Li Yizhong | Taking Responsibility, Being Pragmatic, and Promoting "Dual Carbon"

The following is a transcript of Li Yizhong's speech:

Respected Dean Zhang, Principal Yang, Chairman Xiao Gang, General Manager Ma, distinguished leaders, experts, teachers, students, and friends,

First of all, congratulations on the successful hosting of the Tsinghua PBC School of Finance "Carbon Neutral Economy" Forum. The two university leaders who spoke earlier gave excellent presentations. I would like to share some thoughts on implementing dual-carbon goals in the industrial sector. I have prepared three questions: First, responsibility and tasks. Second, three adjustments that require significant effort from the industrial sector. Third, I'd like to exchange opinions on a few issues.

I. Achieving carbon peak and carbon neutrality is a weighty responsibility and a formidable task.

Reducing carbon dioxide greenhouse gas emissions and preventing climate change from causing disasters for humanity is a global consensus and action. As early as December 2015, President Xi Jinping, at the UN Climate Change Conference in Paris, responded to the Paris Agreement and proposed my country's Nationally Determined Contribution (NDC) target for peaking carbon emissions by 2030. To be more precise in media reports, this wasn't a recent proposal, but rather one put forward in December 2015. In the six years since, we have made significant efforts and achieved considerable success, but the task remains arduous. Therefore, since September of last year, the General Secretary has repeatedly emphasized and reiterated the carbon peaking target, raising its level and proposing to strive for carbon neutrality before 2060.

1. Where does carbon dioxide come from?Human production and consumption activities, as well as the life processes of humans, animals, and plants, produce large amounts of carbon dioxide. Generally speaking, it's the former—the carbon dioxide produced by human production and consumption activities. The combustion of fossil fuels such as coal, oil, and gas, as well as some biomass energy sources, or their use as raw materials in chemical and biological processes, also release carbon dioxide; this accounts for the vast majority. As for the carbon dioxide released by human and animal life processes, this amount is also considerable. There are no precise national statistics, but it's estimated to be around 1.5 billion to 2 billion tons, though this is inaccurate, it's still a significant quantity. Here's a photo that shows how alarming it is. In fact, this situation still exists today.

2. Data shows that my country's production and consumption activities generated 10 billion tons of carbon dioxide in 2019, although this figure may not be very accurate.Globally, the figure is 33.1 billion tons, with China accounting for 30% of the global total, and an average annual growth rate of approximately 1.5%. Why use 2019 data? Because the 2020 figures are somewhat abnormal due to the impact of the pandemic. This table shows that the United States is second, with a peak of 5.7 billion tons, which it reached at the beginning of this century. In 2019, it reached 4.8 billion tons, a decrease of 29%, indicating it had already peaked and was moving towards a neutral level. The EU and the UK, at the time of the statistics, had 2.9 billion tons, a decrease of 5%. Most EU countries peaked at the end of the last century, and the situation is roughly the same for the other countries, although countries like Japan, India, and Russia are still growing.

my country is a large developing country, consuming 2.36 billion tons of energy, roughly one-quarter of the global total. Coal accounts for a staggering 56.8% of its primary energy mix, a consequence of the country's unique energy structure. Globally, coal accounts for 27.2% of primary energy consumption, while China's 56.8% is double the average. The main reasons for this are: firstly, high carbon dioxide emissions; and secondly, a heavily coal-dependent energy structure. Therefore, China faces a formidable and challenging task in reducing carbon emissions.

3. Carbon reduction and emission reduction mainly involve controlling human production and consumption activities.Carbon dioxide emissions from human and animal life processes are uncontrollable; what can be controlled is the carbon dioxide produced by human production and consumption activities. The most important aspect is reducing the consumption of fossil fuels. In my country, industrial energy consumption accounts for 69% of total social energy consumption. 70% of energy consumption is generated by industry, a characteristic of large developing countries, making it a major source of carbon dioxide emissions. In other sectors, non-industrial sectors, and various industries and daily life, energy consumption, equipment, appliances, and materials are also provided by industry. Ultimately, to achieve dual-carbon goals, energy is the source, and industry is the key.

Second, efforts should be made to reduce carbon emissions by adjusting and optimizing the energy structure, industrial structure, and product structure.

