China launches three-year action plan to accelerate energy efficiency and carbon reduction in key industries

知识亮点 22 July 2026

On 15 June 2026, China’s National Development and Reform Commission (“NDRC”), Ministry of Industry and Information Technology, Ministry of Ecology and Environment, State-owned Assets Supervision and Administration Commission of the State Council, and National Energy Administration published the “Notice on Carrying Out a Three-Year Action to Accelerate Energy-Saving and Carbon-Reduction Transformation in Key Industries”, which includes the “Three-Year Action Plan for Energy Conservation and Carbon Reduction Transformation in Key Industries” (“Plan”).

The Plan focuses on nine industries characterised by high energy consumption and high carbon emissions: steel, electrolytic aluminium, cement, flat glass, oil refining, ethylene, synthetic ammonia, methanol, and coal-fired power generation. The Plan launches a three-year programme of energy-saving and carbon-reduction transformation across these sectors with the stated aim of comprehensively improving the energy and carbon efficiency of the industries and accelerating their green and low-carbon transformation.

The Plan forms part of China’s broader carbon-peaking and green industrial transition agenda and is expressly framed as support for completing the energy-saving and carbon-reduction targets of the 15th Five-Year Plan period (2026-2030). For more on the 15th Five-Year Plan, please read our article “Navigating opportunity and compliance under China’s 15th Five-Year Plan”.

This article sets out some of the key highlights of the Plan.

Targets to end-2028

The Plan sets quantified targets to be met by the end of 2028. Across steel, electrolytic aluminium, cement, flat glass, oil refining, ethylene, synthetic ammonia, and methanol, the proportion of production capacity meeting the current energy-efficiency benchmark level is to increase by an average of 20 percentage points; the coal-fired power industry is to strive for a 15-percentage-point increase. 

By the same date, capacity below the energy-efficiency benchmark level is to be basically eliminated, cumulatively delivering energy savings of more than 100 million tonnes of standard coal and reducing carbon dioxide emissions by more than 200 million tonnes.

Key measures

Some of the key measures set out in the Plan are set out below:

• Financial support: Eligible energy-saving and carbon-reduction retrofit projects may receive central financial support of up to 20% of their approved investment, with priority given to projects that achieve benchmark energy-efficiency levels after retrofitting. Local governments are encouraged to make use of existing funding mechanisms; tax incentives for energy-saving equipment, technological upgrades and comprehensive resource utilisation are to be implemented; and financial institutions are encouraged to provide diversified financial products and services.
• Differential electricity pricing: Provincial authorities may consolidate existing differential, tiered and punitive electricity pricing arrangements into a unified differential electricity pricing policy, with a surcharge of no more than RMB 0.1 per kilowatt (“kW”)-hour on top of the market transaction electricity price; the surcharge is to be used to offset system operating costs.
• Policy coordination and incentives: Carbon dioxide reductions achieved by existing industrial enterprises through retrofitting may, once verified by the provincial energy-conservation authorities together with relevant departments, be recognised as offsetting capacity for the approval of new, renovated, or expanded high-energy-consuming and high-emission industrial projects. For key industries within the national carbon emission trading market, quotas are to be allocated on an “incentivising the advanced and spurring on the lagging” basis, with enterprises whose carbon intensity is better than the benchmark supported to obtain reasonable quota benefits.

Phase-out of outdated capacity

The Plan identifies sector-specific outdated processes, sub-scale facilities, and inefficient equipment to be prioritised for upgrading in each of the nine industries, with a separate coal-consumption reduction requirement for coal-fired power units of 300,000kW and above. 

Projects whose energy efficiency does not meet the mandatory energy consumption limit and benchmark levels are to complete transformation by the end of 2028, striving to reach the benchmark level. Projects that cannot complete transformation on schedule, or that still fail to meet requirements afterwards, are to be eliminated and shut down in accordance with regulations.

Implementation

Key industry enterprises are the primary entities responsible for implementing energy-saving and carbon-reduction transformation, and are required to conduct diagnostics, formulate specific plans setting out transformation content, implementation path and timeline, and arrange the transformation sequence around shutdowns and maintenance.

Provincial energy-conservation authorities are to formulate regional plans, allocate targets and tasks down to individual enterprises, and submit overall plans and retrofit lists to the NDRC and other departments by the end of July 2026, reporting progress by the end of December each year. Central state-owned enterprises are expected to play a leading role, with retrofit requirements built into the performance evaluation of their leaders, and regulators are to conduct annual follow-up assessments and special inspections.

Comment

While directed at domestic industrial regulation, the Plan is likely to affect foreign-invested enterprises operating in the targeted sectors, as well as overseas investors, lenders, and supply-chain participants. Foreign-invested manufacturers may need to budget for retrofit expenditure, reassess the long-term viability of older production assets, and incorporate the new energy-efficiency benchmarks into future expansion and investment decisions.