Facing China's Coal Future - IEA

© OECD/IEA 2012 Facing China’s Coal Future
Prospects and Challenges for Carbon Capture and Storage
including IGCC, a key CCS application. Relevant projects that have received financial support from
local government include GreenGen in Tianjin Municipality, the Shenyang IGCC project in the
Shenyang High Tech Industrial Development Zone and the Dong Guan IGCC project in Dong Guan
(Hart and Liu, 2010).
Domestic bank loans
Like many sectors in China, the banking sector is under transition from centrally planned to
market‐oriented, and banks range from publicly owned to hybrids. China Development Bank
(CDB), a wholly state‐owned bank with a mandate to advance China’s national interest, plays an
important role in the energy sector (Downs, 2010). In 2010, CDB, with double the assets of the
World Bank, provided over USD 35.5 billion in low‐interest loans to Chinese companies for clean
energy projects, which constitute about 28% of all CDB lending. Many of the loans were in
support of expanding China’s manufacturing and production base, which will help push down
technology costs for domestic use and enable more competitive exports.
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Given financing for demonstration projects to date, China’s state‐owned banking system has
demonstrated willingness to lend to CCUS projects, which is significant, particularly, as few banks
globally have been willing to lend to CCS‐related projects. For example, domestic banks provided
USD 195.5 million (representing 47% of project costs) to finance GreenGen’s Phase I and are
expected to participate in the second and third phases, which include CCUS. Future CCUS projects
supported by the central government are likely to be viewed favourably by state‐owned domestic
banks for financing support, as they actively promote Chinese government policy.
Domestic carbon markets
In 2013, China plans to launch a domestic carbon market to help meet its 2020 carbon intensity
targets: ‐ 40% to ‐ 45% by 2020 compared with 2005 levels and a 17% reduction over the 2011‐15
period. Targets for individual provinces have been allocated and the government has been
exploring sectoral cap‐and‐trade schemes to help meet these goals, but there is still debate
among experts and industry regarding their design (World Bank, 2011). Domestic trading
platforms will be included in three major exchanges, in Beijing, Shanghai and Tianjin, and seven
pilot carbon market regions have been chosen: the provinces of Guangdong and Hubei and the
cities of Shenzhen, Beijing, Chongqing, Shanghai and Tianjin (Stanway, 2011) Possible sectors for
pilot projects are likely to include coal‐fired power generation (for which CCUS could be eligible)
(Jing, 2010). Demand for domestically generated carbon credits could open significant CCUS
project opportunities.
China’s state‐owned enterprises and international private capital
China’s industrial sector uses about 70% of total energy, with much of it concentrated among
about 1 000 state‐owned enterprises. Therefore government sustainability directives for clean
energy and carbon‐capture technologies can be relatively quickly deployed. Moving beyond R&D
investments, large CCS projects would require larger additional pools and funds for CCS directed
by state‐owned enterprises (SOEs). As costs for deploying CCS in China are still unclear, and may
vary from low‐cost early opportunity industrial projects to more expensive projects in power and
industry, select SOEs may be directed by agencies with authority over these sectors to stimulate
development and deployment in specific CCS applications. As SOEs develop their plans for
strategic investments in line with government policy, costs related to deployment of CCS must