Latest Articles by He Gang

China, climate change and the equity principle

CS Kiang, Gang He — Wed, 19 Dec 2007 11:14:00 +0000

Climate-change policy in China has reached a critical moment. A new, equitable form of development that takes global warming into account could be the nation’s gift to the world, say He Gang and CS Kiang.

Since the industrial revolution, people have followed a model of development that relies on large-scale consumption of fossel fuels. These fuels are non-renewable and their use has produced a terrible side-effect in the form of climate change. This western model of economic growth is unsustainable. If China is to take a leading role in tackling global warming, it should find an alternative model for humanity to follow. A core idea in traditional Chinese thought is “unity between heaven and man, between knowledge and practice”. When applied to climate change, this suggests we need to create a new model of development, which achieves harmony between man and nature. This will be China's contribution to the world.

In dealing with climate change, China should continue to apply the principle of equity. The twenty-first century should not be the American century or the Chinese century: it should be the century of equal coexistence. Global warming, however, threatens this possibility. China cannot isolate itself from the rest of the world any more other countries can isolate themselves from China. China needs a world that develops peacefully, and the world needs a China that develops sustainably. In facing up to the challenge of climate change, China and the rest of the world need to communicate and act together on an equal basis. In this, the equity principle is key.

Climate-change policy in China has reached a critical moment. Domestic and foreign opinion demand the country takes positive, substantive steps to tackle global warming. China's leadership needs to be founded on the rigorous implementation of the principle of “common but differentiated responsibilities”. Faced with pressures at home and abroad, will China continue to allow developed countries to lead it around by the nose? Or will it take positive, strategic action to break the encirclement in which it finds itself? We offer the following, simple remarks in the hope an ensuing discussion may lead us to greater things.

Multiple mechanisms

Writing about the recent UN-led climate-change conference in Bali, Maurice Strong, former secretary-general of the 1992 United Nations Conference on Environment and Development, said that the conference would kick start the post-Kyoto process. The international community will enter an era of “processing”, when China will continue to adhere to the dual-track programme of the UNFCC and Kyoto Protocol. But China should also take the initiative in establishing bilateral and multilateral mechanisms to supplement the dual-track approach. They could even become an important driving force in implementation. The basis for all of these mechanisms, which are listed below, must be the principle of equity.

• A multilateral D6 mechanism: the six largest developing nations, China, India, Brazil, Mexico, South Africa and Indonesia, could meet in the same way the G8 group of developed nations currently do. Through the G8+5, China, India, Brazil, South Africa and Mexico already meet with developed countries for talks on climate change. However, a D6 group would provide a platform for closer communication and cooperation between developing countries, which would put them in a better position to pursue their interests in talks with developed nations.

• Dialogue between China and India: the International Energy Agency estimates China and India’s combined emissions accounted for one-third of the total increase in global emissions in 2007. Cooperation and agreement between the world’s two largest developing nations is vital for negotiation and collective action on climate change.

• Bilateral mechanisms between China and Europe; China and the US; and China and Australia: a partnership between China and Europe would focus on strengthening cooperation on climate change, energy issues and encouraging sustainable development. The US is still the world’s biggest emitter and is not signed up to Kyoto, but there have been recent positive changes in domestic climate-change policy. Australia has just signed the Kyoto Protocol. Bilateral partnerships between China and the US, and China and Australia, would open up new possibilities for cooperation on climate change.

Taking the initiative

In previous climate negotiations, China has insisted on retaining its status as a developing nation, and the demands that go with this. The government has emphasised the principle of “common but differentiated responsibilities” and the issue of historical emissions. It has also drawn the important distinction between the emissions that China creates to survive and develop, and the west’s “luxury” emissions. The issue of taking joint responsibility for exported emissions has also received recent attention. These are all issues that the principle of common but differentiated responsibilities needs to take into account. But what if the Chinese government were to alter its principally defensive stance? It could start to take active, strategic steps to change the current situation, where the country reduces its emissions, but is still criticised. The country could win greater understanding, respect and support from the international community.

