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Roadmap for CCS Demonstration and Deployment in China – A Possible Game Changer

15th December 2015

Topic(s): Carbon capture, Economics, Engineering and project delivery, use and storage (CCUS)

The Asian Development Bank (ADB) has released a new publication titled Roadmap for the Demonstration and Deployment of Carbon Capture and Storage (CCS) in the People's Republic of China. Tony Wood leads the Grattan Institute’s Energy Program, which is an important policy think-tank in Australia. In his previous role as Program Director of Clean Energy Projects at the Clinton Foundation, he was a Project Team Leader and lead author of the Roadmap. In this Insight, Tony highlights why he thinks this Roadmap is important

On 1 December, at the International Climate Change Conference in Paris (COP21), the Asian Development Bank (ADB) and the National Development Reform Commission (NDRC) of the People’s Republic of China (PRC) launched a Roadmap for Carbon Capture and Storage (CCS) demonstration and deployment in the PRC. CCS Roadmaps have been published before, so why might this one be different? The answer lies in both the context and content.

The PRC is the world’s largest energy consumer and 90 per cent of that energy is based on fossil fuels. Combustion of fossil fuels, particularly coal, is the major contributor to man-made climate change and also to severe air pollution in many parts of China. Recognising this challenge, the Government intends that China’s greenhouse gas emissions should peak by 2030. Despite China’s rapid adoption of renewable energy such as solar and wind, CCS is the only available technology to cut emissions from carbon-intensive coal-chemical plants, steel and cement manufacturing and refineries. And, without CCS, realising China’s climate change objective could be 25 per cent higher. Yet CCS, although technically proven, is currently immature in terms of commercial deployment.

The problem is not unique to China. Only a few weeks ago, the International Energy Agency (IEA) released its World Energy Outlook 2015. In this report, the IEA reaffirmed the critical role that CCS will play if, at the Paris conference, the international community commits to actions to achieve the objective of constraining average global temperature increases to less than two degrees Celsius. The Report confirmed that the total of national commitments made in the lead-up to COP21 will not achieve the objective. However, if policies are introduced to meet the two degrees objective, then CCS would be fitted to three-quarters of the coal-fired power stations in the world by 2040.

This is a major technical and financial challenge, not least because policy settings around the world have, to date, failed to deliver large scale CCS projects in the power sector at anything like the necessary scale. More progress has been made on first-generation industrial CCS projects, such as the recently-launched Quest project in Canada. For CCS to achieve its potential at a global scale, it must be applied in both the power and industrial sectors.

It is clear that little, if any, progress will be made on CCS without an integrated approach, incorporating sustained support for early-stage demonstration projects and credible policies for longer-term commercial deployment.

In this context, the Department of Climate Change of the NDRC, with the support of the ADB, initiated the project to deliver a Roadmap for CCS Demonstration and Deployment in the PRC. A project team was assembled, comprising leading Chinese experts in the fields of technology and economic modelling. They were supported by a group of international experts who also brought knowledge and relevant international experience in policy formulation, legal issues and public engagement.

The outcome is a Roadmap to inform the PRC’s decision makers on the technical, economic and policy dimensions of deploying CCS over a timeframe and at a scale to enable the cost-effective achievement of the PRC’s emissions reduction targets.

The Roadmap applies international experience of programs and policies to support CCS with the unique low-cost opportunities in the PRC, specifically in the coal-chemical sector. In addition, early stage projects are expected to capture the economic value that can be created by utilising CO2 for enhanced oil recovery (EOR).

Although CCS technologies have been operating successfully in the oil and gas industries for many years, commercially viable, integrated CCS has not been applied to power generation plants and industrial processes on a wide scale. This means that today’s high incremental cost need targeted incentives in the short term and a credible forward carbon price for the long term. Yet, today’s high costs and the scale of initial investment have meant that policy makers have to date been reluctant to support CCS to the same extent as they have supported renewable energy. The key message of the Roadmap is how to resolve this conundrum.

China’s unique circumstances create the need and the opportunity for successful demonstration and deployment of CCS. The Roadmap recommends a phased, but integrated, approach. This means first targeting low-cost CCS applications in coal-chemical plants. Further, these projects should be targeted in regions of China that have the potential to use the CO2 for EOR from partially depleted oil fields. This will prove the technical feasibility of CCS and create the confidence for expansion to the power sector. In parallel, an intensive research and development effort, including limited application in coal-based power plants should have the objective to bring down the capture cost.

The dual-track approach combines accelerated demonstration and intensive research and development over the next 10 years, creating the basis for wider deployment of cost-competitive CCS beyond 2030. The NDRC intends that the Roadmap should be regularly updated to incorporate new technical and financial knowledge as it emerges.

The CCS Roadmap was launched at COP21 in the context of China’s efforts to address climate change and the need for international support and cooperation. CCS may be critically important to the PRC’s achievement of its climate change goals. However, if the CCS Roadmap can lead to China’s having an impact on CCS cost and deployment in the way it has to solar PV, then it could be a game changer.

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