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China

Brief description:

ENERGY & CLIMATE CHANGE - POLICY AND PROGRESS

Background

China, a non-Annex 1 party within the Kyoto Protocol, is now officially the world's largest emitter of greenhouse gases. However, it is also one of the largest investors in "clean energy", pledging over US$55 billion in 2010. In its first national communication to the UNFCCC in 2004, it recorded estimated GHG emissions from 1994, but cited difficulty in obtaining data. There have been no further reports to the UNFCCC to date.

Working from Global Warming Potential values provided by the IPCC, China estimated its total GHG emissions in 1994 as 3650 million tonnes of CO2 eq, with CO2, CH4 and N2O contributing 73.05%, 19.73% and 7.22% of emissions, respectively. In that year, per capita electricity consumption – for a population of 1.20 billion – was 72.7kW. China currently produces about 50 per cent of the global supply of coal. Coal meets 70 per cent of its energy consumption, with 60 per cent used by the power sector. Read China’s initial UNFCCC national communication

A report in March 2011 by The Climate Group for HSBC concluded that China has ‘exceeded the expectations of the IEA’ for stabilising CO2 concentrations at 450ppm. However, Climate Action Tracker believes the country’s targets are inadequate to help reduce global emissions to below 44 billion tonnes of CO2 eq per annum by 2020.

China’s current Five Year Plan (2011-2015) for economic growth aims for a 7% increase in GDP coupled with the need to de-carbonise its coal-based economy. The government has set a carbon-intensity reduction target of 17% and intends to reduce energy intensity by a further 16% by 2015. While this means an increase in emissions from an estimated 7.02Gt to 8.17Gt, it represents a 1.05 Gt reduction on previous five-year plan estimates.

In February 2012, the IEA published a paper exploring the potential role of CCS in China's energy mix, which looks likely to include the fossil fuels well into the future despite strides being made in the use of renewables. Read the report, Facing China's coal future:prospects & challenges for CCS.

Issues and challenges

With around 1.3 billion people, China has the world's largest population. The country comprises 9.6 million square kilometres of land, 66% of which is mountainous or hilly. Rainfall is distributed unevenly across the country and this creates a shortage of water in some areas.

The impacts of climate change have been studied by Chinese scientists since the 1990s. The warming trend is the most obvious change, mainly affecting the northern, north western and north eastern regions. Several studies suggest that extreme heat events will increase, and the occurrence of droughts and flooding will rise. Climate warming will shorten the crop-growing period and increase the costs of agriculture practices. Food production will drop by 10% and yields for wheat, rice, and maize would all decrease.

Vegetation zones will move to higher latitudes or westwards, and models suggest a high impact from global warming on areas of permafrost, marshes, and deserts. Expected sea level rise would aggravate coastal erosion and inundate freshwater areas with sea water, affecting fresh water supplies, habitats and biodiversity.

A rapidly increasing population coupled with economic growth is already creating the challenge of meeting energy demand while attempting to rein in GHG emissions. China’s target of achieving a 10% share of the energy mix by non-fossil fuels, over the last five years, was hit by a larger-than-expected energy demand along with delays in developing hydroelectric and nuclear power. The share of oil and natural gas in China’s primary energy production increased from 19.5% in 1994 to 25.2% in 2000. However, the government is committed to meeting increasing energy demand, while reducing pollution, through a continued reliance on coal. In 2010, China was the world’s leading coal consumer, using 3.5 billion tonnes of coal.

China recognises the value of CCS in reducing emissions but the technologies have yet to demonstrate economic viability on a world stage. Therefore, China’s current 2011-2015 Five Year Plan does not include CCS specifically as one of its ‘clean coal’ technologies. Instead, the country’s New Energy Industry plan focuses on coal-to-gas, coal-to-liquids and IGCC technologies.

The principal factors affecting China’s future GHG emissions include economic development, population growth, increasing urbanisation and lifestyle aspirations, and the resulting increase in energy demand. The government faces the challenge of enabling the country’s overall growth while controlling GHG emissions. Its success or failure to do so will affect not just China but the rest of the world.

Government commitments and policy

Under the Copenhagen Accord, in 2011, China announced its intention to lower CO2 emissions per unit of GDP by 40-45% by 2020 compared to the 2005 level. It pledged to increase the share of non-fossil fuels in energy production to around 15% by 2020 and take renewable energy to 15% of the energy mix by the same year. More details in this UNFCCC document. China is yet to implement a CCS-specific policy.

The government intends to establish "low carbon zones" in eight cities and five provinces, and introduce a carbon pricing regime. There are also plans to establish some form of ETS in six major cities and provinces by 2013 and expand it nationally by 2015. In February 2012, the government confirmed that it was considering a carbon trading scheme to help cut GHGs and improve energy efficiency in public buildings.

