Decarbonization in China Trends and Forecast
The future of the decarbonization market in China looks promising with opportunities in the oil & gas, energy & utility, agriculture, government, automotive & transportation, aerospace & defense, and manufacturing markets. The global decarbonization market is expected to grow with a CAGR of 11.8% from 2025 to 2031. The decarbonization market in China is also forecasted to witness strong growth over the forecast period. The major drivers for this market are the increasing investment in decarbonization technologies to reduce costs associated with carbon emissions, the growing awareness of the effects of climate change, and the stricter emissions standards across the world.
• Lucintel forecasts that, within the services category, the sustainable transportation service segment will remain the largest segment over the forecast period.
• Within the end use category, oil & gas will remain the largest segment.
Emerging Trends in the Decarbonization Market in China
China is rapidly transforming its energy and industrial sectors to align with its national goal of carbon neutrality by 2060. This ambitious target is reshaping the landscape of the decarbonization market, driven by strong policy mandates, green technology innovation, and global environmental commitments. The government is encouraging industries to transition to low-carbon models while investing in advanced energy systems. These emerging trends reflect a multi-sectoral shift that includes renewable energy, electric mobility, green hydrogen, digitalization of energy systems, and carbon capture technologies.
• Expansion of Renewable Energy Deployment: China is aggressively expanding its solar, wind, and hydro energy capacities to reduce its reliance on coal-based power. The country has become the world leader in renewable energy investments, with provinces prioritizing clean energy projects for both grid and distributed power generation. This surge in renewables is enabling local governments to meet emissions targets while powering industrial and urban regions more sustainably. The trend supports domestic green job creation, stimulates clean tech manufacturing, and reduces emissions intensity, which is critical to achieving the national decarbonization roadmap.
• Acceleration of Electric Vehicle Adoption: The electric vehicle market in China is expanding due to a combination of consumer incentives, infrastructure development, and manufacturing innovation. As the largest EV market globally, China is driving mass adoption through subsidies, widespread charging networks, and technology partnerships. EVs play a central role in decarbonizing the transport sector, which is a significant source of urban pollution. This trend reduces oil dependency, strengthens the domestic auto industry, and enhances energy efficiency while aligning with urban sustainability goals and climate commitments.
• Investment in Green Hydrogen Technologies: China is investing in green hydrogen as a strategic energy vector for decarbonizing heavy industries such as steel, cement, and chemicals. Pilot projects across various provinces are testing hydrogen fuel in transportation and industrial processes. These initiatives are supported by government policy and partnerships with state-owned enterprises. Green hydrogen offers a scalable solution to decarbonize sectors that cannot easily electrify, making it a key pillar in China’s broader energy transition strategy. The development of hydrogen ecosystems is expected to foster new markets and innovation-driven industrial growth.
• Deployment of Smart Energy Infrastructure: Digitalization is transforming energy systems in China through the adoption of smart grids, intelligent metering, and AI-driven demand management. These technologies optimize electricity usage, integrate renewable energy sources more effectively, and support the operation of decentralized power networks. This trend is enhancing system resilience, reducing energy waste, and enabling a more efficient allocation of resources. Smart energy infrastructure also empowers consumers and utilities to monitor and manage emissions, contributing to the broader goal of a low-carbon economy.
• Advancement of Carbon Capture Utilization and Storage (CCUS): China is increasing its focus on carbon capture, utilization, and storage technologies to address emissions from coal and industrial plants. Government-supported pilot projects are under development, particularly in energy-intensive regions. CCUS is emerging as a transitional technology that enables ongoing industrial activity while minimizing environmental impact. This approach is critical for sectors where carbon emissions are otherwise unavoidable. By advancing CCUS, China is preserving industrial competitiveness and positioning itself as a global technology leader in emissions management.
These emerging trends are reshaping the decarbonization market in China by stimulating technology adoption, attracting investment, and aligning industrial strategies with environmental goals. From renewables to smart infrastructure and CCUS, each trend contributes to building a resilient, low-carbon economy. The combined effect is not only a significant reduction in national emissions but also the creation of new economic opportunities across energy, transport, and industrial sectors. China’s proactive approach is setting the pace for global decarbonization efforts.
