Outlook and obstacles for CCS (2)

In the final segment of his two-part report, He Gang sets out his technical and policy recommendations for China's adoption of an important technology.

Considering China’s circumstances and strategic requirements on the energy front, discussed in the previous section of this article, there are three aspects of the situation that need attention if the country is to make the technical and policy preparations for CCS.

First, China needs more more capacity building:

* CCS technology is not yet mature. China needs to focus on research-and-development, particularly with attention to the country's energy security; hold demonstrations of coal-to-liquids, IGCC and CCS technology; explore the economic sustainability of enhanced oil recovery and enhanced coal-bed methane; and analyse and evaluate future CCS technological pathways.

* China’s geology is complex; the country needs to conduct more more surveys of on-shore and off-shore coal, oil, gas basin and salt formations that have the potential for carbon sequestration. Comprehensive surveys of geological structure, storage potential, the risk of leakages and the feasibility of monitoring are necessary.

* There needs to be risk evaluation and management for all stages of CCS: capture, transportation and storage.

* China must establish CCS management structures, laws and regulations.

* China needs to increase public awareness of CCS, which means increasing public knowledge of the value and the risks of the technology.

Second, sources of funding should be expanded. Currently, fund transfers mainly take place via the international carbon market. As the funds available for CCS in China are very limited, international financial investment and support are very important.

The Clean Development Mechanism (CDM) is one of the Kyoto Protocol’s three mechanisms, and is a key part of encouraging developing nations to participate in global emission reductions. Currently, its executive board has raised the possibility of allowing CCS projects under the CDM. This is still highly controversial; opponents hold that CCS emissions reductions will weaken the effectiveness of the CDM’s market in Certified Emission Reductions (CERs).

In the current market, carbon dioxide (CO2) costs between 8 and 23 Euros (US$12 to $34) per tonne: much less than the cost of CCS (from 50 to 100 Euros, or US$75 to $150, per tonne of CO2). Even if CCS were included as a CDM project, there would be a significant price gap, which means CCS would have to be funded through other channels.

The fluctuating price of CERs also means that CCS will struggle to attract stable investment through this channel. Sectoral emissions reduction mechanisms may bring the power sector as a whole into emissions reduction arrangements, but this is still at an exploratory stage. Therefore, an international climate-change agreement must find new financial mechanisms to meet the needs of CCS implementation.

Third, we must strengthen international cooperation. International probes into CCS are still underway. The United Kingdom has legislated that new power plants must be “carbon-capture ready” if they are to connect to the power grid. The United States has announced an investment of US$1 billion to restart the FutureGen project, and is to build an IGCC+CSS demonstration plant in the mid-western state of Illinois. The European Union’s economic stimulus plan includes 1.05 billion Euros (around US$1.6 billion) in investment for CCS technology at seven power plants, with a “CCS Alliance” of 12 demonstration plants to be formed by 2012. In July 2009, China and the US announced plans to develop the “US-China Clean Energy Research Center”.

As cooperation between China and the US, Canada, the EU, Japan, Australia and other countries continues in the CCS field, China will form global links to the CCS industry, remain up-to-speed with technical advances and exchange know-how. This will lay the foundations for China to master the technology – and participate in the global effort to address climate change.

For more information, download the full report Real Drivers of CCS in China and Implications to Climate Change Policy by Richard Morse, Varun Rai and Gang He.

He Gang is research associate at Stanford University’s Program on Energy and Sustainable Development. [email protected]

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