Wood Mackenzie’s latest analysis shows over US$5 trillion of investments would be needed for China to reach its pathway for carbon-neutrality by 2060.

The hefty bill is the total sum required for additional power generation capacity to accommodate the growth in electrification by 2050.

Wood Mackenzie Asia Pacific Head of Markets and Transitions, Prakash Sharma, said: “It is definitely a colossal task for a country using 90% hydrocarbons in its energy mix and annually producing more than 10 billion tonnes of CO2-e, and in addition, accounting for 28% of global total emissions.

“In our Accelerated Energy Transition (AET-2) scenario, China’s emissions peak immediately and enter a period of rapid decline, reaching net-zero slightly after 2050. This is achieved by widescale electrification of transport, heating and industry as well as deployment of carbon capture use and storage (CCUS).”

For China to reach its goal, Wood Mackenzie estimates solar, wind and storage capacities will have to increase 11 times to 5,040 gigawatts (GW) by 2050 compared to 2020 levels. Coal-fired power capacity halves while gas ends at the same level as in 2019. Total power output expands nearly 2.5 times to 18,835 terawatt-hour (TWh) by 2050 compared to current levels.

Sharma said: “The most challenging part of the shift is not the investment or magnitude of renewable capacity additions but the social transition that comes with it. Halving coal capacity will result in loss of coal mining jobs, affecting provinces that depend on its revenues and employment generation.

“We expect the government to retrofit coal-fired power plants with CCS to retain coal mining activity in key provinces. This approach aligns with China’s strategy to optimise domestic coal resources to improve energy security.”

One major hurdle to China’s carbon-neutral goal is the lack of scalable low-carbon alternatives in the transport and industrial sectors. Last year, China’s carbon emissions from these two sectors reached 5.7 billion tonnes, roughly as large as the total emissions in the US and the UK combined.

As a result, these sectors will require government subsidies and/or carbon pricing to decarbonise. In the AET-2 scenario, Wood Mackenzie expects China’s carbon price support to reach US$109 per tonne by 2030. China is expected to become a centre of energy innovation to decarbonise difficult sectors.

Under the scenario, China’s road transport must be fully electrified. Total new stock of electric vehicles would hit 325 million units by 2050, compared to 4 million units today. As a result, oil demand collapses, falling below 7 million barrels per day by 2050, coming primarily from petrochemicals or the export of refined products.

The industry sub-sectors such as steel, cement, refining and chemicals, would require hydrogen and CCS as mainstream fuel and feedstock supply options to tackle emissions. Hence hydrogen production could grow five-fold to approximately 150 million tonnes by 2050, equally distributed between green hydrogen (electricity-based) and blue hydrogen (coal- or gas-based, paired with CCS).

Sharma said: “Given China’s large heavy industry and machinery sector, it is crucial that China masters the use of CCS and forest sinks to offset the remaining emissions. Without it, China’s pledge to become carbon-neutral is nearly impossible.”

KeyFacts Energy Industry Directory: Wood Mackenzie