By Jin Wu and Karoline Kan
(Bloomberg) — For the full experience visit: The Chinese
Companies Polluting the World More Than Entire Nations
The world’s top five polluters were responsible for 60% of
global emissions in 2019. China alone generated about the same
amount of CO2 as the next four countries combined. And its
carbon output is still rising every year.
China’s emissions are so vast that its biggest companies,
few of which are household names, create more pollution than
entire nations. China Baowu, the world’s top steelmaker, put
more CO2 into the atmosphere last year than Pakistan.
Take state-owned oil giant Sinopec Group. One of its
subsidiaries, China Petroleum & Chemical, contributed more to
global warming last year than Canada, itself an emissions
heavyweight with the 11th-most CO2 among nations.
China’s biggest companies have more sway over warming
temperatures than most countries. Yet little is known about the
emissions from these state-run giants. Until now.
Curbing China’s output of greenhouse gas will do more than
almost anything else at this point to decide the fate of the
planet. That primacy comes from being, by far, the world’s top
source of new emissions. But few outside of the Chinese
government can examine the true drivers of this crucial planet-
warming pollution: dozens of gigantic state-run companies.
As world leaders and diplomats head to Glasgow, Scotland,
to discuss how to keep rising temperatures in check,
understanding the role of China’s industrial titans has never
been more important. These companies won’t be party to United
Nations-backed negotiations. Yet no deal will be effective in
practice without their strong cooperation.
China’s companies drove the country’s greenhouse gas
emissions above those of all developed nations combined in 2019,
according to a study by Rhodium Group. To deliver on President
Xi Jinping’s promise to zero out emissions by 2060, these same
companies will have to shift away from dirty energy, embrace new
technologies and change the way they operate.
“Emissions of numerous state-owned enterprises in the
power, steel, cement, oil refining, and other major emitting
sectors are equal to those of entire nations,” says Lauri
Myllyvirta, an analyst with the Centre for Research on Energy
and Clean Air who produced the estimates used in this project.
“Once these enterprises align their investments and business
plans with the emissions-neutrality target, they can make an
enormous contribution, if they choose to.”
To measure the task ahead, CREA, a Finland-based
environmental research group, focused on some of the largest
emitters in China’s most-polluting sectors. Companies were
chosen based on the availability of public data showing metrics
such as coal use and manufacturing capacity, drawn from
financial statements of listed units and corporate
sustainability reports.
All the estimates include emissions from company operations
and electricity use. In sectors where significant greenhouse
gases are generated along the supply chain, CREA added those
estimates as well. Doing so takes into account the steel used to
build cars and the gasoline required to power them, as well as
emissions from burning oil products and steel or cement used in
construction.
In some cases these emissions overlap, as when Petrochina
Co.’s gasoline fuels cars built by SAIC Motor Corp. Experts
argue that holding both companies accountable for the same
gallon of gasoline raises the chance that those emissions will
be eliminated, whether at the source or by the end user. None of
the companies responded to questions about their emissions.
In some sectors, companies do publish data about their
emissions, though there’s little detail on how those
calculations are made.
China says it will soon release a detailed road map for
reaching peak emissions by the end of the decade. Meanwhile
government agencies and state-owned companies have announced
plans that signal a much faster buildout of clean power and
energy storage than official targets suggest. Still, China won’t
promise to start reducing coal use until 2026, and is trying to
boost output by 100 million tons by the end of the year to ease
power shortages.
While Xi announced in September that China will stop
building coal plants overseas, Beijing has pushed back against
international demands to stop using the dirtiest fossil fuel at
home. Officials argue that its current goal will be the most
ambitious emissions reduction ever attempted. They also point
out that developed countries, which are responsible for the bulk
of the greenhouse gases that have accumulated in the atmosphere,
are also struggling to meet their own climate targets.
But China is in a category by itself today. CREA estimates
that the country generated greenhouse gases equivalent to more
than 13 billion tons of CO₂ in 2019, mostly from manufacturing
and construction. The top emitter of all time, the U.S., has
curbed emissions to produce just about half of that, 6.6 billion
tons, according to the country’s Environmental Protection
Agency.