1. Energy Consumption Structure

Here is a table showing the composition of my country's primary energy consumption from 2012 to 2020. Last year, my country's total primary energy consumption was 4.98 billion tons of standard coal equivalent, a year-on-year increase of 2.2%. (Standard coal equivalent is not physical coal; it is converted to 7,000 kcal per kilogram, hence the high conversion rate). As you can see from the table, the leftmost row for coal saw an average annual decrease of 1.3 percentage points over the eight years—quite an achievement. The rightmost row, including non-fossil energy, hydropower, wind power, solar power, nuclear power, and bioenergy, saw an annual increase of 0.7 percentage points over the same period. Non-fossil energy includes nuclear power, but nuclear power is not a renewable energy source, hence the difference between non-fossil energy and renewable energy. The middle two categories—oil and natural gas—showed a steady but slight increase, while natural gas saw a significant increase. This is the trajectory we've taken over the past eight years.

What will the situation be like by 2030? By 2030, we have committed to achieving a 25% share of non-fossil energy, which is the percentage in the rightmost column. This 25% represents a 9.1 percentage point increase from the current 15.9%. What will be reduced by this 9.1 percentage point increase in non-fossil energy? Undoubtedly, the share of coal should decrease by another 10 percentage points. Given the national situation, this will be a challenging but necessary task. If coal consumption doesn't decrease by 10 percentage points, the non-fossil energy share won't increase by 9.1 percentage points, resulting in a combined 100%. As for natural gas, with its high hydrogen content, it depends on the situation. Natural gas power generation uses gas turbines, so its overall energy efficiency is 80.5%. Coal power generation uses steam produced from combustion, and its thermal efficiency is only 45.5%. Therefore, natural gas power generation is much better than coal power generation, and it also reduces carbon dioxide emissions by 55%. Although natural gas is also a fossil fuel, its development should be relatively rapid. As for oil, this is more complex. It remains to be seen whether a steady decline can be achieved by 2030. Here's a photo, it's stunning. Ruicheng County in Shanxi Province boasts a total installed photovoltaic power generation capacity of 1.02 million kilowatts, ranking first in the world. The mountains are covered with photovoltaic power plants; this aerial photo is truly breathtaking.

2. Industrial Structure

How much coal did China consume in 2020? 4.1 billion tons of physical coal. Note that I'm referring to physical coal, not standard coal. Physical coal has a calorific value of approximately 5000 to 5500 kcal. Here's a table showing the breakdown: power generation accounted for 52%, steel for 17%, building materials for 13%, chemicals for 8%, and other uses and residential use for 10%. This is the distribution of the 4.1 billion tons of physical coal burned in our country in a year. Therefore, these industries are definitely key sectors.

The petrochemical industry burns very little coal, but it burns oil, gas, and uses electricity. Oil refining and ethylene production are not the entirety of petrochemicals; I calculated that oil refining and ethylene production consume an estimated 70 million tons of standard oil annually, equivalent to 100 million tons of standard coal. Therefore, the industries listed in the table, plus Mr. Ma's petrochemical sector, should be key areas for carbon reduction and emission reduction, and should be crucial for achieving dual-carbon goals.

What to do? The first measure, as shown in the four photos, is to eliminate outdated production capacity, shutting down small coal-fired power plants immediately. The second, shown in the upper right corner, is to upgrade and replace outdated production with advanced technology and equipment. For example, the "short process" in steelmaking—not refining iron from ore but directly refining steel from scrap steel. The third, shown in the lower left corner, is waste heat recovery from fisheries and rotary kilns in building materials, comprehensively utilizing and recovering waste heat. The fourth, shown in the lower right corner, is fine chemicals—extending the industrial chain to reduce average energy consumption.

The petrochemical industry needs to reduce oil consumption and increase chemical production, meaning it should produce less refined oil products as electric vehicles replace gasoline-powered vehicles. Light rail and high-speed rail will use electric power sources to replace diesel engines, leading to a gradual decrease in refined oil consumption and potentially eliminating refined oil production altogether. Ethylene and chemical industries will also see a reduction in oil consumption and an increase in chemical fuels. Other industries not mentioned above face similar challenges, requiring adjustments to their industrial structure based on specific industry needs.

3. Product Structure

First, we need to improve the use value of products by increasing strength, reducing weight, and extending lifespan, which essentially reduces carbon emissions. For example, the strength of rebar has increased; where 8mm was previously needed, 6mm is now sufficient. Second, we need to improve the energy efficiency of products. Whether in manufacturing or daily life, energy consumption should be high, low-energy, and recyclable throughout its entire life cycle, until it is scrapped and recycled. Third, we need to continuously innovate and replace existing products. For example, actively developing electric vehicles will gradually replace gasoline-powered vehicles.Here is a photo of BYD, our own pure electric vehicle, which now has a range of 500 kilometers.

