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1、 February 2024 OIES Paper:CE13 Prospects of the Chinese coal chemical industry in an increasingly carbon-constrained world Kevin Jianjun Tu,Senior Visiting Research Fellow,OIES i The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford
2、Institute for Energy Studies or any of its Members.The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its members.Copyright 2024 Oxford Institute for Energy Studies(Registered Charity,No.2860
3、84)This publication may be reproduced in part for educational or non-profit purposes without special permission from the copyright holder,provided acknowledgement of the source is made.No use of this publication may be made for resale or for any other commercial purpose whatsoever without prior perm
4、ission in writing from the Oxford Institute for Energy Studies.ISBN 978-1-78467-230-0 ii The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Contents Contents.ii Figures.ii Tables.
5、ii Acknowledgements.1 About the author.1 Abstract.2 1.Introduction.3 2.State of play.4 2.1 An overview of Chinas coal chemical industry.4 2.2 Development of Chinas coal chemical industry.5 2.3 From the 3E to SECTOR framework:Assessing the prospects of Chinas chemical industry.7 3.Drivers and limitat
6、ions of coal chemical development in China.10 3.1 The drivers behind coal chemical development in China.10 3.2 Limitations constraining coal chemical development in China.16 4.Prospects of the Chinese coal chemical industry.22 5.Policy recommendations.24 Bibliography.27 Figures Figure 1:Simplified f
7、low diagram of the Chinese coal chemical industry.4 Figure 2:Production capacity of selected modern coal chemicals in China during the 13th FYP period.6 Figure 3:Estimated breakdown of Chinas coal flow by sector in 2020.7 Figure 4:Key driving forces that affect coal chemical development in China.8 F
8、igure 5:Comparison of dependency rates on oil and gas imports among China,USA,and EU.10 Figure 6:Hydrogens role in sector coupling and power-to-X.14 Figure 7:CO2 emission factors of different coal chemical products in China.17 Figure 8:Chinas primary energy mix in different scenarios by 2060.18 Figu
9、re 9:Volatile fossil fuel prices since 1 January 2019.21 Figure 10:CO2 emissions trajectories of the Chinese coal chemical industry.22 Tables Table 1:A sample survey on SECTORs perceived impacts on the prospects of coal chemical development in China.9 Table 2:Comparison of CO2 emissions parameters b
10、etween typical coal chemicals and thermal power.15 Table 3:Cost competitiveness of coal chemicals under different international oil price assumption.20 1 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Stud
11、ies or any of its Members.Acknowledgements The author would like to express his sincere appreciation to David Sandalow(Center on Global Energy Policy)and Michal Meidan(Oxford Institute for Energy Studies)for their strong support,without which the publication of the paper would not be possible.Specia
12、l thanks go to Matthew Robinson(Center on Global Energy Policy),Laura Cozzi(International Energy Agency),Anders Hove(Oxford Institute for Energy Studies),and several anonymous reviewers at the Center on Global Energy Policy,Oxford Institute for Energy Studies,and International Energy Agency for thei
13、r comments,and Yichu Lu and Ningrui Zhao(Center on Global Energy Policy)for their research assistance.Throughout the study period,many industrial contacts in China have contributed to this report by inviting the author to speak at coal chemical conferences,arranging his site visits to different coal
14、 chemical facilities,and sharing valuable insights.The author would also like to thank the above-mentioned contributions.About the author Kevin Jianjun Tu is a Non-Resident Fellow at the Center on Global Energy Policy of Columbia University.He is also the managing director of Agora Energy Transition
15、 China,and an adjunct professor at the School of Environment of Beijing Normal University.Tu served in various key positions,including China program manager at the Paris-based International Energy Agency,director of the China Energy&Climate Program at Carnegie Endowment for International Peace in Wa
16、shington DC,partner at a Vancouver-based premier energy consulting firm,director of marine operations at Chinas largest LPG importer and distributor,and construction project manager at Sinopec,a Chinese national oil company.Tu has more than two decades of solid experience in the energy and environme
17、ntal fields,as well as government affairs in Asia Pacific,North America,and Europe.His research interests cover the full spectrum of energy issues including fossil fuel value chains,energy transitions,energy sector reforms,climate change,and corporate strategy and transformation,with a focus on EUCh
18、ina relations as well as USChina relations,and their implications for Chinas energy and climate policies.2 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Abstract The coal che
19、mical industry utilizes coal as both energy and feedstock to produce gases,liquids,and solids,which are then synthesized into various fuels and chemicals.In China the industry is generally classified into two categories:traditional versus modern coal chemicals.In 2020,the Chinese coal chemical indus
20、try processed nearly one quarter of national coal throughput,and accounted for about 5.4 per cent of national carbon dioxide(CO2)emissions.The potential of coal chemicals to slow Chinas rising oil and gas imports bodes well with Chinese leaderships rising energy security anxiety amid geopolitical te
21、nsions.Due to this,coupled with strong political desire for investment-driven growth exaggerated by a sluggish post-pandemic economic recovery,especially at the local level,the coal chemical industry is the only major coal-consuming sector in China that could still see substantial capacity expansion
22、 as well as emissions spikes in the coming decades.Without an appropriate decarbonization strategy in place,further expansion of the industry is expected to contradict Chinas dual carbon goals of peaking national carbon emissions before 2030,and achieving carbon neutrality before 2060.Despite its la
23、rge industrial scale,the Chinese traditional coal chemical industry has long suffered from overcapacity,legacy assets,single product structure,and heavy pollution,among other chronic weaknesses.Thus,the coal chemical industry is continuously subject to increasingly stringent and sometimes disruptive
24、 energy and environmental regulations.In the above context,the modern coal chemical industry is prioritized by key stakeholders,especially local governments and the coal industry,to supplement petrochemical manufacturing and climb up the value chain.Nevertheless,unless the modern coal chemical indus
25、try can outperform its petrochemical counterpart in the net-zero transition once China enters the era of its post-2030 carbon neutrality goal,the long-term prospects for the Chinese coal chemical industry as a whole still look challenging.3 The contents of this paper are the authors sole responsibil
26、ity.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.1.Introduction As the worlds largest energy producer and consumer,as well as CO2 emitter,China relies heavily on coal for power generation and heat provision,and coal currently accounts f
27、or more than half of the countrys primary energy consumption.Unlike the rest of the world,China also increasingly utilizes coal as a raw material to manufacture chemical products.Even so,the rapid ascendance of the Chinese coal chemical industry is a rather recent phenomenon.After Chinas accession t
28、o the World Trade Organization in 2001,the countrys spectacular economic boom was soon translated into burgeoning demand for all sorts of chemical products,with its worldwide chemical sales growing at an astonishing rate of more than 18 per cent annually.Consequently,Chinas share in the global chemi
29、cal market rose drastically,from a mere 6 per cent at the beginning of the millennium to 44 per cent in 2022.1 This could be mostly explained by a large consumer base;favourable government policies,including a rather open attitude towards foreign direct investment;easy availability of low-cost capit
30、al and labour;government subsidies;and relaxed environmental norms.2 Because of its abundant coal resourcesversus its limited conventional oil and gas endowmentin addition to rising investment in typical chemical manufacturing segments including organic and inorganic industrial chemicals,ceramic pro
31、ducts,petrochemicals,agrochemicals,polymers,and fragrances,China has also become the only major economy to continuously invest heavily in both coal research and greenfield large-scale coal chemical facilities.Following the high-profile international climate pledge in September 2020 to peak its natio
32、nal carbon emissions before 2030 and achieve carbon neutrality before 2060,in April 2021 China announced its aim to strictly limit the increase in coal consumption over the 14th Five-Year Plan(FYP)period(20212025),and phase it down in the 15th FYP period(20262030).As a result,major Chinese coal-cons