Recent Developments in the Decarbonization Market in China
China is intensifying its decarbonization efforts to meet its dual carbon goals of peaking emissions by 2030 and achieving carbon neutrality by 2060. Recent policy initiatives, technological advancements, and market reforms are accelerating the country transition toward a low-carbon economy. Key developments include expanding the national carbon trading market, implementing comprehensive energy conservation plans, standardizing carbon management practices, rapidly scaling up renewable energy capacity, and enhancing emissions reporting in heavy industries. These measures are reshaping China decarbonization landscape, fostering innovation, and positioning the country as a global leader in sustainable development.
• Expansion of the National Carbon Trading Market: China has announced plans to extend its national carbon trading market to include the steel, cement, and aluminium industries, adding approximately 1,500 firms to the scheme. This expansion will increase the total carbon dioxide volume managed by the trading system to 8 billion metric tons, covering over 60% of the country emissions. The initiative aims to create a market-driven mechanism encouraging heavy industries to adopt low-carbon technologies and phase out obsolete, polluting facilities. By integrating these sectors, China is enhancing the effectiveness of its emissions trading scheme and promoting industrial decarbonization.
• Implementation of the 2024-2025 Energy Conservation and Carbon Reduction Action Plan: China State Council has released an action plan targeting a reduction in energy consumption per unit of GDP by approximately 2.5% and carbon dioxide emissions per unit of GDP by about 3.9% in 2024. The plan emphasizes energy-saving and carbon-reduction transformations in key sectors, aiming to reduce carbon dioxide emissions by around 130 million tons annually during 2024 and 2025. Measures include controlling fossil fuel consumption, optimizing the energy mix, and increasing the share of non-fossil fuel energy consumption to about 20% by 2025. This comprehensive approach supports China commitment to sustainable development.
• Issuance of 70 National Standards for Carbon Management: China plans to issue 70 national standards in 2024, focusing on carbon footprints, energy efficiency, consumption, and carbon capture, utilization, and storage. These standards aim to enhance the country capacity for monitoring and managing carbon emissions, facilitating the achievement of peak carbon emissions. Additionally, China intends to establish 100 carbon emission management standardization pilots by 2025. By standardizing carbon management practices, China is promoting transparency, accountability, and consistency across industries, thereby strengthening its decarbonization framework.
• Rapid Expansion of Renewable Energy Capacity: China is rapidly expanding its renewable energy capacity, with clean energy sources accounting for 44% of electricity generation as of May 2024. Solar energy share increased to 12%, up from 7% a year earlier, while wind energy accounted for 11%. During the first five months of 2024, China added approximately 79 GW of solar installations and 20 GW of wind power installations, representing growth rates of 29% and 21%, respectively, compared to the previous year figures. This significant investment in renewables is reducing reliance on coal and advancing China energy transition.
• Enhancement of Emissions Reporting in the Steel Sector: China Ministry of Ecology and Environment is seeking public feedback on new draft guidelines for reporting greenhouse gas emissions in the steel industry. The guidelines aim to standardize emissions measurement, preparing steel mills for integration into China national carbon market. The steel sector, heavily reliant on coal-fired processes, accounts for about 17% of the nation total greenhouse gas emissions. By improving emissions reporting, China is enhancing the accuracy and reliability of its carbon market, facilitating better compliance and encouraging emissions reductions in high-emitting industries.
These recent developments underscore China comprehensive approach to decarbonization, combining policy reforms, technological advancements, and market mechanisms. The expansion of the carbon trading market, implementation of energy conservation plans, standardization of carbon management, rapid growth in renewable energy capacity, and improved emissions reporting are collectively driving significant progress toward China climate goals. These initiatives not only contribute to global efforts to combat climate change but also position China as a leader in the transition to a sustainable, low-carbon economy.
