"China Accelerates towards Carbon Neutrality" Coal Chemical Industry: Carbon emission reduction path for coal chemical industry

In the opening article of our series "China Accelerating towards Carbon Neutrality", we imagined a carbon-neutral world in 2050 dominated by new energy elements such as electric vehicles, hydrogen steelmaking, photovoltaic power generation, and green energy storage. Achieving this vision also means that the world needs to reduce net man-made carbon dioxide emissions by about 45% by 2030 compared with 2010. To achieve "net zero emissions" by 2050. In the face of the dual challenges of target and time, the road to carbon neutral transition needs to be started.

In the opening article of our series "China Accelerating towards Carbon Neutrality", we imagined a carbon-neutral world in 2050 dominated by new energy elements such as electric vehicles, hydrogen steelmaking, photovoltaic power generation, and green energy storage. Achieving this vision also means that the world needs to reduce net man-made carbon dioxide emissions by about 45% by 2030 compared with 2010. To achieve "net zero emissions" by 2050. In the face of the dual challenges of target and time, the road to carbon neutral transition needs to be started. While countries are competing to carry out specific research and implementation work, China also took the lead in proposing the goal of "carbon peak and carbon neutrality" in the general debate of the seventy-fifth session of the United Nations General Assembly. The United Nations Sustainable Development Goal 13 "Climate action" is also one of McKinsey's social responsibility priorities in China. At this key juncture, McKinsey officially launched China's large-scale carbon neutral transition research project in China. With the help of McKinsey's rich experience in global sustainable development research, combined with comprehensive understanding and profound insight into Chinese society, industries and enterprises, Mobilize the knowledge of more than 100 people around the world to carry out research on carbon neutral transition trends, countermeasures and technologies across major industrial sectors, hoping to make a small contribution to China's early achievement of carbon neutrality goals.

As the fourth article in this series, this paper will continue to study carbon neutral transition with coal chemical industry as a sample. Following this, we will publish a series of articles covering high-carbon emission industries such as oil and gas and power, covering many topics such as carbon emission reduction path analysis, emerging technology discussion, investment cost forecast, international practice sharing, and explore the latest trends in traditional carbon emission reduction process innovation, carbon capture, utilization and storage (CCUS), and new carbon emission reduction technologies such as hydrogen energy. In the process of continuing to promote this research, we are very welcome experts from all walks of life colleagues, you can put forward valuable comments in the message area, you can also directly contact the team. We look forward to working with all sectors of society to advance the path of carbon neutral transition in a green China.

Necessity of carbon emission reduction in coal chemical industry in China

The coal chemical industry has long been a major carbon emitter in the coal industry chain, contributing about 10% of China's total carbon emissions in 2015. Due to its resource endowment, China's chemical industry uses more high-carbon coal as feedstock than any other country. Taking synthetic ammonia and methanol as an example, natural gas is the main raw material for synthetic ammonia and methanol in most countries, while about 80% of synthetic ammonia and methanol in China is made from coal (Figure 1), which leads to the carbon intensity of China's coal chemical industry is higher than that of other countries. Coal to hydrogen 1 kg (synthetic ammonia and methanol feedstock gas) will emit about 11 kg of carbon dioxide, if natural gas to hydrogen, carbon emissions will be reduced by half. According to McKinsey's internal analysis, to meet the 1.5C target, the chemical industry needs to reduce carbon emissions by more than 90 per cent by 2050.

In recent years, traditional coal enterprises have transformed to coal chemical industry, and the scale of China's coal chemical industry has grown steadily. Because of the energy structure with Chinese characteristics and economic considerations, coal is difficult to be completely replaced in the chemical industry in the short term, so the clean and efficient use of coal has become a top priority. The coal chemical industry should realize the low-carbon utilization of high-carbon energy, optimize and reduce the demand for downstream products, reduce energy consumption and coal consumption, improve the level of energy electrification, develop clean energy technology, seize the strategic commanding heights of low-carbon technology, and promote the comprehensive transformation and upgrading of industrial structure with scientific and technological progress.

China coal chemical industry carbon emission reduction path

In the coal chemical industry, we focused on the two products that consume the most coal - synthetic ammonia and methanol, which accounted for more than half of the coal consumption in the coal chemical industry in 2019. The carbon emission of synthetic ammonia and methanol comes from the by-product carbon dioxide in the process of hydrogen production from gas and coal combustion. According to our calculation, 1 ton of synthetic ammonia emits about 4.9 tons of carbon dioxide in the whole life cycle (see Figure 2), and 1 ton of methanol produces about 4.4 tons of carbon dioxide.

For the carbon reduction of synthetic ammonia, the decline in terminal demand is the biggest starting point, and it is expected to contribute up to 40% of the carbon dioxide reduction; On the supply side, energy efficiency improvements in production (including carbon reduction through process and operational optimization) contribute about 15%, coal-fired electrification contributes about 30%, and the remaining 5% to 10% of the carbon reduction gap needs to be addressed through emerging technologies such as carbon capture, utilization and storage (CCUS) and green hydrogen.

Methanol has a similar carbon reduction starting point to synthetic ammonia, with energy efficiency improvements and coal-fired electrification reducing carbon emissions by 15% and 20%, respectively. However, due to the extensive use of methanol in construction and chemical industry, the final demand for methanol is expected to continue to grow in the next 30 years, so the larger carbon reduction gap still needs to be solved by emerging technologies. We estimate that in 2050, more than 80% of methanol production will need to use CCUS or green hydrogen to achieve the full carbon reduction requirements of the methanol industry under the 1.5 ° C temperature control path.