33、uming sectors(especially coal power and heavy industries such as iron and steel,and cement)face increasing scrutiny by various levels of government,with medium-to long-term sectoral coal demand growth potential severely dented.In light of USChina frictions and other geopolitical tensions,rising anxi
34、ety over energy security among Chinese decision-makers has prompted Beijing rethink coals role.This is evidenced by the State Council of Chinas announcement in December 2021 that newly added renewable capacity and feedstock energy would be exempt from any energy consumption cap during the 14th FYP p
35、eriod,signalling a relaxation of restrictions on energy-intensive heavy industries,especially coal chemicals.3 During its second quarterly press conference in 2023,the National Energy Administration(NEA)reiterated that coal remains the ballast stone for Chinas energy security.4 Despite the short-ter
36、m backlash against the dual carbon goals and the constantly changing regulatory environment,the coal chemical industry remains the only major coal-consuming sector in China that still possesses great potential for substantial capacity expansion as well as emissions spikes in the coming decades.As a
37、result,it is necessary to take a deep dive to better understand the prospects of the industry in an increasingly carbon-constrained world.More specifically:What are the past and the status quo of the Chinese coal chemical industry?What are the major driving forces and constraints that affect coal ch
38、emical development in China?What will the Chinese coal chemical industry look like in the coming decades?How should the industry be appropriately regulated?The following sections present the state of play of the Chinese coal chemical industry,followed by a proposed energy policy framework,and an ass
39、essment of major driving forces and constraints that affect coal chemical development.After a glimpse into the future of the industry,the paper highlights several pathways the industry could adopt to better adapt to an increasingly carbon-constrained world,aiming to inform both international audienc
40、es and Chinese decision-makers.1 CEFIC(n.d.).2 CRISIL(2019).3 Reuters(2021).4 NEA(2023).4 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.2.State of play 2.1 An overview of Chi
41、nas coal chemical industry The coal chemical industry utilizes coal as both energy and feedstock to produce gases,liquids,and solids,which are then synthesized into various fuels and chemicals.In China,the industry is generally classified into two categories:traditional versus modern coal chemicals(
42、see Figure 1).Figure 1:Simplified flow diagram of the Chinese coal chemical industry Source:Author In the Chinese context,the traditional coal chemical industry mainly consists of coke manufacturing,coal to ammonia and urea,and coal to polyvinyl chloride(PVC)via calcium carbide(CaC2)manufacturinguse
43、s of coal as raw material to produce coal-based derivatives through oxidation and solvent extraction processes.Coke manufacturing:Coke and coke by-products,including coke oven gas,are produced by the pyrolysis(heating in the absence of air)of suitable grades of coal(i.e.,coking coal).The process als
44、o includes the processing of coke oven gas to remove tar,ammonia(usually recovered as ammonium sulfate),phenol,naphthalene,light oil,and sulfur before the gas is used as fuel for heating the ovens.5 Coke,the main product of this manufacturing process,is primarily used as a reducing agent in smelting
45、 iron ore in a blast furnace.Coal-based ammonia:The basic processing in a coal-based ammonia plant consists of an air separation module for the separation of O2 and N2 from air,the gasifier,the sour gas shift module,the acid gas removal module,and the ammonia synthesis module.In the downstream end,a
46、mmonia is often used to produce urea as fertilizer or dynamite.5 World Bank(1998).CoalCoking coalDirect liquefactionCoal gasificationFischerTropsch processMethanol synthesisCoal-to-Ethylene glycolCoal-to-GasCoal-to-Olefins or Methanol-to-OlefinsCoal-to-Aromatics or Methanol-to-AromaticsOil productsO
47、ther chemicalsOlefinsAromaticsEthylene glycolNatural gasAmmonia synthesisCokingCalcium carbide ovenCokeFertilizerDynamiteCoke oven gasSynthetic gasUreaCoal tarCalcium carbidePyrolysisCarbon blackAmmonium nitrateModern coal chemical industryTraditional coal chemical industryAcetylene-based chemicalsC
48、oke 5 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.CaC2 manufacturing:CaC2 is made by carbothermal reduction of lime(calcium oxide),or by heating calcium oxide with coke or
49、coal in the presence of water at over 350C.It is an important raw material in industries such as metallurgy,ceramics,synthetic fibres,and chemicals.PVC manufacturing:Unlike the rest of the world,where PVC is largely synthesized using the ethylene process,China produces PVC primarily through the CaC2
50、 process,in which hydrogen chloride is used to produce PVC after electrolysis of raw salt,and the remaining sodium is used to produce caustic soda.Therefore,there is a symbiotic relationship between chlorine and alkali,and the balance of chlor-alkali is also an important factor to be considered in P
51、VC manufacturing.6 The modern coal chemical industry normally starts with large-scale coal gasification to produce synthesis gas,i.e.,hydrogen(H2)and carbon monoxide(CO).The synthesis gas is then used for supplying hydrogen in the hydrogenation of coal and synthesis of liquid fuels,including indirec
52、t coal-to-liquids(CTL).By comparison,direct CTL involves contacting coal directly with a catalyst at elevated temperatures and pressures with added H2,in the presence of a solvent,to form a raw liquid product which is further refined into product liquid fuels.In the Chinese context,typical modern co
53、al chemicals include,but are not necessarily limited to:CTL:consists of oil products produced by both direct and indirect CTL facilities.Coal-to-gas(CTG):a multiple-step process starting with coal gasificationcoal is first burned with water vapor or oxygen to produce synthesis gas;after the cleaning
54、 process,a water gas shift/methanation process is followed to produce synthetic natural gas.Coal-to-olefin(CTO):the process always starts with synthesis of methanol,which is manufactured with syngas from coal gasificationas methanol is a feedstock for the methanol-to-olefins(MTO)process,coal-derived
55、 olefins could be produced by either integrated CTO facilities or MTO plants.Coal-to-ethylene glycol(CtEG):the process normally includes three steps:gasification of coal to syngas;catalytic coupling of CO with nitrite esters to dialkyl oxalates(e.g.,dimethyl oxalate);and hydrogenation of oxalates to
56、 EG.Coal-to-aromatics(CTA):aromaticsmore complex petrochemicalscan also be produced from(coal-derived)methanol,although this technology is at a much earlier stage of development.Though the distinction between traditional versus modern coal chemicals is widely used in China,it is worthwhile to note t
57、hat the rationale behind the boundary between traditional versus modern coal chemicals has not been clearly clarified in the literature.For instance,categorizing coal-to-methanol(CTM)as a modern coal chemical and coal-based ammonia as traditional coal chemical is rather arbitrary,as coal gasificatio
58、n,precursor of both processes,is long-established.Nevertheless,as industrial policies in China are often designed in accordance with the above usage,and government attitudes towards project development generally differentiate between traditional and modern coal chemicals,the above industrial categor
59、ization is used throughout this study.2.2 Development of Chinas coal chemical industry Since the inception of the Peoples Republic of China(PRC)in 1949,the Chinese coal chemical industry has developed from traditional coal chemicals with coke,synthetic ammonia,and calcium carbide as its main product
60、s,to modern coal chemicals with a scale of production not duplicated in any other part of the world.At the beginning of its development,the Chinese coal chemical industry mostly relied on imports of technology and equipment from developed countries;now it features some of the worlds most advanced co
61、al technologies and manufacturers.Taking the traditional coal chemical industry as an example,Chinas coke output was only 0.54 Mt in 1949.Largely driven by the massive iron and steel capacity expansion in the past decades,Chinas coke output reached 492.6 Mt in 2023,accounting for nearly 70 per cent
62、of global total,or the equivalent of more than 6 NGO Chemical Group(2019).6 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.911-fold output growth since 1949.7 Similarly,many o
63、ther traditional coal chemicals,including synthetic ammonia and calcium carbide,also rank first in the world.Figure 2:Production capacity of selected modern coal chemicals in China during the 13th FYP period Source:various sources.8 Note:According to China Coal Processing&Utilization Association,in
64、2021 Chinas CTL capacity reached 9.31 Mt/annum with actual output at 7.96 Mt;CTG capacity reached capacity reached 6.125 bcm/annum with actual output at 4.629 bcm;CTL capacity reached 16.72 Mt/annum with actual output at 15.75 Mt;and CtEG capacity reached 6.75 Mt/annum with actual output at 3.23 Mt.