There are several factors in China’s favor as it works to
decarbonize. Solar and wind power are now often cheaper than
fossil fuels. Electric vehicle and battery technology has
matured, and China is a leader in both. Investment in green
technologies such as hydrogen and carbon capture is at an all-
time high, increasing the likelihood of deployment on a large
scale.
“Emissions have been increasing much faster in 2021,
instead of slowing down,” says Myllyvirta. This suggests that
China expects other countries to make up for a slower start in
its own emissions reduction. But, he says “there is hope that
emissions could turn around fast, if energy policy and economic
policy pull in the same direction.”
China’s biggest task is to green its electricity sector.
That means shutting down thousands of coal-fired power plants
and dramatically increasing clean energy. The nation already
leads the world in renewables and just kicked off a massive 100
gigawatt project in the desert that will be bigger than all the
wind and solar installed in India today.
Known as the Big Five, China’s top utilities—Huaneng Group
Co., Huadian Corp., China Energy Investment Corp., State Power
Investment Corp, and Datang Co.—are some of the world’s largest
polluters.
The parent corporations aren’t listed. However, all five
companies have public units that report figures for coal
consumption and thermal power generation. In 2020, emissions
from those operations alone added up to 960 million tons of CO₂,
more than double that of Russia’s entire coal fleet.
The Big Five have pledged to reach peak emissions by 2025,
but power demand is still increasing and coal has been promoted
by government officials as a way to maintain energy
security—especially as the world grapples with a shortage
heading into winter. In the first half of this year, state-owned
firms proposed 43 new coal-fired generators and construction
began on 15GW of new coal-power capacity.
More than a fifth of China’s coal is burned by the steel
industry. Emissions from the sector soared more than 40% from
2010 to 2020, even as the average energy use per ton of steel
has fallen.
The industry has pledged to cut emissions by 30% from its
peak by the end of the decade, in part by replacing hundreds of
millions of tons of aging capacity with newer and cleaner
equipment. But the initiative risks extending the use of blast
furnace technology and locking the sector into further coal
dependency.
Beijing’s other tool is to cap steel output. The government
wants this year’s production to be below that of 2020.
Manufacturing surged to an all-time high in the first half,
meaning there needs to be an 11% year-on-year drop in the final
six months.
Companies are testing new technologies that could help cut
emissions. Baowu is piloting the use of microwaves during the
sintering process to replace coal. It also plans to build a 1-
million-ton furnace that will use hydrogen generated from
renewable energy. HBIS Group and Jianlong Group, two other major
steel producers, are also starting to dabble in hydrogen, even
though it’s still five times more expensive than traditional
methods.
“China does have a good foundation for scaling large-scale
deployment of green hydrogen,” says Wu Changhua, senior
researcher at Beijing-based think tank Center for China and
Globalization. Green steel is expected to grow faster than the
government originally envisioned, she says, and starting to
generate hydrogen from fossil fuels could help accelerate the
shift to 100% carbon-free hydrogen.
China is constructing skyscrapers and shopping malls at
breakneck speed as its cities boom. Putting up new buildings was
responsible for about 4 billion tons of CO₂ in 2019, according
to CREA’s estimates, with 95% of that coming from the production
of materials such as steel and cement.
And that doesn’t include the emissions from running the
buildings. Existing properties generate 2.1 billion tons of CO₂
a year, according to the Chinese Society for Urban Studies,
mainly from electricity use, heating, and cooling.
A government clampdown on debt-fueled real estate
companies, including China Evergrande Group, could help cut
those emissions. But it’s also a major risk to China’s economy
and threatens to create a wave of defaults if it isn’t properly
managed.
Decarbonizing the sector will also come down to finding
greener materials. Cement production is one of the worst-
polluting sectors in China because the plants are coal fueled
and energy intensive.
One solution is to capture carbon and store it away. Anhui
Conch Group Co., China’s No. 2 cement maker, has invested 60
million yuan to separate and purify 50,000 tons of CO₂ at one of
its plants. China National Building Material Group Co. , the
nation’s biggest materials producer, says it’s making an effort
to replace coal with solar and biomass and upgrade its furnaces
to improve combustion efficiency.
