TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalExecutiveSummary/April2022rmi.org/2TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalAboutRMIRMIisanindependentnonprofitfoundedin1982thattransformsglobalenergysystemsthroughmarket-drivensolutionstoalignwitha1.5°Cfutureandsecureaclean,prosperous,zero-carbonfutureforall.Weworkintheworld’smostcriticalgeographiesandengagebusinesses,policymakers,communities,andNGOstoidentifyandscaleenergysysteminterventionsthatwillcutgreenhousegasemissionsatleast50percentby2030.RMIhasofficesinBasaltandBoulder,Colorado;NewYorkCity;Oakland,California;Washington,D.C.;andinBeijing,People’sRepublicofChina.rmi.org/3TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalAuthorsShuyiLi,PeishanWang,YujunXueAuthorslistedalphabetically.AllauthorsfromRMIunlessotherwisenoted.OtherContributorsTingLi,RMIContactsShuyiLi,sli@rmi.orgCopyrightsandCitationShuyiLi,PeishanWang,YujunXue,TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoal,RMI,2022,https://rmi.org/transforming-chinas-chemicals-industry.RMIvaluescollaborationandaimstoacceleratetheenergytransitionthroughsharingknowledgeandinsights.Wethereforeallowinterestedpartiestoreference,share,andciteourworkthroughtheCreativeCommonsCCBY-SA4.0license.https://creativecommons.org/licenses/by-sa/4.0/.AllimagesusedarefromiStock.comunlessotherwisenoted.AcknowledgmentTheauthorsthanktheChinaPetroleumandChemicalIndustryFederation(CPCIF)andEnergyTransitionsCommission(ETC)forofferingtheirinsightsandperspectivesonthiswork.Also,specialthankstotheAngelaWrightBennettFoundation,BloombergPhilanthropies,ClimateWorksFoundation,QuadratureClimateFoundation,SequoiaClimateFoundation,andtheWilliamFloraHewlettFoundationfortheirsupportofthisreport.Inaddition,wewouldliketoexpresssincerethankstoallexpertsfromtheindustryresearchinstituteswhoprovidedcommentsandsuggestionsforthisstudy.AuthorsandAcknowledgmentsrmi.org/4TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalChinaistheworld’slargestproducerandconsumerofchemicalproducts.China’schemicalsindustryaccountsfor20%ofthetotalnationalindustrialemissionsand13%ofthecountry’stotalCO2emissions.1Thezero-carbontransformationofthechemicalsindustryisofgreatsignificancetothenationalgoalofcarbonneutralityandthelow-carbontransformationoftheglobalchemicalsvaluechain.Challengesandopportunitiescoexistintheprocessoftransformation.Thezero-carbontransformationofChina’schemicalsindustryfacesthreemainchallenges:•TheoveralldemandformajorchemicalproductsinChinawillcontinuetoincrease.•ChemicalproductioninChinaishighlydependentoncoal,whichhasacarbonintensitymuchhigherthanthatofotherfuelsandfeedstocks.•Existingproductionassetsarerelativelyyoung,andtheriskofstrandedassetsmaybehigherduetorapidtransformation.Also,therearethreemajoropportunities:•Chinahasastrongcapabilityintechnologyintegrationandalargemarketscale,whichenablesrapidscale-upofnewtechnologydeployment.•KeyplayersinChina’schemicalsindustryaremainlystate-owned,sotheyhavetheabilityandresourcestoleadtheoverallindustry.•Thelarge-scaleandintegratedpatternofChina’schemicalsindustryallowstheoptimalutilizationofresourcesandenergyandachieveseconomiesofscale.Thisreportfocusesonthreerepresentativechemicalproducts,namely,ammonia,methanol,andethylene.Ontheonehand,thesethreeproductswillbethemainsourceofcarbonemissionswithinChina’schemicalindustryinthefuture.Thetotalcarbonemissionsofammonia,refinery,andmethanolarecurrentlythehighestinthechemicalssector.2However,giventhelimitedgrowthpotentialofrefinedoildemand,thesizeoftherefineryindustrywilltendtoshrink.Forethylene,althoughitsself-sufficiencyrateinChinaisabout60%,ithasgreatpotentialforcapacitygrowth,sothecarbonemissionsoftheethyleneindustryareontracktoincreaseinthefuture.Ontheotherhand,fromtheperspectiveoftheirpositionsinthevaluechain,ammonia,methanol,andethylenearekeyprimarychemicalsinthesectorwithnumerousdownstreamproductsandhighaddedvalue.AsChinagraduallyentersthelaterstageofindustrializationandurbanization,itsdemandforsteelandcementisexpectedtodecreaseinthelongrun.Incontrast,China’sdemandforchemicalproductswilltakelongertopeak.Thefirststeptoanalyzethezero-carbontransformationofChina’schemicalsindustryistoprojectthedemandofmajorproducts,analyzingtheinfluencingfactorsaswellastheeffectofthecarbonneutralitytarget.Inthisreport,zero-carbonproductionmeansachievingnet-zeroCO2emissionsintheproductionprocess(back-endtreatmentlikecarboncaptureandstorage[CCS]