65、Please note that the 2021 statistics from CCPUA are not entirely compatible with data serials in this figure,which is likely to be caused by difference in statistical coverage.After China lost its long-cherished status of energy self-reliance in 1993,the rising anxiety over the countrys increasing d
66、ependency on oil imports prompted sustained interest in utilizing coal as a raw material to produce liquid hydrocarbon,synthetic natural gas,olefins,and glycol,among other fuel and chemical products.Following years of scientific and technological research,especially through the project demonstration
67、 during the 11th FYP period(20062010),the direct CTL process and catalyst developed by Shenhua Group have been successfully commercialized at a 1.08 Mt/annum demonstration project in Erdos,Inner Mongolia,which was commissioned in 2008.9 Since then,the Chinese modern coal chemical industry has witnes
68、sed substantial growth in both manufacturing capacity and annual output.As a result,the number of CTL plants reached 10 in 2020.Though annual CTL output reached 9.63 Mt in the same year,it accounts for no more than 1.5 per cent of Chinas national oil consumption.By comparison,CTG output reached 4.7
69、bcm in 2020,just under 1.5 per cent of Chinas national gas consumption.Meanwhile,CTO output reached 15.39 Mt in 2020.Taking polyethylene as an example,the CTO/MTO process represents about one-fifth of national production capacity.By comparison,CtEG output reached 2.35 Mt in 2020,and accounts for abo
70、ut 15 per cent of national EG consumption(see Figure 2).As illustrated in Figure 3,coal power is the dominant coal-consuming sector in China,accounting for more than half of national coal throughput.Coal processed by the Chinese coal chemical industry represents about one quarter of national coal th
71、roughput.As most coal processed by the Chinese coal chemical industry is passed to other sectors as either chemical feedstock(e.g.,coke)or fuel products(e.g.,liquid 7 NBS online database,available at https:/ Cao Xute(2020);Chen Yang and Yang Qian(2022),Intelligence Research Group(2020);Liu Diandong
72、and Wang Yu(2021),Xu Zhenggang(2020),Zhang Xin(2022),and anonymous industrial sources.9 NEA(2019).7 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.hydrocarbon),so coal chemica
73、ls share of national carbon emissions,which is estimated at about 5.4 per cent,is significantly lower than the percentage of coal processed by the industry.Figure 3:Estimated breakdown of Chinas coal flow by sector in 2020 Source:National Bureau of Statistics,and the authors own estimation.10 Note:b
74、reakdown is based on approximate estimation,as both double counting and under-reporting are inevitable for this sector due to extremely complicated chemical reaction routes through the coal chemical value chain.For instance,coke consumption by the chemical industry is allocated as coal throughput on
75、ly in the coke manufacturing industry to avoid double counting.In the Chinese coal chemical industry,nearly 70 per cent of coal throughput is processed to manufacture coke,an important ingredient for the iron and steel industry and certain coal chemical products,followed by 16 per cent of coal proce
76、ssed by the modern coal chemical industry.Other coal chemicals,such as ammonia and CaC2,account for the remaining 15 per cent.2.3 From the 3E to SECTOR framework:Assessing the prospects of Chinas chemical industry When the International Energy Agency(IEA)was established in 1974 with the objective of
77、 coordinating the response of participating states to the global energy crisis,it had long focused on three key pillars:economic development,energy security,and environmental protection,known as the 3E of IEA or the 3E Trilemma.As the global energy sector has become increasingly interconnected and c
78、omplicated over time,not only does the definition of energy security need to be broadened,but additional criteria should also be incorporated into energy decision-making process.In the above context,this paper argues that prospects of the Chinese coal chemical industry could be assessed against a li
79、st of key criteria,with the acronym SECTOR(see Figure 4).Energy(system)security:While the IEA defines energy security as the uninterrupted availability of energy sources at an affordable price,11 and long focused its collective actions among member countries on oil supply security,the rising importa
80、nce of gas supply security and electricity security prompted the agency to broaden its energy security-related coverage in recent years.As a result,security of the energy system is a more appropriate consideration for Chinas coal chemical development.Energy(system)security may be defined as reliable
81、,affordable access to increasingly interconnected energy sources for all key energy stakeholders,including energy importing,exporting,and transition countries.Economic development:A major goal of Chinas Reform and Opening policy is economic development or economic growth.The two terms are not identi
82、cal.Growth may be necessary but not sufficient for development.Economic growth refers to increases in a countrys production,as approximately measured by gross national product(GNP),or income per capita.Economic development refers to economic growth 10 NBS(2023).11 IEA(n.d.).8 The contents of this pa
83、per are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.accompanied by changes in output distribution and economic structure.12 The consumption of energy fuels economic growth,so energy remains an important
84、factor in the determination of economic development.Figure 4:Key driving forces that affect coal chemical development in China Source:Author Climate change:As human-induced climate change is the largest,most pervasive threat to the natural environment and societies the world has ever experienced,con
85、sideration of environmental protection alone becomes increasingly insufficient to target this paramount global challenge.Climate change thus deserves to be categorized as an individual driving force underlying coal chemical development.The issue of climate change attracted virtually no public or pol
86、itical attention from China in the 1960s,and only a little during the energy policy debates of the developed world in the 1970s.Since then,Beijing bided its time in developing an increasingly proactive and comprehensive energy and climate policy,which culminated on 22 September 2020,when Chinese pre
87、sident Xi Jinping announced the dual carbon goals.13 Given Chinas unique political system,climate change is expected to remain a key factor shaping Chinas energy policy,including coal chemical development,in the decades to come.Technological maturity:The Chinese government recognizes that reaching c
88、arbon neutrality by 2060 will not be achievable without a major acceleration in clean energy innovation.According to IEA,reaching net zero emissions in China will require the widespread use after 2030 of technologies that are still at the prototype or demonstration stage today.To achieve the dual ca
89、rbon goals,technologies that are available on the market today provide the bulk of the CO2 emissions reductions required in 2030 relative to 2020;but in 2060,40 per cent of the reductions will come from technologies that are under development today.14 Regulatory burden:As coal is at the center of en
90、ormous energy,environmental,social,and climate challenges in China and worldwide,coal is undoubtedly regulation-intensive throughout its entire value chain.A core challenge for effective regulatory governance in China is the coordination of regulatory actions,from the design and development of regul
91、ations at the central government level,to their implementation and enforcement at local levels:closing this loop requires painstaking institutional reforms that are always politically challenging to carry out.By comparison,Chinas transition away from coal is not only critical to addressing multiple
92、regional and global challenges,but also beneficial to substantially lower regulatory burdens faced by both the government and the energy industry.Other pressing issues:As coal chemical manufacturing often consists of water-intensive production processes with substantial wastewater discharge,water av
93、ailability and contamination are major constraints faced by the industry.Since coal chemical projects are mainly located in water-stressed western regions with questionable environmental enforcement records,further expansion of Chinas sizable coal chemical industry is expected to exaggerate widespre
94、ad water scarcity and water pollution in some affected regions.12 Nafziger(2005).13 Tu(2022).14 IEA(2021).9 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Meanwhile,air pollut
95、ion remains at an alarming level in China,and affects economies and peoples quality of life.Thus,coal chemical manufacturings impacts on air quality are hard to ignore.From coal mining and transport to end uses,the Chinese coal value chain has led to severe environmental and public health consequenc
96、es.In particular,outdoor air pollution,which is largely caused by coal mining,transport,and combustion,has been a leading risk factor for mortality,contributing to an estimated 1.2 million premature deaths in China in 2017.Dispersed coal combustion from small burners and residential uses are the mai
97、n cause of heavy pollution in many urban centers across China.In 2017,indoor pollutants emitted by Chinese households burning coal caused about 750,000 deaths from respiratory diseases.15 Another chronic policy challenge related to coal chemical manufacturing is safety.Coal chemical plants contain f
98、lammable materials,and face hazards related to the combustion or even explosion of these materials.On 5 January 2022,one explosion at a coal chemical plant in Henan killed three people.16 As coal chemical manufacturing leads to sustained coal mining operations,the industrys connection with coal mini
99、ng accidents is difficult to overlook.According to official statistics,more than 269,000 Chinese coal miners have died in numerous mining accidents since 1949.17 Though China has made significant progress to improve coal mine safety in the past two decades,major accidents are still difficult to enti
100、rely eliminate.On 22 February 2023,an open-pit coal mine collapse in Inner Mongolia killed 53 miners.18 When examining the Chinese coal chemical industry,it is important to incorporate impacts of the above-mentioned policy drivers.Table 1 adopts a numerical rating scale,ranging from 5 representing t
101、he most negative impacts to+5 representing the most positive,and is utilized to assess prospects for the Chinese coal industry in the last section of this paper.It is recommended that a survey could be conducted in a follow-up study,ideally with weights of each drivers assigned explicitly.Table 1:A
102、sample survey on SECTORs perceived impacts on the prospects of coal chemical development in China Driving forces Short-term(14th FYP)Mid-term(Around 2030)Long-term(Mid-century)Security of energy system+Economic growth+Climate change Technological maturity +Regulatory burden Other pressing issues:Wat
103、er scarcity Water contamination Air quality Safety Note:(5)represents the most negative impacts on coal chemical development in China;+(+5)represents the most positive impacts,and 0 represents no impacts at all.15 Gang He et al.(2020).16 S(2022a).17 Tu(2007).18 Caixin Global(2023).10 The contents of
104、 this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.3.Drivers and limitations of coal chemical development in China 3.1 The drivers behind coal chemical development in China To better understand
