Will China be able to keep its carbon neutrality vows?

China’s largest carbon emitter, the steel industry, smokes 15% of total carbon emissions 

China will not be able to keep its carbon-neutral promises without first carrying out a clean-up in its steel industry, according to S&P Global Ratings’ latest report.

The sector is the largest carbon emitter among manufacturing sectors and contributes about 15% of total carbon emissions in the country.

Read more: China vows to limit projects with high carbon emissions

The report further pointed out that whilst China has long planned to cut steel capacity as excess supply drained earning potential, the rate of expansion has slowed and the sector is now more profitable with a lot of inefficient and overly polluting equipment being decommissioned or upgraded. S&P now anticipates steel output to peak in 2022 then plateau for several years before it gradually trends down.

Chinese steel mills have been retrofitting their facilities to achieve "ultra-low emissions". From 2018 to 2020, about 60% of crude steel capacity was completed or began the process of meeting ultra-low emission. S&P expects more than 80% of crude steel capacity to reach ultra-low emission by 2025.

While fossil-fuel combustion will continue to dominate for some time, China will likely experiment with alternative production technologies. For example, replacing metallurgical coke with hydrogen in the steel-making process can reduce carbon emissions by 70%-80%. The ratings agency, however, expects this technology to take years to become economically feasible at scale.