Insights and Commentaries

To meet emissions goal PRC needs to scale up on carbon capture and storage

15th December 2015

Topic(s): Carbon capture, law and regulation, Policy, use and storage (CCUS)

The Asian Development Bank (ADB) has recently published a Roadmap for Carbon Capture and Storage Demonstration and Deployment in the People's Republic of China. The Roadmap discusses the importance of carbon capture and storage (CCS) to the power sector and industrial processes in the People's Republic of China (PRC). Co-authors of the Roadmap are Annika Seiler and Tony Wood. In a previous Insight Tony Wood introduced the Roadmap. In this Insight, Annika Seiler, ADB Finance Specialist, summarises the Roadmap's key recommendations.

The publication, “Roadmap for Carbon Capture and Storage (CCS) Demonstration and Deployment in the People’s Republic of China (PRC),” was jointly unveiled by Minister Xie Zhenhua, Special Envoy on Climate Change for the Government of the PRC, Deputy Director General Yang Yingming of the PRC’s Ministry of Finance, and Takehiko Nakao, the President of the Asian Development Bank (ADB), on the sidelines of the 21^st Conference of Parties (COP21) of the United Nations Framework Convention on Climate Change in Paris.

In the photo (from left to right): Ministry of Finance Deputy Director General Yang Yingming, Minister Xie Zhenhua, NDRC and ADB President Takehiko Nakao. Source: Asian Development Bank.

The roadmap is a direct result of the long-standing partnership on climate change between ADB and the PRC’s National Development and Reform Commission (NDRC). In 2009, ADB set up a dedicated CCS Fund thanks to contributions first from the Global CCS Institute and then, in 2012, from the Government of the United Kingdom Department of Energy and Climate Change (DECC). Since then, ADB in collaboration with the NDRC has supported a series of capacity development projects for the development of CCS in the PRC, which eventually led to the support for the formulation of this roadmap.

Roadmap Attributes

The roadmap was designed to be a practical document focusing on a bottom-up approach with the following attributes:

• realistic—based on a detailed assessment reflecting:
  • the status of development of the CCS technology relevant to the PRC
  • economic development prospects
  • projected carbon dioxide (CO₂) emissions trajectory by the government
  • the status of infrastructure for CCS deployment
• comprehensive—integrating strategic considerations, technology development, critical stakeholder interests and international lessons learned from previous CCS roadmaps for successful implementation
• implementable and specific—based on in-depth analysis of barriers, providing practical and specific recommendations to move CCS towards large-scale demonstration.

Participatory Approach

A team of eminent national and international experts from well reputed institutions were engaged to provide key analysis to help prepare this roadmap. (Refer to page v of the Roadmap for list of contributors).

Based on their background reports listed below, the roadmap was synthesised. Background reports included:

• Review of International CCS Roadmap Experiences
• Opportunities for CCS Demonstration and Deployment in the PRC under Low-Carbon Transformation Scenarios
• Roadmap toward a CCS Regulatory Framework
• Selection of Early-Opportunities for Carbon Capture, Utilization, and Storage Projects in the PRC
• Review of CCS Technologies

These associated reports will be available on the ADB and Global CCS Institute webpages in the coming weeks.

To ensure a broad buy-in from national stakeholders, the elaboration of this roadmap was conceived as a collaborative process during which consultants first held discussion rounds among themselves, and subsequently under ADB guidance engaged in in-depth focus group discussions with representatives from key ministries, the PRC’s major energy companies, industrial emitters, knowledge think tanks, and design institutes at various stages of the process. This dialogue led to multiple adjustments of the roadmap, which was time consuming, but eventually resulted in the roadmap’s acceptability and stakeholder's support.

Concise Summary

As the world’s largest energy consumer and emitter of CO₂, the PRC plays a crucial role in the global struggle against climate change. But in the process it faces tough challenges dealing with the “energy trilemma” of balancing sustainable economic growth with energy security and protecting the environment.

In recent years the country has launched many initiatives to reduce its emissions, including policies to expand energy efficiency, promote renewable energy sources, and shift toward a future energy mix with a greater share for non-fossil fuels. Despite these efforts though, the economy continues to rely on coal –the most carbon-intensive fuel and single largest contributor to worsening air pollution– for two thirds of its energy consumption, way above the global average of 24%. Moreover, coal is still expected to continue to power the country over the next 25–30 years. Even with new, more efficient plants, emissions will continue to rise.

