China's Guangdong province issues carbon emissions peaking plan

China's southeastern province of Guangdong on Feb. 7 published an official "Carbon Peaking Implementation Plan" under which it has set a target of 35% of its energy consumption from non-fossil fuels by 2030, more ambitious than the national-level target of 25%.

The implementation plan is significant because Guangdong is among China's most heavily industrialized provinces and has had the highest GDP among all China's provinces for 34 consecutive years.

It is also China's main manufacturing and trading hub, and goods exported from the province are likely to be subject to carbon accounting frameworks if measures like Europe's Cross Border Adjustment Mechanism or CBAM are introduced.

China issued a national carbon peaking action plan in 2022, which aims for 20% of energy consumption from non-fossil fuels by 2025 and 25% by 2030. Guangdong is aiming for 32% of energy from non-fossil fuels by 2025 and 35% by 2030, which is tighter than the national target. Non-fossil fuels cover renewable energy and nuclear energy.

Guangdong's carbon peaking action plan is important as it will be a testing bed for how some of the country's most energy intensive industries peak their emissions.

Industrial decarbonization

Guangdong plans to use existing technologies along with testing new ones like carbon capture, utilization, and storage or CCUS and renewables-based hydrogen.

For the steel sector, the short-process electric furnace steelmaking should be promoted, and, by 2030, the conventional long-process crude steel producers should cut their carbon emissions per unit by at least 8% from the level in 2020, according to the plan.

Demonstration projects should be established for non-blast furnace ironmaking, hydrogen-based smelting, and CCUS, the plan said.

In the refining and petrochemical sector, the government called for reducing oil product yield and increasing the yield for high-value petrochemical products to cater to evolving market demand, and the use of CCUS to decarbonize the refining process.

It encouraged refining companies to divert resources into renewables-based hydrogen production and build up hydrogen refueling networks for future vehicles.

Guangdong plans to continue promoting electric vehicles, facilitate hydrogen adoption in commercial transportation, support biofuel use in aviation, electrify the inland shipping fleet, and accelerate the building of LNG-fueled vessels and LNG bunkering.

In 2030, electricity and low-carbon fuels, such as LNG, biofuels, and renewable energy, should account for around 40% of transport capacity additions, the government said.

Guangdong aims to deploy CCUS in the cement industry, according to the plan. China accounts for over 50% of global cement production, with Guangdong having the highest production volumes among the country's provinces.

Pilot role in carbon trading

Guangdong's provincial emissions trading scheme is expected to expand to new sectors in the near future, including ceramics, textiles, data centers, public buildings, and transportation.

Guangdong's pilot compliance emission trading scheme was established in 2013, eight years before the national compliance market was launched in 2021. The national carbon market only covers the power sector, while Guangdong's market already covers power, cement, steel, refining and petrochemicals, aviation and paper making.

Guangdong plans to develop carbon futures and other environmental commodities to allow hedging and give a long-term price signal for the carbon market, the plan showed.

The province will maximize the use of natural gas a bridging fuel in the energy transition, with plans to increase installed gas-fired power capacity by about 36 GW during 2022-2025.

Guangdong had around 30.55 GW of gas-fired power at the end of 2021, accounting for about 28% of China's total gas-fired capacity of 108.59 GW in 2021, official data showed.