China’s oil giants in some ways have a more complicated
task than their power and steel brethren. While those firms
produce the vast majority of their emissions at on-site
generators or mills, most oil and gas emissions happen far away
from the source, at car tailpipes or gas stovetops.
Sinopec Group, the country’s largest oil refiner, and China
National Petroleum Corp., the largest oil and gas producer, both
aim to reach peak emissions by 2025 and net-zero by midcentury.
According to their own reports, PetroChina—the listed arm of
CNPC—emitted 167.4 million tons of CO₂ in 2020, while its
Sinopec counterpart—called China Petroleum & Chemical
Corp.—added 171 million tons.
Those targets don’t cover emissions from the burning of
their products. Adding them brings emissions to 881 million tons
for PetroChina and 733 million tons for Sinopec, according to
CREA. To cut those so-called Scope 3 emissions, “China’s oil
companies will also have to develop new business opportunities
that help them shift away from fossil fuels,” says BloombergNEF
analyst Luxi Hong. But that will be difficult if the government
maintains a “mandate of maintaining and growing the core oil and
gas business.”
Between now and 2025, operations will start at 10 mega-
refining projects able to process more than 200 million tons of
crude a year. By the middle of the decade the country’s total
refining capacity is set to grow to 1 billion tons a year.
One saving grace is that as the world moves toward electric
transportation, refiners are shifting their businesses away from
fuel and toward chemicals, which make everyday products from
washing powder to plastics. At least with those goods, some of
oil’s carbon stays trapped in polymer chains instead of wafting
into the atmosphere after being burned.
More than half of China’s oil is used for transportation.
So far the government has focused on shrinking those emissions
by boosting a nationwide electric vehicle fleet that’s already
by far the biggest in the world. Planners want one in every five
new cars sold to be a new EV by 2025, up from 5% now. Combined
with ever-greener power generation, that’s the best bet to
reduce carbon while still moving people and goods around.
Still, just putting automobiles together in massive,
energy-hungry factories carries a heavy toll on the environment.
SAIC Motor Corp, the country’s biggest manufacturer, generated
98 million tons of CO₂ from its operations, electricity use, and
steel production in 2020, according to CREA’s calculations.
Adding the emissions from driving all the vehicles the company
has sold so far brings it to 158 million tons.
Passenger vehicles are relatively easy to electrify, but
answers are harder to come by for heavier equipment like trucks,
trains, airplanes, and ships, all of which are growing rapidly.
Possible solutions, such as hydrogen and ammonia, are far from
being economically viable.
Feeding the world’s biggest population generates a lot of
greenhouse gas. According to researchers from China’s Ministry
of Agriculture and Rural Affairs, energy use has surpassed
fertilizers to become the biggest source of CO₂ emissions from
the sector as processes become more mechanized. In 2019 the
industry’s energy consumption was responsible for 188 million
tons of CO₂ emissions, according to CREA.
And that’s not even counting the methane produced by
China’s pigs and cows. The superpotent greenhouse gas traps 80
times more heat than CO₂ in its first two decades in the
atmosphere. In 2020, China reared more than two-thirds of the
pigs raised for meat consumption worldwide.
The top five pig-breeding companies in China together
raised 48.6 million pigs that produced 14 million tons of CO₂
equivalent, according to CREA. That was only a tenth of China’s
national herd, which is set to grow as incomes rise and
citizens—already the top pork consumers in the world—add more
meat to their diets.
“The land use sector, including agriculture, has been long
neglected,” says Li Shuo, an analyst with Greenpeace East Asia.
“If China is serious about carbon neutrality, it can’t afford to
turn its head away from this sizable source of emissions. As the
to-do list for the power and transportation sectors become
clear, the land sector needs to play some urgent catch-up.”
–With assistance from Adrian Leung and Elaine To.
To contact the authors of this story:
Jin Wu in Hong Kong at jwu1006@bloomberg.net
Karoline Kan in Beijing at ckan31@bloomberg.net
To contact the editor responsible for this story:
Sharon Chen at schen462@bloomberg.net
Dan Murtaugh
Jane Pong