An active strategy would require recognition of two points: firstly, tackling climate change is an important opportunity for China to find a sustainable development path. Reducing energy consumption and emissions will help China achieve a low-carbon society and develop both quickly and sustainably. Secondly, China must seize the diplomatic initiative to create an image of itself as a responsible power. There are many who believe in concepts such as the “China threat” and “value-oriented diplomacy”, an active and exemplary climate-change stance from China would provide an effective riposte to them.

It is also necessary to look at the core issues in climate-change policy: mitigation, adaptation, technology and finance. Equity is central to all four, and we argue that China should be more active, flexible and strategic in its approach to global warming.

Mitigation targets

Climate-change mitigation is the most urgent of all the steps China can take. The country's eleventh Five-Year Plan contains a number of restrictive targets. By 2010, for instance, China’s energy consumption per unit of GDP should be around 20% lower than in 2005. Emissions of major pollutants (excluding greenhouse gases) should be reduced by 10%, and 10% of the country's energy should come from renewable sources. The eleventh Five-Year Plan on environmental protection has added emphasis regarding climate change. The State Council passed legislation specifically requiring reductions in energy consumption and emissions (known as the “three plans” and “three laws”). These are all positive contributions from China.

But a problem still needs to be solved: how do we turn political pressure into specific and effective action? China needs to think seriously about its long-term plans for cutting emissions and come up with suitable strategies for reductions. The EU has set a target to reduce emissions to 20% below 1990 levels by 2020, and individual European countries have set their own emissions reduction targets. Specific reductions targets are an effective method of reducing emissions.

China should also create emissions reduction plans, which could, for instance, come into effect when per-capita emissions reach a certain level. This would increase the transparency and predictability of the policy-making process and be an important step towards establishing a responsible image. However, common but differentiated responsibilities must continue to be the guiding principle.

Adaptation at home and abroad

China is a large farming nation, and climate change has a strong impact on agriculture. For vast areas of China that are impoverished and have fragile ecosystems, global warming presents some particularly daunting challenges. Thirty-eight percent of Chinese GDP comes from exports, and research shows that exports are responsible for 23% of China's emissions. The effects of climate change on China are huge, and many of the steps that the country wants to take to protect the environment – such as increasing forest cover to 20%, as slated in the eleventh Five-Year plan – may be all the harder to achieve because of these impacts. China needs to adapt to climate change.

At the same time, poor African nations and small island states are suffering the most as a result of climate change. As China seeks its resources in other parts of the world, it should combine adaptation to climate change with ideas of local sustainable development, development of resources and local economic growth. This is a requirement of an equal and mutually-beneficial relationship and also a sign of responsibility as a large country.

Technological cooperation

Whether to slow or to adapt to global warming, technology is vital. In its current stage of development, China needs technology that can provide breakthroughs in energy- and carbon-intensive, highly polluting industries like the chemical, steel, and concrete sectors. Technology is also required to make advances in energy efficiency, renewable energy, hydrogen fuel cells, clean coal and carbon capture and storage. In tackling climate change and reducing emissions, technology is not a solution in itself, but it is the most important means to a solution.

There are various methods of using technology to alleviate and adapt to climate change: technology diffusion, technology deployment, technology transfer, technology development and joint technology development. We need to apply these methods to each specific industry and technology as appropriate, according to demand and stage of development.

Many technologies can be attained from developed countries. There are still some problems to be resolved concerning intellectual property rights and trade barriers, but there are also international mechanisms and bilateral plans in place for technological cooperation. China is still not clear what its technological requirements are. It does not have a strong enough awareness of the technologies that are urgently needed. The country needs to take into consideration how technology can be applied and used economically. The most advanced technology is not necessarily the most suitable. A list should be drawn up of technology needed by different sectors, and mutually beneficial mechanisms for technological cooperation should be pursued.

Financial guarantees

The State Council approved the establishment in October of the China Clean Development Mechanism (CDM) fund. By the end of the same month, the country’s top economic planning body, the National Development and Reform Commission, had already approved 885 CDM projects. If all of these projects are successful, total emissions reductions due to the projects will total 1.5 billion tonnes, bringing in an income of US$15 billion. Over US$3 billion of this will go into the CDM Fund. It is a small sum, but a significant starting point that represents the first funding targeted specifically at tackling climate change.

