China – Gas Policy Brief

The International Energy Authority has described China’s challenge to deliver a carbon-neutral economy by 2060 as the biggest climate undertaking ever made by any country and compared it to China’s successful challenge post-1978 to transform its rural economy into an industrial global powerhouse.

The scale and magnitude of the challenge facing the world’s largest CO2 emitter is daunting. Though it has been actively pursuing a sustainable energy policy for more than 20 years, coal still comprised 58% of the primary energy mix in 2020. This reflects a 10% reduction in the last decade and means the country remains the world’s largest producer and consumer of coal which is used primarily to generate 69% of its electricity needs.

However, it is also the world’s renewables leader with 45% of the world’s installed capacity and was responsible for almost half of the globe’s renewable capacity added in 2020 – doubling its own growth from a year earlier. It is the largest investor in renewable energy accounting for 28% of the world’s total in 2020.

Between 2020 and 2030, China will have installed more solar and wind power than the entire installed electricity capacity of the US today. It overtook US’s installed renewables capacity in 2013.

Non-fossil fuels are now contributing more than 30% of electricity while their generation capacity stands close to 45%.

China has committed to achieve net-zero carbon emissions by 2060 with carbon emissions peaking in 2030 when carbon emission intensity will be at least 65% of the 2005 levels.

China is focusing on three main areas:

Going green: Adopting renewable and non-fossil fuels to cut emissions and reducing the role of fossil fuels though coal will remain a major contributor in the medium to long term.

Technology: Developing new technologies to reduce the carbon footprint, particularly to make coal cleaner and greener and renewables more efficient and affordable, as well as increasing the production of unconventional natural reserves such as shale, while establishing leading positions in new areas such as artificial intelligence and Electric Vehicles (EV).

Market reform: Liberalising the gas, power and oil sectors, developing power and environmental product trading while promoting foreign direct investment in multiple sectors including energy and transport.

Natural gas has a niche but critical role to help drive down air pollution and emissions where there has been heavy coal use. It is being prioritised for industry and for city heating to improve air quality in populated areas, as well as being linked to renewables as a complementary energy to build innovative distributed energy systems. Though its share of the primary energy mix is 8%, China’s natural gas consumption has doubled in the last decade and is currently the third largest in the world.

By 2050, natural gas is expected to have 15% of the primary energy share with more than half coming from non-fossil fuels sources.

In the last 15 years, the government has built thousands of kilometres of domestic gas pipelines throughout the country, backed out coal for gas in cities and industry, started importing gas by pipeline from Russia and other central Asian countries and built 22 LNG regasification plants to become the second largest LNG importer globally in 2020.

In a 2020 State Council white paper, natural gas priorities focus on developing new technologies to increase production, including unconventional reserves such as shale, coalbed methane, tight gas and methyl hydrate, and improving midstream infrastructure – pipelines and storage.

With economic growth predicted at 4.6% per annum for the next 10 years there will be a significant role for natural gas and the size of that role over the next 30 years will depend on how quickly China moves toward its renewables options, develops clean coal solutions and other technological solutions such as hydrogen.