CCUS in China: Essential for Achieving Carbon Neutrality
Since Beijing's pledge to decarbonize in 2020, China has taken various actions and measures to help achieve its 30-60 emission goals, focusing on renewable energy development and energy efficiency improvements. CCUS requires extensive research and development resources and capital expenditure, which require a longer period of development. As an integral approach to achieving carbon neutrality (rather than a core strategy for achieving carbon emission peak), CCUS technology and business models have received great attention. However, it will be developed more after 2030 (especially after 2040), with greater market opportunities.
The Annual Report on Carbon Dioxide Capture, Utilization, and Storage in China in 2021 indicates that China's emission reduction needs for CCUS are: 0.02~408 billion tonnes in 2030, 0.65~1.45 billion tonnes in 2050, and 1.02~1.82 billion tonnes in 2060. A recent report by the Ministry of Ecology and Environment(MEE) indicates that China must achieve a capacity of 500 million tonnes/year of CCUS to achieve the Paris Agreement target of 2°C temperature control by 2060. The current capacity of CCUS projects in China is approximately two million tonnes, which necessitates long-term development planning and substantial financial support.
CCUS Applications in Different Industries
In the global action plan to address climate change, CCUS occupies an irreplaceable strategic and technological position, but different industries vary in utilization, feasibility, and costs. In China, CCUS is still in the R&D and pilot utilization phase. Thermal power + CCUS is the focus of the current CCUS pilots' development in China to effectively promote clean power under the carbon neutrality target while ensuring that the power system remains flexible. Early demonstration projects are mostly in the petroleum and chemical industries due to high emission concentrations, lower energy consumption for capturing, and lower investment and operation costs.
In China, CCUS technology is still in the R&D and demonstration phases, mostly carried out by state-owned energy companies and applied in coal power plant emission reduction and oil/gas recovery, e.g., CO2-enhanced oil recovery (CO2-EOR), and CO2-enhanced coalbed methane (CO2-ECBM). The Annual Report on Carbon Dioxide Capture, Utilization, and Storage in China in 2021 reveals that approximately 40 CCUS demonstration projects are in operation or under construction in China, with an annual capture capacity of 3 million tonnes.
There are three categories of CCUS emission reduction technologies: 1. Traditional CCUS technologies and negative emissions technologies (NETs), also known as Greenhouse Gas Removal (GGR) technologies (mainly used in fossil fuel power plants and secondary industries, with capture technologies vary by the CO2 concentration from the emission source) 2. Bioenergy with Carbon Capture and Storage (BECCS) 3. Direct Air Carbon Capture and Storage (DACCS).
BECCS primarily refers to the conversion or combustion of biomass to recycle CO2. For instance, capturing and storing carbon dioxide by obtaining biomass bioenergy (e.g., photosynthesis). Energy is extracted in useful forms (electricity, heat, biofuels, etc.) as the biomass is utilized through combustion, fermentation, pyrolysis, or other conversion methods. BECCS can be viewed as a biomass power plant equipped with CCUS.
CO2 is captured and stored by DACCS with higher costs as this method requires higher purification costs since the CO2 content in the air is too low compared to industrial exhaust gas.(please refer to the China Policy Perspective - March 2021 Issue for an overview of CCUS processes and technologies).
China Actively Developing CCUS Industrial Clusters
Demonstration CCUS projects under construction or operation in China focus primarily on CO2 capture and oil recovery in the petroleum, coal chemical, and power industries. CNPC's Jilin Oilfield EOR project is the only Chinese project among the 21 large industrial CCUS projects operating worldwide and the largest EOR in Asia, with a cumulative storage capacity of 2 million tonnes of CO2. In July 2021, Sinopec officially commenced construction on China's first million-tonne CCUS project: the Qilu Petrochemical-Shengli Oilfield Project.
The captured CO2 must be transported to the utilization sites. For example, CO2 -EOR, and CO2 -ECBM projects require transportation to the storage sites (oil and gas fields). These can be transported by tanker truck, pipeline, or ship. The benefits of pipeline transmission include high continuity, high safety, and the ability to transport at large scale and over long distances, but due to geographical limitations, pipeline transmission technology is still at a mid-term trial stage in China. Tanker truck transportation and shipping have been put into commercial applications.
Currently, China is capable of designing large-scale onshore pipelines and is actively developing relevant standard specifications to increase transmission capacity. Yet China lacks the necessary expertise and technology to develop offshore subsea pipelines to transport CO2. The cost is 40%-70% higher than onshore pipelines, so it is still in the R&D stage.
Geographically, there are three types of storage: terrestrial saline aquifer sequestration, sea-bed saline aquifer sequestration, and depleted oil and gas reservoir sequestration. Currently, China has enough storage capacity available to meet its entire CCUS demand. According to McKinsey, China has a total capacity for saline aquifer sequestration equal to 50-70 times that of the total demand for CCUS. Contrary to oil/gas recovery projects, storage does not bring economic benefits, and the cost of using NETs (negative emissions technologies) is high, which calls for improved policy incentives and supporting measures.