105、the status quo and prospects of the Chinese coal chemical industry in an increasingly carbon-constrained world,it is necessary to first explore the major drivers that support coal chemical development in China.Coal chemicals potential to slow Chinas rising oil and gas imports bodes well with Chinese
106、 leaderships energy security anxiety amid rising global geopolitical tensions.Since China lost its long-cherished status of energy self-reliance in 1993,the country has imported increasingly higher amounts of oil to meet its surging demand.After China surpassed the USA as the largest oil importer in
107、 2017,its dependency rate on oil imports reached more than 70 per cent in recent years,just when the American oil dependency rate fell to its lowest level in decades.Consequently,the tone of USChina energy relations has gradually shifted:from the looming danger of oil resource access competition-ind
108、uced hostility at the beginning of the millennium,towards the bilateral energy trades increasingly prominent role in reducing the American trade deficit with China during the Trump presidency.Nevertheless,as USChina relations under President Joe Biden remain tense,the US House of Representatives ove
109、rwhelmingly passed a bill in January 2023 to ban releases of oil from the American Strategic Petroleum Reserve from being exported to China.19 This legislative initiative,coupled with other rhetoric as well as bilateral hostility,has not only dented the potential of USChina energy trade,but also has
110、 further increased energy security anxiety among Chinese decision-makers.Figure 5:Comparison of dependency rates on oil and gas imports among China,USA,and EU Source:various sources.20 After the global financial crisis in 2008,Chinas national gas consumption skyrocketed.As domestic supply has been u
111、nable to meet the burgeoning demand,Chinas dependency rate on gas imports increased to a record 46 per cent in 2021.By comparison,the shale gas revolution made the worlds largest gas consumer,the United States,a net gas exporter as early as 2017.Since the outbreak of the Russian-Ukrainian War in Feb
112、ruary 2022,global energy markets have been in turmoil.As China is heavily exposed both to Russian commodity exports and to global markets,rising energy security anxiety,coupled with high oil and gas prices,has convinced Beijing not only to further prioritize domestic energy production,but also to do
113、uble down on efforts to suppress oil and gas imports.Chinas dependency rates on oil and gas fell to 71.5 and 41.2 per cent,respectively,in 2022.Following the outbreak of the IsraelHamas conflict in October 2023,a spike of geopolitical tensions in the Middle East not only put 19 Reuters(2023a).20 US
114、EIA online database,Eurostat online database,and CNPC ETRI(various years).11 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.global energy markets at risk,but has also reinforc
115、ed Chinas desire to reduce dependency on politically unstable oil and gas-producing regions.Given modern coal chemicals theoretical potential to rely on domestically abundant coal resources to substitute imports of oil,gas,and petrochemical products,during his visit to a coal chemical company in Yul
116、in City in September 2021,Chinese president Xi Jinping made the following statement:The coal chemical industry possesses great potential and is very promising,the industry should increase comprehensive energy efficiency of utilizing coal as chemical feedstock,promote high-end,diversified and low-car
117、bon development,regard technological innovation as the most pressing task,accelerate breakthrough of key technologies,actively develop coal-based specialty fuels as well as coal-based biodegradable materials,and etc.21 According to the China National Coal Association(CNCA),production capacities of C
118、TL,CTG,CTO,and CtEG in 2025 are recommended to reach 12 Mt/annum,15 bcm/annum,15 Mt/annum and 8 Mt/annum,respectively.22 In sum,the modern coal chemical industry is expected to play a more prominent role in chemical product manufacturing than petroleum substitution.By comparison,because of rapid mar
119、ket penetration of electric vehicles and other new energy vehicles,from 25.6 per cent in 2022 to 65 per cent in 2035,Chinas transport fuel consumption is projected to decline by more than 100 Mt/annum in the coming decade,contributing to national oil consumption peaking at around 2026 at about 800 M
120、t/annum.23 Even so,CTO/MTO,or coal to plastics downstream of methanol,possesses great potential to substitute petroleum imports at scale,leading to substantial growth of national coal consumption and CO2 emissions.As zeolite24 is proven to have excellent performance in MTO,significant progress has b
121、een made in MTO reaction mechanisms and the development of a highly efficient zeolite catalyst,with more in-depth research and development(R&D)to be carried out by the Chinese coal chemical community in the years to come.Strong support from pro-growth local governments and a coal industry dominated
122、by state-owned enterprises(SOEs).While the central government has been relatively cautious in permitting greenfield coal chemical facilities during the 14th FYP period,especially after the announcement of the dual carbon goals in September 2020,the attitude of the coal industry is more supportive.In
123、 June 2021,CNCA recommended further capacity expansion of the Chinese modern coal chemical industry;demonstration of CTA,CtEG,and coal tar deep-processing projects with Mt/annum capacity and 10 Mt/annum of cascade utilization of coal plants in accordance with grade and quality;completion of 30 Mt/an
124、num of long flame coal pyrolysis capacity;and the aim to covert 160 Mt of coal equivalent(Mtce)of coal by 2025.25 In July 2020,the China National Petroleum&Chemical Planning Institute recommended similar 14th FYP targets for the modern coal chemical industry,with an even more ambitious goal to conve
125、rt 200 Mtce of coal by 2025.26 Moreover,the industrial structure of Chinas energy sector benefits coal chemical development.State-owned enterprises dominate the Chinese fossil fuel industry,and account for almost all national oil and gas output as well as three quarters of revenue of the coal indust
126、ry.27 Not surprisingly,the majority of coal chemical capacity in China is also owned by SOEs,as described below.28 CTL:Except for a 0.45 Mt/annum pilot coal-petroleum co-processing oil facility operated by Shaanxi Yancheng Petroleum Group,Chinas other eight operational CTL plants are all owned by co
127、al companies,with 56,25,and 19 per cent of aggregate production capacity owned by central SOEs,local SOEs,and private enterprises,respectively.CTG:There are four operational CTG plants in China,with about two thirds of production capacity owned by SOEs,and the remaining by private enterprises.It is
128、worthwhile to note that Chinas first 21 Yan Jing and Ma Teng(2022).22 CNCA(2021).23 Sinopec(2024).24 Zeolite is a family of crystalline aluminosilicate materials commonly used as adsorbents or catalysts.25 CNCA(2021).26 NPCPI(2020).27 Sina(2023a).28 Xu Zhenggang(2020).12 The contents of this paper a
129、re the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.CTG plant was commissioned by a central SOE of the power industry in 2013,accounting for about one quarter of national production capacity.CTO:About three q
130、uarters of Chinas CTO capacity are owned by SOEs,with the remainder belonging to private companies.Central SOEs with their main business in coal(e.g.,Shenhua),oil(i.e.,Sinopec),and power(e.g.,Datang)are all active players in this sub-sector.CtEG:Local SOEs dominate Chinas national CtEG production ca
131、pacity,with central SOEs such as Sinopec only playing a marginal role in this sub-sector.From a theoretical perspective,direct government control of SOEs can either accelerate or hinder their corporate low-carbon transition.On one hand,SOEs have a strong incentive to respond quickly to the dual carb
132、on goals imposed by the central government,and their market dominance and deep pockets can enable them to rapidly adopt and scale up immature clean energy technologies.On the other hand,political contestation among governments and conflicting policy goals are prone to be taken advantage of by SOEs i
133、n accordance with their own interests.Though Chinese SOEs are more likely than their competitors in the private sector to pilot advanced low-carbon technologies,Chinas SOE-dominated industrial structure is likely to give unabated operational coal chemical facilities more staying power than otherwise
134、 would be the case,especially after 2030.While national oil companies dominate the Chinese oil and gas industry,so far they have shown no interest in CTL and CTG,and played only a marginal role in CTO and CtEG development.However,due to the deterioration of crude oil grades and upgrading of fuel oil
135、 quality,hydrogen demand by the petroleum refining industry is on the rise,accounting for 0.8 to 2.7 per cent of refinery throughput on a weight basis.29 Lured by the significant cost advantage of coal-derived hydrogen against both steam methane reforming and partial oxidation of fuel oil,Chinese na
136、tional oil companies,as well as teapot refineries,30 are becoming increasingly reliant on coal gasification to meet the hydrogen demand of their petroleum refining and petrochemical operations.Given the emissions-intensive nature of coal-based hydrogen production,the National Development and Reform
137、Commission(NDRC)and several other authorities recently urged the Chinese petroleum refining industry to switch to renewable hydrogen,to lower the carbon footprint of its hydrogen supply.31 The most important driving force in permitting greenfield coal chemical facilities in China is the sustained en
138、thusiasm of local governments of coal regions.When coal resources are awarded to an enterprise,it is a common practice for local government in a coal region to impose requirements of coal conversion and utilization within its administrative boundary,the equivalent of endorsement of coal power,coal c
139、hemical,or other coal-intensive heavy industry development at the local level.32 As the majority of coal chemical projects in China are located in the top four coal-producing provinces,with 24 per cent in Inner Mongolia,18 per cent in Shaanxi,15 per cent in Xinjiang,and 7 per cent in Shanxi,33 a pha
140、se-down of coal chemical manufacturing needs to proactively consider how alternative economic momentum may be nurtured to ensure a just transition at the provincial level.Not surprisingly,Chinas top coal-producing regions have all released quite supportive coal chemical plans during the 14th FYP per
141、iod.34 Shanxi,the largest coal producer in China,with aggregate output by enterprises above a designated size at 1,357 Mt in 2023:35 Rationally develop the modern coal chemical industry;significantly improve technological sophistication and energy efficiency of the modern coal chemical 29 Wang Yuqia
142、n(2014).30 Teapot refineries refer to privately owned unaffiliated refineries in China,they are known as teapots because of the shape of early designs.They grew from small clay kilns that began processing oil mainly from fields in Shandong where oil output was more than state-owned refiners could ab
143、sorb.31 NDRC et al.(2023a).32 Song Ge(2018).33 Anon.(2021).34 Qianzhan Analyst(2022).35 CNCA(2024).13 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.industry;actively promote
144、large-scale coal chemical development at industrial parks or energy bases;and promote orderly establishment of large-scale modern coal chemical bases.Inner Mongolia,the second largest coal producer with output at 1,211 Mt in 2023:Rely on Ordos city to rationally develop CTL,CTG,CTO,CtEG,etc.;and est