In August 2011, China announced that it had raised development targets for renewable energies through to 2015. The country said it would now aim to have 100GW of on-grid wind power generating capacity by then - higher than its previous proposal of 90GW. Reuters story, August 2011. The country has established seven new Strategic Emerging Industries, including the clean energy sector, which is expected to enhance the future role of CCS.

In January 2010, the government established the National Energy Commission (NEC) to take charge of the country's energy policy. The commission is responsible for drafting national energy development plans, reviewing energy security and coordinating international cooperation. The NEC also coordinates efforts to meet China's CO2 emissions reductions target. The Department of Climate Change is responsible for policy relating to climate change mitigation. Both are overseen by the NDRC, which released a Climate Change Policy and Actions Annual Report in 2010.

China’s 12th Five Year Plan – which runs from 2011 to 2015 – has significant targets for low-carbon energy and energy efficiency measures, including a potential role for CCS. The country’s energy supply is already incorporating more non-fossil fuel sources, and low-carbon technologies are expected to develop rapidly. To achieve the goals of national poverty eradication and energy development in rural areas, the government has formulated a series of policies and measures for supporting the development of renewable energy. In order to meet its low-carbon energy targets, China is also increasing nuclear power production from 10GW to 40GW. Around 70GW will come from hydroelectric and between 13-33GW from gas-fired generation. Wind power is expected to generate 48GW.

However, there will be an additional 260GW provided by new coal-fired generation – and new power plants are not expected to be fitted with CCS. Overall, coal’s share of the energy mix will fall from 72% to 63%. The China Coal Cap, announced last year, recognises the need to reduce dependency on coal, with a cap on coal production at 3.8 billion tonnes by 2015. However, a continued reliance on coal will necessitate the use of CCS.

Investment in green technologies is now at the heart of China’s development strategy, and this has given business leaders the incentive to invest in the sector. It is also seen as China in a race with Europe and the US to capitalise on the development of economically viable clean technologies. The market is opening up to foreign companies, which is in turn sparking competition.

China is putting an emphasis on IGCC as a cleaner source of coal-derived power, and observers believe this will lower the price of these plants globally, in turn making CCS-ready plants more economically viable. The 12th FYP shows that China is looking at the economic benefits of addressing climate change. If CCS can be shown to be viable, it could play a key role.

Read The Climate Group’s analysis of China’s Five Year Plan.

Regulatory framework

Since 1992, the Chinese government has taken a series of actions and measures to try to achieve sustainable development, beginning with its Agenda 21, released in 1994. It has enacted numerous laws aimed at protecting natural resources and the environment. A key part of China’s industrial policy is to improve attempts to use energy and resources more efficiently, promote cleaner production practices and control industrial pollution.

There are no specific legal frameworks or policies on CCS.

CCS initiatives and funding

In October 2012 the World Bank provided funding for the appointment of a Foster Wheeler subsidiary as adviser to the Chinese government on the application of CCS nationally.

In August 2012, the Asian Development Bank announced that it was supporting China's moves to develop a CCS roadmap, which is expected to include plans for at least two large-scale CCS demonstration projects by 2016, with an installed capacity to capture at least 2 million tonnes of CO2 per year.

The Global CCS Institute's Global Status of CCS 2012 reported that five of nine new CCS projects identified in the past year were in China, with the country focusing on R&D followed by the roll-out of pilots and demonstration projects. As of June 2012, there were 11 large-scale projects under development by major state-owned power, oil, or coal companies in partnership with international companies.

In the next five-year period, private and public sector funding for science and technology R&D is set to increase from 1.7% to around 2.5% of GDP, in keeping with China’s global economic ambitions.  Carbon capture technologies are in line to benefit from this. In fact, the Ministry of Science and Technology has set out – in its 12th science and technology programme – goals to capture 300,000 tonnes per annum from coal to oil projects, and the generation of 35MW from the demonstration of oxy-fuel combustion.

According to the Global CCS Institute, there are around 20 CCS projects at some stage of development, mostly pilots and R&D. The most significant large-scale bids are being led by major state companies. State power giant The Huaneng Group is the biggest driver of CCS. It has two fully integrated post combustion capture pilots – in Beijing, in partnership with Australia’s CSIRO agency, and Shanghai – and construction has begun on its Greengen IGCC project south-east of Beijing.

China’s largest coal producer, the Shenhua Group, is leading a coal-to-liquids with CCS project in Ordos, Inner Mongolia. Another CTL project by Dow Chemicals and the Shenhua Group, at Yulin in the Shaanxi province, is at the feasibility study stage.

The two main challenges for the commercial roll-out of CCS in China remain the level of public funding and a lack of in-depth knowledge about potential CO2 storage sites. China has been eyeing the economic benefits of re-using CO2 – in the food and industry sectors – which could make CCS more commercially viable, but experts suggest that any large-scale use will require international co-operation.