canbeused),andthefinalproductsarecalledzero-carbonchemicalproducts.Also,thechemicalsindustryshouldoptimizefeedstocksources,promotecarbonreductionduringproductionprocesses,andcooperatewithupstreamanddownstreamcompaniestoachievelife-cyclezero-carbonemissions.Low-carbonproductionisatransitionalsolutiontozero-carbonproduction(i.e.,asignificantreductionincarbonemissionsfromtheproductionprocess).Thechemicalsindustryneedstoutilizediversecarbonabatementtechnologiestoreduceoreveneliminatecarbonemissionsfrombothenergyandfeedstockperspectives,strivingforcarbonpeakingandcarbonneutralityinthechemicalsindustry.rmi.org/5TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalDemandOutlookintheZero-CarbonScenarioInRMI’szero-carbonscenario,structuralchange,efficiencyimprovement,andfullreleaseofrecyclingpotentialcouldcontributetoasmuchasa49%reductionofprimarychemicalsintheirconventionalenduseby2050.Concurrently,theiremergingenduseasnewenergyandmaterialsisexpectedtoexpandsignificantly,withanincreaseofmorethan165%.Inthenextthreedecades,ammoniademandinChinawilldecreasefirstandthenincrease.Themaindemandcomesfromagriculture,whichwilldecreaseinthefutureduetomoreefficientfertilizeruse.IndustrialuseofammoniawillbeunlikelytoincreaseonalargescaleduetothelimitedroomforconstructionasChina’sindustrializationandurbanizationisgraduallyenteringalaterstage.After2035,theuseofammoniaasanenergysourceislikelytogrowrapidly,withapplicationsrangingfromshippingtopowergeneration.Thetotaldemandforammoniawillbearound60milliontonsby2025,withacontinuousbutslightdecline,andwillfalltoabout46milliontonsby2035mainlyduetoshrinkingagriculturaluseasfertilizerefficiencyimproves.Bythen,thegrowthrateofindustrialuseforammoniawillslowandammoniausedasenergywillbepilotedaround2030butonlyinsmaller-scaleapplications.From2035to2050,thetotaldemandforammoniawillincreaseduetotheexpansionofenergyusewherelarge-scalecommercialapplicationsareavailable.By2050,energyusewillaccountfor50%oftotaldemandforammonia,withagriculturalandindustrialuselevelingoff.Exhibit1AmmoniademandprojectioninChinaIndustrialuseEnergyuseAgriculturaluse01020304050607080901002020202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Ammonia(milliontons)AgriculturaluseIndustrialuseEnergyusermi.org/6TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoal0204060801001202020202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Methanol(milliontons)TraditionalenduseMTOEnergyuseMethanoldemandwillincreasefirstandthendecreasethrough2050.Atpresent,traditionalusesuchasaceticacid,methyltert-butylether(MTBE),andformaldehyde,whicharemainlyusedinbuildingmaterials,decoration,andgasolineblendstock,remainamongthemajordemandsformethanol.However,underthepressureofenvironmentalprotection,safety,andcarboncontrol,traditionaluseformethanolwillberestrainedwithgraduallyacceleratingdecline.Themethanol-to-olefin(MTO)processcanefficientlyutilizecoalresourcesandrelievedependenceoncrudeoilimport;hence,theincreasingdemandforethyleneinthefuturewilldriveacertaingrowthofMTO.However,inthelongrunmethanolshouldbegraduallyshiftedtolow-carbonandzero-carbonsources.Energyuseofmethanolwillmaintainsteadygrowth,butthelong-termpotentialislimited,mainlybecausethetransitiontocleanerfuelsissubjecttocompetitionwithotherenergysources.China’stotalmethanoldemandwillincreasetoabout100milliontonsby2030,withMTOandenergyuseasthemaingrowthdrivers,whiletraditionalusewillslowlydecline.From2030to2050,totalmethanoldemandinChinawillcontinuetodecreaseto70milliontons.EthylenedemandinChinawillcontinuetoincreasethrough2050,graduallystabilizingafter2040.Ethyleneisoneofthecriticalbuildingblocksinthepetrochemicalsindustry,withplasticasalargeproportionofitsdownstreamendproducts.Thegrowthoftotaldemandforplasticsandthereleaseofrecyclingpotentialwillbethemainfactorsaffectingthetrendofethylenedemandinthefuture.Plasticsrecyclingincludesmechanicalandchemicalrecycling.Mechanicalrecyclingreliesmoreontheimprovementoftherecyclingsystem,(e.g.,theimprovementofthecollectingandsortingsystem),whereaschemicalrecyclingneedstechnologicalbreakthroughsanddevelopment.Ethylenedemandwillcontinuetogrowatabout1%peryearuntil2040.After2040,thedemandofethylenewillflattenatabout87milliontons.Exhibit2MethanoldemandprojectioninChinaTraditionaluseMTOEnergyuseSource:2020datafromEarlyWarningReportofChinaPetrochemicalMarket,ChinaNationalPetroleum&ChemicalPlanningInstituteandShandongLongzhongInformationTechnologyCo.,2