consumption mix to around 20pc by 2030.

In addition, China has set a target to cut coal use by more than 160mn t below current levels by 2020. But the new target does not appear to mandate a much lower reduction than the country might in any case achieve under a business-as-usual scenario.

The target would imply a total fall of almost 6pc over the next 5-6 years. By contrast, a compound annual reduction rate in line with last year's 2.9pc drop in coal use would lead to a fall in coal consumption of more than 16pc up to 2020.

Meanwhile, China's energy mix will become less emissions-intensive this year as alternative energy sources further erode coal's share of the generation mix. Coal's contribution to power generation will fall to 59pc this year from 61pc last year, even if utilities are expected to add 38GW of new coal-fired generation capacity in 2015, according to a survey by lobby group the China Electricity Council.

China's coal consumption reached a peak last year and is now expected to decline steadily, reaching 3.5bn-3.7bn t by 2020, according to the Energy Research Institute, which helps China's main economic planning agency the NDRC map out energy policies. The country's coal demand dropped by 2.9pc to 4.1bn t last year, its first decline in 14 years, as an economic slowdown, an increase in hydropower output and a relatively cool summer cut power demand.