CLEAN

The China Low-carbon Energy Action Network (CLEAN) is a non-government, not-for-profit organisation that brings together CCS professions working in southern China. It provides a knowledge-sharing forum, and members include research institutes and universities, energy economists, policymakers, and engineers from relevant industries – such as petroleum, chemical, geology, and energy.  It also aims to fast-track R&D, advise policymakers and encourage investment in CCS.

Lianyungang IGCC

In 2009, a US-China carbon management conference in West Virginia provided a forum for energy and technology experts to debate the role of IGCC and CCS in China and describe initiatives under way. The Chinese Academy of Science (CAS) has played a key role in IGCC R&D, and has been working with Jiangsu province to develop a clean energy innovation park featuring a 1200MW IGCC power plant with plans to incorporate CCS. A feasibility study was expected in mid 2011. The park would also include a petrochemical plant that would capture CO2 for use in EOR projects.

Storage potential

According to Gassnova’s CCS technology 2009 report, China has sufficient CO2 storage to cater for its own use and possibly other countries, such as Japan and South Korea. A preliminary assessment suggests there are 46 oil and gas reservoirs, that would provide storage for 10 billion tonnes of CO2. Sixty eight unmineable coal beds could provide for 12 billion tonnes of CO2 storage with methane recovery. And 24 saline aquifers may potentially store 3 billion tonnes of CO2. A number of initiatives are under way to explore this (see below) but much work remains to be done before China can fully exploit its storage potential.

International co-operation

The government considers international cooperation as crucial in tackling climate change, and it has taken part in exchanges with various countries and organisations. With support from the UN's global development network, the World Bank and the Global Environment Facility, it has implemented a number of energy efficiency, conservation and renewables projects. The UNFCCC and the World Bank have funded China to carry out a Climate Change Technology Needs Assessment (TNA), with a report due in 2014-15. 

China's Department of Climate Change entered into an MoU with GCCSI in March 2012, which created a framework for a range of activities aimed at accelerating CCS in China.

In early 2011, the US and governments signed a 'new era' agreement to set up the US-China Clean Energy Research Center (CERC). The public-private partnership – with funding from both countries of $150 million –  includes research 'consortia' that will focus efforts on clean technologies, including CCS. Each consortium is led by a research institution, with the World Resources Institute focusing on advanced coal and CCS. As the top two coal consumers in the world, both countries hope to benefit significantly from the collaboration.

This was followed in early 2012, by the announcement that Duke Energy and the China Huaneng Group had signed a three-year agreement to continue research into advanced coal and CCS technologies. The study was to focus on applying Huaneng Group’s low-cost carbon capture process at unit 3 of Duke Energy’s Gibson Station in Indiana.

In August 2012, there were media reports that oil giant Sinopec Group and an assortment of Chinese banks were in talks over investing up to $1 billion in the US' Texas Clean Energy Project - which would be one of the biggest investments by a Chinese company in the US power sector.

Three clean energy technology projects resulted from the 2009 agreement between NETL, the Pacific Northwest National Laboratory (PNNL) and CAS, which was showcased at the 2009 US-China conference mentioned above. The resulting Clean Energy Partnership agreed to undertake the projects over five years. One concerns the conversion of an EOR site at China’s Jiangsu oilfield into a CO2 storage site. Other geological sites in China also will be evaluated to provide better understanding of the challenges and costs of deploying CCS in China. The other two projects related to gasification of biomass and converting synthetic gas into natural gas.

In 2009, a $2 million three-year programme to explore large-scale CO2 sequestration in saline aquifers in China was set up by Stanford University's Global Climate and Energy Project, in the US, in collaboration with the University of Southern California, Peking University and China University of Geosciences. The project intended to identify the best approach to developing safe and secure methods for CO2 storage in China.

China was one of the nations that formed the Asia-Pacific Partnership (APP) on Clean Development and Climate in 2006; the other countries being Australia, India, Japan, South Korea, Canada and the US. The group identified 13 project proposals for exploring clean coal and gas technologies. APP concluded its work in early 2011, with a number of its projects continuing and/or being transferred to other agencies. As part of the APP, Australia's science agency CSIRO joined China United Coalbed Methane Corporation (CUCBM) to progress an AUS $10 million project to demonstrate CO2 storage with enhanced methane recovery. The research was supported by the Japan Coal Energy Centre, JCOAL as well as funding from the Chinese and Australian governments. 

The Asia Coalition for Climate and Energy (ACCE) is a joint industry agency with members from China, Hong Kong, South Korea, Taiwan and Japan. It was set up to facilitate the deployment of sustainable fossil energy and cutting-edge renewable energies. ACCE is also a stakeholder of the international Carbon Sequestration Leadership Forum and the Zero Emissions Platform (ZEP). The next meeting of the coalition is due to take place in Beijing, China, in August 2011.

More information

The Climate Group report on China’s 12th Five-Year Plan

GCCSI blog on China’s CCS progress, February 2011 

Carbon capture and storage in China, publ by Germanwatch, 2009 


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