Funding for dealing with climate change should also come in part from the national budget and specialist funds. Space should be made in the national budget for research into climate change, technological development, management and innovation. Problems that need a major breakthrough to be solved should be financed through specially-established funds.

On an international level, multilateral and bilateral funds should continue to be used in tandem. The first part of this article looked at the importance of multilateral and bilateral mechanisms in initiating processes and finding solutions. In finance, multilateral and bilateral funds are just as important. Multilateral funds are more influential, but management and coordination are more difficult. Bilateral funds are more manageable, but often suffer from lack of investment and are limited in what they can achieve. Maurice Strong recently argued that the UN should set up a US$1 trillion fund to tackle climate change.

Decisive action

Only action can secure China’s position as a leader on climate change. What should China do? We suggest an action plan should have “Chinese characteristics” and “global influence”. By acting in an exemplary fashion and engaging in global networks, China can encourage global action.

China can become a member of the 50 zero-emissions communities that explore approaches to climate change by cooperating on energy-saving, the circular economy, energy-efficiency in buildings and so on, on the condition they work within their own natural, economic, cultural and religious conditions. Were China to join this network, it could increase mutual understanding between China and the world and provide a base for coordinated actions. China would also be given a chance to share its wisdom with the world.

China should foster community leadership. Training at a grassroots-level is key to implementing plans and will instill ideas of leadership in sustainable development and climate-change awareness at the heart of society, which creates a basis for equal coexistence.

Crisis or opportunity?

Climate change is an unprecedented crisis for humanity. But realising the crisis and being determined to change can prove a turning point. Encouraging use of clean, renewable energy and research-and-development into new technology can set humanity on the path to a more sustainable model of development. For China, it is an opportunity to make the transition from a manufacturing economy to a knowledge economy based on innovation, increase government transparency and strengthen the rule of law. Climate change is already a global and regional security issue. By tackling climate change, China should hold firm on principles of equity and engage in global dialogue and coordinated action. It needs to actively take on responsibilities and fulfill its potential to be a global leader. In the long term, this will mean that for China, climate change can be an opportunity rather than a crisis. It is an opportunity to pursue genuine sustainable development and become a nation respected by the world.

He Gang completed his master’s degree at Peking University. He was a member of the youth delegation to the 2005 UN Climate Change Conference in Montreal

CS Kiang is the founding dean of the College of Environmental Sciences, Peking University

Homepage photo by Lindsey T

New ministry begins to bark, but still lacks bite

Gang He — Thu, 18 Sep 2008 11:14:00 +0000

The creation of an environment ministry is one example of positive reform transforming China’s government, writes He Gang. But there is room to improve the capacity to enforce environmental laws.

March 28, 2008, saw the launch of China's Ministry of Environmental Protection (MEP). As stated in its mission, this new cabinet-level ministry will take responsibility for China's environmental governance. MEP is tasked to develop and organise the implementation of environmental protection; to manage all related planning, policy and standards; and to coordinate across jurisdictions and levels of government to solve the country's major environmental problems.

The creation of the MEP is an example of the widespread reforms that have been transforming China's government in the past decades. Since 1982, five waves of major reforms have reduced the number of government ministries from 52 to 27. The latest round of these has aimed to create a "small government in a big society" , as public-sector priorities have shifted from economic development to regulation and public service. However, such a bold long-term transformation will only be possible by maintaining current rates of economic growth while simultaneously reducing inflation pressure and preserving central government macroeconomic performance. The Chinese government will also need to strike the dedicate balance between development, environment and social stability.

Figure 1. Milestones in Chinese Environmental Governance

After more than 30 years of rapid economic growth and development, China is facing unprecedented challenges in its efforts to protect its environment and natural resource base. The rapid deterioration of the nation's environmental quality and depletion of its natural resources are threatening the lives and health of the largest population in the world and the very potential for sustained growth of the economy. Some of the most pressing challenges include:

Air Quality. Two of the Blacksmith Institute's 10 most polluted cities are in China. Three major city clusters in China–Beijing-Tianjin-Tangshan, the Yangtze River Delta and Pearl River Delta–all face significant air pollution problems. Zhong Nanshan, head of the Guangzhou Institute of Respiratory Diseases, warned that most people older than 50 experience "black lung" as result of air pollution in Guangzhou city. With the 2008 Olympic Games right around the corner, Chinese officials in Beijing have introduced an even-odd license plate number system to control the number of vehicles on city roads after July 20 in an effort to improve air quality for the athletes and visitors.

