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International Workshop on Economics, Financing and Policies of Carbon Capture, Utilisation and Storage Kicks off in Guangzhou

On May 5th, the “International Workshop on Economics, Financing and Policies of Carbon Capture, Utilisation and Storage”, organised by the Department of Climate Change, National Development and Reform Commission (NDRC) and Global CCS Institute (GCCSI), was held in Guangzhou, China. Mr. Lu Xinming, Deputy Director of the Department of Climate Change, National Development and Reform Commission (NDRC), Mr. Brad Page, CEO of Global CCS Institute (GCCSI), Mr. Hong Jianwu, Director of Climate Change Division, Department and Reform Commission of Guangdong Province; and Mr. Ma Li, General Manager of South China Branch of China Resources Power, hosted the workshop and gave opening speeches.

The workshop discussed the economic status, commercial development models, and political issues involving CCUS projects, with the aim to promote China’s carbon capture, utilisation and storage pilot initiatives, support a healthy and orderly development of related industries, and reinforce communications among governmental agencies, enterprises, research institutions and related international organisations.

“Carbon capture, utilisation and storage (CCUS) is an emerging technology with a large-scale potential for greenhouse gas emission reductions. The United States, Canada, Australia, United Kingdom, and other countries have all carried out related technology research and development and constructed a number of demonstration projects”, Lu Xinming continues, “based on China’s national conditions, coal and other fossil fuels contribute the largest proportion to the energy mix, and China’s carbon emissions will continue to grow. In order to promote CCUS technology development in China, we need to take full account of the role, necessity and advantages and disadvantages as compared with other technologies before we move forward with policy decisions”. He further acknowledged that CCUS project constructions requires large amounts of initial investments, accompanied with difficulties in leveraging the finances. The Government could pursue the inclusion of the technology into the carbon trading market or CCER, provide tax cuts to pilot demonstrative projects, or prioritise the technology in the provision of economic incentives for power generation projects.

“Domestic regions and enterprises have carried out different types of carbon capture and storage demonstration projects. The Development and Reform Commission of Guangdong Province and the UK-China (Guangdong) CCUS Centre have done a lot of work in Guangdong to promote carbon capture, utilisation and storage pilot and demonstration projects. I hope that this workshop can result in some good policy proposals to provide reference points for the national Government on decision-making”, Mr. Lu stated.

Independent (and credible) projections forecast the world in 2040 to still heavily rely on fossil fuels as a substantial part of the energy, despite the unprecedented and expected surge in the deployment of renewable energy and energy efficiency projects. CCS is the only technology that can achieve large reductions in emissions from the industrial processes. Mr Brad Page admits that, “Governments such as those of the United States, Norway, Canada and now Japan, have led the world in developing and committing to supportive policies that have already enabled the industry to deliver successful CCS projects. Other nations such as the United Arab Emirates, Australia, China, and the Netherlands are set to join the move, all with large-scale integrated CCS projects either nearing operational status, or in the final stages of evaluation”.

In recent years, Guangdong has performed well on achieving its target of emissions reduction. Hong Jianwu asserted that, “Guangdong will exceed the state assigned emission reduction goal of 19.5%. Guangdong has proposed innovative energy and ecosystem solutions to allow the national carbon market to achieve sustainable development. Over the past two years, the unceasing improvement in the systematic delivery of the UK-China (Guangdong) CCUS Centre initiatives formed a fundamental platform for financing CCS research activities. This includes the Pearl River Basin and CRP’s demonstration project. Thus, I truly hope the US and UK could collaborate on near-zero emission technology innovations”.

Ma Li from CRP pointed out that China Resources Power always abides by the concept of green development, reflected by the development of Haifeng’s plant, first million-kilowatt full-capacity carbon capture ready feasibility research project, with its first phase put into operation in 2015. During construction, the company made an additional investment of 200 million Yuan to suppress emissions to below current state gas emissions levels. Supported by the Guangdong provincial government, Haifeng project was chosen for Guangdong’s first CCUS demonstration project. CRP retains its confidence in the project and will continue with its development.

