China’s drive to reduce carbon emissions is set to lower its crude imports and favour vessels with better fuel efficiency, according to a senior analyst.
In the next official five-year plan due in 2021, the government is expected to require oil refineries to control their carbon footprint.
The new policy will probably translate into slower growth in Chinese refinery throughout and crude imports, Braemar ACM’s east of Suez tanker research head Anoop Singh said.
With the unabated growth of crude imports, China has been the most important demand driver for the tanker market since the early 2000s.
“[The development] is of course material for oil tanker demand growth overall,” Singh said in a note. “More relevant to carbon costs, though, is that we also expect refiners to want to lower emissions across their own supply chains.
“That will throw up opportunities for the most fuel-efficient tonnage to secure preferential employment.”
Climate target
Officially, China — the world’s largest greenhouse gas emitter — has pledged to peak CO2 emissions by 2030 and achieve carbon neutrality by 2060.
To meet the near-term target, the proportion of oil in the national energy mix will need to fall from 18% this year to 16.7% in 2030, a Tsinghua University study has found.
With China’s emissions already reaching 9.8bn tonnes last year, Singh said the country will “very likely” set an annual cap of 10.5bn tonnes from 2021.
The Ministry of Ecology and Environment has reportedly released a consultation plan for a national emissions trading scheme (ETS), which is expected to cover major polluters in the oil and steel sectors, among others.
China has been operating pilot schemes for emissions trading since 2013, but their effects have been limited due to their small scale.
Under the national scheme, entities would be able to offset up to 5% of their emissions by operating renewable-energy and methane-recovery projects and carbon sinks, Argus Media reported.
The ministry has yet to provide a timeline for the national ETS.
Cap-and-trade requirements are likely to apply to entities with annual emissions exceeding 26,000 tonnes of CO2 equivalent, Singh said. A 300,000-barrel-per-day refinery can have emissions of between 800,000 and 4.2m tonnes of CO2 equivalent per annum.
“We expect that the Chinese refiners will be required to cap and trade their emissions within the duration of the next five-year plan,” Singh said.