021rmi.org/7TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalExhibit3PlasticsdemandprojectioninChinaExhibit4EthylenedemandprojectioninChinaSource:2020datafromEarlyWarningReportofChinaPetrochemicalMarket,ChinaNationalPetroleum&ChemicalPlanningInstituteandShandongLongzhongInformationTechnologyCo.,202101020304050607080901002020202120222023202420252026202720282029203020312032203320342035203620372038203920402041204220432044204520462047204820492050Ethylene(milliontons)0%1%83%1%5%74%12%10%55%100%17%100%20%100%23%Plastics(milliontons)020406080100120140203020502020TotalplasticsdemandMechanicalrecycledplasticsChemicalrecycledplasticsAlternativeproductsPrimaryplasticsrmi.org/8TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalChemicalsIndustryDecarbonizationPathways:DevelopDisruptiveTechnologiesBasedonResourceEndowmentDecarbonizationofthechemicalsindustrycanproceedfromboththedemandsideandthesupplyside,andthepathsincludeconsumptionreduction,high-endproduction,end-productsubstitution,efficiencyimprovement,fuelsubstitution,feedstocksubstitution,andback-endtreatment.Thefocusofdemand-sidedecarbonizationistoreducedependenceoncarbon-intensiveproducts.Thisincludesreducingdemandwhilemaintainingthesameservicelevelbymeansofimprovingefficiencyandrecycling.Itisalsoimportanttopivottogreenerhigh-endproductsoralternativeproducts.Supply-sidedecarbonizationroutesmainlydealwithprocessemissionsandfuelcombustionemissions,supplementedbynegativeemissionstechnologies,tofullyrealizedecarbonization.Exhibit5DecarbonizationpathwaysofpetrochemicalsandchemicalsindustriesDEMANDSIDESUPPLYSIDEConsumptionreduction•Increasefertilizerefficiency,reducefertilizerconsumption•Plasticban/restriction,increaserecyclingofwasteplastics,rubber,andsyntheticfiberEfficiencyimprovement•Reduceenergyconsumptionthroughintegratedmethodofproduction•Reduceenergyconsumptionthroughcoal-basedcross-industryproductionandone-stepproductionofhydrocarbonHigh-endproduction•Develophigh-endproducts,increaseshareofadvancedmaterials,specialchemicals,andhigh-endfertilizer•Adjustproductstructureofoilrefiningindustry,increaseshareofdownstreamchemicalproducts,andreduceshareofrefinedoiluseFuelsubstitution•Electrifylow-tomedium-temperaturereactions•Substitutefossilfuelswithbiomass,hydrogen,etc.End-productsubstitution•Developbio-basedmaterial,substituteorpartlysubstitutesyntheticmaterialsproducedfromfossilfuelFeedstocksubstitution•Developlow-andzero-carbonfeedstockssuchasrenewablehydrogenandbiomasstoreplacefossilfuelfeedstocksBack-endtreatment•DevelopCCUStoreduceoreliminatecarbonemissionsfromfossilfuel–basedprocessesrmi.org/9TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalCarbonemissionsreductionmethodsrelatedtochemicalproductproductionmodescanbeconsideredfromthreeaspects:feedstockssubstitutions,fueldecarbonization,andsystematicenergyconservation.Thecarbonelementinthefeedstockshouldgraduallyshiftfromfossilfuelstobiomass,biogas,andCO2,whilethehydrogenelementshouldgraduallyshiftfromcoalandnaturalgastobiomass,biogas,andgreenhydrogen.Eveniffossilfuelscontinuetobeused,lesscarbon-intensivefeedstocksshouldbeselected.Forexample,inethyleneproduction,thefeedstockcanbegraduallyshiftedfromcoalandnaphthatolighthydrocarbonswherepossible.Intermsoffuelselection,chemicalprocessesshouldbeelectrifiedasmuchaspossible,andtheenergysourceshouldbegraduallyshiftedfromfossilfuelstorenewables.Intermsofsystematicenergyconservation,optimizationofenergymanagementandcatalysttechnologiesshouldbeusedtoreducetheenergydemandofthereactiontoreducethecarbonemissions.Technologiesthatcanpromotedecarbonizedtransformationofchemicalproductionwillgenerallyreachtheleveloflarge-scaledeploymentby2050,andthetimingofdevelopmentscanbeestimatedaccordingtotheirreadinesslevels.Intermsoftechnologyreadiness,demandreductionmethodslikerecyclingandenergyefficiencyimprovementarehighlyfeasibleintheshortandmediumterm.Suchtechnologieshaveunlockedsignificantcarbonreductionpotentialsofarbutcouldbefurtheradvanced.However,neitherdemandreductionnorenergyefficiencyimprovementcouldachievecompletedecarbonization.Althoughdisruptivetechnologiessuchasfuelelectrification,greenhydrogenutilization,biomassutilization,andcarboncapture,utilization,andstorage(CCUS)havegreaterpotentialtoreducecarbonemissions,theirtechnologymaturityisrelativelylow.Ingeneral,availabledecarbonizationtechnologiesinthechemicalsindustrywillachievecommercialapplicationaround2035,whichwillgreatlyboostzero-carbontransformationinthemediumandlongterm.Exhibit6showsthetechnologyreadinessoutlookforrelatedtechnologies.Exhibit6ChemicalsindustrydecarbonizationtechnologyoutlookPolicy-driventomarket-drivenTechnologyTRLPilot/Demonstrationproject202020252030203520402045205020552060Low-carbonfossilfeedstockInnovativecatalystElectricheatingBiomass/Municipalsolidwaste(MSW)CCS9SatelliteChemical’s1.25Mtlighthydrocarbontoethyleneprojectcommissioned(2021)8–9EcoCatalytic’smetaloxideoxygentransferagentforethylene(2020)7–9Dow’sFCDhreduces25%energyconsumption(2022)7–9Baofeng’s13,000t/amethanol(greenH2/a+coalchemical)(2021)6–7SinopecQiluPetrochemical’sEORproject(2021)7BASF,SABIC,andLindejointdevelopmentofe-cracking(2023)8–9NewHopeEnergy’s715,000t/amethanolproject(2023/24)8–9BASFmethanol480,000t/a(naturalgas+biomethane)(2018)4–7EUsupportedCO2EXIDEprojectusesCO2toproduceethylene(2020)7–9Perstorp’smethanol200,000t/a(2025)Power-to-X(DAC)Coalchemical+greenhydrogenMarketmatureCommercializedPilotZero-carbonproductionprocessandfeedstockLow-carbonproductionZero-carbonproductionprocessInnovativeenergyefficiencytechnologyGreenhydrogen+biomassBiogasCommontechnologyFuelsubstitutionFeedstocksubstitutionBack-endtreatmentTechnologyreadinesslevelrmi.org/10TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalBecausethecostofdisruptivetechnologiessuchasgreenhydrogenandCCSisexpectedtodropsignificantlyinthefuture,thecostcompetitivenessoflow-carbonandzero-carbonchemicalproductionwillbegreatlyenhanced.Thecostoflow-carbonandzero-carbonproductionroutesislargelydeterminedbyfuelandfeedstockcosts,whilethecostofcapitalandequipmentplaysasmallerroleunlessextensiveretrofittingisrequired.Inaddition,thecostcompetitivenessofvariousproductionroutesvariesfromregiontoregionduetodifferentresourceendowmentsandmarketconditions.Greenhydrogenisanimportantfeedstockforzero-carbonchemicalproduction,anditscostreductionmainlycomesfromthesharpdropinthecostofrenewablepower,thereductionofthecostofelectrolyzers,andtheimprovementofconversionefficiency.Electricitycostisamajorpartofgreenhydrogencostatasmuchas60%–70%.Atpresent,thecostofhydrogenproductioninareaswithabundantgreenpowerresourcesinChinaisaboutUS$2.6/kg,anditcoulddroptoUS$1.7/kgorevenlowerinareaswithrichrenewableresourcesby2050.Intermsofequipment,thecurrentcostofelectrolyzerisaroundUS$300/kW,andthepriceisexpectedtodroptoUS$100/kWby2050.Intermsofconversionefficiency,electricityconsumptioninhydrogenproductioncoulddropto45kWh/kghydrogenby2050,about20%lowerthancurrentlevels.Greenhydrogencostwilldependonwhetheron-siterenewablesorgridelectricityareutilized.Becauseelectricitymarketreformmightbringuncertaintiestothetrendofelectricitypricesindifferentregionsinthefuture,theelectricityandhydrogenpricesinthiscostmodelareatthenationalaveragelevel.ThehighconcentrationofCO2emittedfromchemicalproductioncreatesexcellentconditionsforCCSapplicationsatarelativelylowercost.Inthefuture,thecostofCCSwillcontinuetofallasthetechnologyevolvesandisusedateconomiesofscale.Thecostoffirst-generationcapturetechnologywilldropby15%–25%by2035,andassecond-generationcapturetechnologyiFirst-generationcapturetechnologiesrefertothosetechnologiesthathavebeendemonstratedonalargescale,suchasamine-basedabsorbers,physicalsolvents,andoxygen-enrichedcombustion.Second-generationcapturetechnologiesrefertonewtechnologiesthatcansignificantlyreduceenergydemandandcostcomparedwithmaturefirst-generationtechnologies,suchasmembraneseparationtechnologyandnewabsorptiontechnology.becomescommerciallyavailableitscostwillbe5%–10%lowerthanthatoffirst-generationtechnology.iBy2040,withtheformationofCCSclusters,thecostofsecond-generationcapturetechnologieswillbe40%–50%lowerthancurrentlevels.3By2050,thecostwilldropevenfurther.BiomassresourcesarerelativelylimitedinChina.Althoughthefuturetrendofbiomasslarge-scaleutilizationisexpectedtoreducethecostofbiomass-basedchemicalproduction,comparedwithothertechnologies,biomasswillplayalimitedroleandisonlylikelytobeappliedonalargescaleinareaswherebiomassresourcesareparticularlyadvantageous.Asisshownbelow,thisstudyanalyzesthecostofdifferentzero-carbonproductionroutesforammonia,methanol,andethylene.Intheshortterm,conventionalcoaltoammoniawithCCSisamoreeconomicalroutesofproducingdecarbonizedammonia,whilewiththerapiddeclineofgreenhydrogencost,greenhydrogen-basedammoniacouldachievelowercostinthelongterm.Atpresent,theproductioncostofammoniawithCCSisaboutUS$570/t,withacostpremiumofabout60%comparedwiththeconventionalroute.However,thiscostwilldroptoUS$490/tby2030andUS$340/tby2050.DuetotheoveralllowcostofCCSapplicationinammoniaproduction,existingcoal-to-ammoniaplantscouldbeequippedwithCCSintheshortterm.Inthelongrun,however,ifcarbonpriceisnottakenintoaccount,thecostofgreenhydrogen-basedammoniawillreachparitywiththecostofcoal-basedammoniaatahydrogenend-usepriceofaboutUS$1.5/kgby2050.Withthehigherfutureexpectedcarbonprice,greenhydrogen-basedammoniasynthesiswillbemorecostcompetitive.Inaddition,inregionswithgoodrenewableenergyconditionsandlowzero-carbonelectricityprice,thecostcompetitivenessofgreenhydrogen-basedammoniawillbemoreprominent.rmi.org/11TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalWhenhydrogenischeaperthanUS$1.8/kg,greenhydrogen-basedammoniawillbemorecostcompetitivethancoal-basedammoniawithCCS.Ifon-siterenewablepowerisutilizedforhydrogenproductionwhentheelectricitypriceislessthanUS$27/MWh,thecostofgreenhydrogen-basedammoniaisevenlower.Bycomparingthesecostconditions,earlyopportunitiesforammoniaproductionpilotswithCCSorgreenhydrogencanbeidentifiedandthemostcost-competitivezero-carbonproductionroutecanbeselectedforammoniaproductionindifferentregions.Similarly,theconventionalcoal-to-methanolprocesswithCCSisthemostcost-efficientzero-carbonproductionrouteformethanol.Evenwithagreenpremiumofmorethan70%,thecostofthisprocesswithCCSwasstillsignificantlylowerthanotherzero-carbonproductionroutesin2020.By2030,thegreenpremiumforcoal-basedmethanolwithCCSwouldbelessthan15%evenatalowercarbonprice.By2050,coal-basedmethanolwithCCSwillbemorecostcompetitivethancoal-basedmethanolwithacarbonprice.ThecompetitivenessoftheCCSroutecomesfromtwoaspects.First,theCO2concentrationincoalchemicalproductionisveryhighatcloseto100%,sothecostofcarboncapturecanbesignificantlyreduced.Second,China’smethanolproductionishighlydependentoncoal,andtheapplicationofCCSenablesthebestuseofexistingproductioncapacityandassets,avoidinguncertaintiescausedbylarge-scaletransformation.However,withtherapidcostreductionofgreenhydrogen,methanolproductionroutesusinghydrogen—througheithertheconventionalcoalchemicalprocesscoupledwithhydrogenordirecthydrogen-basedpower-to-X(PtX)—couldachieveidealcost-effectivenessinthelongterm.ComparedwiththecostofCO2feedstock,thecostofgreenhydrogenisstillthebottleneckfactordeterminingthecostcompetitivenessofPtXmethanolproduction,whileindustryby-producthydrogencouldbeutilizedasatransitionalsolution.By2050,evenifthecostofCO2feedstockisashighasUS$100/t,whichisequivalenttothecurrentcostofdirectaircapture,thecostofgreenhydrogenwillstillaccountforabout60%ofthetotalatahydrogenpriceaslowasUS$1.6/kg.Whentheend-usehydrogenpriceislowerthanaboutUS$0.8/kg,theproductioncostofgreenhydrogen-basedzero-carbonmethanolwillbelowerthanthatofcoal-to-methanolwithCCS.Thecostofgreenmethanol-basedethyleneproductionhasgreatpotentialtodecline,mainlyduetothedecreasingcostofgreenhydrogen.Thecostofnaphtha-andlighthydrocarbon-basedethyleneproductioncanbereducedslightlyduetothematurityofenergymanagementtechnology,thereductionofelectricityprice,andthedecliningnaphthafeedstockcost.ThecostofthefossilfuelfeedstockroutewithCCSorelectriccrackingwillreachaboutUS$800/t,butthecostcompetitivenessofnaphtha-andlighthydrocarbon-basedrouteswillbeweakenedifScope3emissionsareconsidered.Thecostofthebiomassroutecouldbereducedwiththedevelopmentofbiomasstechnology,buttheconstraintsonfeedstocksandthedemandforelectricitycouldbecomeobstaclestofurthercostreduction.Itisestimatedthatthecostofbiomass-basedethylenewillstillbeclosetoUS$1,600/tin2050.Thedecliningcostofgreenmethanol-basedethylenehasgreatpotential,whichismainlyduetothedecreasingcostofgreenhydrogen.ThematuringofPtXbreakthroughswillalsoleadtocostreduction.Thecostofgreenhydrogen-basedPtXandgreenmethanol-basedMTOroutesisexpectedtodecreasetoaboutUS$1,100/tin2050,whichwillbecompetitivewithfossilenergyroutes.rmi.org/12TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalExhibit7Zero-carbonproductioncostofammonia,methanol,andethyleneunderdifferentgreenhydrogenprices(2050)MethanolAmmoniaGreenhydrogen(US$/kg)Greenhydrogen(US$/kg)rmi.org/13TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalAssumptions:CarbonpriceUS$0/tin2020,US$21/tin2030andUS$43/tin2050;CCScostsUS$56/tin2020,US$36/tin2030andUS$18/tin2050forhighconcentratedCO2capture.EthyleneGreenhydrogen(US$/kg)rmi.org/14TