Our global team at RAP spends a lot of time working on the deep details of building sector energy policy and regulation, grappling with the next policymaking steps in various places around the world. To calibrate our efforts and to make sure we are on the right track, we find it useful to also keep an eye on the long-term, big-picture view of decarbonisation. This is particularly important in China where energy policy changes rapidly.

China’s building sector is the world’s largest in terms of energy consumption. It is characterised by a vast and diverse building stock. District heating and combined heat and power play major roles in the northern half of the country. Although years of national and provincial efforts have produced some important green building policies, carbon emissions from buildings continue to rise, partly due to increasing demand for heating and cooling as household incomes increase.

China’s national “dual carbon” goals call for an economy-wide emission peak in 2030 and carbon neutrality in 2060. This raises the question of the decarbonisation pathway for the building sector. Here we take a brief look at the broad outlines of a feasible and cost-effective pathway and then discuss potential obstacles that may hinder China’s alignment with this trajectory.  

A Pathway to Building Decarbonisation

The Energy Research Institute of Chinese Academy of Macroeconomic Research, collaborating with international partners, regularly updates scenarios for economy-wide decarbonisation. This China Energy Transformation Outlook (CETO) includes one of the few regularly updated and publicly available decarbonisation pathway analyses for China’s building sector. The CETO scenario that is consistent with China’s dual carbon targets features several key building sector milestones:  

  • The building sector’s final energy demand peaks around 2030, followed by a slight decline from 2030 to 2060.
  • Between 2019 and 2035, direct coal usage in buildings decreases and distributed natural gas consumption remains relatively stable, followed by the complete elimination of both fossil fuels by 2060.
  • Electricity consumption rises from 35% to 64% of building final energy demand between 2019 and 2060, primarily driven by the increased use of heat pumps.
  • District heating covers about 60% of the floor area in China by 2060, up from about 40% in 2020.
  • Electricity consumption in district heating plants increases from zero to 38% between 2021 and 2060, while fossil fuel usage decreases from 82% to 38%.

This decarbonisation pathway is broadly consistent with studies developed for other countries, which also show a heavy emphasis on electrification and energy efficiency. Some things stand out; it envisages a dramatic increase in district heating, which is not typically matched in decarbonisation pathways, as in the United States for example. One of the elements of CETO’s decarbonisation pathway that may evolve in future editions is the significant amount of remaining fossil fuel in district heating in 2060, as this implies substantial use of carbon capture that, in turn, raises significant questions of cost. Overall, however, the CETO pathway — or something directionally similar — makes sense as a way to evaluate and calibrate China’s near-term policy efforts in the building sector.

A tall order for policy: what will it take to get China’s building on the decarbonisation pathway?

China’s 14th five-year plan (2021 to 2025) is somewhat conflicted about major decarbonisation questions. On one hand, the “Green Buildings” component of the national plan includes a statement that urges the use of electricity over fossil gas in buildings. It also has a target to increase the percentage of electricity in building final energy consumption to 55% by 2025, which surpasses the CETO decarbonisation scenario, at least in terms of this variable. For comparison, the building electrification rate was about 45% in 2021.

On the other hand, various national policy documents include language that frames both electric heat pumps and fossil gas as “clean energy” options. Meanwhile, the local infrastructure component of the five-year plans includes targets for the aggressive buildout of urban gas distribution networks and expansion of gas consumption. This is largely part of coal heating replacement but raises questions about how the building sector will decarbonise and the risk of stranded assets, given the long-lived nature of gas infrastructure. The economics of heating, reflected in CETO and other decarbonisation analyses around the world, suggest that it would be best to replace remaining coal heating with efficient electric options and avoid new gas investments. It’s also worth noting that a building sector electrification target is not necessarily a good guiding target as it can be reached in efficient (heat pumps) or inefficient (electric resistance and inefficient cooling) ways.

Fortunately, there are signs of a new approach at the local government level. In November, Beijing Municipality became the first major local government to issue a heating policy that specifically elevates electric heat pumps over gas heating, prohibits new fossil gas heating systems (albeit with some limited exceptions), and sets targets for citywide “new energy” applications (meaning chiefly electric heat pumps) in building heating. As it only calls for 10% of the city’s total heating area to be provided by new energy by 2025, however, even Beijing Municipality’s new policy is likely not in line with the CETO decarbonisation pathway.

What’s next?

The framing of the next Five-Year Plan targets will be crucial in steering China toward a decarbonised future. While national policy statements supporting building electrification and heat pump adoption are already in place, applying more stringent language that elevates heat pumps and electric district heating over natural gas — and prohibits the use of fossil fuels in new buildings — would be big steps forward. In the meantime, bolstering Beijing Municipality’s new approach and expanding it to other provinces and cities can help speed the transformation.

Chinese version is available.