Water Pollution. Huge blooms of blue-green algae have led to severe water pollution at Taihu Lake in the Yangtze Delta both this summer and last. According to the 2006 China Environmental Condition Communique, 28 percent of the nation's 745 water-quality monitoring sections are under standard V, which is the lowest level of China’s Environmental Quality Standards for Surface Water. For more than ten years, the central government has poured money into pollution treatment projects on the Huai River and Dianchi Lake, with little success. Only 43.2 percent of the 46 sections of the river's 44 major tributaries passed quality tests, according to a 2007 report by the Huai River Committee.

Climate Change. The results of China's Assessment Report on Climate Change show that annual average air temperature has increased by 0.5-0.8°C over the last century (slightly higher than the average global temperature rise), with most of the temperature rise observed in the last 50 years. Along China's coasts, sea levels have risen an average of 2.5 mm annually over the last 50 years. China's mountain glaciers have also retreated, and the trend is accelerating. The geography and climatic conditions of the country already give rise to frequent extreme events. Recently, though, extreme events have been exacerbated by the complexity and fragility of China's ecosystems, and by the fact that its three largest urban agglomerations and industrial centres are in coastal areas. In rural areas, agricultural output could be reduced by between 5 and 10 percent by 2030. The Fourth Assessment Report of the Intergovernmental Panel on Climate Change (IPCC) warned that China will be one of the world's most affected regions if the climate continues to change as predicted.

Pan Yue, Vice Minister of Environmental Protection, estimates that two environmental incidents occur every three days in average around China, threatening the government's goal of creating a "Harmonious Society". In 2005, the formal public hearing held in the wake of the controversy surrounding the Yuan Ming Yuan Park, which used impermeable membranes on the bottom of the Park's lakes to save water, but impacted both the area's ecosystems and nearby historic cultural sites, was the first of its kind in the environmental arena. The project was stopped after this hearing.

Since then, Chinese people have become more engaged in the environmental movement. Increasing environmental awareness and concern for environmental justice have led to widespread environmental protests. In June 2007, the citizens of Xiamen, a city on the southeastern coast known for its environmental awareness and ecotourism industry, demonstrated against the construction of a chemical factory slated to be built nearby. People in Shanghai protested against an extension of the city's Maglev system in January 2008, and in May citizens in Chengdu demonstrated against the construction of a petrochemical factory and oil refinery. With the release of The Regulations on Government Disclosure of Information in May 2008, calls for information transparency and public participation will continue to increase.

With increasing calls for action to ensure environmental quality, the government has responded with mixed results. For example, billions of dollars have been spent to clean up pollution on the Huai River, one of China's major rivers, but this effort has resulted in little real progress. The issue here is decentralisation: the local environmental governor is nominated and assigned by the local officer, and all local environmental improvement projects are funded solely by the local government. While the central government may have a strong will when it comes to the environment, local reluctance is still a big problem. Local governments lack both the incentives and the capacity to implement well-developed projects. High-level Chinese leaders often promise "clean water and clean air for everybody," but this simple-sounding goal is, in reality, not an easy job.

Elevation of the MEP to the cabinet level is a promising step, but this does not guarantee results. Although its status improved over the last 30 years, the environmental administration is still comparatively weak in the cabinet. The Environmental Protection Storm, initiated by MEP Vice Minister Pan Yue, is both a national campaign to promote environmental awareness and an example of how the MEP has had to use relatively creative methods to consolidate its power in the government. Notable setbacks, such as the MEP's failure to implement a new "green GDP" evaluation system given the complexity of greening the GDP, show that the ministry is not yet as efficient and effective as other core ministries like the National Development and Reform Commission (NDRC), China's macroeconomic management agency.

To better understand the Chinese system of environmental management, it is helpful to compare it to analogous systems in the United States and European Union.

