The industrial sector has long been the cornerstone of China’s rapid economic growth, but it is also a major energy consumer and carbon emitter. Over two decades ago, China began laying the foundations for the green and low-carbon transition of its major industries. Between 2012 and 2022, China reduced energy consumption per unit of value-added in major industrial enterprises by over 36%, making notable progress in low-carbon transition while sustaining robust GDP growth.

“Chinese enterprises are increasingly focused on energy efficiency, emission reduction, and sustainable development, driven by new opportunities in the green and low-carbon transition. This shift reflects a broader decarbonization trend and the sustainable growth of China’s industrial sector,” said Dr. Ping He, Senior Program Director of the Industry Program at Energy Foundation China (EF China). “For over two decades, EF China has collaborated with various stakeholders to drive the deep decarbonization of industry. Our focus has evolved from improving energy efficiency to promoting integrated, multi-dimensional solutions aimed at meeting the ‘dual-carbon’ goals.”

Improving energy efficiency to reduce the climate impacts of industrial growth

As China’s heavy industry—such as iron and steel, automotive, and shipbuilding—grew rapidly in the 21st century, the challenge of excessive energy consumption became evident. “In 2008, industry accounted for 71.8% of China’s total energy use,” Dr. He noted. “Inefficient and redundant production processes were driving up both energy demand and CO₂ emissions.” Addressing these inefficiencies became crucial to reducing the climate and environmental impacts of China’s industrial sector.

To encourage corporate emission reductions, many developed countries introduced “voluntary energy-saving agreements,” where businesses voluntarily committed to improving energy efficiency in collaboration with the government. In 2003, EF China piloted this approach in Shandong Province, facilitating the first voluntary energy-saving agreement in China between two steel mills—Jigang and Laigang—and the Shandong Provincial Economic and Trade Commission. The pilot project achieved substantial energy savings, emission reductions, and various synergies.

The success in Shandong showcased the vast potential for energy conservation in industrial enterprises and served as a reference for subsequent policy development. In 2006, China’s 11th Five-Year Plan introduced a binding target to reduce energy consumption per unit of GDP, which significantly encouraged energy-saving initiatives across the nation. That same year, the National Development and Reform Commission (NDRC), together with five other departments, launched the “Top-1000 Energy-Consuming Enterprises Program,” with voluntary energy-saving agreements as a key component. Building on the success in Shandong, EF China and a team of researchers provided technical support for the program’s design and implementation. The program exceeded expectations, saving 156 million tons of coal. Given the importance of voluntary energy-saving agreements in improving energy efficiency, this mechanism was formally incorporated into the revised Energy Conservation Law, passed on October 28, 2007.

The successful implementation of the Top-1000 Program and subsequent legal frameworks led to growing discussions around energy management models. In 2008, leveraging its international expertise and technical resources, EF China supported the introduction of advanced global energy management tools to Shandong Province. By adapting these methodologies to local conditions, EF China took a leading role in advancing research in this area. In 2011, Shandong Province launched China’s first local standard for energy management systems (EMS), an innovative practice that gained national attention. Within just one year, China launched the Energy Management System Requirements as a national EMS standard, providing technical support for industrial enterprises across the country in their energy-saving efforts.

In 2012, to further promote energy conservation and the adoption of EMS in enterprises, China launched the “Action Plan for Energy Conservation and Low-Carbon for 10,000 Enterprises.” The program, the world’s largest corporate energy-saving initiative at the time, mandated all participating businesses implement robust EMS to optimize energy management and enhance energy efficiency. EF China and its partners played a pivotal role in supporting this program by contributing to the design of implementation plans, training local talent, building institutional capacity, and fostering policy innovation. As a result of these collective efforts, the Top-10,000 Program exceeded its target by the end of the 12th Five-Year Plan, saving over 250 million tons of standard coal—equivalent to a reduction of 660 million tons of CO₂ emissions.

With the increasing adoption of energy-saving measures among enterprises, China has accelerated the development of energy efficiency standards to guide businesses in reducing energy consumption while improving product quality. Between 2006 and 2010, a review of the existing standards identified over 100 that required updates or revisions. In 2012, multiple ministries and commissions jointly launched 100 projects to upgrade these energy efficiency standards, marking the largest national standards revision since the founding of the PRC. EF China actively contributed to this effort by collaborating with key stakeholders, including enterprises and trade associations in the steel, cement, chemicals, and non-ferrous metals industry, providing valuable insights and recommendations for the revisions of the standards.

After nearly two years of concerted effort, all 100 standards were successfully revised and released in 2013. By 2015, the second phase of the project was completed, culminating in the release of a total of 206 national energy efficiency standards.

Taking a multifaceted approach to advancing deep industrial decarbonization

Over the past two decades, China has made substantial strides in improving industrial energy efficiency. However, as a vital engine of economic growth, the industrial sector continues to be the largest consumer of energy and primary source of carbon emissions. In 2020, China unveiled the “dual-carbon” goals (to peak carbon emissions by 2030 and achieve carbon neutrality by 2060), setting higher expectations for sustainability in the industrial sector and calling for an accelerated transition to green and low-carbon practices to meet broader national objectives.

