China’s 12th Five Year Plan

China’s 12^th Five Year Plan (FYP) covering 2011-2015 has a clear focus on building clean energy and will have a dramatic impact on its economy and future industries. China has plans to continue its ‘clean revolution’ over the next five years, with significant targets for low-carbon energy, energy efficiency and clean technology. The policy framework will be more sophisticated, with phasing in of market mechanisms and ‘bottom-up’ action in provinces and cities.

What is clear is that China’s low-carbon ambitions are accelerating and will bend the nation’s carbon emissions growth curve in the next five years. At the same time the country’s energy supply is incorporating more non-fossil fuel sources and low-carbon technologies will continue to develop rapidly. China has ambitions for clean energy that are beyond those recognised by the International Energy Agency’s (IEA) World Energy Outlook 2010 scenario for containing climate change by stabilizing atmospheric concentrations of CO₂ at 450ppm (parts per million) by 2100, suggesting that China is ‘pulling its weight’ in this regard. It is believed that low-carbon energy deployment will be on or ahead of target.

China reached an 8.3 per cent share of primary energy from non-fossil fuel sources in the 11th FYP against the target of 10 per cent. Challenges came from larger than predicted overall energy consumption and from delays in developing hydroelectric and nuclear power over the last five years. Current indications are that these technologies will now progress more rapidly with stronger government backing.

Progress on low-carbon energy will come from a four-fold growth in nuclear power to 40GW (although the full implications of the disaster in Japan on this are not known at this stage), 70GW of new hydroelectric capacity, growth of 13-33GW in gas-fired generation, 48GW of new wind capacity to more than double the current capacity and solar capacity expected to reach 5GW of by 2015. These figures are against the backdrop of an estimated additional 260GW of coal generation – although the share of coal in the energy mix is anticipated to fall from 72 per cent to 63 per cent.

This means China’s expansion of coal-fired electricity will be greater than that necessary to achieve the IEA scenario for 450ppm.

So what does the FYP mean for CCS? The new coal-fired power stations are not anticipated to be fitted with CCS. This isn’t really that surprising as the timeframe is too soon for wide scale deployment of CCS. However, 20-100GW of the new coal power plants by 2020 are predicated to be IGCC plants, which should drive down the price of those plants globally and therefore making carbon capture ready plants cheaper.

Considering both export and domestic consumption, the 12th FYP also sets out aggressive growth plans for strategic emerging industries (SEIs) critical to economic restructuring, including electric vehicles, next generation information technology, energy efficient products and renewable energy. A figure of RMB 10 trillion ($1.5 trillion) of public and private investment in the next five years across all SEIs has been discussed but a government target may not be set. Fiscal incentives form part of an integrated strategy.

CCS has not been identified specifically as one of these technologies but The New Energy Industry plan includes plans for the development of ‘clean coal’ technologies, which includes coal-to-gas, coal-to-liquids and integrated gasification combined cycle (IGCC). Clean coal is not included in new-energy generation and purchasing targets however. The interesting observation is that almost all technologies China does include in its new energy generation and purchasing targets are low carbon but also have significant advantages beyond carbon savings. This is a challenge for CCS, whose benefits beyond emission reduction have not been effectively articulated.

Research and development, however, is an area where CCS is likely to benefit from the FYP. R&D funding is set to increase dramatically, leveraging public and private sources from the current 1.7 per cent to reach 2.2-2.5 per cent of GDP as China aims to become a global technology innovator, including coal chemistry. In particular, The Ministry of Science and Technology (MOST) has included capturing CO₂ from coal to oil projects (300,000 tons/yr) and demonstration of Oxy-Fuel Combustion Capture (35MWth) R&D projects, among other CCS related technologies in its 12th FYP major science and technology program. The focus of most research efforts is encapsulated by the Chinese use of the acronym, CCUS instead of CCS, or ‘utilising’ any captured CO₂ for commercial purposes.

The fundamentals of the 12th FYP bode well for low carbon technologies, including potentially CCS as it supports regulation, technology development, capital investment and market mechanisms. There is likely to be better-planned phase-out of inefficient infrastructure and clearer devolution of central targets by sector and province. Market mechanisms, including energy price reform, carbon trading pilots, energy labelling of consumer products and support for energy services companies, will be actively developed and are likely to form a key element for China’s energy policy framework by 2015. All potentially good news for CCS.

The 12th FYP makes it clear that China is determined to capture the economic opportunities that exist from addressing climate change. If CCS can demonstrate it can provide this then it could be a significant part of the China’s energy future.

Read The Climate Group’s Guide to China’s 12^th Five Year Plan