The Inner Mongolia Autonomous Region has significant energy resources in terms of coal, iron ore, wind, solar, and minerals. It is one of the major energy-producing provinces in China and will continue to play an important role in China’s energy transition. During the 13th Five-Year Plan (FYP) (2016–2020), Inner Mongolia failed to achieve its “Dual Control” targets, which included a required energy intensity reduction and a cap on increased energy consumption set by the central government. It is critical for Inner Mongolia to identify gaps and potential areas to improve its energy intensity. The goals of this project are to provide a technical analysis of the industrial sector in Inner Mongolia, including conducting an energy intensity benchmark analysis in Inner Mongolia’s iron and steel industry and aluminum smelting industry and providing information on major industrial corporations’ decarbonization commitments to inform Inner Mongolia’s long-term direction on carbon neutrality. Our analysis shows that Inner Mongolia has significant potential to reduce its steel energy intensity (3-20% higher than the Chinese national average of key enterprises). It has a comparable electricity intensity in primary aluminum smelting to the China national average (in the range of 1.3% lower to 2.7% higher). But compared to international practical minimum energy intensities, Inner Mongolia still has substantial potential to improve in both industries. The local and central government can use a range of policy measures, such as regulatory requirements to conduct energy assessments and energy-efficiency retrofits, fiscal and financial incentives, and information on technologies and practices, to promote the adoption of energy-efficiency technologies in the steel industry. For improving aluminum smelting electricity intensity, policies on improving recycling collection and sorting, connecting participants along the supply chain, and implementing extended producer responsibility schemes could be considered. Energy intensity benchmarking is the first step to identifying potential energy-saving and emission-reduction potentials. It can be followed up with more detailed energy assessments, retrofits, and/or adopting energy-efficient and low-carbon technologies. Many commercialized and cost-effective technologies and measures can be taken to improve the energy performance in the steel and aluminum industries in Inner Mongolia.

China’s manufacturing sector generates 61% of the country’s CO2 emissions, nearly three-quarters of which is related to industrial process heating. To meet China’s climate targets and attain a zero-carbon industrial sector, decarbonizing these industrial heating processes is a necessity. If China’s electricity grid is similarly decarbonized, direct electrification is the most practical means of supplying this heat efficiently at the required scale. In addition to reducing greenhouse gas emissions, industrial electrification would help reduce conventional pollution that was responsible for 1.85 million premature deaths in China in 2019, and it would improve China’s energy security, as the country imported 85% of its petroleum products and crude oil as well as 46% of its natural gas in 2021. Direct electrification would also help Chinese firms avoid volatile fossil fuel prices and future carbon pricing costs, and ensure competitiveness when selling products to environmentally-conscious buyers and governments that may use carbon border adjustment mechanisms or similar efforts to encourage the procurement of cleaner materials. Two electrified technologies stand out as means for China to decarbonize its industrial process heating: industrial heat pumps and thermal batteries. Heat pumps can be the most efficient and cost-effective method to supply clean, low-temperature heat for industrial processes. They can achieve efficiencies several times higher than other electrical technologies because they do not convert their input electricity into heat. Instead, heat pumps move heat from a low-temperature to a high-temperature area, operating much like a refrigerator or air conditioner. Industrial heat pumps can extract heat from a source (such as the air, ground, or waste heat from another industrial process) and output heat at temperatures up to 165 °C. Heat pumps that raise temperature by 40 to 60 °C typically have efficiencies of 300-400%. Notably, no other heating technology can generate heat at an efficiency beyond 100%; this exceptional efficiency makes heat pumps a particularly cost-effective electrification route. For higher temperature processes, thermal batteries can provide up to 1,700 °C, making them a viable option for supporting over two-thirds of China’s manufacturing sector’s process heating needs. Thermal batteries contain thermal storage material with a high specific heat capacity that resists chemical breakdown at high temperatures. The storage material is enclosed in a highly insulated shell to minimize heat loss, losing as little as 1% a day in some systems. Electrical resistance heaters inside the battery convert their electricity to heat that is absorbed by the storage material and can then be extracted when the industrial facility is ready to use the heat. The storage capability of thermal batteries means that they can provide steady-state heat in both on- and off-grid configurations. Off-grid batteries would be able to procure electricity at wholesale prices from dedicated renewables projects, smoothing over the variability of day-night cycles or lulls due to weather conditions. Similarly, for grid-connected batteries, energy can be purchased during the cheapest times of day and banked for future use. While many Chinese manufacturing firms are located in the eastern provinces where there may be limited land for creating new off-grid renewables projects, grid-connected thermal batteries offer firms and utilities the benefits of price-hunting and optimization. Additionally, by reducing industrial electricity demand when electricity is in short supply, direct electrification with thermal batteries could aid in grid regulation, help the grid integrate variable renewables, and cut peak demand, lowering the required grid-related capital costs of transitioning to clean industry. Performing a techno-economic comparison of these two electrified heating technologies and their alternatives in China, we found that for temperatures under 100 °C, industrial heat pumps were the second-cheapest heating option with a levelized cost of $38/MWhth (¥260/MWhth), remaining competitive with combined heat and power (CHP) variants and considerably cheaper than natural gas or electric boilers (Figure ES-1). While coal-fired boilers currently offer the lowest levelized cost of heat production, when incorporating a 2030 estimated carbon cost, industrial heat pumps become the lowest-cost option for low-temperature heat. For temperature ranges of 100-165 °C, industrial heat pumps cost about $58/MWhth (¥391/MWhth), but are broadly competitive with natural gas, and may improve in terms of costs and efficiency with additional research and development. Industrial thermal batteries are costed in-between the two heat pump variants at $46/MWhth (¥314/MWhth) and can support far higher temperatures. Relative to coal-fired technologies, heat pumps were found to achieve significant reductions in five pollutants (CO2, NOx, SOx, PM10, and PM2.5) and thermal batteries in three pollutants (SOx, PM10, and PM2.5), accounting for the pollutant emissions associated with the electricity they use. As China’s grid increasingly shifts to zero-emissions electricity sources, electrified technologies’ pollutant emissions will decline, ultimately reaching zero if China’s grid becomes fully decarbonized. Smart policy is necessary to overcome the barriers to industrial electrification in China. Fossil fuel prices are considerably lower in China than the cost of electricity for industrial energy buyers. Limited availability of electrified equipment, especially high-temperature industrial heat pumps and industrial thermal batteries, also presents a current hurdle. Additionally, upgrading and electrifying existing industrial equipment can be technically challenging, and doing so outside of the equipment’s natural replacement cycle can incur additional costs. Policymakers can incentivize the transition using equipment rebates, retooling grants, and access to low-interest financing mechanisms to offset the capital expenditures related to adopting these technologies. Enhancing existing energy-efficiency standards, emissions standards, and green public procurement programs can likewise encourage the transition to direct electrification. China’s research laboratories, such as those operated by the Chinese Academy of Sciences, can collaborate with private industry on research and development (R&D) programs to move these early-stage technologies forward. Grant funding is not limited to supporting laboratory-scale R&D but can also fund pilot or demonstration plants that provide proof-of-concept and encourage industrial players to transition. Creating a competitive landscape between coal and electricity is also important and can be achieved by carbon pricing or by subsidizing the cost of clean electricity and the cost of upgrades to support electrification. Inter-provincial electricity trading and optimization of China’s Green Electricity Certificate system can help facilitate access to clean electricity. Direct electrification of industrial process heating in China has the potential to reduce greenhouse gas emissions immensely and would yield massive benefits to the country and the globe. While existing technologies offer a path forward, China must incentivize their adoption by creating a supportive environment for industrial decarbonization through the right policy approaches. Given the country’s large industrial capacity, China has the potential to lead in clean industrial technology while achieving its climate targets.

