CCS in China

Ecoal December 2009, Volume 69

Stanford University's Programme on Energy and Sustainable Development (PESD) recently released a report on "The Real Drivers of Carbon Capture and Storage in China and Implications for Climate Policy".

The report examines China's motives for its current programme of CCS demonstration and looks at the strategy required to move CCS towards commercial scale deployment.

Drivers for CCS

The report suggests that one of the primary motivations for CCS demonstration in China is to secure the country's energy future in case of possible future constraints on emissions. Although the report indicates the current CCS demonstration programme may not point towards China fully embracing CCS yet, it reinforces the point that the programme will provide China with the means to rely upon it own indigenous coal resources regardless of future developments in domestic and international climate change policy.

In addition to the energy security benefits of CCS development, the report also points to coal-to-liquids (CTL) as an important early driver for demonstration of the technologies in China. CTL has the potential to reduce China's dependence on oil imports. The report highlights Shenhua's CTL project in Ordos, Inner Mongolia, as one of the first major CCS projects in the country. According to the report, an additional immediate benefit of CTL will be the use of captured CO2 for enhanced oil recovery (EOR), further allowing China to utilise its own oil supplies.

Funding Strategies

Although the Chinese State Government has provided funding for a number of CCS research and pilot projects, the report suggests that international input and investment will be the primary means of pushing the technologies towards long-term commercialisation. Projects such as GreenGen and the Near Zero Emission Coal (NZEC) project are highlighted as current examples of international investment in CCS in China. GreenGen, a proposed coal-fired IGCC plant, is the main focus of state funding for CCS in China and is supported by Peabody Energy of the USA (and member of the World Coal Institute). The report sees GreenGen as an important step towards commercialisation of CCS.

The report suggests that international funding instruments such as the Clean Development Mechanism (CDM) will not be able to meet the challenge of widespread CCS deployment in China without additional direct investment. It is indicated that even in an optimistic scenario, where CCS becomes eligible under the CDM and the Waxman-Markey bill becomes law in the US with a CCS methodology for international offsets, there will be a funding gap. Funds raised under this scenario may only account for around 25% of the total CCS investment required annually in China (estimated at US$25-30 billion). The report therefore suggests that cost-sharing agreements between China and international partners are likely to be the most feasible means of covering the anticipated gap in CCS financing.

The report acts as an important reminder of the effort needed on an international scale to drive CCS in China. It provides key messages that international climate policy and offset schemes must acknowledge the unique conditions that exist within the country. This will be an important step to commercial scale deployment of CCS in what has the potential to be its most important market.