Structure. Learning from experiences in the United States, China established five regional inspection offices in 2006 in an effort to foster regional coordination. But, in contrast to the U.S. system, the province is the basic political and economic unit in China. Environmental agencies at the provincial level are not staffed by the central government and are funded exclusively by local governments. This disconnect has effectively turned provincial "environmental protection officers" into professional workers with no real power. The five regional-level inspection offices will have little influence over the situation on the ground, as they still do not have the power to coordinate the provincial offices.

Personnel. In a country of 350 million people, the US Environmental Protection Agency has more than 17,000 employees, not including outside contractors. China, a country with four times the population and significantly more pollution per capita, has only about 300 workers at the MEP in Beijing and perhaps 30 people in each of the five regional inspection offices. Including affiliate agencies and institutes, the total number of personnel can perhaps reach 2,600. Some important support comes from the affiliated research institutions, but the ministry remains weak, lacking the decision-making capacity and financial resources of many other agencies.

Enforcement. China's central regulations and rules do not have the same force as US or European laws. As one of its key instruments, China's central government issues five-year plans that set general national targets, which in turn are delegated to local governments; promotions for government workers are based on how well they meet those goals. The current 11th Five-Year Plan contains two major environmental goals: a 20-percent improvement in energy efficiency and 10-percent decreases in major pollutants. But as long as China's promotion system is solely based on GDP growth, any government mandates to curb pollution will remain secondary, and any environmental targets will not be fully enforced on the ground.

The way forward

Zhang Shiqiu, professor at Peking University's College of Environmental Sciences and Engineering, delivered her worries at the first Chinese Environmental Protection System Reform Conference in 2007. She said that China is currently in its most critical time for the transition of environmental regulatory system, given the concern of China is facing the most serious period of environmental damages, which will likely continue into the near future. She highlighted emerging environmental incidents, particularly serious pollution accidents that increase environmental risks and threaten national environmental security. She also noted that the environmental crisis has recently instigated social conflicts and weakens social stability.

In her view, an effective environmental rights structure needs clear definitions and clarifications. She proposed that environmental management should turn from "sector management" to "public management" that integrate public resources governance and public participation into their management with people oriented pursuit. She also calls for the transition of environmental regulatory system from "local based" to "regional based," "from single-pollutant control to multiple pollutants control strategy," "from end-of-pipe to lifecycle management, which focuses on the restructuring of the economy and energy consumption," and to use more market-based instruments (MBIs) to provide incentives to enterprises and social actors, especially a combination of damage compensation schemes, eco-services payment schemes and pollution/resources taxation schemes.

As a leading consulting group, the China Council for International Cooperation on Environment and Development (CCICED) has united with top leaders and international experts. At its 5th Annual General Meeting, the China Task Force on Environmental Governance released a report, recommending that China strengthen its environmental governance in four major issue areas:

Improving the government's capacity to enforce environmental laws and oversee the implementation of environmental programs, to enhance the government's capacity to control environmental pollution, and to improve the management of natural resources;
Engaging the business sector to take a more proactive role in environmental management by providing incentives to those that perform well and punishing those that do not, and by promoting best practices of industrial production and hazardous accident preparedness;
Engaging civil society by providing greater transparency of information concerning environmental and natural resource conditions and of government decision-making activities, combined with access and participation by stakeholders, NGOs, and the general public, and;
Establishing greater policy coherence and planning capacity for both domestic and international environmental and natural resource issues. Promote the capacity and incorporate this into the expectations of performance of other government ministries and agencies.

The World Bank has also undertaken projects to support environment management in China. The Bank believes that while MEP has seen many successes, the overall deterioration of the environment has not been reversed. To their mind, environmental management in China has become increasingly complex, as widespread socioeconomic changes have created new and urgent environmental challenges. Environmental management, which is largely dealt with by the Ministry of Environmental Protection, has been further complicated by ongoing institutional reorganisation and the sheer size of the country. Yet many of the country's natural resources and environmental services are already under great pressure. China's need for effective environmental management is becoming ever more important. In the end, though, "only a greatly expanded and strengthened coordination framework between local and central level institutions will be able to cope with this challenging agenda."

