Towards carbon neutrality: decarbonizing China’s steel and petrochemical industries: Pathways and policies

Abstract

Tackling climate change is one of the most pressing challenges of our time. Among the various sectors contributing to global greenhouse gas (GHG) emissions, the industrial sector plays a pivotal role, responsible for 24% of total GHG emissions. As the world’s largest emitter of CO₂, China has committed to peaking emissions by 2030 and achieving carbon neutrality by 2060. The industrial sector in China accounts for 36% of China’s direct emissions and around 56-60% when indirect emissions are included. In other words, the direct CO2 emission from China’s industry is responsible for approximately 12% of global emissions. Therefore, the decarbonization of China’s industrial sector is not only crucial for achieving its own carbon neutrality target but also holds significant implications for global climate governance. However, reaching these targets is particularly challenging for energy-intensive industries such as steel and petrochemicals, due to the technological, economic and political barriers. This thesis explores how China’s steel and petrochemical industries can transition to a carbon-neutral future. It investigates potential technological pathways for achieving deep decarbonization in these sectors and examines the role of policy in facilitating this transformation. Using optimization models, the research identifies potential decarbonization pathways while accounting for economic, social, and geopolitical factors that may influence their adoption. Furthermore, the thesis evaluates the adequacy of China’s current green industrial policies in supporting decarbonization in the steel and petrochemical sectors. Key findings highlight that while technological solutions exist to help China achieve its carbon neutrality goals, deep decarbonization will require significant investments in technology, industrial infrastructure, and robust policy support. Regional disparities, governance structures, and geopolitical factors add further complexity to this transition. The steel and petrochemical industries face distinct challenges, ranging from differences in technological maturity to varying levels of value chain complexity and future demand projections, which will influence their respective decarbonization roadmaps. Overall, the steel industry is expected to achieve faster progress toward decarbonization compared to the petrochemical industry.