Iron and steel manufacturing is energy intensive in China and in the world. China is the world largest steel producer accounting for around half of the world steel production. In this study, we use a bottom-up energy consumption model to analyze four steel-production and energy-efficiency scenarios and evaluate the potential for energy savings from energy-efficient technologies in China’s iron and steel industry between 2010 and 2050. The results show that China’s steel production will rise and peak in the year 2020 at 860 million tons (Mt) per year for the base-case scenario and 680 Mt for the advanced energy-efficiency scenario. From 2020 on, production will gradually decrease to about 510 Mt and 400 Mt in 2050, for the base-case and advanced scenarios, respectively. Energy intensity will decrease from 21.2 gigajoules per ton (G/t) in 2010 to 12.2 GJ/t and 9.9 GJ/t in 2050 for the base-case and advanced scenarios, respectively. In the near term, decreases in iron and steel industry energy intensity will come from adoption of energy-efficient technologies. In the long term, a shift in the production structure of China’s iron and steel industry, reducing the share of blast furnace/basic oxygen furnace production and increasing the share of electric-arc furnace production while reducing the use of pig iron as a feedstock to electric-arc furnaces will continue to reduce the sector’s energy consumption. We discuss barriers to achieving these energy-efficiency gains and make policy recommendations to support improved energy efficiency and a shift in the nature of iron and steel production in China.

This paper conducts panel analysis to evaluate the effects of a structural economic shift from the industrial to the tertiary sector, a reduction in industrial overcapacity, and improvements in energy efficiency on energy consumption using data for 30 Chinese provinces from 1995 to 2015. We find that, at the national level, the structural shift to the tertiary sector, the reduction in cement and steel production, and the increase in energy efficiency in the industrial sector all have statistically significantly negative effects. We also divide the sample into three geographic and economic regions to evaluate regional differences. We find that the gross domestic product (GDP) share of the tertiary sector shows its greatest impact on reducing energy consumption in the eastern region, a decline in heavy industry production would reduce energy demand more in the central region, and improvement in industrial electricity efficiency would also help reduce energy consumption the most in eastern China. We also forecast energy consumption in China will reach 4.8–4.9 billion tonnes of coal equivalent (tce) in 2020 and further grow to 5.0–5.4 billion tce in 2030.

China needs to drastically reduce carbon dioxide (CO₂) emissions from heavy-duty trucks (HDTs), a key emitter in the growing transport sector, in order to address energy security concerns and meet its climate targets. We address existing research gaps by modeling feasibility, applicability, and energy and emissions impacts of multiple decarbonization strategies at different points in time. China still relies heavily on coal power, so impacts of new HDT technologies depend on the timing of their introduction relative to progress toward non-fossil power. We use a bottom-up model to simulate HDT energy consumption and CO₂ emissions through 2050. Results show that beginning to deploy battery electric and fuel-cell HDTs as early as 2020 and 2035, respectively, could achieve significant and the largest CO₂ emissions reduction by 2050 with a decarbonized power sector. However, viable near-term strategies-improving efficiency and logistics, switching to liquefied natural gas-could halve HDTs' current diesel consumption and CO₂ emissions by 2050. Our results underscore the need for a mix of near- and long-term policy and technology options to decarbonize China's HDTs.