Cement and glass industries: China tightens capacity replacement regulations to address overcapacity and ensure carbon peak goals

The?2024 Implementation Measures for Capacity Replacement in the Cement and Glass Industries, released on 30 October, are in force today.

China’s Capacity Replacement Policy aims to control overcapacity and reduce emissions in high-pollution industries like cement, glass, and steel. The policy mandates that companies offset new production by retiring greater inefficient capacity rather than simply adding more. This update addresses the pressing issues of overcapacity and excessive carbon emissions in these sectors, aligning with China’s goal to peak carbon emissions by 2030 and support sustainable industrial growth. As part of the ongoing supply-side reform, the new measures enforce stricter capacity control and replacement policies, reflecting China’s commitment to greener production and more efficient industry practices.

A Stringent Approach to Overcapacity and Inefficiency

Like the steel industry, where China has recently halted new project permits, the cement and glass sectors face significant overcapacity. Demand in these industries has waned since 2021, with cement output dropping 15% by 2023 compared to 2020. This decline highlights a trend of production outpacing demand, exacerbating excess supply and environmental impact.

The 2024 measures build upon the previous 2021 guidelines by introducing tougher standards and stricter definitions for capacity replacement. These include prohibiting the approval of new cement clinker and flat glass projects unless companies can offset their plans by retiring inefficient, outdated capacity elsewhere.

Key Revisions in the 2024 Measures

The MIIT’s revised guidelines enforce several specific changes to streamline capacity management and improve environmental accountability in these high-emission sectors:

1. Stricter Replacement Ratios and New Criteria: Cement clinker facilities running inefficiently can no longer be utilized for replacement, and companies are barred from splitting and transferring clinker capacity across projects, ensuring that new projects are matched with meaningful, complete offsets.

2. Updated Capacity Evaluation Standards: The new rules remove outdated standards based on kiln diameter and glass melting capacity, encouraging a closer alignment between approved and actual capacity and reducing the room for regulatory loopholes.

3. Regionally Differentiated Policies: High-priority air pollution control zones and provinces with cement utilization rates under 50% over the past three years are restricted from importing replacement capacity from other regions. This approach aims to localize industry upgrades and reduce carbon emissions in areas most affected by pollution.

4. Simplified Cross-Region Capacity Transfers: For entities within key pollution control regions or a single corporate group, cross-regional transfers can now bypass certain provincial review requirements, streamlining the process while ensuring tighter regulatory coordination.

5. Energy Efficiency and Environmental Collaboration: Any production facility falling short of baseline energy efficiency levels cannot participate in capacity replacement, aligning industry actions with broader energy-saving and environmental objectives.

Environmental and Economic Pressures on the Cement Sector

China’s cement industry, a foundational sector for the national economy, accounts for over 10% of the country’s total carbon emissions and 80% of emissions within the construction materials industry. With annual cement production exceeding 2 billion tons, China produces and consumes more than half of the global supply. However, the high energy demands and carbon output associated with cement production, particularly from coal-powered electricity sources, have intensified pressure to reform this high-emission sector.

In recent years, demand for cement has diminished amid a slowdown in construction and real estate markets, underscoring the need for efficient production and rationalized supply. The industry’s carbon emissions peaked at 1.23 billion tons in 2020, after which output declined by more than 15% through 2024. MIIT’s tightening of capacity policies aims to continue this downward trend, reducing emissions through direct cuts in fossil fuel use and structural optimizations.

Lessons from Steel Industry Regulation

The steel industry, which has also faced overcapacity and high emissions, is a case study of the effects of strict capacity replacement policies. Following the 2021 revision of the steel capacity replacement guidelines, the MIIT suspended all new replacement project approvals in August 2024, identifying gaps in enforcement and monitoring mechanisms. This experience informed the cement and glass industry regulations, incorporating more rigorous criteria and region-specific controls to optimize policy effectiveness.

A Path Forward for Sustainable Industrial Development

The revised 2024 capacity replacement measures reflect China’s commitment to managing production sustainably and fulfilling its carbon peak ambitions. By coupling stricter replacement standards with refined monitoring and efficiency requirements, the MIIT aims to recalibrate production in the cement and glass industries toward environmentally responsible and market-responsive practices.

As the industry adapts to these regulatory changes, the focus will shift toward innovation in carbon reduction technologies, efficiency improvements, and eco-friendly manufacturing practices. This policy shift underscores China’s proactive stance on climate change and signals potential long-term benefits, from enhanced air quality to a more sustainable path toward industrial and economic resilience.