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalCoal+CCSGreenH2PtXBiomassH2pricesensitivityUS$3.2/kgH2US$1.6/kgH2US$0.8/kgH2Exhibit8showsthecarbonabatementcostforeachzero-carbonproductionroutesforammonia,methanol,andethylenein2050.ThecarbonabatementcostofCCSandelectricheatingwillbeaboutUS$32/t.Thecarbonabatementcostofthebiomassroutewillremainhigh.Forthegreenhydrogen-basedroute,thecostvariesgreatlywiththedeliverypriceofgreenhydrogen.Inthisstudy,thecarbonabatementcostiscalculatedatthreegreenhydrogendeliverycostsofUS$3.2/kg,US$1.6/kg,andUS$0.8/kg,respectively.Whenthegreenhydrogencostislowenough,theabatementcostcouldevenbenegative.Inthefuture,whenthecarbonpriceishigherthanthecarbonabatementcost,zero-carbonproductionrouteswillbemoreeconomicalthanconventionalroutes.Emissionsabatementcostforammonia(2050)Exhibit8Carbonabatementcostsfordifferentchemicals(2050)Coal+CCSCoal+greenH2BiomassUS$3.2/kgH2US$1.6/kgH2US$0.8/kgH2GreenH2PtXH2pricesensitivityEmissionsabatementcostformethanol(2050)rmi.org/15TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalEmissionsabatementcostforethylene(2050)Naphtha+CCSGreenmethanolMTOLH+CCSUS$3.2/kgH2US$1.6/kgH2US$0.8/kgH2LH+electriccrackingH2pricesensitivityBio-ethanolGreenH2PtXNaphtha+electriccrackingLHislighthydrocarbonrmi.org/16TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalTheRoadtoZeroCarbon:Timeline,RegionalImplication,andTransitionModelMethodsforzero-carbontransformationofChina’schemicalsindustryincludeindustrialstructureoptimization,energystructurechange(includingfeedstockandfuelswitch),energyconservation,resourcerecycling,andCCUS.Duetothedifferenttechnologyreadiness,costcompetitiveness,anddevelopmentstagesofdifferentmethods,itiscriticaltoestablishanintegratedactionplanthatcombinestheoptimaloptions.Inthezero-carbonscenario,thetransformationofChina’schemicalsindustrywillpresentthefollowingmainfeatures.First,thecurrentproductionmodewithcoalasthedominatingfeedstockandfuelwillgraduallyshifttoonewithmorediversifiedfeedstocksandfuels,andgreenhydrogenwillreplacecoalasthemostimportantfeedstockduetothegradualexpansionofthePtXroute.Second,becausetheexistingassetsbasedonfossilfuelarerelativelyyoung,CCUScouldbeinstalledontheexistingfacilitiesatalargescaleintheshorttomediumterm,whilegreenhydrogen-basedproductionrouteswillbedeployedatscaleinthemediumandlongterm.Third,eveniffossilfuel–basedproductionroutescouldbeequippedwithCCUS,therewillstillbelarge-scalewithdrawalofassetsbasedoncoalandgas,giventheconstraintsofbackwardcapacityphaseoutandemissionscontrol.Exhibits9and10respectivelyshowthetransformationroadmapofChina’schemicalsindustryinthezero-carbonscenario,andthechangesofpenetrationofdifferentroutesinthetransformationprocessofammonia,methanol,andethyleneproduction.Exhibit9TransformationroadmapforChina’schemicalsindustryinthezero-carbonscenariormi.org/17TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalThepathwayofzero-carbonchemicalproductiondependsondecarbonizationtechnologiesandresources,includingzero-carbonelectricity,suitableCCSstoragelocations,andbiomassresources.Throughcomprehensiveanalysisoftechnicalfeasibility,costcompetitiveness,andresourceavailability,zero-carbonchemicalproductioncapacityismorelikelytobeclosetoregionswithbetterzero-carbonresourceconditions.Accordingly,thedistributionofchemicalproductionwilllikelyrelocatefromplacesclosetofossilenergytoplacesclosetozero-carbonresources.Basedonthecomprehensiveanalysisofcurrentcapacitydistribution,existingchemicalbaseplanning,anddistributionofzero-carbonresources,thepotentialgeographicaldistributionofChina’szero-carbonchemicalcapacityinthefuturecouldbeidentified.Takingthedistributionofzero-carbonmethanolasanexample,thefollowingcharacteristicscouldbeidentified:iiTheareaaroundNingxiaNingdongEnergyChemicalBase,InnerMongoliaOrdosCityandShaanxiYulinCityiscollectivelycalledthe“GoldenTriangle”ofenergybecauseitconstitutesageometric“triangle”ingeography.•Inthecoalchemicalsindustryinthe“GoldenTriangle”iiregioninnorthwestChina,coalchemicalplusgreenhydrogen,coalchemicalwithCCS,andgreenhydrogen-basedPtXmethanolproductioncanbesimultaneouslydevelopedduetotheexcellentrenewableresourcesandavailablecarbonstoragelocations.•SouthwestChinaincludingYunnan,Sichuan,andChongqingcouldbecomeatypicalregionforgreenhydrogen-basedPtXmethanolproductionduetoitsadvantagesinhydroresourcesandtherelativelyhighcostofmethanolproductionfromfossilfuels.