GCCSI’s CEO Mr. Brad Page noted that in the current global context, fossil fuels remain an important part of the world’s energy structure, while CCS could make an immense contribution to reducing emissions. In addition to the power industry, CCS also has a role to play in the industrial sector, which accounts for 25% of global emission. Mr. Page maintained that a global total of 4 billion tons of CO2 needs to be stored and that CCS technologies could also be pivotal to emerging economies. The good news, he added, is that countries have submitted national reductions targets during COP21 in Paris, and CCS is expected to help restrain global temperatures within the 1.5 degrees target.

Presently, there are seven large-scale integrated CCS projects scheduled to be launched by 2017. These, combined with the 15 large-scale projects already in operation, would provide governments and corporations across the world with the confidence and insight to develop policies that would stimulate CCS investment at scale and across all industries involved. Just last month, we welcomed the launch of the Tomakomai CCS Project, and congratulated the Japanese Government on the successful completion of the country’s first integrated CCS facility. This was the first fully integrated project that utilised carbon capture, compression, transport, and geologic storage technology on a hydrogen production facility in the Asia Pacific region – an essential feat for demonstrating the growing range of applications for industrial CCS. Legal, regulatory, and policy incentives are equally as important as technical advancements. In the United States, the EPA’s latest policy has considerably promoted CCS applications, with Brazil and Mexico rapidly advancing in the CCS and CCUS field. In Europe, offshore storage projects have great potential for development. China is likely to become a global leader in CCS development; the Government had established the goal of constructing one million tons full-chain CCS projects and commercialise CCS applications in power plants by 2020.

Based on the obstacles that domestic demonstration projects encountered, Dr. Zhang Jiutian from the Administration Center of China’s Agenda 21 indicated that the project approval process is currently relatively complex, but CCS projects could refer to it. Compared with the other mainstream projects, CCS projects require special consideration in monitoring environmental impact factors. In practice, the legal authorisation of project approvals and the use of underground spacing remains unclear, with the uncertainties in attribution of responsibility of carbon storage project and other issues hindering the proper promotion of the technology.

“We need to improve national legal and regulatory framework, administrative regulations and departmental rules and regulations. At the start of the demonstrative activities, focus should be given to the exploration and development of safe, risk management laws and regulations. In the mid-term, emphasis should be placed on the promotion of investment and approval procedures, shifting to the sound commercialisation of CCS and improvement of relevant laws and project management in the longer term.

Appropriate structuring of CCS business models is of the utmost necessity and offers a significant boost for the development of the industry. CCS projects, at home and abroad, are hampered by funding gaps that could be bridged by the inclusion of CCS in carbon trading and supportive taxation policies. Reasonable CCS business models require long-term trial-and-error explorations, particularly in the technology, value, and industrial chains. Coordinating the interests of all parties in this process is also very important; there is a need to consider both corporate profitability and social responsibility goals. Potential business models include integrating capture, transport and EOR parties with others within an established chain consortium.

At the meeting, representatives from Shell, Yanchang Petroleum, Huangzhong University of Science and Technology (HUST), Guangdong offshore storage CCUS project, and Sinopec’s Zhongyuan Oilfield CO2-EOR project introduced their projects’ financial business models.

CCUS’s industrial policies are also crucial. China’s CCUS strategic positioning and related incentives and domestic CCUS policy, the influence of CCUS demonstration project development on China’s industrial transformation and upgrading, the Asian Development Bank CCUS financing models, and other key issues regarding the inclusion of carbon capture the storage within the national carbon market were also discussed. Last but no least, domestic and foreign experts provided suggestions on the construction of China’s CCUS and policy environment from project supporting viewpoints, the linkage of CCUS with the carbon market, and CCUS’s industrial development as well as the opportunity for the establishment of domestic and foreign co-financing programmes and other aspects of project financing.

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