China produces and consumes more than half of the world's steel, which accounted for about 17 per cent of the country's carbon emissions in 2019. This makes the steel industry the country's second largest emitter after the power sector. Decarbonising the steel sector will play a significant role in achieving China's dual-carbon goals - carbon peak by 2030 and carbon neutral by 2060.
This report from RMI and ETC, builds on their 2019 report titled ‘China 2050: A fully developed rich zero-carbon economy’, analysing the specific path of China's steel industry to achieve the zero-carbon scenario by 2050. To achieve these goals, the report believes that great transformation will be required the product structure, energy consumption structure, and production process.
The report provides further granularity to achieve this transformation. This would involve reducing crude steel production, supported by
- A transformation in the secondary steel market to replace primary steel as the main force of China's steel production capacity.
- Withdrawal of fossil fuel and raw materials from the steel production process.
- Hydrogen-based steelmaking playing an important role in primary steel production.
- Carbon capture and storage (CCS) technology providing end-of-pipe treatment for decarbonisation of carbon emissions associated with the remaining blast furnace-basic oxygen furnace (BF-BOF) steelmaking.
The report further identifies the challenges and advantages faced by the China’s steel industry. On one hand, the industry’s dominant fuel is coal; the dominant technology is highly carbon emission intensive; and it has a large share of young facilities. On the other hand, the sector is entering a stage of declining demand; the growth of total steel stock and scrap are enabling the development of secondary steel; and the industry is led by the state-owned enterprises (SOEs), with motivation and stability to implement national strategies and policies.
The report also gives policy suggestions for short-term, mid-term and long-term targets setting, pathway identification, action plan making etc. to internalise the external cost of climate impacts.