•Regionslocatedincoastalareaswithsuperiorcoalresources,suchasShandong,havealotofuncertaintyintheirpotentialzero-carbonproductionmode.•Onlyrelativelysmallmethanolcapacityispossibleinprovinceswithabundantbiomassresources.Exhibit10Feedstockstructureofthreemajorchemicalsinthezero-carbonscenario0%10%20%30%40%50%60%70%80%90%100%2020203020402050Feedstockstructureofthreemajorchemicals化石原料化石原料+CCUS零碳原料0%20%40%60%80%100%2020203020402050煤煤+CCS天然气天然气+CCSPtX其他0%20%40%60%80%100%2020203020402050煤煤+CCS煤+绿氢天然气天然气+CCSPtX生物质其他0%20%40%60%80%100%2020203020402050油油+CCS轻烃轻烃+CCSMTOMTO（零碳甲醇）生物质其他CoalCoal+CCSGasGas+CCSPtXOthersCoalCoal+CCSCoal+GreenhydrogenGasGas+CCSPtXBiomassOthersOilOil+CCSLighthydrocarbonLighthydrocarbon+CCSMTOMTO(zero-carbonmethanol)BiomassOthersFossilfeedstockFossilfeedstock+CCUSZero-carbonfeedstockAmmoniaMethanolEthylenermi.org/18TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalExhibit11Typicalzero-carbonmethanolcapacityregionsinChinaandpossiblecapacitytypesThecentralgovernment’splanforelectricityandhydrogentransportationbetweeneasternandwesternareaswillimpactthecapacitylayoutofchemicalsinthefuture.Iflong-distanceinfrastructurecouldensurelarge-volumecheapelectricityorhydrogentransportedfromthewesttoeasterncoasts,theexistingproductioncapacityintheeastcouldleverageabundantrenewableresourcesinthewestandminimizerisksofstrandedequipment.Inaddition,theremaybethreetransitionmodelsofdecarbonizedchemicalproductioninChinainthefuture:(1)large-scaleandcentralizedproductionmodelinthechemicalsindustry;(2)smaller-scaledistributedproductionmodel;and(3)competitionwithimportedchemicalproducts.•InModel1,thetransformationrequiresacombinationofmultipleroutestoformanintegratedsolutionduetolandlimitationsonlarge-scalegreenhydrogenapplications,theintermittencyofon-siterenewable-basedhydrogenproduction,andthelimitationsindistributionandscaleofsuitableCCSsites.•InModel2,thetransformationneedstoconsiderhowtoobtainhydrogenandcarbonelementsinfeedstocksbecausethelocationandscaleofdistributedzero-carbonchemicalproductionaremoreflexibleandareaswithbetterrenewableenergyconditionswillbepreferredchoices.•InModel3,Chinamayalsoturntoimportedchemicalproductsinsteadofdomesticproductionbecausethereisstillacertaingreenpremiumforzero-carbonchemicalproducts.Furthermore,inadditiontopurchasingendproducts,Chinamayalsochooseproductsfromlaterstagesinthevaluechainasfeedstockstoproduceendproductsdomestically,avoidingcarbon-intensiveprocesses.0.51.02.05.0Mt•Greenhydrogen-basedzero-carbonmethanolproductionLow-costzero-carbonpowerPotentiallow-costzero-carbonelectricityCoalbasesTypicalzero-carbonmethanolproductionzones•Existingcoalchemicalswithcarboncaptureandstorage(CCS)•Potentialcoalchemicalscouplingwithgreenhydrogen•Potentialgreenhydrogen-basedzero-carbonmethanolproduction•Competitionbetweendomesticmethanolandimportedmethanol•Large-scalecoalchemicalbasecouplingwithgreenhydrogen•Existingcoalchemicalswithcarboncaptureandstorage(CCS)•Greenhydrogen-basedzero-carbonmethanolproductionMethanoloutputinChina(2017)Richinbiomassresourcesrmi.org/19TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalPolicyRecommendationsSupportinnovationbyleadingplayersincludingstate-ownedenterprises(SOEs),withspecialfocusonresearch,development,anddemonstration(RD&D)ofkeytechnologiesandequipment.Afteryearsofdevelopment,China’schemicalsindustryhasformedfeatureddevelopmentpatternsledbySOEsandbasedonlarge-scaleproductionbases,withlarge-scaletechnology,equipment,andproductioncapacityleadingtheworld.ThegovernmentshouldeffectivelyguideSOEsandleadingprivateparticipants,providingtargetedsupportforkeytechnologiesandequipment,strengtheningcross-sectorsynergies,andeliminatingconcernsabouttherisksofdevelopingcutting-edgetechnologiesbymeansofpolicysupportandfinancialsubsidies.Promotecirculationandefficientutilizationofproductsandforceeliminationofbackwardproductioncapacityonthesupplysidethroughdemandreduction.Atpresent,someendproductsstillhaveproblemswithextensiveandinefficientutilization,buttheimprovementofutilizationefficiencycanreducethedemandforprimarychemicalproducts,achievingemissionsreductions.Intermsofpolicy,standardizedmanagementshouldbeimprovedtoguiderationalcontrolofchemicalconsumptionandalleviatesupplyrisksandpressureofemissionscontrol.Atthesametime,recyclingofchemicalproductsshouldbepromoted.Leveragetheinternationalmarkettodynamicallyadjusttheimportandexportpoliciesoffeedstockswhileensuringsupplychainsecurity.Onthepremiseofsupplychainsecurity,thestructureofimportandexportproductsshouldbeadjusteddynamicallybasedonthecharacteristicsofChina’schemicalsindustryvaluechainandglobalresources.Intheshortterm,attentionshouldbepaidtocarbonreductionwiththeuseandimportoflighthydrocarbonfeedstocks.Inthemediumterm,greenhydrogencouldbeimportedfromcountrieswithabundantrenewables.Inthelongterm,capacityandstructureofprimarychemicalproductscouldbefurtheroptimized.Inaddition,globaltechnologicalexchangesshouldbeactivelypromoted.Advancesupportforcarbonreductiontechnologiestoreducetheircostsandinternalizecarboncostsofconventionalroutesbypolicymethodssuchascarbonmarkets.Encouragingrouteswithlowemissionsandsuppressingrouteswithhighemissionssimultaneouslycouldgraduallyreducethegreenpremiumoflow-carbonandzero-carbonchemicalproduction.Policymethodssuchassubsidiesandtaxcreditscouldencourageadoptionofdisruptivetechnologiessuchasgreenhydrogenwhileacceleratingtheintegrationofpetrochemicalsandchemicalindustriesintothenationalcarbonmarketandintegratingemissionscostsofconventionalroutesintoproductioncosts.rmi.org/20TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalGuidethecoalchemicalsindustrytoproperutilizationofcoal,thatis,usingcoalasafeedstocktoprovidecarbonelements,notasfuelorareactionagenttoproducehydrogen.Policyshouldrationallycontrolthetransformationofthecoalchemicalsindustrytoavoidexcessiveradicalcontrol,usingcoalasafeedstockforchemicalproducts,notasfuel.Effortsshouldbemadetopromoteupgradingheatingsystemsforchemicalplants,especiallyhigh-temperaturereactionequipment,andencouragethedevelopmentofnewenergysources.Inaddition,priorityshouldbegiventocleanhydrogenproductiontoavoidusingcoalasahydrogenproductionreactionagentwhilereplacinggrayhydrogenwithgreenhydrogen.Inthelongrun,Scope3emissionsfromchemicalproductscouldalsobeincludedintheassessment,andzero-carbonproductionroutesshouldbepromotedscientificallyandunderthepremiseofsupplysecurity.Establishindustrystandards,improvethecertificationsystemforzero-carbonproducts,andcultivatethedemandmarketforzero-carbonchemicalproductsbymeanssuchastaxcredits.Industrystandardsandcarbonaccountingandcertificationsystemsforlow-carbonandzero-carbonchemicalproductsshouldbeestablished,encouragingprocurementbygovernmentsatalllevelsandSOEs,andgraduallyexpandingadoption.Inaddition,theconsumptionhabitsoflow-carbonorzero-carbonchemicalproductsshouldbegraduallyadoptedbyindividualconsumersthroughpromotionsbylarge-scalechemicalconsumercompaniesasastartingpoint.Demandforlow-carbonandzero-carbonchemicalproductsaswellasrelatedconsumptionhabitsshouldbeestablishedthroughoutsociety.Promotetheformationofagreenhydrogenwhole-valuechainandintegratetheapplicationofgreenhydrogeninthechemicalsindustryintothegreenhydrogenpolicysystem.Theindustrialapplicationsideandtheproduction,storage,andtransportationofgreenhydrogenwillpromotethecontinuedmaturationofeachother.Greenhydrogenisanecessarystepforchemicalsindustrydecarbonization,andthechemicalsindustryisalsothelargestdownstreamindustryinhydrogenutilizationatpresent.Thehugedemandforhydrogenfromthechemicalsindustryshouldbeleveragedtoalleviatemarketmaturationconcernsformajorplayersinothersegmentssuchashydrogenproduction,storage,andtransportation.Thestructureofthedemandsideshouldbeoptimizedtosynergizeallsegmentsofthehydrogenenergyvaluechain.rmi.org/21TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoalEndnotes1ChinaNationalPetroleum&ChemicalPlanningInstitute,2021.2ResearchonPathsofCarbonPeakingandCarbonNeutralityinChina’sPetrochemicalandChemicalIndustry,ChinaNationalPetroleum&ChemicalPlanningInstitute,2021.3ChinaCCUSAnnualReport,ChineseAcademyofEnvironmentalPlanning,InstituteofRockandSoilMechanics,ChineseAcademyofSciences,TheAdministrativeCenterforChina’sAgenda21,2021.ShuyiLi,PeishanWang,YujunXue,TransformingChina’sChemicalsIndustry:PathwaysandOutlookundertheCarbonNeutralityGoal:ExecutiveSummary,RMI,2022.RMIvaluescollaborationandaimstoacceleratetheenergytransitionthroughsharingknowledgeandinsights.Wethereforeallowinterestedpartiestoreference,share,andciteourworkthroughtheCreativeCommonsCCBY-SA4.0license.https://creativecommons.org/licenses/by-sa/4.0/.AllimagesusedarefromiStock.comunlessotherwisenoted.RMIInnovationCenter22830TwoRiversRoadBasalt,CO81621www.rmi.org©April2022RMI.Allrightsreserved.RockyMountainInstitute®andRMI®areregisteredtrademarks.
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