4. To achieve the above structural adjustments, it is necessary to actively develop new energy sources and simultaneously carry out green and intelligent technological transformation.

First, we need to deepen our efforts in five areas: energy conservation, consumption reduction, quality improvement, carbon reduction, and pollution control. We've been working on these in the past, and we need to deepen them further. Second, we need to focus on digital transformation and upgrading, including precision manufacturing, flexible manufacturing, personalized customization, additive manufacturing, and collaborative manufacturing. We must implement policies tailored to each industry. Discrete and process manufacturing are very different, and each industry is unique. We need to implement policies tailored to each industry and summarize the experiences from pilot projects to promote them across the industry. The Ministry of Industry and Information Technology is currently conducting pilot demonstrations of intelligent manufacturing, focusing on industry-specific examples. Here's a photo of the control room at Zhenhai Refining & Chemical Co., Ltd., which is a pilot project overseen by the Ministry of Industry and Information Technology. This is my second point: three adjustments and three structures.

III. Dialectical analysis, accurate understanding, comprehensive planning, and steady progress

1. Clarify the meaning of carbon peaking and carbon neutrality.

my country is still in the late stage of industrialization, and energy consumption will continue to increase for some time. We are still developing and have not yet achieved industrialization. The United States industrialized in 1955, Germany in 1965, Japan in 1972, and South Korea in 1995. We will not be able to basically achieve industrialization until 2035, so we are still in the late stage of industrialization. Therefore, our total energy consumption will continue to increase for some time.

Carbon dioxide emissions are still increasing, but we need to reduce this rate of increase as quickly as possible, bringing it close to zero, and gradually decreasing it after reaching its peak. The goal is to reach carbon peaking before 2030. Reaching peaking doesn't mean pushing up the peak value; if emissions continue to increase before 2030, that would be pushing it up. The aim is to lower the peak value, which will reduce the pressure on carbon neutrality. As Dean Zhang mentioned, developed countries typically have 50 years, or even longer, between reaching carbon peaking and achieving carbon neutrality. The US reached its peak at the beginning of this century, and some Western European countries reached their peak at the end of the last century. They will achieve carbon neutrality by 2050, giving them 50-60 years. We, on the other hand, only have 30 years to reach peaking in 2030 and neutralization in 2060, making it much more challenging.

Even after carbon emissions peak, we still need to continue reducing carbon dioxide emissions and capture and reuse some of it, converting and fixing it into other forms of matter. This, combined with the carbon dioxide emissions from humans and animals I mentioned earlier, is something we can't completely eliminate. Both of these emissions combined can be absorbed by ecological carbon sinks, leading to near-zero emissions – this is the meaning of carbon neutrality. Carbon neutrality doesn't mean no emissions, but rather a reduction in the amount emitted, so that the total emissions, including those from animals and plants, can be absorbed by ecological carbon sinks. Therefore, it's crucial to understand the industry's situation.

2. While accelerating the development of non-fossil energy, we must still pay attention to the rational development and scientific utilization of fossil energy.

I believe carbon neutrality does not mean the extinction of fossil fuels. For a considerable period, fossil and non-fossil fuels will coexist; the key is to accelerate the formation of an energy structure dominated by non-fossil fuels. As mentioned earlier, non-fossil fuels currently account for only 15.9% of our energy mix. Achieving this dominance will be a long and arduous process. In 2020, my country's crude oil import dependence reached 73.5%, up from 72.6% in 2019 to 73.5% in 2020, an increase of one percentage point. Natural gas is slightly better at 42%. Oil security is crucial to energy security and national security. We must focus on the intensive development of domestic oil and gas fields and coal mines, and also launch a new round of oil and mineral exploration. Here's a photo: Is there oil in the Bohai Sea? For many years, development efforts were considered unlikely. However, in the last 10 years, technological advancements and investment have led to the discovery of a considerable oil and gas field, the Kenli 6-1 field in the Laizhou Bay of the Bohai Sea. Simultaneously, we must fully utilize both domestic and international markets and resources, seeking cooperation and mutual benefit to acquire more oil and gas resources.

The 14th Five-Year Plan put forward new binding targets. I don't know if everyone has noticed, but it is necessary to maintain my country's comprehensive energy production capacity of more than 4.6 billion tons of standard coal, which means that our own energy production capacity cannot be less than 4.6 billion tons of standard coal, in line with the pattern of domestic circulation as the mainstay.