Strategic Growth Opportunities for Decarbonization Market in China
China is aggressively pursuing decarbonization goals, with substantial investments aimed at reducing its carbon emissions. The country is focusing on a wide range of applications to achieve these goals, including renewable energy development, green hydrogen production, energy efficiency improvements, electric vehicle (EV) adoption, and industrial decarbonization. These applications are key to achieving carbon neutrality by 2060 and are opening numerous strategic growth opportunities for companies and investors looking to engage in China green transition.
• Renewable Energy Expansion: China is scaling up its renewable energy capacity, targeting wind, solar, and hydropower as crucial components of its decarbonization strategy. The country is investing heavily in solar and wind power installations, with projects reaching record-breaking capacities. China’s focus on renewables is also expected to promote the development of energy storage solutions to address intermittency issues. This expansion is central to reducing dependence on fossil fuels and driving the transition to a cleaner energy mix, making it a significant growth area for both domestic and international companies in the green energy sector.
• Green Hydrogen Development: China is investing in green hydrogen as part of its strategy to decarbonize hard-to-abate sectors, including heavy industry and transportation. The country is focusing on large-scale hydrogen production projects that use renewable electricity to generate hydrogen, which is expected to replace fossil fuels in sectors like steel and chemicals. With supportive policies and substantial financial backing, China is positioning itself as a leader in the green hydrogen market. The development of this sector presents growth opportunities for technology providers, infrastructure developers, and companies looking to capitalize on the global demand for hydrogen solutions.
• Electric Vehicle (EV) Market Growth: The electric vehicle market in China is one of the fastest-growing sectors globally, driven by government incentives, technological advancements, and consumer demand for cleaner transportation. China is the largest EV market in the world, and the government has implemented policies to support EV adoption, such as subsidies and the expansion of charging infrastructure. With the push for 100% electric vehicle sales by 2035, this sector offers significant growth opportunities for manufacturers, infrastructure providers, and suppliers of critical EV components, including batteries and charging technologies.
• Energy Efficiency in Industry: China industrial sector accounts for a large portion of its carbon emissions, and improving energy efficiency in manufacturing and construction is a key area for decarbonization. The government is introducing policies and incentives to drive energy efficiency upgrades across industries, including the use of energy-efficient equipment, waste heat recovery systems, and advanced manufacturing technologies. Companies focusing on energy-saving technologies, automation, and process optimization will benefit from these regulatory changes, as industries seek to reduce energy consumption and carbon emissions while maintaining competitiveness in the global market.
• Carbon Capture and Storage (CCS) Technologies: Carbon capture and storage is a crucial technology for mitigating emissions from sectors like cement, steel, and power generation. China is ramping up its investment in CCS technologies, with pilot projects already underway in various regions. By capturing carbon emissions at the source and storing them underground, CCS can significantly reduce the carbon footprint of high-emission industries. This offers strategic growth opportunities for companies developing and deploying CCS technologies, as well as for firms involved in the transportation and storage infrastructure required to support this solution.
The strategic growth opportunities in China’s decarbonization market are wide-ranging, driven by advancements in renewable energy, green hydrogen, EVs, energy efficiency, and CCS technologies. These areas not only align with China’s long-term climate goals but also create avenues for domestic and international companies to contribute to the nation’s green transition. As China continues to prioritize sustainability and reduce carbon emissions, the decarbonization market will present significant opportunities for innovation, investment, and growth across various industries.
Decarbonization Market in China Driver and Challenges
A mix of technological, economic, and regulatory factors shapes the decarbonization market in China. As the world’s largest emitter of greenhouse gases, China faces significant challenges and opportunities in transitioning to a low-carbon economy. The country has committed to achieving carbon neutrality by 2060, which has led to rapid investments in clean energy technologies, regulatory reforms, and efforts to modernize infrastructure. However, the transition to a green economy is hindered by several challenges, including high dependency on coal, limited technological capabilities in some sectors, and complex policy coordination.
The factors responsible for driving the decarbonization market in China include:
• Government Commitment and Policies: The Chinese government has set ambitious targets for reducing carbon emissions and achieving carbon neutrality by 2060. Policies such as the 14th Five-Year Plan for Ecological and Environmental Protection and the National Carbon Market are significant drivers in the decarbonization market. Government incentives, subsidies, and regulations promote the development and adoption of renewable energy, energy efficiency, and low-carbon technologies. These commitments offer both long-term stability and the necessary financial support to foster green innovation and accelerate the transition to cleaner energy systems.