145、ablish a high-standard modern coal chemical demonstration park in Ordos.Shaanxi,the third largest coal producer with output of 761 Mt in 2023:Promote clean,highly efficient coal conversion;expand a circular economy of integrated utilization of coal,oil,gas,and salt;extend supply chain and increase v
146、alue-added;comprehensively increase technological sophistication of energy and chemical supply chain;promote orderly cascade utilization of coal in accordance with grade and quality;develop high-end specialty olefin products;rationally control CtEG capacity;make CTA-related technological breakthroug
147、hs;and promote downstream development towards high value-added manufacturing.Xinjiang,the fourth largest coal producer with output of 457 Mt in 2023:Establish large-scale national bases for coal mining,coal power,and coal chemicals;promote large-scale development of coal bases with focus on four reg
148、ions;implement large-scale coal chemical projects;promote reliable construction of strategic CTL and CTG bases;promote orderly development of the modern coal chemical industry;achieve technological breakthroughs related to seasonal conversion between CTG and other chemical products;implement clean,h
149、ighly-efficient,and comprehensive utilization of coal in accordance with grade and quality;and promote switching of highly efficient and clean utilization of coal from fuel to feedstock.Renewable hydrogen economy offers the industry a rare opportunity of redemption:Hydrogen has the potential to help
150、 decarbonize emissions-intensive industrial sectors where fossil fuel is utilized both as an energy carrier and as a feedstock.Renewable hydrogen is a promising energy vector in coal chemical manufacturing,and thus has potential to eliminate its otherwise hard-to-abate CO2 emissions.A number of Chin
151、as leading coal chemical companies,such as Baofeng and China Energy Investment Corporation(China Energy),are experimenting to explore potential low-carbon and net-zero coal chemical manufacturing solutions with renewable hydrogen.China is the largest hydrogen producer and consumer in the world,with
152、national hydrogen production reaching 34.1 Mt in 2020.However,hydrogen manufacturing in China is dominated by coal,which accounted for 72 per cent of national output in 2020,followed by 14 per cent natural gas,10 per cent oil,and about 4 per cent electrolysis including chlor-alkali by-production and
153、 water electrolysis.36 Due to Chinas abundant coal resources and low production cost of coal-derived black hydrogen(that could be lower than 10 yuan/kg of hydrogen,with an average unit production cost around 14 yuan/kg),the coal-based production route is expected to continuously dominate Chinas nati
154、onal hydrogen output in the short to medium term.By comparison,depending on the price level of electricity(e.g.,valley,shoulder,or peak)and types of electrolysers(e.g.,alkaline or proton-exchange membrane),the unit production cost of renewable hydrogen is estimated to range from 24.04 to 70.47 yuan/
155、kg.37 A similar indicator of the steam methane reforming process ranges from 22.07 to 41.71 yuan/kg.38 Given the significant cost disadvantage of renewable hydrogen,and a lack of political willingness for generous subsidies at the central government level,Chinas national renewable hydrogen productio
156、n target is set at only 100200 kt/annum by 2025,a rather modest level in the Chinese context.36 Tu and Wang(2022).37 Sun Xudong et al.(2023).38 Coalchem.org(2022).14 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for
157、 Energy Studies or any of its Members.Figure 6:Hydrogens role in sector coupling and power-to-X Source:Tu and Wang(2022).Though renewable hydrogen currently represents only a negligible share of national hydrogen production in China,it could promote sector coupling39 between the chemical industry an
158、d renewable power,leading to low-carbon substitution of fossil fuel-based hydrogen in ammonia,methanol,and other chemical manufacturing.Some advantages of sector coupling include increased flexibility,enhanced storage,and distribution opportunities to use renewable energy,as well as reliability.In e
159、nergy transition-related discourse,sector coupling implies making renewable power the default form of energy in energy-consuming sectors wherever possible.Meanwhile,energy conversion pathways that utilize electricity,especially renewables,as the primary input to produce various electro-fuels,energy
160、services,and chemicals are often categorized as Power-to-X(PtX),especially in the European context.In 2022,renewables accounted for 31.6 per cent of Chinas power generation,and China plans to increase it to 33 per cent by 2025.Though Chinas 14th FYP targets for renewables are widely considered conse
161、rvative,the growing share of renewables in Chinas power mix enables renewable hydrogen to serve as an energy carrier to supplement electricity in sector coupling and net-zero decarbonization,especially in transport and energy-intensive heavy industry such as coal chemical manufacturing.During the fi
162、rst 11 months of 2023,64 renewable hydrogen projects were announced across China,with 58 per cent in Inner Mongolia alone.40 Looking to the future,SOEs,private new energy firms,as well as coal chemical companies with deep pockets are expected to continuously dominate renewable hydrogen investment in
163、 China,with production sites increasingly concentrating in regions with promising resource endowment(e.g.,Inner Mongolia,Ningxia,Xinjiang,Qinghai)or where local governments are willing to offer generous supportive measures(e.g.,Inner Mongolia).As the above geographic overlay is similar to the distri
164、bution pattern of renewable and coal chemical projects in China,it could largely explain why Inner Mongolia and Ningxia have been identified as the most promising production bases in China for renewable hydrogen and green chemical manufacturing.41 By comparison,hydrogen may be labelled blue whenever
165、 CO2 emissions generated from coal gasification or steam methane reforming are captured and stored underground through carbon capture and storage(CCS).Given Chinas rising energy security anxiety,as well as the relatively high cost of natural gas,blue hydrogen in the Chinese context is mostly likely
166、to be produced via the coal-based manufacturing route.39 Sector coupling is defined as the connection of at least two different sectors via substitution of non-renewable activities with renewable alternatives to establish fully renewable energy systems.40 Sina(2023b).41 RMI and China Hydrogen Allian
167、ce(2022).15 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Compared with black hydrogen,addition of a CCS facility is estimated to increase the cost of blue hydrogen by 51.5 p
168、er cent,which nevertheless still possesses a cost advantage against other hydrogen production routes,especially renewable hydrogen.Configuration of CCS is expected to reduce life-cycle CO2 emissions intensity of black hydrogen by only 53.3 per cent,42 while blue hydrogen may offer existing coal chem
169、ical facilities a transitional option to lower CO2 emissions intensity with reasonable costs.However,it should not be used to justify the permitting of any greenfield coal chemical facilities.Some coal chemical facilities are suitable for piloting carbon capture,utilization,and storage(CCUS)projects
170、:CCUS is a climate mitigation process that captures CO2 emissions from large point sources such as coal chemical plants,then either reuses it or transports it to a storage location for the purpose of long-term isolation from the atmosphere.As in the rest of the world,the potential of CCUS developmen
171、t in China has been largely untapped:its effectiveness to reduce emissions is well recognized by key stakeholders,but deployment beyond small-scale pilot projects has been slow.By the end of 2022,aggregate capture and storage capacity of operational CCUS projects in China had reached only 4 and 2 Mt
172、/annum,43 respectively,leading to limited impacts on national CO2 emissions of more than 10,000 Mt/annum.As a commercially immature,relatively expensive but effective climate mitigation technology,CCUS could,in theory,serve as the last-resort solution once other net-zero options are exhausted.Accord
173、ing to Tao Yi et al.,44 CO2 emissions of the Chinese modern coal chemical industry(including CTM)represent more than 3 per cent of national total emissions,and they primarily consist of process emissions as well as fuel combustion emissions,with the former normally accounting for 56 to 67 per cent o
174、f total emissions.There are large streams of high-purity CO2(80 per cent concentration)or pure CO2(98.5 per cent concentration)available as a result of coal chemicals production and industry separation processes,45 so coal chemical facilities are ideal high-concentration emission sources that are su
175、itable for carbon capture.In some cases,they can avoid carbon capture processes altogether,thus coal chemical manufacturing is widely regarded as the most preferred industry for piloting CCUS projects in China.Table 2:Comparison of CO2 emissions parameters between typical coal chemicals and thermal
176、power Technology Process emissions share of total(%)Combustions share of total(%)CO2 concentration of process emissions(%)CO2 concentration of combustion emissions(%)CTL(direct)56 44 87 12 CTL(indirect)67 33 91 13 CTO 63 37 90 13 CTM 61 39 85 13 Thermal power N/A 100 N/A 1314 Source:Tao Yi et al.(20
177、23).Compared with low-concentration CO2 emissions sources such as thermal power plants,the capital cost of the capture process in a modern coal chemical plant could be significantly reduced,and the operating energy consumption is also lower.46 Carbon capture of high-concentration CO2 emissions from
178、coal chemical facilities could have at least three end use options:CCS:To be transported,ideally via long-distance pipeline,and then stored underground.It is worthwhile to note that CCS retrofitting to existing coal chemical facilities is sometimes deemed as 42 Wei Yiming et al.(2021).43 ACCA 21 et
179、al.(2023).44 Tao Yi et al.(2023).45 Ning Wei et al.(2014).46 Jingjing Xie et al.(2022).16 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.a relatively low-risk path towards red
180、ucing life-cycle CO2 emissions intensity from an economic and technical perspective.CCUS:To be utilized for enhanced oil or gas recovery.In August 2023,Sinopec commissioned Chinas first ever 1 Mt/annum CCUS project,consisting of a carbon capture section operated by Sinopec Qilu Petrochemical Company
181、 and a utilization and storage section at Sinopec Shengli Oilfield.The project is expected to help produce more than 200 kt/annum of extra crude output.Construction of Chinas first-of-its-kind 100-km CO2 transmission pipeline is also under way.47 CCU or sector coupling or PtX:During periods of peak
182、renewable power output,excess electricity could be utilized to produce hydrogen or synthetic gases via power-to-gas(PtG).Coupled with CO2 captured from coal chemical facilities,the above gases can be further processed to various types of e-fuels for aviation,maritime shipping,and long-haul heavy-dut
183、y trucking.With CO2 injection operation starting in January 2011 and the full operation beginning in May 2011,the Shenhua Ordos CCS project is the first Chinese pilot-scale demonstration for CO2 deep saline aquifer storage in combination with direct CTL production.Once CO2 injection ceased in April
