Facing China's Coal Future - IEA

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Facing China’s Coal Future: Prospects and Challenges for CCS © OECD/IEA 2011 Technology Mechanism, would provide new opportunities for financing and incentives for CCS in China. The Durban Decision: a new window of opportunity for CCS Page | 54 Given the CCS potential in China and the technical work that has been done to date, China would clearly benefit from international mechanisms facilitating CCS development such as the CDM, the NAMA framework, the Green Climate Fund, and the Technology Mechanism. Based on cost data for CCS in China, carbon offsets (either through the CDM or NAMAs) could potentially bridge a much higher portion of the commercial cost gap in comparison to developed countries. Differing from a CDM framework, NAMA support may take the form of building capacity, overcoming financing barriers, reducing costs of implementing policies (e.g. feed‐in tariffs) and developing and demonstrating advanced technologies like CCS that are not cost‐effective today. The Green Climate Fund and the Technology Mechanism would support implementation of NAMAs and will be critical in facilitating CCS development and deployment in China as well as other emerging economies. Will CCUS projects meet the objectives of CCS? There is significant and expanding activity in the area of R&D into CCUS activities, with a growing number of pilot projects currently underway to provide technical knowledge, training and further research. Existing technical skills and experience with transport, EOR and other CCS‐related industries give China a significant competitive advantage in developing demonstration projects. China’s move towards CCUS is underpinned by some early experience with EOR and ECBM projects; however, safety, storage permanence and long‐term monitoring will be critical from the start, and doubts remain whether all such utilisation projects are going to meet the inherent objectives of CCS as a climate‐change mitigation tool. Determining the most efficient path for CCS technology development, while evaluating China’s context, and understanding the importance of timely action to meet rapidly accelerating carbon emissions is a near‐term priority. Next steps CCS development in China is critical for global GHG mitigation based on current scenarios. China is already engaged in an ambitious effort on CCS research, development and demonstration. It has the right conditions and political will to enhance these efforts provided that international support and global climate policy also expand. Box 6 Next Steps for R&D Building on existing work, China may benefit further from directing resources to priority R&D areas such as: ‐ Reducing efficiency penalty during capture; ‐ Assessing storage capacity; ‐ Assessing opportunities for CCS in industrial applications; ‐ Testing co‐benefits and costs of CCS‐EOR and CCS‐ECBM; and ‐ Implementing related pilot projects.
© OECD/IEA 2012 Facing China’s Coal Future Prospects and Challenges for Carbon Capture and Storage This would allow China to speed up technological development, position itself as a technology leader and achieve ultimate objectives of reducing costs of CCS. A focus on policy development conducive to CCS would be a way for China to explore domestic and international incentive mechanisms, facilitating the commercialisation and deployment of this technology. China could start with further evaluating the costs; reviewing fiscal and financial instruments, as well as legal and regulatory frameworks that would need to be adjusted and/or created for CCS. It could also explore how an emerging domestic carbon market could be structured to benefit CCS and other low‐carbon technologies. There are also several international mechanisms that could assist China in CCS policy development and implementation. The NAMA framework could be a vehicle for setting national CCS‐related GHG targets and receiving support through the mechanisms like the Green Climate Fund and private financing for achieving and over‐achieving them. CCS should not be considered in isolation: local and regional environmental, resources and economic considerations are also important in China. Additional analytical work, potentially done with international experts, could help clarify risks, costs and benefits further and suggest ways for addressing risks and challenges. Continued knowledge sharing, technical exchange and capacity building will be an important part of engagement on CCS in China. Page | 55
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