PESD releases new working paper on the real drivers of carbon capture and storage in China and implications for climate policy

PESD researchers Richard Morse, Gang He, and Varun Rai offer a unique analysis of China's carbon capture and sequestration efforts, which are now widely viewed as critical for stabilization of the global climate. They argue that China's energy security interests are the primary drivers of current CCS projects. Contemplating CCS at scale in the Chinese context, they argue that Chinese energy markets present special obstacles for deploying CCS in China and offer insights into how international climate policy can engage this crucial problem.

Appeared in PESD Working Paper Series, August 27, 2009

AUTHORS
Richard K. Morse - Research Associate at PESD
Varun Rai - Research Fellow at PESD
Gang He - Research Associate at PESD

The capture and permanent storage of CO₂ emissions from coal combustion is now widely viewed as imperative for stabilization of the global climate. Coal is the world’s fastest growing fossil fuel. This trend presents a forceful case for the development and wide dissemination of technologies that can decouple coal consumption from CO₂ emissions—the leading candidate technology to do this is carbon capture and storage (CCS).

China simultaneously presents the most challenging and critical test for CCS deployment at scale. While China has begun an handful of marquee CCS demonstration projects, the stark reality to be explored in this paper is that China’s incentives for keeping on the forefront of CCS technology learning do not translate into incentives to massively deploy CCS in power plant applications as CO₂mitigation scenarios would have it. In fact, fundamental and interrelated Chinese interests—in energy security, economic growth and development, and macroeconomic stability—directly argue against large-scale implementation of CCS in China unless such an implementation can be almost entirely supported by outside funding. This paper considers how these core Chinese goals play out in the specific context of the country’s coal and power markets, and uses this analysis to draw conclusions about the path of CCS implementation in China’s energy sector.

Finally, the paper argues that effective climate change policy will require both the vigorous promotion and careful calculation of CCS’s role in Chinese power generation. As the world approaches the end of the Kyoto Protocol in 2012 and crafts a new policy architecture for a global climate deal, international offset policy and potential US offset standards need to create methodologies that directly address CCS funding at scale. The more closely these policies are aligned with China’s own incentives and the unique context of its coal and power markets, the better chance they have of realizing the optimal role for CCS in global climate efforts.