He Gang completed his master’s degree at Peking University. He was a member of the youth delegation to the 2005 UN Climate Change Conference in Montreal

Homepage photo by tripper54

Outlook and obstacles for CCS (1)

Gang He — Tue, 27 Oct 2009 06:30:00 +0000

China needs carbon capture and storage technology to decrease its emissions from coal power, but the transition will be costly and difficult. In the first section of a two-part report, He Gang surveys an energy dilemma.

Carbon capture and storage (CCS), a technology that stops carbon dioxide produced by coal plants being released into the atmosphere, is essential in order to cut carbon emissions and thus mitigate the impacts of climate change. Accordingly, China’s ministry of science and technology already has a range of CCS technology projects underway. CCS has also featured prominently in the government's National Outlines for Medium and Long-term Planning for Scientific and Technological Development (2006-2020), the National Climate Change Programme and other national plans on basic and high-technology research and development.

Existing demonstration projects include: the GreenGen project, which is a joint initiative by Huaneng and major state-owned energy giants, combining integrated gasification combined cycle (IGCC) technology with CSS; Shenhua’s coal-to-liquids and CSS project in Ordos; Huaneng’s post-combustion capture project in Gaobeidian in Beijing; and a new project in Shidongkou, in Shanghai.

China is also engaged in international partnerships, such as the UK-China NEZC initiative and Cooperation Action with CSS China EU (COACH). China also participates in the United States-led Carbon Sequestration Leadership Forum and is a part of the FutureGen Alliance. Cooperation agreements are also underway with Japan and Australia.

China is carrying out research, development and demonstration of CCS technology, but it is still at an early stage. According to predictions by the International Energy Agency, by 2050 CCS will provide 14% of the emission reduction required to stabilise the climate, 20% to 25% of which will come from China, with 60% of those cuts coming from the installation of CCS technology in power plants.

Given China’s circumstances and strategic needs, our most pressing task is to make preparations for CCS technology and policy.

The importance of CCS

China is a coal-rich country, but lacks oil and gas. According to BP, the country has 114.5 billion tonnes in its coal reserves, about 13.5% of the global total, compared to 2.1 billion tonnes of oil and 66.54 billion cubic metres of natural gas, accounting for 1.3% and 1.1% of the world total respectively.

In 2008, China imported 179 million tonnes of crude oil, meaning it relies on imports for 49.8% of its oil consumption. This reliance is increasing. Rocketing oil prices in 2008 gave coal-to-liquids technology a boost, with experts predicting that by 2020, China will be able to produce the equivalent of 35 million tonnes of oil with this method: enough to replace about 25% of oil imports.

However, coal-to-liquids technology is also a significant producer of greenhouse gases, and it will be necessary to reduce those emissions. Therefore, the combination of CCS with coal-to-liquids will be important.

IGCC technology currently achieves 40% to 43% efficiency, and can achieve as high as 50% efficiency. Although the costs are higher than that of super-critical or ultra-super-critical turbines, taking CCS costs into account gives IGCC a clear advantage. Also, IGCC reduces pollutants such as nitrogen oxides and sulphur. IGCC is expected to contribute significantly to energy security, though still with some risks due to high costs and technological uncertainty.

These advanced technologies are integral to future energy strategy. This is important not only for China, but also for other nations who can gain valuable lessons from the country's experiences.

If China uses its late-starter advantage and quickly masters proprietary manufacturing and innovations, it will find advantages in manufacturing costs, personnel and capital, potentially becoming a new centre of manufacturing and exporting.

CCS is a wide-ranging area, covering chemical, power-generating and geological fields. The research, development and demonstration of the technology will lead to rapid progress and technological innovation in these fields.

Obstacles

The costs of capturing carbon are huge. Research from Energy Technology Innovation Policy, at Harvard University in the United States, found that carbon capture alone (not taking into account transportation or storage, for instance) in a first of a kind power plant would cost US$100 to $150 per tonne of carbon that is abated, increasing the cost of power by US$0.10 per kilowatt-hour in comparison to a super-critical pulverised coal plant. Using mature technology, the costs would be approximately US$30 to $50 per tonne of carbon abated. The Special Report on Carbon Dioxide Capture and Storage from the Intergovernmental Panel on Climate Change (IPCC) shows that the addition of CCS technology increases electricity generation costs by 40% to 80%. So, although combining IGCC and CCS can reduce the costs of CCS, the overall costs of electricity generation will still increase 40% to 60%.