"Research indicates that industrial carbon reductions will contribute at least one-third of China’s transition toward carbon neutrality,” said Dr. He. “To meet the 'dual-carbon' goals, China needs to develop a modern industrial system that is efficient, green, and low-carbon. However, improving energy efficiency alone is not enough; we need a coordinated, multifaceted approach that brings together all stakeholders to drive toward deep decarbonization of the industrial sector. The four key areas for achieving carbon neutrality are demand reduction, process optimization, energy-efficiency enhancement, and energy substitution. We should focus on these areas to provide systematic, scientific support for the industry’s low-carbon transformation," he emphasized.

In 2021, EF China launched the Industrial Deep Decarbonization Initiative, working to promote carbon reductions in key industries. The sectors of iron and steel, cement, nonferrous metals, and petrochemicals are among the largest consumers of energy and producers of carbon emissions. Besides, the growing energy consumption in cooling and refrigeration equipment, exacerbated by the use of fluorinated refrigerants, also emerged as a significant climate challenge. "Given these imperatives, our project focuses on the four energy-intensive sectors and the cooling and refrigeration industry to accelerate deep industrial decarbonization. Key efforts include supporting the development of strategies and policies, promoting low-carbon innovations among industrial enterprises, facilitating the implementation of standards and market incentives, and fostering synergies while enhancing capacity building across various sectors," said Dr. He.

A well-structured high-level guidance is essential for driving the green transformation of industry. In recent years, EF China has collaborated with leading domestic and international research institutions to conduct research on carbon neutrality pathways for key sectors, such as iron and steel, cement, nonferrous metals, and petrochemicals, providing analytical and technical support for policymakers. Thanks to these collective efforts, a series of policy documents have been successfully introduced, including action plans for carbon peaking, implementation plans for energy conservation and carbon reduction, etc. These documents outline clear objectives and measures for the low-carbon transformation of China's industrial sector.

Industrial decarbonization must be driven by concrete actions in the business sector, particularly through corporate pilot demonstrations of technological innovations and integrated solutions. To this end, EF China established an expert steering committee for its Industrial Deep Decarbonization Initiative, bringing together experts and company representatives from iron and steel, cement, nonferrous metals, and petrochemicals industry. The committee aims to implement four primary carbon reduction pathways in key areas, helping them reach carbon peaks and ultimately carbon neutrality. At the same time, EF China has been working with its partners to advance the development and large-scale application of innovative low-carbon technologies, such as electric arc furnace (EAF) steelmaking, hydrogen metallurgy, low-carbon cement, aluminum recycling, green hydrogen-integrated chemical process, and low global-warming-potential (GWP) refrigerants. These innovations aim to set industry-leading examples and inform enterprises with integrated solutions for carbon neutrality.

The deep decarbonization of industry also depends on advanced standards and market-based mechanisms to incentivize carbon reductions. To achieve the "dual-carbon" goals, China needs to adopt systematic and cutting-edge standards, particularly in carbon accounting, verification, reporting, product carbon footprints (PCF), green product evaluations, and carbon labeling. Since 2021, leveraging over 20 years of research expertise in energy efficiency standards, EF China has supported think tanks in conducting relevant studies, offering insights and recommendations for developing energy-saving and low-carbon standards across various industries such as iron and steel, cement, nonferrous metals, petrochemicals, cooling and refrigeration, and heat pumps. A notable achievement has been the development of energy conservation standards for room air conditioners, which are now more stringent than those of the European Union and Japan, establishing global leadership with widespread adoption. Besides, EF China has partnered with think tanks and businesses in the automotive, construction, and iron and steel sectors to explore market-driven strategies for emission reductions throughout the supply chain. Key initiatives include organizing cross-industry dialogues, establishing service platforms and tools, developing low-carbon supply chain and procurement strategies, supporting the formulation of low-carbon standards and labels, and facilitating pilot projects in low-carbon procurement. Through these efforts, EF China has provided innovative, market-based solutions to accelerate the low-carbon transformation of China’s industrial sector.

Coordinated and integrated action is vital for the transition toward a low-carbon industry. In recent years, EF China and its partners have actively explored different emission reduction pathways across sectors, while integrating new technologies to enable a more efficient low-carbon transition. Since 2021, in collaboration with a dedicated research team, EF China has supported pilot industrial parks in adopting a coordinated approach that integrates different emission reduction pathways. These efforts have led to initiatives like the “Low Carbon Pacesetter” and the “Energy Efficiency Carbon Code” mechanism. By evaluating carbon efficiency in energy-intensive enterprises and designating “near-zero carbon” pilot factories, EF China helped establish innovative mechanism for the low-carbon transformation of industrial parks. Furthermore, to enhance the synergy between digital technology and carbon reductions, EF China worked with leading research institutes to quantify the impact of digital solutions in iron and steel, building materials, and petrochemicals industry. This research has laid an analytical foundation for developing guidelines that empower industries to harness digital technology for carbon reduction.

Today, as emerging technologies continue to reshape China’s industrial landscape, the sector is undergoing profound transformations towards low-carbon practices. "Achieving green, low-carbon development in the industrial sector is a shared aspiration for all stakeholders, requiring innovative policies and mechanisms, technological breakthroughs, decisive corporate action, and a supportive market environment," affirmed Dr. Ping He. "EF China remains committed to working alongside our partners to advance the transition to a zero-carbon future, contributing to global green transformation anchored in a deeply decarbonized industrial sector.”