• Expansion of Renewable Energy Sources: China has become a global leader in renewable energy production, particularly in solar and wind power. Technological advancements in these sectors, along with government support, have enabled rapid growth in renewable energy capacity. The push for green energy solutions, such as offshore wind farms and large-scale solar projects, is reshaping the energy landscape. This expansion not only contributes to the country’s decarbonization goals but also creates substantial investment opportunities in the green energy sector. The renewable energy industry is expected to continue to grow, driving significant market changes.
• Technological Innovations and Energy Storage: Technological innovation plays a crucial role in accelerating decarbonization in China. Advances in energy storage systems, smart grids, and carbon capture and storage (CCS) technologies are enabling more efficient and reliable integration of renewable energy into the grid. The development of electric vehicles (EVs) and hydrogen fuel technologies is also gaining momentum. Innovations in energy-efficient manufacturing and industrial processes are helping reduce emissions in heavy industries, making technological progress a key driver of decarbonization efforts across various sectors of the economy.
• International Collaboration and Trade: China’s active participation in international climate agreements and collaborations is driving decarbonization efforts within the country. The Belt and Road Initiative (BRI) includes clean energy projects that align with global decarbonization goals. China is also a leading investor in renewable energy infrastructure in developing countries, which enhances its domestic green technology sector. Trade agreements and cooperation in green technology development with nations like the European Union and the United States provide access to advanced technologies and international markets, fostering growth in China’s clean energy sector.
• Private Sector Investments: The private sector in China is increasingly aligning with decarbonization goals, investing in clean technologies and sustainable practices. Major corporations are adopting renewable energy, electric vehicles, and energy-efficient technologies to reduce their carbon footprints. The growing interest in green bonds and climate-focused financial products further supports the decarbonization market. Private investments in renewable energy projects, energy-efficient technologies, and infrastructure are essential for achieving long-term sustainability and enhancing China’s position as a global leader in the green economy.
Challenges in the decarbonization market in China are:
• High Dependency on Coal: Despite significant investments in renewable energy, China remains heavily reliant on coal for electricity generation. This dependence on coal presents a major challenge in achieving decarbonization goals, as coal-fired power plants contribute significantly to the country’s carbon emissions. The transition to renewable energy sources, while growing rapidly, requires significant infrastructure changes and large-scale investments. Overcoming this dependency on coal is essential for achieving China’s carbon neutrality target by 2060, but it will require tackling both political and economic barriers related to the coal industry.
• Energy Efficiency in Heavy Industries: China’s industrial sector, particularly in steel, cement, and manufacturing, is a major source of carbon emissions. Improving energy efficiency in these heavy industries is a key challenge, as these sectors rely on energy-intensive processes. Despite technological advancements in energy-efficient manufacturing, many industries still operate with outdated infrastructure and practices. Reducing emissions in these sectors requires significant investments in cleaner technologies, better resource management, and the adoption of green practices. This transition may be slowed down by the costs associated with upgrading old facilities and technologies.
• Policy and Regulatory Complexity: The regulatory landscape in China can be complex and inconsistent, which poses a challenge to decarbonization efforts. While the government has set clear climate goals, the implementation of policies and coordination between national and local authorities can sometimes be slow. Regional disparities in policy enforcement, as well as a lack of clear incentives for certain sectors, may impede progress. Additionally, businesses may face challenges in navigating the regulatory environment, as inconsistent policies across provinces can create uncertainty and delay investments in green technologies.
The decarbonization market in China is influenced by strong government policies, technological advancements, and private sector investment. However, challenges such as high dependency on coal, energy inefficiency in heavy industries, and regulatory complexities hinder the full realization of decarbonization goals. Overcoming these challenges while continuing to foster innovation and investment will be critical for China to meet its ambitious climate targets and solidify its position as a global leader in green energy. The path forward will require significant efforts from both the public and private sectors.