China’s potential for geological carbon sequestration is huge – but not currently quantified. Joint research by the Pacific Northwest National Laboratory in the United States and the Wuhan Institute of Rock and Soil Mechanics at the Chinese Academy of Sciences calculated a theoretical capacity to store 2,300 billion tonnes of carbon. By calculating distances between potential storage sites and 1,620 major emissions sources, the cost of transportation and storage (not including capture) was estimated to be below US$10 per tonne of carbon.

Due to China’s complex geology, there is uncertainly over carbon sequestration. Of the storage methods currently being investigated, CO2 enhanced oil recovery (EOR) and enhanced coal bed methane recovery (ECBM) have the greatest potential, due to the potential for profits.

Public acceptance of CCS also impacts on the feasibility and risks of its adoption. Vattenfall’s first CCS demonstration project at Schwarze Pumpe in north Germany had to be abandoned due to public opposition, with the carbon captured pumped straight back into the atmosphere.

Furthermore, the IPCC special report on CCS shows that the addition of CCS reduces the efficiency of coal-burning power generation by 20% to 30% due to energy penalties: a plant operating at 40% efficiency would be reduced to between 25% and 30% efficiency.

In China, the cost of post-combustion capture in power plants would be US$130 per tonne of carbon abated, increasing generating costs by 20% to 30% and reducing efficiency by 8 to 10 percentage points. Therefore, the addition of CCS will require the burning of roughly 25% more coal in order to generate the same quantity of electricity. In 2008, China burned 2.72 billion tonnes of coal, 1.18 billion tonnes of which was used in power generation. If CCS was added to all of China’s power plants, an extra 290 million tonnes of coal would be required to generate the same amount of electricity.

The cost of that extra coal consumption will be passed on through the entire coal industrial chain: to personnel, capital, road, rail and water transport, as well as in coal mining, transportation and storage. Factoring these expenses into the overall cost, it is clear that even greater pressure will be exerted on a coal industry already stretched to the limit. And costs would be even higher if “externalities” such as environmental impacts and safety were considered. So, calculating the costs of CCS can not be restricted to the costs of installing and running the technology: the extra costs the energy system will incur as a result of CCS must be considered.

The price of coal itself accounts for 80% of the costs of generating electricity, hence power plants are very sensitive to changes in the cost of coal. Low margins in the power sector mean it cannot absorb the costs of CSS. Although China's coal sector is gradually starting to operate on market principles, the power industry is still very much under central control. The state has introduced some changes in pricing, but electricity prices are still managed in order to ensure economic growth and social stability.

According to the China Electricity Council, increases and fluctuations in the price of coal last year caused losses for power generators of 70 billion yuan (US$10.3 billion), 40 billion yuan (US$5.9 billion) of which was lost by the five major power firms alone. Therefore, power companies are unable to pass the increase in coal costs on to consumers, much less the costs of CCS.

This is a crucial time for energy saving and emissions reduction, as well as a stage of rapid development in hydro, solar, nuclear and other new energy sources. In 2008, wind power generation capacity increased from 0.76 gigawatts to 13.24 gigawatts. Increasing that to the target of 30 gigawatts will require over 1 trillion yuan (US$146 billion) in investment. For solar power to reach its target of 10 gigawatts, there will need to be around 300 billion yuan (US$44 billion) in investment. Furthermore, the country needs 750 billion yuan (US$110 billion) to achieve its aim of having 5% of all electricity generated by nuclear power by 2020.

The National Energy Administration predicts that China needs 2.5 trillion yuan in investment to meet the target of drawing 16% of all power from renewable sources by 2020. CCS will have to compete with these new energy sources for funding. New energy fits in with China’s future overall energy strategy; it will have knock-on effects in terms of upgrading industrial capacity and increasing employment. Therefore, it should be the focus of investment. Currently, there are huge opportunity costs associated with widespread implementation of CCS.

The implementation of CCS in China faces the same obstacles it does globally: issues that arise from the costs, the storage, the risks and the uncertainties. But the coal-and-electricity relationship in China means that the costs of CCS cannot be passed on to end-users with higher prices; the extra expenses will have to be absorbed by the entire energy system.

