Steel Production Growth Leads to Surge in CO2 Emissions in China
CO2 Emissions ChinaSCMP

Steel Production Growth Leads to Surge in CO2 Emissions in China

According to Helsinki based Centre for Research on Energy and Clean Air’s recent report, China's emissions of carbon dioxide emissions rose by, fastest

According to Helsinki based Centre for Research on Energy and Clean Air’s recent report, China's emissions of carbon dioxide emissions rose by, fastest pace in more than a decade, 15% in the first quarter of 2021 compared with pre-pandemic levels, driven by a carbon-intensive economic recovery and big hikes in steel and cement output. The post-pandemic surge means China’s emissions reached a new record high of nearly 12 billion tonnes GtCO2 in the year ending March 2021. This is some 600 million tonnes 5% above the total for 2019. The reasons for such rapid emissions growth in China relate to the way the country has come out of the coronavirus pandemic on a wave of stimulus spending. The CO2 surge reflects a rebound from coronavirus lockdowns in early 2020, but also a post-Covid economic recovery that has so far been dominated by growth in construction, steel and cement.

CREA’s lead analyst Mr Lauri Myllyvirta said that “Since China began relaxing COVID-19 lockdowns, total CO2 emissions exceeded pre-pandemic levels by 7%, setting the fastest rate of growth since 2012. In the first quarter of 2021, China’s CO2 emissions from fossil fuels and cement production grew by 14.5%, relative to the same period a year earlier. Around 70% of the CO2 surge in the first quarter was due to increased consumption of coal, as Chinese coal production rose 16% year on year in the first three months.”

Based on coal and power consumption data, the steel sector is responsible for more than 30% of total coal use in China and has been the main source of growth in demand. The numbers cited in conjunction with the emissions target indicate that only direct emissions from iron and steel production are included, not electricity use for manufacturing of steel products or electric steelmaking from scrap. Yet, the target still has implications that also go beyond steel. The plan to cut steel emissions is mainly predicated on a major increase in electric steelmaking from scrap metal, potentially reaching almost 40% of steel output by 2030. This compares to the current share of electric steelmaking of just 10%. If steel output volumes level off and the supply of scrap is fully used for steel production, this alone would be enough to deliver an almost 30% reduction in emissions from the sector, as 30% of primary steelmaking and direct emissions would be replaced with electric arc production.

The industry can play a role in stabilising or reducing steel demand, because higher quality steel reduces the amount needed in construction. But the emissions reduction plan can only work if the current expansion of steel demand for construction slows down. During the past five years, steel demand growth significantly exceeded government targets and forecasts: GDP growth was in line with targets, but was far more steel-intensive than expected. Steel production in 2020 was 40% higher than projected in the previous five-year plan in 2016, for example. Steel production expanded by 31% over the period, while the GDP expanded 32%. If the need for steel continues to grow as fast as China’s GDP, then total demand could rise more quickly than the level able to be supplied by increasing output from scrap. It would also be too large to be met by plans to pilot hydrogen and other non-coal-based steelmaking.

China has set targets to bring carbon emissions to a peak by 2030 and become carbon-neutral by 2060. China has vowed to cut coal consumption, its biggest source of carbon emissions but only after 2025. While emissions from China’s steel sector have been increasing rapidly in recent years, ambitious emissions reduction targets are being put in place for the industry. These targets would involve the sector’s CO2 emissions peaking before 2025 and falling 30% from the peak by 2030. The goals are the steel industry’s proposed response to the central government’s call for emissions from major energy-consuming industries to peak by 2025, achieve steady reductions by 2030 and substantial reductions by 2035.

The analysis is based on official figures for the domestic production, import and export of fossil fuels and cement, as well as commercial data on changes in stocks of stored fuel. Emissions are estimated from National Bureau of Statistics data on production of different fuels, steel and cement, China Customs data on imports and exports and WIND Information data on changes in inventories

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