The Role of Carbon Market in Promoting Carbon Capture, Utilisation and Storage in China
On September 2nd, The Role of Carbon Market in Promoting Carbon Capture, Utilisation and Storage in China was held in Beijing. The meeting was hosted by Tsinghua University National Carbon Market Research Centre, National Centre for Climate Change Strategy and International Cooperation (NCSC), Beijing National CCUS Centre, and UK-China (Guangdong) CCUS Centre. A number of government officials, experts from carbon market and carbon capture and storage (CCS) field and business representatives attended the meeting. They discussed the role of carbon market in promoting low-carbon investment in post-Paris Agreement period, and ways to overcome obstacles of CCUS fitting into carbon emissions trading system in China.
Mr. Zhaoli Jiang, deputy director of the NDRC Climate Change Department, said in his opening remarks, "China has made promise to peak emissions in 2030. In addition to improve the energy efficiency of industry and daily life, we need to control the growth of CO2 in some other areas, especially through CCS.”
"The development of CCS in China needs more attention in technical and economic feasibility, which is the rationality of its application in developing countries as well as in large-scale." Mr. Jiang believed that if CCS is feasible, it would play a more important role in "13th Five-Year", "14th Five-Year" period and the 2030 carbon emissions control in China.
Mr. Junfeng Li, Director of NCSC, stated that 60% to 70% of energy in China is generated by coal. Even if it would be reduced to 35% to 40% according to the national plan, the amount of coal utilization would still be huge. Thus, promoting CCS technology was significant in controlling greenhouse gas emissions in China and around the world.
“The discussion on promoting the development of the CCUS in carbon market between CCUS experts and experts in carbon market MRV could help to push forward the introduction of policy by National Development and Reform Commission. The government is actively formulating policies to promote low carbon and energy transition. CCUS is one of the new technologies that align with our innovation requirements,” said Mr. Li.
“CCUS and carbon trading are important elements in the next ten years in China’s low carbon transition. Firstly, a major move in China is the establishment of a national carbon market next year,” the British Embassy Climate Counsellor Mr. Neal Carlin said, “we have witnessed the great progress of CCUS development in China. The Commission also published the Chinese CCUS Roadmap on Paris Summit last year. I am honored that the UK could help to promote the establishment of the Beijing CCUS Centre. We’ve also supported the development of CCS and coal chemical technologies in Sichuan, which made a great contribution to the research of CCS.”
Similar as China as a major fossil fuel user, Australia is also facing the challenge of low carbon energy transition. The Australian Embassy Counsellor Mr. Ben Jarvis said CCS and carbon markets were important areas for cooperation between China and Australia regarding the energy and climate change policy aspects. Carbon market and carbon pricing were important tools to support the development of CCS.
“We are cooperating with the NDRC and NCSC to launch some greenhouse gas accounting system and develop the method of measuring and calculating oil and gas, coal and oil refining industry emissions. We have researched with the NDRC and Tsinghua University on greenhouse gas reporting system. With respect to the design of the carbon market, we think the rules should be clear, consistent and transparent,” Mr. Jieming Jia said, “We should pay more attention to storage. Technical data are often owned by major oil companies. I hope that policy makers can use better methods to push these companies to share their data. Australia and China will continue to work closely together to reduce our coal dependence."
As Asian Development Bank Energy Technology Consultant Mr. Yongping Zhai said, he was most concerned about the project popularization, emission reduction effect and innovation. This applied to CCS as well. ADB supported CCS technology and the Shanghai and Guangdong CCS Centre for Excellence. He believed that the broad market, complete industrial chain and strong scientific foundation in China could bring hope to the reduction of CCS cost.
“The most important aspect of the whole process of CCUS is its economic viability, and in fact this issue can be directly addressed through carbon pricing," said Tim Yeo, former UK Energy and Climate Change Minister.”
Last year in December, Paris Agreement made adjustments to climate change action after 2020.
However, the University College London professor and Electricity Regulatory Commission Chief Consultant Dr. Michael Grubb believed that countries were not ready to meet their specific goals set in the agreement. It is impossible to meet the goals if CCUS technology cannot achieve large-scale commercialization.
According to Prof. Grubb, the most ambitious proposal and regulation in the Paris Agreement on the market mechanism is a new transfer mechanism. In fact, the carbon market is not able to support the CCS entirely through the market. There is also a need for very strong carbon pricing. If the price of technologies with high environmental cost was raised, the market would be able to choose cleaner technologies, which is the goal of carbon pricing.
“In the design of the carbon market, it is recommended to set a price range in the cap-trade trading system or set different prices for different sectors. In fact, the carbon market has two functions, on one hand, it provides funding; on the other hand, it builds confidence for investors on the reliability of the carbon market. This will bring enough time and the corresponding funding and infrastructure to promote technology innovation.”
In 2017, before the kick-off of the national carbon market, there were 7 regions in China that carried out a pilot carbon trading. Prof. Maosheng Duan, the director of Tsinghua University National Carbon Market Research Centre, said that the design was different between the 7 carbon markets, such as the service industry was covered in pilot cities. At the same time, they learned the lessons from the EU system in the allocation of quotas. They used intensity method based on the enterprises’ actual production for allowance allocation, which is suitable for the conditions in China.
With respect to the design of the national carbon market, the current plan was to take a top-down approach to build a new system. From legal aspect, the market regulations have been incorporated into the legislative regulations of the State Council in 2016. Uniform rules would be designed for all regions. The central government was responsible for the design of the entire system, and the provincial DRC was responsible for the implementation of the relevant management rules with flexibility. In the implementation period, comprehensive measures would be used to promote performance, such as the current construction of the national credit system.
Dr. Xi Liang, the Secretary General of UK-China (Guangdong) CCUS Centre and Director of Centre for Business and Climate Change at University of Edinburgh Business School, and Professor Qianguo Lin, the Global CCS Institute China representative and professor of North China Electric Power University, introduced briefly about “Including CCS in Carbon Market” project supported by Guangdong provincial DRC and the British SPF.
Dr. Liang said, “CCS has an important role in low carbon development, energy saving and emission reduction. CCS is an important technology for China." He said, incorporating CCS into the carbon market would build confidence for the CCS industry. We could consider the establishment of a set of CCS transport and storage certificate mechanism. To promote the development of CCS, the transfer of "utilisation" to "emission reduction" could mobilize enterprise enthusiasm. He hoped that the carbon market will become the core of the emission reduction mechanism; and the use of carbon market to support CCS will be significant and realistic.
Professor Lin introduced the development of CCS in China from the aspects of space, time and economy. He believed several issues should be considered for the integration of CCS into the commercial development: project development of the main body, the project boundaries, measurement and validation as well as the core foundation. There are different challenges for incorporating CCS and CCUS into the ETS with regards to measurement and verification because of different capture, transport and storage technologies. Capture projects and transportation projects are relatively simple while storage projects are fairly complex.
As he said, China had the relative superiority in managing the integration of CCS into ETS. Coordination between different provinces is critical to solve problems in carbon dioxide emissions migration, project management, responsibility and long-term risk measurement and verification problems.