184、2015,the projects operations are considered to be safe from a storage point of view,and successfully demonstrate the feasibility of large-scale commercialization of CCUS in the Ordos Basin.48 Since Chinas largest coal company,Shenhua,merged with China Guodian as China Energy in 2017,China Energy rem
185、ains the largest coal chemical company in China,with hydrogen production capacity of its coal chemical plants exceeding 4 Mt/annum.By comparison,Sinopec,Chinas largest petroleum refiner,produced about 3.9 Mt of hydrogen in 2021.49 As central SOEs with heavy fossil fuel assets and deep pockets,such c
186、ompanies have strong incentive to showcase their political willingness to support the climate targets mandated by the central government,and thus are actively piloting renewable hydrogen and CCUS projects,aiming to reduce the emissions intensity of their chemical manufacturing operations.3.2 Limitat
187、ions constraining coal chemical development in China Climate change-related uncertainty is the biggest risk faced by the Chinese coal chemical industry:Given the highly emissions-intensive nature of coal chemical manufacturing,further capacity expansion will contradict Chinas dual carbon goals.As on
188、e of the most important sectors for coal use,the coal chemical industry is also a leading contributor to national CO2 emissions.The processes of coal gasification and coal liquefaction,which are the main routes from coal to chemicals,are also major sources of CO2 emissions in China.Coal use as a raw
189、 material to produce chemicals is more CO2 emissions intensive than petroleum or natural gas due to the higher carbon/hydrogen ratio.The emission factor of coal-based ammonia in China is around 4.6 tCO2/t of NH3,which is about 2.2 times that of natural gas-based manufacturing route,and 40 per cent h
190、igher than the coefficient of oil-based product(see Figure 7).50 47 SASAC(2022).48 Keni Zhang et al.(2016).49 Anon.(2022).50 Wenji Zhou et al.(2010).17 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studie
191、s or any of its Members.Figure 7:CO2 emission factors of different coal chemical products in China Source:You Zhang et al.(2019).Note:COGTM,coke oven gas-to-methanol.Compared with the traditional coal chemical industry,modern coal chemical products have much higher CO2 emissions coefficients due to
192、the energy-intensive nature of its operations as a result of complicated chemical processing.According to Figure 7,emissions coefficients of typical modern coal chemical products range from 2.83 to 10.6 tCO2/t product.While the Chinese coal chemical industry is estimated to account for about 5.4 per
193、 cent of national CO2 emissions in 2020,further expansion of the industry without a legally binding decarbonization roadmap is expected to contradict Chinas dual carbon goals.Not surprisingly,Chinas carbon neutrality goal is likely to make the countrys existing coal chemical facilities stranded asse
194、ts:51 This is often associated with the concept of creative destruction in modern capitalism.52 In the case of stranded fossil fuel assets,creative destruction would primarily be driven by climate policy:from country-level targets and how they are interpreted by economic actors,to sectoral policies
195、meant to drive the transition to low-carbon,or trade policies aiming to discourage international flow of emissions-intensive commodities.Given the emissions-intensive nature of coal chemical manufacturing,Chinas sizable operational coal chemical facilities are likely to become stranded assets in an
196、increasingly carbon-constrained world.51 Stranded assets may be defined as assets that have suffered from unanticipated or premature write-downs,devaluations,or conversion to liabilities.52 OECD(2015).04812CokeAmmoniaUreaCOGTMCTMCTOMTOCTEGCTGCTL(direct)CTL(indirect)TraditionalModernEmissions coeffic
197、ient(tCO2/t product)Fuel combustion Process emissions 18 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure 8:Chinas primary energy mix in different scenarios by 2060 Sourc
198、e:ERI(2023).Note:The scenarios in the China Energy Transformation Outlook(CETO)comprise three development pathways for the Chinese energy system.The Baseline scenario(BLS)is developed by projecting current trends in the energy system,and incorporates considerations of prevailing political and econom
199、ic tensions across the globe,aiming to serve as a benchmark for quantitative comparison with two scenarios that both envisage carbon neutrality.Both the Carbon Neutrality Scenarios 1(CNS1)and 2(CNS2)accept the dual carbon goals,with different choices of pathways and timing for the energy system to a
200、chieve net-zero emissions.While CNS1 targets net-zero emissions around 2055,CNS2 aims for net-zero emissions before 2055.Note:2020 is historical data,the data of other years are modelling results As coal alone accounted for 56.2 per cent of Chinas primary energy consumption,non-fossil fuel only repr
201、esented 17.4 per cent of the national energy consumption mix in 2022.According to the overarching working guidance of Chinas dual carbon goals,the share of non-fossil energy consumption is planned to reach around 25 per cent by 2030,and to exceed 80 per cent by 2060.So the role of coal in Chinas ene
202、rgy mix is not promising in the long run,with the caveat that setbacks in coal phase-down may occur in the short term.To steer Chinas emissions trajectory away from the baseline scenario(BLS),two carbon neutrality scenarios(CNS1 and CNS2)are designed by the China Energy Transformation Outlook(CETO)2
203、023 project team to simulate how China may achieve the dual carbon goals.The above modeling exercise concludes that non-fossil fuels and natural gas are expected to substitute coal over time.Though coal still accounts for about one quarter of national energy consumption by 2060 in BLS,its share of t
204、he national energy mix is projected to decline to almost nil if China does achieve the dual carbon goals in time,and more specifically,3.3 per cent in CNS1 or 1.9 per cent in CNS2(see Figure 8).In particular,a sudden and unexpected tightening of the carbon emission goal,or sudden changes in expectat
205、ions in the presence of tipping points,can lead to abrupt repricing of fossil fuel assets.53 With regard to tackling environmental problems,the Chinese government applied campaign-style governance as early as the end of the last century,even though the historical pedigree of these campaigns goes bac
206、k to the early days of the PRC.Beyond the field of environmental protection,this phenomenon of Chinese administrative management has appeared in areas such as social stability management,resource conservation,and food safety.54 Since the announcement of the dual carbon goals,China has promulgated a
207、number of regulations related to coal development,primarily consisting of enforcement of capacity swap policy,closure of backward capacity,more stringent environment regulation and enforcement,and low-carbon development of the industry,with selected examples as below.53 Sen and von Schickfus(2020).5
208、4 Feng Jia(2019).19 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.In September 2021,the Central Party Committee(CPC)and the State Council of China released a Working Guidance
209、 for Carbon Dioxide Peaking and Carbon Neutrality in Full and Faithful Implementation of the New Development Philosophy,which is the 1 of Chinas 1+N dual carbon policy framework,and calls for firmly curbing irrational expansion of energy-intensive and high-emission projects including coal chemicals.
210、55 In October 2021,the State Council of China released an Action Plan for Carbon Dioxide Peaking before 2030,which aims to strictly control additional production capacity in oil refining and traditional coal chemical industry,and pursue development of a modern coal chemical industry in a steady and
211、orderly manner.56 In November 2021,the CPC and the State Council of China released the Circular regarding In-depth Efforts in the Nationwide Battle to Prevent and Control Pollution,which mandates that greenfield coal chemical capacity addition is prohibited in key regions,and calls for appropriately
212、 controlling the aggregate capacity of the CTL and CTG industries.57 In February 2022,NDRC et al.jointly issued the Implementation Guidelines on Energy Conservation and Carbon Dioxide Emissions Reduction Retrofits and Upgrades in the Modern Coal Chemical Industry,which aims to pressurize coal chemic
213、al facilities with inferior energy intensity levels to improve performance through retrofitting and upgrading.58 In March 2022,the Ministry of Industry and Information Technology(MIIT)et al.jointly released the Guidance for Promotion of High-quality Development of Petrochemical and Chemical Industri
214、es,which calls for safe,clean,high-end production,diversification,and low-carbon development in the coal chemical industry.59 In April 2022,the Ministry of Ecology and Environment(MEE)released the 14th FYP Action Plan for Environmental Impact Assessment and Waste Discharge Permits,which calls for st
215、rict implementation of capacity swap and capacity reduction policies during environmental impact assessment of coal chemical projects in key regions.60 In June 2023,NDRC et al.jointly released a Notice to Promote Healthy Development of the Modern Coal Chemical Industry.In light of several high-profi
216、le power crunches in the past several years,the notice aims to strictly control the approval,siting,and capacity of greenfield coal-to-chemical projects,and to prioritise supply of coal to power and heat plants.61 In the past,some regions have set overly ambitious and unrealistic goals,or simply cha
217、nted slogans without taking actions,while some industries failed to make solid energy-saving efforts in the hope that certain technology would solve the problem once and for all.To make matters worse,some regions adopt a one-size-fits-all approach in shutting down energy-intensive projects and a sud
218、den cut-off in loans to coal-fired power projects.Though the central government tried to rectify the above campaign-style emissions reduction actions in August 2021,62 the resurgence of the above governance practice at the local level is a looming danger that makes assets in the Chinese coal chemica
219、l industry much more likely to be stranded in the years to come.The coal chemical industry has worsened Chinas water shortage-and water pollution-related challenges:Coal chemical manufacturing often consists of water-intensive processes with substantial wastewater discharge.Average water demand inte
220、nsities of unit coal chemical product stand at 22 t/t for CTO,1216 t/t for ammonia,and 13 t/t for CTM in 2020,and are only expected to improve marginally by 5 per cent by 2025.63 Not surprisingly,water availability is one of the most important constraints of coal 55 CPC and State Council(2021a).56 S
221、tate Council(2021).57 CPC and State Council(2021b).58 NDRC(2022).59 MIIT et al.(2022a).60 MEE(2022).61 NDRC(2023b).62 Xinhua(2021).63 MIIT et al.(2022b).20 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy St
222、udies or any of its Members.chemical development,with substantial impacts on the viability of individual projects.Meanwhile,coal chemical projects are mainly located in water-stressed western regions.In particular,while Yulin in Shaanxi and Ordos in Inner Mongolia are two of Chinas most important co
223、al chemical bases,both cities fall under the category of regions with heavy water stress.So further capacity expansion of Chinas sizable coal chemical industry is expected to result in excessive consumption of water resources,with severe impacts on water flow,water quality,and water levels of rivers
