In September, China’s President Xi Jinping pledged before the UN General Assembly to make China carbon neutral by 2060.
This is a bold goal for the world’s largest polluter at a time when the nation is planning to develop nearly 150 gigawatts worth of coal power plants.
Offshore Energy is read by thousands of professionals every day.
Increase your visibility with banners, tell your story with a branded article, and showcase your expertise with a full-page company profile in our business directory.
Follow Offshore Energy on:
Join thousands of industry professionals who start their day with our newsletter.
The momentum is building for the world’s players to step up and go green as the only way of mitigating the impact of climate change.
The gargantuan endeavor is being revealed as the EU strengthens its Paris agreement goals, vowing to slash emissions by 55% by 2030 in line with its Green Deal policies.
On the other hand, the United States, the world’s second-largest CO2 emitter, is set to abandon the treaty in November under the guidance of Donald Trump, who, if reelected is likely to backtrack the nation’s environmental efforts.
At the same time, some of the states remain committed to their environmental efforts, such as California, which wants to become carbon neutral by 2045.
China’s announcement comes ahead of the 2021 United Nations Climate Change Conference, COP26, which was supposed to be held this year but was delayed due to COVID-19.
The conference is expected to result in more ambitious climate action from global governments in order to keep global heating below 2C.
Clamping down on emissions across global supply chains, industrial sectors, and vowing to attain carbon neutrality has become a major trend over the past couple of years amid growing pressure from the public to slash emissions.
This year alone, we have seen many oil and gas majors, like Shell, BP and Equinor, announce their energy transition goals with a major switch to investments in renewables.
The shipping sector is also witnessing a shift toward investments in renewables like hydrogen or offshore wind, the most recent example being Scorpio Bulkers revealing plans to build a massive wind turbine installation vessel while shedding bulker fleet.
Beijing’s pledge will require a massive and rapid shift in policy making and implementing to meet the 2060 carbon neutrality goal.
But, if anyone can do it at this pace, China can as its track record has shown!
Namely, China has become a clean-tech manufacturing powerhouse and a world leader in renewable energy, resulting in an investment surge to support solar and wind projects over the past five years.
For one, China is busy making strides in the offshore wind realm, as it is expected to overtake the UK’s booming offshore industry.
The country has shown steady growth in terms of installed capacity in coastal waters, marking a 23% growth in total installed offshore wind capacity in 2019 to around 2 gigawatts (GW), including nine fully commissioned wind farms and more than 530 turbines added on the mainland, data from Rystad Energy shows.
Rystad expects new installed capacity could nearly double to 4 GW this year and reach nearly 7 GW in 2021.
Furthermore, China’s three biggest national oil companies – Petrochina, Sinopec and CNOOC – are also looking to diversify into wind and hydrogen power.
“The path to zero emissions will require intervention on a scale not seen before, with the need for new regulations, feed-in tariffs for renewables, subsidies for alternative fuels as well as more stringent laws to ensure compliance. Any new rules and regulations would inevitably ‘spill over’ to impact countries that trade with China, ” David Bull , a Senior Analyst at Gibson Consultancy and Research writes in the latest edition of Gibson’s Tanker Market Report.
Wood Mackenzie’s latest analysis shows over $5 trillion of investments would be needed for China to reach its pathway for carbon-neutrality by 2060.
Even though Xi said in his speech that China’s aim is to reach peak CO2 emissions ’before 2030’, the country will need to start to reduce its fossil fuel consumption soon if it is to transition its economy to achieve its reduced emission targets.
“It is definitely a colossal task for a country using 90% hydrocarbons in its energy mix and annually producing more than 10 billion tonnes of CO2-e, and in addition, accounting for 28% of global total emissions,” Wood Mackenzie Asia Pacific Head of Markets and Transitions, Prakash Sharma , said.
“In our Accelerated Energy Transition (AET-2) scenario, China’s emissions peak immediately and enter a period of rapid decline, reaching net-zero slightly after 2050. This is achieved by widescale electrification of transport, heating and industry as well as deployment of carbon capture use and storage (CCUS).”
For China to reach its goal, Wood Mackenzie estimates solar, wind and storage capacities will have to increase 11 times to 5,040 gigawatts (GW) by 2050 compared to 2020 levels. Coal-fired power capacity halves while gas ends at the same level as in 2019. Total power output expands nearly 2.5 times to 18,835 terawatt-hour (TWh) by 2050 compared to current levels.
To support the transition to low-carbon alternatives the country is expected to introduce considerable government subsidies and carbon pricing systems.
WoodMac estimates that China’s carbon price support to reach $109 per tonne by 2030.
In the shipping business, global trends have a major focus on what goes on in China, as demand and supply shifts in line with the country’s policies tend to shape outlooks for entire sectors within the shipping market.
“China currently accounts for approximately 52% of coal, 14% of oil and 8% of natural gas global consumption. Moving its economy away from these fuels will have significant implications on all fossil fuels (including oil),” Bull said.
“This will impact both local production and import volumes. The refinery sector will also have to adapt to the new environment. Whether this can be accomplished with the current infrastructure is still to be decided.”
Gibson predicts that the climate goals of the world’s largest oil importer will have implications for the global tanker market, as oil demand growth from China slows, and eventually declines.
As a result, tankers will need to look elsewhere for demand, some of which may be unconventional.
DNV GL’s Programme Director on the ETO, Sverre Alvik , agrees the tanker sector is likely to be impacted heavily by the transition.
“For oil, carbon neutrality in 2060 and peak emissions in 2030 would probably mean a continued increase in oil import the coming decade, but thereafter a relatively steep decline from 2030 to 2060 in our forecasts,” Alvik said when approached for a comment by Offshore Energy-Green Marine.
“For coal, only a very small share of the coal China use is imported on keel, so the decisions taken to produce domestically or not are more important on short/medium term. Longer-term, carbon neutrality would implicitly mean very little coal and hence little import.”
DNV GL estimates that imports of coal are likely to start decreasing not later than the late 2020s.
However, the move to carbon neutrality is likely to spell some good news for the LNG imports for the upcoming 15-20 years, Alvik explained.
“After this also gas (and LNG) use will ultimately start to reduce,” he said.
Gibson believes alternative fuels such as hydrogen, ammonia and methanol could well be the growth sectors of the future, with Sinopec already focusing on producing hydrogen.
“The country’s transition over the next 40 years will impact all aspects of the shipping sector, from bunker fuels to vessel design, all in a bid to reach the goal of being carbon neutral, ” Bull said.
When asked about the likelihood of trends like the switch to hydrogen, ammonia imports picking up as a potential business opportunity for shipowners in China, Alvik explained:
“It is hard to say whether hydrogen will be produced domestically or shipped, but generally shipping hydrogen is expensive and challenging.”
“If ammonia wins the race to low/zero-carbon fuel, it can be an interesting commodity, but bear in mind that the volumes will never be near what they are for oil and oil products today.”
“Renewable energy will certainly be big, and although the pandemic has demonstrated the vulnerability of supply chain and maybe increased the appetite for local production, China is believed to be a powerhouse for producing renewable energy components, which could give some export possibilities,” he pointed out.
“The energy itself, in the form of electricity, is believed to be more of a locally/regionally produced form of energy and will offer relatively little trade opportunities, at least for shipping. “
about 5 years ago
In September, China’s President Xi Jinping pledged before the UN General Assembly to make China carbon neutral by 2060. This is a bold goal for the world’s largest polluter at a time when the nation is planning to develop nearly 150 gigawatts worth of coal power plants. The momentum is building for