In 2015, the National Energy Group(NEG) completed the scale demonstration of its Ordos Saline Aquifer CO2 Storage Project (10,000 tonne/year CO2 storage), reaching the group's overall storage target of 300,000 tonnes. NEG's Shenhua Guohua Jinjie power plant commenced construction of a 150,000 tonne/year post-combustion CO2 capture and storage entire process demonstration project in 2019, which will become the largest CCUS demonstration project for coal-fired power plants in China upon completion. The project intends to capture CO2 for saline aquifer sequestration.
In July 2021, Sinopec officially kicked off the construction of China's first million-tonne CCUS project (Qilu Petrochemical - Shengli Oilfield CCUS Project). According to The Annual Report on Carbon Dioxide Capture, Utilization, and Storage in China in 2021, the Songliao Basin has a large potential for CO2-EOR application and shall be the prioritized area for project implementation along with the Bohai Bay Basin, Ordos Basin, Junggar Basin, and Tarim Basin.
China to Accelerate Research & Development of CCUS Technologies
The utilization of CO2 after capture is also an important part of the CCUS value chain and more economically viable than sequestration technology. From the perspective of the application method, it can be divided into two categories: CO2 direct utilization and CO2 conversion. As a result of CO2's static chemical nature and complex reaction pathway, a suitable catalyst is essential for a technological breakthrough. Unlike the previously-mentioned geological utilization addresses technologies, such as CO2 oil/gas recovery, the CO2 utilization in chemicals relies on its conversion to inorganic chemicals (e.g., urea) and organic chemicals(e.g., syngas, alcohol, etc.).
CAS: Gasoline Production from CO2
On March 4, 2022, the Dalian Institute of Chemical Physics (DICP) under the Chinese Academy of Sciences (CAS) and Zhuhai Futian Energy Technology Co. jointly launched the world's first pilot plant for CO2 hydrogenation for gasoline production, with a capacity of 1,000 tonnes per year. The project has produced clean gasoline products that meet the China VI standard.
- Developed stable catalysts for mass production
- In CO2 catalytic conversion, CO2 hydrogenation produces gasoline and water, gasoline combustion produces CO2, and water electrolysis also produces hydrogen, i.e., every tonne of gasoline produced consumes 4.3 tonnes of CO2, 0.6 tonnes of hydrogen, and 0.3 tonnes of by-product light hydrocarbons.
- With this technology, 95% of carbon dioxide and hydrogen can be converted into gasoline, meeting China VI standards.
CCUS Development Requires Clear Positioning and Policy Support
According to The Trend Analysis of China CCUS Technology Development, the amount of CO2 sequestered by CCUS technology in China will continue to increase, reaching 20 million tonnes in 2025 and 97 million tonnes in 2050, with a compound annual growth rate of 16.8%. CO2 treatment by CCUS technology will increase output value by CNY 39 billion by 2025, then climb to CNY 570 billion by 2050 (corresponding to a unit carbon emission price of CNY 587.6 per tonne), with a compound annual growth rate of 11.3%.
R&D cycles for CCUS are long and require financial assistance and policy incentives. The development of CCUS is currently facilitated by funding from government and public sources, national incentives, taxation, compulsory emission reduction policies, and carbon trading. From 2020 to the present, China's CCUS policies have been mainly focused on broadening funding channels, as summarized in the following table.
Time |
Relevant Authority |
Policy |
Impact |
Jul 2020 |
People's Bank of China, NDRC, China Securities Regulatory Commission |
China Green Bond Endorsed Project Catalogue (2020 version) |
CCUS is included in the Catalogue, expanding projects' financing channels |
Mar 2021 |
National People's Congress |
The Outline of the 14th Five-Year Plan (2021-2025) for National Economic and. Social Development and Vision 2035 of the PRC |
Proposed to carry out demonstration projects of CCUS |
Mar 2021 |
State Council |
The Guideline to Accelerate the Development of a Green and Low-carbon Circular Economic Development System |
Accelerate the implementation of CCUS projects |
Jun 2021 |
NDRC |
The Notice on the Reporting of the CO2 Capture, Utilization, and Storage (CCUS) Projects |
CCUS projects summary and information collection |
Nov 2021 |
People's Bank of China |
PBOC Officially Rolls Out New Lending Tool for Carbon Reduction (Monetary Policy) |
Expanding the financing channels for projects across the CCUS value chain |
China should scale up CCUS demonstrations and industry clusters and accelerate the commercialization of CCUS by incorporating CCUS into the project catalog for industrial and technological development. As a reference, the U.S. Section 45Q tax credit (the world's most advanced CCUS incentive) provides favorable financial assistance to CCUS facilities. The California Low Carbon Fuel Standard and the European Innovation Fund of the EU present opportunities to reduce CCUS project costs and drive speedy distribution. In parallel, China should develop a comprehensive system of construction, operation, regulation, and decommissioning/termination standards.
Written by the GL Consulting team (Mysteel's consultancy arm on energy transition): glconsulting@mysteel.com
Edited by Nickey Fu: nickeyfu@mysteel.com
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