224、 and groundwater.The production processes of the coal chemical industry are complicated,and various pollutants may be produced by each process.The resulting wastewater typically contains phenols,ammonia,nitrogen heterocyclic substances(NHCs),polycyclic aromatic hydrocarbons(PAHs),long-chain hydrocar
225、bons,and cyanide.The wastewater generated by coal chemical manufacturing can be differentiated as gasification wastewater,purification wastewater,domestic and laboratory wastewater,circulating sewage,chemical water station drainage,initial rainwater,and concentrated saline wastewater generated durin
226、g sewage treatment and reuse.64 Since new coal chemical projects often sited in areas without sufficient environmental capacity or appropriate discharge destination,most of the new coal chemical projects that are currently being built or that are under construction in China adopt a scheme of zero wa
227、stewater discharge.At present,most projects that have been put into operation cause different degrees of environmental problems.So far,none of these projects could achieve a long-term stable zero wastewater discharge,with water contamination-related scandals periodically reported by the media.The fi
228、nancial viability of coal chemical projects is becoming increasingly uncertain in a volatile world energy market:As fuel expenditure is an important part of the production cost of modern coal chemical products,which often need to compete with their petrochemical counterparts,the economics of modern
229、coal chemical projects are sensitive to both domestic coal prices and international oil prices.According to Table 3,the break-even Brent crude oil price for CTL projects ranges from 55 to 65$/bbl.When the international oil price is above 50,55,and 60$/bbl,respectively,CTO,CtEG,and CTA projects becom
230、e cost competitive.When the mine-mouth coal price is less than 200 yuan/t,the production cost of CTG projects is comparable with pipeline gas imports from Central Asia.When the mine-mouth coal price is below 370 yuan/t,CTG projects in inland China could compete with LNG imports in coastal provinces
231、in east and south China.65 Table 3:Cost competitiveness of coal chemicals under different international oil price assumptions Coal chemical projects Break-even Brent oil price($/bbl)Brent oil price to ensure baseline investment return($/bbl)CTL Direct 5560 7580 Indirect 6065 8085 Coal tar hydrogener
232、ation 6065 7580 Coal to chemicals CTO 4550 7075 CtEG 5055 7580 CTA 5560 8085 Source:Pingan Securities(2021).64 Jingxin Shi et al.(2021).65 Pingan Securities(2021).21 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for
233、 Energy Studies or any of its Members.Figure 9:Volatile fossil fuel prices since 1 January 2019 Source:various sources.66 Nevertheless,the above research findings have been concluded with several caveats.First,environmental externalities,especially carbon price,have not been fully incorporated.Thoug
234、h Chinas National Carbon Emissions Trading System(ETS)made its debut as late as July 2021 and only covers the power sector in the beginning,Beijing plans to further expand coverage of the National ETS during the 14th FYP period.As a result,a carbon pricing signal is likely to be introduced to cover
235、the coal chemical industry in the future.Second,to justify the financial viability of modern coal chemical projects,it is a common practice for developers to use arbitrarily low mine-mouth coal price(e.g.,200300 yuan/t)as a cost assumption.By comparison,the spot market coal price in China has increa
236、sed significantly in the past several years,with thermal coal price sometimes exceeding 2,000 yuan/t in certain end-use markets.Last but not least,spot market crude oil and LNG prices as well as prices of downstream products have fluctuated widely in the past few years,which could be easily translat
237、ed into a boom-and-bust cycle of coal chemical development(see Figure 9).Over-capacity of the Chinese oil refining industry is expected to result in more fierce competition in downstream chemical markets:Oil refining capacity in China reached 920 Mt/annum in 2022,and surpassed the United States for
238、the first time as the worlds largest.67 Constrained by the dual carbon goals as well as oil supply and demand dynamics,Chinas oil refining capacity is over-built by at least 200 Mt/annum.68 However,Chinas national output of refined petroleum products still lagged behind the United States due to low
239、utilization rates at Chinese refineries.In the past,the relationship between oil refining and petrochemicals was once largely an arms-length one.Refineries focused on fuels,and those that produced naphtha would sell it to operators of ethylene steam crackers.These plants crack naphtha at high temper
240、atures into ethylene,propylene,and other basic chemical building blocks.69 Amid serious over-supply of refining capacity,the Chinese oil refining industry is pressurized to accelerate extension and sophistication of the manufacturing value chain,increasingly betting its future on chemicals instead o
241、f fuels.66 Wind Economic Database,CCTD Coal Database,and SHPGX online database.67 Reuters(2023b).68 Sina(2022b).69 Tullo(2019).-1,000 2,000 3,000 4,000 5,000 6,0002019.012020.012021.012022.012023.012024.01Pirce(yuan/tce)Brent crude spot China LNG factory-gate Thermal coal-Qinhuangdao comprehensive T
242、hermal coal-Newcastle spot Coking coal-Pingyao Shanxi 22 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Chinas chemicals sector is unique globally,and the development of the i
243、ndustry over the past several decades has relied to a significant degree on coal technologies.This proved relatively straightforward,as such technologies have been widely available for nearly a century and have been usedalbeit on a much smaller scaleelsewhere.70 In an increasingly carbon-constrained
244、 world,the share of non-fossil fuels is expected to keep rising,which will make Chinas limited availability of conventional oil and gas resources a less and less important policy concern.Coupled with significant potential of greenfield petrochemical capacity expansion,resource constraint-related jus
245、tification in support of coal chemical development in China is likely to gradually lose traction,and decision-makers will pay more and more attention to coal chemical manufacturings much higher environmental externalities compared with petrochemical processes.4.Prospects of the Chinese coal chemical
246、 industry Though the coal chemical industry ranks as the second largest coal processing sector in China,accounting for near one quarter of national coal throughput,it only represents about 5.4 per cent of national CO2 emissions,as most coal processed by the industry is passed to other sectors as eit
247、her chemical feedstock or fuel products.Despite the dual carbon goals,the coal chemical industry remains the only major coal-consuming sector in China that still possesses great potential for substantial capacity expansion as well as emissions spikes in the coming decades.To assess how the coal chem
248、ical industry can meet Chinas carbon peaking goal before 2030,Jin Ling and eight other senior experts from three of Chinas top environment and coal research institutes published research findings of a bottom-up modelling exercise in 2022,71 with consideration of the status quo of the coal chemical i
249、ndustry,macroeconomic assumptions,energy conservation and emissions abatement technologies,and feedstock and fuel structure adjustment,among other factors.Figure 10 summarizes emissions trajectories of two scenarios in the above study,which not only sheds light on the prospects of the Chinese coal c
250、hemical industry in an increasingly carbon-constrained world,but can also be well explained using the SECTOR framework presented in section 2.Figure 10:CO2 emissions trajectories of the Chinese coal chemical industry Source:adapted from Jin Ling et al.(2022),with sectoral CO2 emissions in 2020 index
251、ed as 1.0.Under the baseline scenario:In the short term,the Chinese coal chemical industry is expected to continuously grow relatively strongly,with sectoral CO2 emissions rising by about one quarter during the 14th FYP period,which could largely be explained by the state of play of key criteria in
252、the SECTOR framework.70 IEA(2021)Op.cit.71 Jin Ling et al.(2022).1.01.11.21.31.42020202520302035Index(2020 emissions=1.0)Emissions control scenario Baseline scenario 23 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute
253、for Energy Studies or any of its Members.Rising anxiety over energy security amid geopolitical tension is the most important driver underlining coal chemical development during the 14th FYP period.As coal remains the ballast stone for Chinas energy security,announcement of major coal chemical projec
254、ts continuously unfolds in both traditional and modern coal chemical sectors.A sluggish post-pandemic economic recovery has led to increasingly stronger desire for investment-driven growth,especially at local level,which gives coal chemical development additional momentum.Though climate change,techn
255、ological maturity,regulatory burden,and other pressing issues(especially water scarcity and contamination)continue to serve as major constraints of coal chemical development,for now they are outweighed by much higher political priority of energy security and economic development.In the medium term,a
256、round 2030,the Chinese coal chemical industry is expected to undergo moderate growth,primarily driven by further capacity expansion in the modern coal chemical industry.By comparison,output of traditional coal chemicals is projected to either decline over time(e.g.,coke)or fluctuate around the curre
257、nt level(e.g.,ammonia).After the 14th FYP period,in the absence of any disruptive geopolitical conflicts,energy security-related anxiety among Chinese decision-makers is expected to ease over time,primarily due to peaking of national oil consumption during the 15th FYP period.While China further dis
258、tances itself from relentless pursuit of economic growth,the priority of climate change will be significantly upgraded as 2030 is the critical juncture for China to peak national carbon emissions beforehand,while entering the era of carbon neutrality goal thereafter.Though technological maturity may
259、 improve over time,as other criteria of the SECTOR framework remain largely intact,progress achieved via technology innovation alone cannot entirely outweigh the damping effects related to energy security and economic development,leading to lower overall sectoral emissions growth around 2030.In the
260、long run,the future of the Chinese coal chemical industry looks rather uncertain.In theory,the rollout of the carbon neutrality goal after 2030 is expected to eventually plateau sectoral CO2 emissions.However,the extent to which the Chinese coal chemical industry may be able to actually decouple its
261、 energy-intensive operations away from CO2 emissions will largely depend on technology maturity-related progress in the baseline scenario.Looking ahead,in the case where any key drivers in support of coal chemical development under the SECTOR framework are drastically prioritized(e.g.,worsening ener
262、gy security anxiety amid a disruptive geopolitical conflict),more active coal chemical development across China,as well as a much higher sectoral CO2 emissions trajectory,would ensue.Under the emissions control scenario:In order to peak sectoral CO2 emissions by 2025,it is necessary to restrict perm
263、itting of greenfield coal chemical plants,optimize feedstock and fuel structure,and improve energy efficiency,among other abatement measures.Even so,sectoral CO2 emissions in 2035 are only lower than those in the baseline scenario by about one fifth,which explains why the coal chemical industry is c