List of Decarbonization Market in China Companies
Companies in the market compete on the basis of product quality offered. Major players in this market focus on expanding their manufacturing facilities, R&D investments, infrastructural development, and leverage integration opportunities across the value chain. Through these strategies, decarbonization companies cater to increasing demand, ensure competitive effectiveness, develop innovative products & technologies, reduce production costs, and expand their customer base. Some of the decarbonization companies profiled in this report include:
• Company 1
• Company 2
• Company 3
• Company 4
• Company 5
• Company 6
• Company 7
• Company 8
• Company 9
• Company 10
Decarbonization Market in China by Segment
The study includes a forecast for the decarbonization market in China by services, technology, deployment, and end use.
Decarbonization Market in China by Services [Analysis by Value from 2019 to 2031]:
• Carbon Accounting & Reporting Services
• Sustainable Transportation Services
• Waste Reduction & Circular Economy Services
Decarbonization Market in China by Technology [Analysis by Value from 2019 to 2031]:
• Renewable Energy Technologies
• Energy Efficiency Solutions
• Electric Vehicles
• Carbon Removal Technologies
• Carbon Capture and Storage
Decarbonization Market in China by Deployment [Analysis by Value from 2019 to 2031]:
• On-premises
• Cloud
Decarbonization Market in China by End Use [Analysis by Value from 2019 to 2031]:
• Oil & Gas
• Energy & Utility
• Agriculture
• Government
• Automotive & Transportation
• Aerospace & Defense
• Manufacturing
• Others
Features of the Decarbonization Market in China
Market Size Estimates: Decarbonization in China market size estimation in terms of value ($B).
Trend and Forecast Analysis: Market trends and forecasts by various segments.
Segmentation Analysis: Decarbonization in China market size by services, technology, deployment, and end use in terms of value ($B).
Growth Opportunities: Analysis of growth opportunities in different services, technology, deployment, and end use for the decarbonization in China.
Strategic Analysis: This includes M&A, new product development, and competitive landscape of the decarbonization in China.
Analysis of competitive intensity of the industry based on Porter’s Five Forces model.
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FAQ
Q1. What are the major drivers influencing the growth of the decarbonization marketin China?
Answer: The major drivers for this market are increasing investment in decarbonization technologies to reduce costs associated with carbon emissions, growing awareness of the effects of climate change, and stricter emissions standards across the world.
Q2. What are the major segments for decarbonization market in China?
Answer: The future of the decarbonization market in China looks promising with opportunities in the oil & gas, energy & utility, agriculture, government, automotive & transportation, aerospace & defense, and manufacturing markets.
Q3. Which decarbonization market segment in China will be the largest in future?
Answer: Lucintel forecasts that sustainable transportation service segment will remain the largest segment over the forecast period.
Q4. Do we receive customization in this report?
Answer: Yes, Lucintel provides 10% customization without any additional cost.
This report answers following 10 key questions:
Q.1. What are some of the most promising, high-growth opportunities for the decarbonization market in China by services (carbon accounting & reporting services, sustainable transportation services, and waste reduction & circular economy services), technology (renewable energy technologies, energy efficiency solutions, electric vehicles, carbon removal technologies, and carbon capture and storage), deployment (on-premises and cloud), and end use (oil & gas, energy & utility, agriculture, government, automotive & transportation, aerospace & defense, manufacturing, and others)?
Q.2. Which segments will grow at a faster pace and why?
Q.3. What are the key factors affecting market dynamics? What are the key challenges and business risks in this market?
Q.4. What are the business risks and competitive threats in this market?
Q.5. What are the emerging trends in this market and the reasons behind them?
Q.6. What are some of the changing demands of customers in the market?
Q.7. What are the new developments in the market? Which companies are leading these developments?
Q.8. Who are the major players in this market? What strategic initiatives are key players pursuing for business growth?
Q.9. What are some of the competing products in this market and how big of a threat do they pose for loss of market share by material or product substitution?
Q.10. What M&A activity has occurred in the last 5 years and what has its impact been on the industry?