STUDYRenewable hydrogen for chemical sector decarbonisation in China 2Agora Energy China—Renewable hydrogen for chemical sector decarbonisation in ChinaPublication detailsStudy Renewable hydrogen for chemical sector decarbonisation in ChinaAuthor affiliation Agora Energy China 502E, German Centre, No. 19 Dongfang East Road Chaoyang District, Beijing, China www.agora-energy.comProject lead Wenbo Zhao wenbo.zhao@agora-energy.comAuthors Wenbo Zhao (Agora Energy China) Philip Horster (formerly Agora Energy China) Emir Çolak (Agora Industry) Wei Meng (Agora Energy China)Acknowledgments We would like to thank Leandro Janke, Matthias Deutsch, Maia Haru Hall, Darlene D'Mello, Julia Metz, Frank Peter, Alexandra Steinhardt, Anja Werner, Isadora Wang and Yiran Jin for their helpful comments and support.→ Please cite as follows: Agora Energy China and Agora Industry (2026): Renewable hydrogen for chemical sector decarbonisation in China 3Agora Energy China—Renewable hydrogen for chemical sector decarbonisation in ChinaPrefaceDear reader, As China undergoes structural economic transformation and rapidly deploys renewable energy, most carbon-intensive industrial sectors have begun to enter a downward emission trajectory. The chemical industry, however, remains a critical exception, continuing to grow its carbon footprint even as broader industrial emissions decline. At the same time, the rapid decarbonisation of power and transport is redirecting coal-dominated fossil fuels into the industrial sector, sustaining investment momentum in coal chemical capacity at a moment when the broader energy transition demands a reversal. This expansion is unfolding amid cyclical economic headwinds, a structural shift in the energy system and tightening carbon emission constraints. Navigating these challenges will require decisive action to transform the chemical industry. In this context, the rapid development of renewable hydrogen – coupled with the 15th Five-Year Plan (2026-2030), which identifies the hydrogen economy as a strategic future growth driver – presents a historic opportunity to accelerate this change.This report demonstrates the potential of renewable hydrogen as a decisive lever for decarbonising China’s chemical industry. It assesses the emission reduction potential of substituting fossil-based hydrogen across key chemical production processes, examines the cost competitiveness of renewable hydrogen and its derivatives and tracks the progress of China’s renewable hydrogen project pipeline. On this basis, the report offers targeted policy recommendations designed to accelerate the deployment of renewable hydrogen and realise its full decarbonisation potential in the Chinese chemical industry.We hope you find it insightful.Julia Metz Director, Agora Industry 4Agora Energy China—Renewable hydrogen for chemical sector decarbonisation in China→ Key findings1Scaling renewable hydrogen in China's emission-intensive chemical sector could eliminate well over 610 million tonnes of carbon annually compared to 2022, while reducing exposure to oil and gas market volatility. This would require technological upgrading and a structural shift in production, with the largest abatement opportunities lying in substituting fossil-based with renewable hydrogen in oil refining and in new, heavily invested coal-based chemical industries, including ammonia and methanol. 2Closing the temporary cost increase of renewable production – the green premium – through targeted, feedstock-specific strategies is key to scaling renewable chemicals in the near term. Current cost gaps vary: from none to USD 360 per tonne for ammonia, and from around USD 230 to USD 610 per tonne for methanol, with the use of directly captured carbon driving higher costs in the latter pathway. Renewable ammonia is therefore closer to parity, while biomethanol and bio-e-methanol can become cost-competitive where affordable sustainable biomass is available. 3Establishing reliable demand through strong policy signals is critical to sustaining investment in green hydrogen, ammonia and methanol. Project pipelines in China indicate a slowdown in investments from 2027, signalling fragile market confidence without a durable policy framework. Mandatory sourcing quotas for renewable-based chemicals and tightened carbon intensity rules across the supply chain can provide revenue visibility and anchor demand. In parallel, clearer green standards and carbon taxonomies would reduce supplier uncertainty and create lead markets for early deployment.4Green hydrogen is a key pillar of China's 15th Five-Year Plan, strategically positioned to drive industrial competitiveness and energy system transformation. Its inclusion, alongside a dedicated national hydrogen fund, signals stronger state backing for building a scaled hydrogen economy and associated supply chains. Within this framework, green hydrogen is also an important lever for reducing dependence on fossil imports and accelerating the shif...
