context: Higher standards and stricter requirements for energy conservation and carbon reduction efforts have been been at the center of decarbonisation discussions, however efforts have been met by mixed results and compliance gaps. This latest plan escalates enforcement mechanisms by tying retrofit failures to mandatory shut downs and market-based penalties, with the aim of addressing the energy-intensive sectors at the root of national emissions.
Five central government departments including the NDRC (National Development and Reform Commission) have launched a three-year campaign for energy conservation and carbon retrofits in key industries.
The notice on launching the three-year campaign for energy conservation and carbon reduction retrofits in key industries states that starting 2026, the PRC will implement upgrades across nine major energy-intensive sectors, including steel, electrolytic aluminum, cement and coal power. The initiative aims to maximise improvements in energy and carbon efficiency in support of carbon peak and carbon neutrality coals.
According to the action plan, by the end of 2028, the percentage output coming from energy-efficient facilities is expected to rise by an average of 20 percentage points across key industrial sectors such as steel, electrolytic aluminum, cement and flat glass.
For the coal power sector, the target is a 15 percentage point increase. Capacity operating below the baseline energy efficiency standard will be virtually phased out.
Fewer than 30 percent of facilities in steel, aluminum, cement clinker and flat glass meet the energy efficiency benchmark, while over 10 percent remain below the baseline.
During the three-year period, factories that fail to meet energy standards will be charged higher electricity rates—up to ¥0.1 more per kWh on top of market prices. Proceeds fund grid stability (storage, peak-shaving) for renewables, while pressuring non-compliant plants to upgrade or shut down.
The campaign is projected to cumulatively save over 100 million tonnes of standard coal equivalent and reduce carbon dioxide emissions by more than 200 million tonnes.
The notice deploys retrofit tasks across three dimensions
- technology upgrades
- promotes advanced industrial equipment such as such as high-efficiency blast furnace smelting and oxygen-enriched kilns, driving demand for green investment and related industrial supply chains
- process transformations
- targets core facilities like blast furnaces, converters and glass kilns, while pushing coal power units to enhance flexible regulation capabilitie
- energy consumption greening
- mandates greener energy use, requiring
- electrolytic aluminum to phase out inefficient captive coal units
- cement to substitute raw materials and fuels
- large coal-power plants (≥300 MW) to pursue low-carbon retrofits—coupling with renewables, co-firing biomass, and adding storage—to cut emissions per kWh by 10–20 percent, aiming for over 20 percent
- mandates greener energy use, requiring
Policies have been rolled out to ensure effective implementation
- alongside relevant authorities, NDRC is increasing central government investment support, offering subsidies of up to 20 percent of total project investment for eligible initiatives
- intensified regulatory oversight
- any production capacity that still fails to meet energy efficiency standards by the end of 2028 will be shut down in accordance with regulations.
Despite the plan, several acute challenges persist, according to Pan Helin 盘和林 Ministry of Industry and Information Technology Information and Communication Economics expert committee member
- significant bottlenecks in carbon reduction technology keep costs high
- retrofitting legacy equipment is difficult
- the steel sector still relies heavily on small and medium-sized blast furnaces
- weak cross-industry collaboration keeps resource recovery rates stagnant, particular for waste heat