We must pay special attention to the clean, efficient and safe use of fossil energy, such as the improvement of clean coal and coal chemical industry, the improvement of oil quality, and the reduction of coal power consumption per unit. These are all important aspects of emission reduction and carbon reduction.

3. Various energy sources must be matched together.

In my country, power generation sources and electricity markets are geographically distant, with the four municipalities and seven major provinces in central and eastern China serving as external power receiving areas. Beijing relies on external supplies for 57% of its electricity, and Shanghai for 45%. Therefore, it is crucial to accelerate the construction of ultra-high-voltage and extra-high-voltage power transmission lines, increase the "West-to-East Power Transmission" program, and reduce the curtailment of hydropower, wind power, and solar power.

Here's a photo of an ultra-high-voltage power transmission line, running from Shanghai Temple in Inner Mongolia to Linyi in Shandong. Shanghai Temple is the name of a power station in Inner Mongolia, not Shanghai; it refers to the line from Shanghai Temple in Inner Mongolia to Linyi in Shandong.

The high proportion of non-fossil energy generation connected to the grid poses a challenge to the stability of the power system, thus necessitating the construction of a smart grid. Last year, my country's total power generation was 7.6 trillion kilowatt-hours, of which non-fossil energy accounted for 32.1%, or one-third, and this figure is projected to reach half by 2030. As mentioned earlier, nuclear power is relatively stable among non-fossil energy sources, though its proportion is not large. Hydropower is also relatively stable, but it experiences seasonal variations due to wind and water. Wind and solar power generation are intermittent due to climate fluctuations. Therefore, it is crucial to vigorously promote the "energy storage + new energy" model to mitigate the intermittency of wind and solar power and the seasonal variations of hydropower. It is important to recognize that thermal power still plays a supporting and "safety net" role; therefore, thermal power cannot be eliminated and must continue to serve as a safety net.

4. Strengthen basic research, policy studies, and scientific and technological breakthroughs.

To accurately identify carbon sources and understand carbon footprints, we need to investigate the exact amount of carbon dioxide emitted by each sector, industry, region, enterprise, and workshop. Frankly, the exact figure isn't entirely clear right now; 10 billion tons is just a rough estimate. First, we must clarify carbon sources and understand carbon footprints, including direct emissions from coal burning and indirect emissions from electricity consumption. Only then can we fully implement accountability. The central government's warning against blindly implementing "campaign-style" approaches is very important.

The carbon trading market is being launched, but how are the carbon dioxide allowances for participating companies determined? Can they decide for themselves? You need to have a third party assess them. How are allowances issued, how are they assessed annually, and how is the carbon pricing mechanism established? There need to be clear rules, and these rules need continuous improvement. As for carbon taxes, they should be introduced in a timely and steady manner, but it's crucial to balance carbon reduction and emission reduction with stable economic growth. It can't be too hasty, too high, or too fast; the impact on stable economic development must be considered.

As for carbon dioxide capture, storage, and utilization (CCUS), it's still under research and industrialization. Carbon dioxide can be used as a raw material; for example, carbon dioxide + hydrogen can produce methanol. Here's a photo of a project the Chinese Academy of Sciences is researching. The left side shows their catalyst, and the right side shows their laboratory, but it hasn't been industrialized yet and requires further research. Another approach is to mineralize carbon dioxide to form carbonates, fixing the carbon dioxide in the salt. These are all areas under research and development. Regarding ecological carbon sinks, how do they differ across regions and tree species? We see that every cubic meter of forest stock can absorb 1.83 tons of carbon dioxide. However, every cubic meter of existing forest stock can absorb 0.3 to 0.6 tons of carbon dioxide per year (because of different tree species). But this varies greatly depending on the region and tree species, and all of this needs further research. How do carbon sinks in grasslands, oceans, soil, and deserts function? Carbon dioxide produced by the life processes of plants and animals should also be included in carbon neutrality. This figure (i.e., based on the national population of 1.4 billion, 400 million pigs, 200 million sheep, 100 million cattle, plus other small animals) is estimated to be 1.5 billion to 2 billion tons per year. This number will not change, but the exact amount is unclear.

Therefore, carbon neutrality is a vast and complex system that requires enormous investment. Dean Zhang just mentioned several staggering figures. This necessitates strengthened inter-departmental collaboration; one department alone cannot achieve the goal, but rather a coordinated effort among related departments. I mentioned the importance of industry, but industry alone is insufficient. It requires the joint efforts of other relevant sectors, including finance, and indeed the entire society. Furthermore, it necessitates in-depth international exchange and cooperation—both multilateral and bilateral—to achieve this common goal for humanity.