With China entering a new phase in its green transformation, the country will exert more forceful and effective control over energy-intensive and high-emission industrial projects from 2026, said a government official. This is likely to have multiple impacts on coke and steel industries and to act as a tailwind for product prices.

To achieve the goal of dual control over both total emissions and intensity, efforts should be made to effectively control energy-intensive and high-emission projects, accelerate the elimination of outdated capacity, and promote innovation in green and low-carbon technologies, said Xiao Weiming, deputy secretary-general of the National Development and Reform Commission (NDRC), at the Annual Conference on China's Economy 2025-2026 on December 13.

He also noted refining total resource management systems, improving the clean and efficient use of fossil fuel, tackling pollution more aggressively, and optimizing the ecosystem.

For the coke and steel sectors, long-standing pillars of China's industrial economy and among the most carbon-intensive, the implications may be profound.

The focus is predicted to shift from simply controlling output volumes to managing emissions intensity, leveraging market-oriented mechanisms such as carbon trading to optimize industrial structures. This aligns closely with China's dual carbon goals of reaching peak carbon emissions before 2030 and achieving carbon neutrality by 2060.

Approval for new production capacity will become more stringent, and outdated capacity will be phased out at a faster pace.

Industry analysis stated that starting in 2026, new coke and steel projects will face tighter scrutiny, especially those relying on traditional technologies. New production facilities should even replace older ones of equal or greater capacity. Environmentally non-compliant and energy-inefficient marginal capacities will be forced out, leading to a predictable contraction in effective industry capacity.

Cost pressures are expected to mount. Stricter controls, including tighter carbon emission quotas and potentially higher carbon trade prices, will increase operating costs across the board.

In the steel industry, the environmental cost per tonne is projected to rise sharply, with some estimates putting the sector's annualized cost increase above 100 billion yuan. Companies will also need to invest heavily in desulfurization, denitrification, and next-generation technologies such as electric arc furnaces and hydrogen-based metallurgy.

Yet amid these conditions lies opportunity. As supply tightens and production costs rise, product prices are likely to find a firmer floor, improving profitability across the sectors. The exit of obsolete capacity will also enhance industry concentration, allowing leading firms to expand their market share.

Furthermore, as the carbon market broadens its coverage, carbon allowances will be allocated with greater transparency, levelling the playing field. This will help drive high-emission, inefficient players out of the market while rewarding enterprises with technological advantages or green certifications.

In sum, the new policy framework signals China's transition from the planning phase to the execution phase of its decarbonization agenda. It offers policy support for the green transformation of the coke and steel sectors, encouraging a pivot toward high-quality development through improved resource management and systemic efficiency.

While short-term profitability may be squeezed, companies that act swiftly to upgrade their technology and manage costs will be well-positioned to benefit from policy incentives and long-term sustainability gains. The overall direction points toward a greener, more efficient, and increasingly consolidated industry future.

Notably, the policy also embraces differentiated management, allowing regions with stronger economic growth to adjust their energy consumption targets more flexibly. By tailoring indicators and leveraging market-based mechanisms, Beijing aims to avoid a one-size-fits-all approach to capacity cuts.

This flexibility could offer a buffer for efficient firms and allow industrial clusters of coke and steel to calibrate their transition pace. Central state-owned enterprises are also being encouraged to pursue specialization and high-end lines, potentially catalyzing emissions reductions across their supply chains.