Green Manufacturing: Carbon Emissions Reduction Roadmap of Carbon Intensive Sectors

Abstract

The implementation of green manufacturing is a key step for China to achieve carbon neutrality. According to China Emission Accounts and Datasets (CEADs), energy-intensive industries such as steel, cement, oil and gas, chemicals and non-ferrous metals, were responsible for about 36% of China’s total carbon emissions in 2017. This chapter analyzes changes in the green premiums of the steel, cement, non-ferrous metals, general manufacturing industries, as well as oil, gas and chemicals at different stages of development to explore how manufacturing sectors may become carbon neutral. Having analyzed total carbon emissions and green premiums of various sectors, we conclude that the higher the proportion of carbon emissions from internal production processes is, the higher green premiums are and the more difficult it is to reduce carbon emissions. As thermal power may be gradually replaced by renewable energy sources, we believe emissions from power consumption may decline sharply. If emissions of an industry mainly come from internal production processes rather than electricity consumption, such an industry would need to upgrade technological routes or adopt carbon capture technologies to reduce emissions, which means a higher green premium. We believe 2021–2030 may be the toughest period for emission cuts in manufacturing industries. While it is relatively easier to cut emissions from power generation, electricity consumption is not the main culprit for carbon emissions in most energy-intensive industries. Therefore, these industries may face both financial and technological problems in cutting emissions, especially in the early stages before 2030. Based on the direct emissions from internal production processes (without taking into account emissions from power consumption), we estimate a green premium ratio (i.e., magnitude of cost increase to achieve net-zero emissions) of 21% for steel, 151% for cement, 4% for aluminum, 61% for chemicals, and 8% for oil and gas sectors in 2019. Earnings of general manufacturing industries may decline about 3% if the green premium is taken into account. We believe these industries will need supportive public policies in this period to help them solve their problems, complete technology upgrading, and find a feasible path for emission cuts. During the period from carbon peak to carbon neutrality, we believe energy-intensive industries may face much milder pressure on emission reduction as these industries can finally develop a feasible and affordable roadmap for emission cuts. With low-carbon transition and falling aggregate supply and demand of some energy-intensive industries, we believe the green premium ratio (based on emissions from internal production processes) may decline to 6.7% for steel, 67.5% for cement, 2.0% for aluminum, −0.8% for chemicals, and −3.3% for oil and gas sectors in 2060, much lower than the current levels.