264、onsidered as a hard-to-abate sector.In the case where much more stringent climate targets than that of the emissions control scenario are imposed on the Chinese coal chemical industry,both economic viability and growth potential of the industry would become questionable.Not surprisingly,resilience o
265、f the Chinese coal chemical industry will ultimately depend on whether an appropriate balance among key criteria of the SECTOR framework could be maintained in an increasingly carbon-constrained world.In particular,disruptive policy adjustments in the areas of climate change,regulatory burden,and ot
266、her pressing issues(especially air pollution and water availability)possess significant risks to coal chemical development.In sum,despite its large industrial scale,the Chinese traditional coal chemical industry has long suffered from overcapacity,legacy assets,single product structure,and heavy pol
267、lution among other chronic weaknesses,and thus is continuously subject to increasingly stringent and sometimes disruptive energy and environmental regulations.In the above context,the modern coal chemical industry is prioritized by key 24 The contents of this paper are the authors sole responsibilit
268、y.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.stakeholders,especially local government and the coal industry,to supplement petrochemical manufacturing and climb up the value chain.Nevertheless,unless the modern coal chemical industry c
269、ould outperform its petrochemical counterpart in net-zero transition once China enters the era of carbon neutrality goal after 2030,the long-term prospects of the Chinese coal chemical industry as a whole would not necessarily be promising.5.Policy recommendations Based on an extensive literature re
270、view,conversations with numerous industrial insiders,and several site visits to coal chemical facilities across China since 2019,this paper suggests pathways that could be adopted to better regulate the Chinese coal chemical industry,aiming to trigger interest in follow-up policy discussions as well
271、 as more in-depth studies.Please note that all these recommendations have been prepared by the author in a personal capacity,and do not necessarily reflect the views of the Oxford Institute for Energy Studies or any of its members.The energy decision-making framework in China should shift from the t
272、raditional 3E model to a more sophisticated paradigm.Since the beginning of the millennium,an increasingly interconnected and digitized energy world has been testing the limitations of the traditional 3E model of energy decision-making.While energy security was once defined as the uninterrupted avai
273、lability of energy sources at an affordable price,its definition should be broadened into energy system security,which may be defined as reliable,affordable access to increasingly interconnected energy sources for all key energy stakeholders,including energy importing,exporting,and transition countr
274、ies.To better regulate its coal chemical industry and beyond,China may consider shifting its energy decision-making framework from the traditional 3E model to a more sophisticated paradigm,with appropriate consideration of a list of driving forces such as energy system security,economic development,
275、climate change,technological maturity,regulatory burdens,and other pressing issues(i.e.,SECTOR).If so,a more sophisticated paradigm is expected to better reflect an increasingly complicated energy decision-making landscape in China and abroad.Comprehensive and transparent statistical reporting and a
276、ccounting throughout the Chinese coal value chain should be established.Reliable statistical reporting is the basis of sound and sensible decision-making in the energy sector and beyond.Given the potential of substantial greenfield capacity addition of coal chemical facilities across China in the de
277、cades to come,reliable statistical reporting and accounting throughout the Chinese coal value chain is a prerequisite for better regulating the industry,as well as for improving understanding of associated social,economic,environmental,and climate consequences.While digitalization of industrial asse
278、t data is well under way,access to such data remains a challenge.Overcoming access-related obstacles is key to quality improvement of statistical reporting,with the caveat that digitalization alone is insufficient to eliminate all the embedded systemic weaknesses related to statistical reporting in
279、China.China should consider adopting a politically feasible but increasingly emissions-constrained approach to actively reduce the carbon footprint of the coal chemical industry.As the first ever hybrid superpower in the modern era,Chinas phase-by-phase climate commitment reflects the so-called deve
280、loping country mentality.In particular,the current generation of Chinese leadership grew up in a much poorer and more backward country compared with today.This helps to explain why China did not commit to peaking national carbon emissions until 2030,giving itself a 10-year buffer.From 2030 onward,as
281、 the younger generation of Chinese in possession of a superpower mentality assume leadership positions,Chinas energy and climate policies are expected to close the gap with those of advanced economies.72 Similarly to the dual carbon goals,China should consider adopting a politically feasible but pha
282、se-by-phase approach to actively lower the carbon footprint of the coal chemical industry,as below.In the 14th FYP period,similarly to regulatory restrictions imposed on the iron and steel industry,China should consider permitting greenfield coal chemical capacity through the so-called capacity 72 T
283、u(2021).25 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.swap policy,which allows manufacturers to swap greenfield capacity addition in return for closures elsewhere.In the 1
284、5th FYP period,China should consider only permitting greenfield modern coal chemical facilities with carbon emissions intensity no greater than natural gas-based production routes.After 2030,a net-zero roadmap featuring legally binding emissions reduction caps over time should be imposed on the Chin
285、ese coal chemical industry in support of achieving the carbon neutrality goal by 2060,ideally as early as 2050.Renewable hydrogens role in deep industrial decarbonization should be prioritized,especially in coal chemical,petrochemical,and iron and steel manufacturing.Given the enormous potential of
286、renewable hydrogen utilization in heavy industries,industrial decarbonization should become the focus of scaling up the renewable hydrogen supply chain in China.Apart from covering selected industrial sectors such as iron and steel into the national ETS,innovative policy and financial policy instrum
287、ents should be considered in the Chinese context,especially green public procurement,Carbon Contracts for Difference(CCfD),and demand quota for climate-friendly raw materials.Meanwhile,though blue hydrogens potential to reduce life-cycle CO2 emissions intensity of coal chemical facilities should not
288、 be overlooked,prospects for this transitional decarbonization solution are expected to become much less promising once China enters the era of carbon neutrality,starting from 2030.The potential of CCUS in lowering life-cycle CO2 emissions intensity of existing coal chemical facilities should be tap
289、ped,but whether sector coupling of renewable hydrogen and CCU could justify permitting of greenfield coal chemical capacity still deserves more in-depth R&D.As the CO2 concentration of process emissions of modern coal chemical plants is often above 85 per cent,coal chemical manufacturing is widely r
290、egarded as the most preferred industry for piloting CCUS projects in China.As the share of process emissions normally accounts for less than 70 per cent of total emissions of a modern coal chemical plant,assuming a 90 per cent CO2 capture rate,less than 60 per cent of total emissions in a modern coa
291、l chemical facility may be captured with relatively low costs.Even so,the potential of CCUS in lowering life-cycle CO2 emissions intensity bodes well for Chinas national carbon emissions peaking goal before 2030,and thus should be tapped by both the Chinese government and the coal chemical industry.
292、Once high-concentration CO2 emissions from coal chemical facilities are captured,they may be coupled with renewable hydrogen to produce various types of e-fuels or chemicals.Theoretically speaking,prospects of CCU,sector coupling,or PtX are rather promising,thus offering emissions-intensive coal che
293、mical industry a rare opportunity of redemption.Nevertheless,given all the unresolved technological,economic,environmental,as well as social acceptance-related obstacles,more in-depth R&D should be conducted to thoroughly evaluate whether permitting of greenfield coal chemical facilities could be ju
294、stified by the above-mentioned technological routes.Performance evaluation and promotion mechanisms of provincial governors and senior executives of SOEs should be revamped,aiming to incentivize decision-making with longer-term orientations.China runs the worlds largest state asset system.State-owne
295、d enterprises are the economic and political bases of the ruling party and the Chinese state.Similarly to high-ranking officials such as provincial governors,senior executives of SOEs are governed by the ruling partys cadre management system,under which senior officials and SOE executives are recrui
296、ted,evaluated,promoted,trained,and supervised by the ruling partys Organisational Department.73 Since implementation of the reform and opening-up policies in 1978,the above system has worked well and contributed to Chinas spectacular economic growth until recently.Due to the limited duration of each
297、 political appointment and over-emphasis on economic performance,both provincial governors and senior executives of SEOs have strong incentives to favor large-scale investment delivering short-term political return,without adequate consideration of the longer-term economic,environmental,and climate
298、consequences.Unless serious reform could be initiated by the ruling 73 Xiankun Jin et al.(2022).26 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.party to tackle the above sys
299、temic weakness,rising risks of manufacturing over-capacity and stranded climate assets in the Chinese coal chemical industry cannot be easily alleviated.In cases where a carbon pricing signal needs to be introduced,carbon tax is recommended as the preferred option to price CO2 emissions in the Chine
300、se coal chemical industry.Almost one decade after the first pilot ETS launched in Shenzhen city in 2013,the eight pilot regional markets continue to operate in parallel with the national ETS.However,the coverage expansion of national ETS is slow to come.One of the key barriers is that China presentl
301、y has insufficient greenhouse gas emissions monitoring capacity,and there have been reports of data fraud in reporting and verification.Given the fact that the power industry is widely deemed the easiest sector in terms of data reporting and verification,and considering the complicated manufacturing
302、 processes of the coal chemical industry,carbon tax is recommended as a better option than national ETS to price CO2 emissions in the Chinese coal chemical industry.Above all,carbon tax is much more effective than ETS to motivate government to improve statistical reporting and penalize fraud.27 The
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