Therefore, if CCS is to be implemented on a large scale in China, international climate-change mechanisms will need to take financing into account. Without stable external sources of funding, CCS is unlikely to be a priority for development in the short term. The more closely international climate policy is aligned with China’s own incentives and the unique context of its coal and power markets, the better chance it will have of realising the optimal role for CCS in global climate efforts.

NEXT: A way forward for CCS

For more information, download the full report Real Drivers of CCS in China and Implications to Climate Change Policy by Richard Morse, Varun Rai and Gang He.

He Gang is research associate at Stanford University’s Program on Energy and Sustainable Development. ghe@stanford.edu

Homepage image from Shenhua Group

Outlook and obstacles for CCS (2)

Gang He — Mon, 26 Oct 2009 06:55:00 +0000

In the final segment of his two-part report, He Gang sets out his technical and policy recommendations for China's adoption of an important technology.

Considering China’s circumstances and strategic requirements on the energy front, discussed in the previous section of this article, there are three aspects of the situation that need attention if the country is to make the technical and policy preparations for CCS.

First, China needs more more capacity building:

* CCS technology is not yet mature. China needs to focus on research-and-development, particularly with attention to the country's energy security; hold demonstrations of coal-to-liquids, IGCC and CCS technology; explore the economic sustainability of enhanced oil recovery and enhanced coal-bed methane; and analyse and evaluate future CCS technological pathways.

* China’s geology is complex; the country needs to conduct more more surveys of on-shore and off-shore coal, oil, gas basin and salt formations that have the potential for carbon sequestration. Comprehensive surveys of geological structure, storage potential, the risk of leakages and the feasibility of monitoring are necessary.

* There needs to be risk evaluation and management for all stages of CCS: capture, transportation and storage.

* China must establish CCS management structures, laws and regulations.

* China needs to increase public awareness of CCS, which means increasing public knowledge of the value and the risks of the technology.

Second, sources of funding should be expanded. Currently, fund transfers mainly take place via the international carbon market. As the funds available for CCS in China are very limited, international financial investment and support are very important.

The Clean Development Mechanism (CDM) is one of the Kyoto Protocol’s three mechanisms, and is a key part of encouraging developing nations to participate in global emission reductions. Currently, its executive board has raised the possibility of allowing CCS projects under the CDM. This is still highly controversial; opponents hold that CCS emissions reductions will weaken the effectiveness of the CDM’s market in Certified Emission Reductions (CERs).

In the current market, carbon dioxide (CO2) costs between 8 and 23 Euros (US$12 to $34) per tonne: much less than the cost of CCS (from 50 to 100 Euros, or US$75 to $150, per tonne of CO2). Even if CCS were included as a CDM project, there would be a significant price gap, which means CCS would have to be funded through other channels.

The fluctuating price of CERs also means that CCS will struggle to attract stable investment through this channel. Sectoral emissions reduction mechanisms may bring the power sector as a whole into emissions reduction arrangements, but this is still at an exploratory stage. Therefore, an international climate-change agreement must find new financial mechanisms to meet the needs of CCS implementation.

Third, we must strengthen international cooperation. International probes into CCS are still underway. The United Kingdom has legislated that new power plants must be “carbon-capture ready” if they are to connect to the power grid. The United States has announced an investment of US$1 billion to restart the FutureGen project, and is to build an IGCC+CSS demonstration plant in the mid-western state of Illinois. The European Union’s economic stimulus plan includes 1.05 billion Euros (around US$1.6 billion) in investment for CCS technology at seven power plants, with a “CCS Alliance” of 12 demonstration plants to be formed by 2012. In July 2009, China and the US announced plans to develop the “US-China Clean Energy Research Center”.

As cooperation between China and the US, Canada, the EU, Japan, Australia and other countries continues in the CCS field, China will form global links to the CCS industry, remain up-to-speed with technical advances and exchange know-how. This will lay the foundations for China to master the technology – and participate in the global effort to address climate change.

For more information, download the full report Real Drivers of CCS in China and Implications to Climate Change Policy by Richard Morse, Varun Rai and Gang He.

He Gang is research associate at Stanford University’s Program on Energy and Sustainable Development. ghe@stanford.edu

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