This being the case, one essential component to curb CO₂ emissions and propel the PRC on the path to sustainable, green economic growth, is through CCS. This is the only near-commercial technology currently available that can cut up to 90% of the PRC’s emissions from coal-fired plants. CCS, though, is still an emerging industry, with nine pilot projects in operation in the whole country.

The CCS deployment pathway in the roadmap has been derived using the China-in-Global Energy Model, co-developed by the Tsinghua University–Massachusetts Institute of Technology China Energy and Climate Project. The model projects emissions to rise and eventually stabilize at around 13.4 gigatons per year in case the Government of the PRC maintains climate change mitigation efforts at the current level. In two “alternative” scenarios, which are consistent with the government’s pledge to peak CO₂ emissions by 2030 or earlier, CCS becomes a crucial low-carbon technology for the country for cost-effective climate change mitigation in the medium to long-term. Energy economic modelling predicts that CCS will lead to a cumulative avoidance of 160 million tons by 2030 and 15 gigatons by 2050. Without CCS, the cost of meeting the PRC’s anticipated long-term climate change mitigation goals would be about 25% higher, and CCS is the only option for drastically cutting emissions from carbon-intensive industries.

The analysis also shows that the scale of CCS deployment to date is highly uncertain and will depend on the degree of cost reductions achieved in the near term, the technology’s cost compared to other low-carbon energy technologies, the proof of safe CO₂ storage capacity, and the gain in capture efficiencies. Early stage demonstration of commercial-scale CCS projects is important to bring down costs, build confidence in the technology and wider deployment in the medium to long-term.

To date, the Government of the PRC has made remarkable progress in building capacity along the CCS value chain through linked research and development activities and its nine pilot projects as well as international cooperation. The PRC is now ready to pursue large-scale demonstration.

PRC can benefit from international experiences as CCS is a proven technology in the oil and gas industries. Also, the Boundary Dam Project, the world’s first large-scale CCS demonstration project in the coal-fired power plant sector, the sector with the largest CCS replication potential in the PRC, has been in operation since October 2014. Around the world there are 15 large-scale CCS projects in operation and seven more are under construction in countries such as Australia, Canada, Norway and the United States. These countries have made progress in developing regulatory frameworks enabling CCS demonstration.

But early-stage commercial CCS projects face many crucial barriers that need to be overcome, such as high capital and operational costs, additional water consumption needed to capture CO₂, perceived and real technical risks, the absence of a regulatory framework for CCS demonstration, and the lack of financing.

The roadmap highlights that the PRC’s large coal-chemical sector represents a unique early opportunity for low-cost carbon capture. A project in this sector may prove to the general public that the technology is effective in achieving deep cuts in carbon emissions and that CO₂ can be stored safely underground. Many of the PRC’s coal and chemical plants are located close to oil fields that can be adapted to CO2-enhanced oil recovery, a technique that allows storage and production of incremental oil to provide a revenue stream and thereby address the twin challenges of energy security and climate change.

Key Recommendations

Recommendations put forward in the roadmap mainly focus on facilitating early-stage demonstration of CCS in the period up to 2020 and preparing CCS deployment in the coal-fired power plant sector in the medium to long-term. Key recommendations include:

1. Implementing 5–10 commercial-scale CCS demonstration projects in the coal-chemical sector and 1–3 projects in the coal-fired power plant sector
2. Announcing CCS enabling policies, including:
   1. a CO₂–enhanced oil recovery policy
   2. CCS–ready policy
   3. standard CO₂ off-take agreement
3. Adopting a fiscal and financial incentive program for CCS demonstration
4. Announcing the Ordos Basin region as a priority region for pioneering CCS demonstration and developing a CCS hub to realise cost reduction benefits from economies of scale and scope
5. Expanding existing environmental regulations to cover carbon capture, utilization and storage demonstration projects and develop management standards for CCS demonstration.

For the key recommendation, the roadmap is complemented with specific policy notes providing specific guidance for the adoption of proposed actions.

Looking ahead, ADB is now discussing with NDRC and its funding partners next steps in supporting large-scale demonstration in the PRC through support to front-end engineering and design studies, further capacity development, and CCS demonstration projects funding.

ADB welcomes feedback on its work to further improve and strengthen its support to its developing member countries. For any comments on this article and/or the roadmap, please contact Annika Seiler, Finance Specialist (Energy) Division, East Asia Department under aseiler@adb.org.

Back to Insights