2011-08-01   Source:WRIInsights

This piece originally appeared on ChinaFAQs.org.

China’s Climate Change Minister Xie Zhenhua offered a new phrase to emphasize the importance of technologies to reduce carbon in a speech at a major international conference on Carbon Capture and Storage (CCS) in Beijing, July 27.

Minister Xie said that China’s energy and environment policies support “energy efficiency and carbon reduction” (jieneng jiantan). This is a modification of the phrase used to support the national policy of “energy efficiency and pollution reduction” (jieneng jianpai), which addresses the broad range of pollutants. Based on a number of signals, including these phrases and the day’s speeches, it seems that China’s interest in CCS is increasing. These developments occurred at the conference sponsored by Xie’s own National Development and Reform Commission (NDRC) and the Asian Development Bank (ADB).

CCS Needs to Be One Climate Mitigation Option

Minister Xie said he’d been studying CCS closely and has been looking at projects and meeting with experts not just in China, but in his travels around the world. Based on these discussions, he said he recognizes that if there are going to be sizable reductions in carbon emissions by 2025, CCS will need to be one of the options considered. He said CCS is still in the experimental stage, and that China is supporting both CCS and Carbon Capture Use and Storage (CCUS) pilot and demonstration projects.

While there are a number of challenges, Minister Xie suggested perhaps the largest of these is finance. The fact that the conference is co-sponsored with the Asian Development Bank (ADB) and China’s Ministry of Finance is a supporting participant, suggests the key place of financing questions at this stage.

Two New CCS Projects Announced

Not only does China have several projects underway, but the conference was also the venue for Alstom Power to announce another two likely projects. Alstom Power is a global leader in the development of Oxyfuel coal-fired CO2 capture from power plants (for a description of oxyfuel see http://www.ccsd.biz/factsheets/oxyfuel.cfm), one of several technologies designed to enable CCS.

Vice President Gwen Andrews announced that the company is in discussion with China Datang Power to develop a 350 MW oxyfuel power plant in Daqing, Heilongjiang. The plant’s CO2 would be used for enhanced oil recovery (EOR), the most advanced of the uses considered as CCUS.

Andrews said that the deal would include IP sharing. She also said the two companies are in discussions about a second project, as well – a partial post-combustion capture project at a 1000 MW plant in Dongying, Shandong, near Sinopec’s Shengli oil field.

Minister Xie spoke about CCUS, and the Director-General of his Climate Change Department Su Wei emphasized that cost-effective uses are essential for China’s own projects. To look beyond these requires more discussion of international financing.

Minister Xie offered several recommendations for the direction of CCS development:

• Developed countries need to implement commercial demonstrations and support additional research and development (R&D).
• International knowledge sharing and capacity building should increase.
• Large-scale CCUS projects should be established and implemented in China. These require joint R&D with shared intellectual property (IP) with developed countries.
• A global CCUS development fund for developing countries should be established.
• CCUS needs effective international coordination, public support and understanding.

The ADB’s East Asia Department Director General Klaus Gerhaeusser noted that the ADB is supporting the Tianjin GreenGen IGCC plant that is expected to go on line within a year. He also said that ADB’s lending plans for this year include a Natural Gas Combined Cycle (NGCC) plant with CCS in the Beijing area, to be developed by the China Datang Corporation.

Challenges to CCS Development

In his remarks to the conference, Climate Change Director General Su Wei noted that there is a great deal of CCS technology research and development as well as pilots in China today (see http://www.chinafaqs.org/blog-posts/us-china-clean-energy-cooperation-an... for a summary of the current state of play in China). He described a number of challenges to address as research, development and demonstrations move forward, including:

• The costs – he noted both their uncertainty and their potential magnitude;
• The energy cost – the additional energy needed to capture and transport CO2;
• The need for further policy development;
• The need for more research on uncertainties, such as what the impact will be of large-scale storage; and
• Public acceptance.

Importantly, Alstom was also able to address one of the key questions that DG Su raised. Alstom Power VP Gwen Andrews said that demonstration projects in the field have shown the energy penalty for CCS is less than 20%, as compared to the 20-30% that DG Su suggested. She noted the technical questions are not prohibitive, that while capital costs are high, this is true of any new technology, and that they will come down as there is wider scale deployment. Storage experience is growing and governments can assist in this process by developing regulatory regimes. The major challenge she noted (as have others), is financing.

Potential Next Steps for CCS

To address these questions, DG Su recommended the following next steps for CCS in China:

• Strengthen R&D on the barriers, risks and impacts of CCUS and clarify its relationship to other technologies;
• Develop a Technology Roadmap. This includes work on standards and regulations and provisions for China’s own IP on the technology;
• Establish a task force to improve coordination among regions/sectors in implementing CCS projects and plan for medium and long term projects;
• Increase R&D on new utilization methods;
• Strengthen R&D on CCS technology and link to national/local/sectoral targets;
• Develop public awareness of CCS – China needs to research public views and get more information out to its public; and
• International Cooperation. There is a continued need for global knowledge sharing.

Overall, the mood of the conference was considerably optimistic for the technology. The real questions are those of financing. The major proposal for addressing the financing question is a proposal by the ADB and the Global CCS Institute to create a $5 billion CCS fund to kick-start CCS projects in developing countries.

Minister Xie’s speech, the first time we are aware of his speaking to a CCS conference, is important, but he used it to stress both the importance of CCS and the importance of an international financing regime for climate mitigation.