China is expected to double its carbon capture and storage capacity in the next five years, given funding for the projects is secured, according to analysts at IHS Markit. The country could add eight large-scale carbon capture, utilization, and storage (CCUS) projects by 2025.
Currently, there are 14 carbon capture plants already in operation with a combined annual capacity of 2.1 million tons. However, the biggest problem hindering the implementation of CCS in China seems to be funding.
“Beyond 2025, projections are highly uncertain and it will depend on policy support, and evolution of the emissions [quota] trading system which could be a game-changer,” said Edurne Zoco, executive director for clean energy technology at IHS Markit.
The Chinese trading emissions scheme was announced in 2017 but it was implemented on the 1st of Feb 2021, expecting to commence in July this year. Being the world’s biggest carbon emitter, the scheme is part of China’s efforts to curb its dangerous emissions levels. The introduction of a cap and trade system could make carbon capture projects more attractive in the future when carbon pricing increases.
In its initial stage, the trading scheme will include just the energy sector and will regulate 2,225 power operators and related entities. They account for 40% of China’s CO2 emissions. The pricing of a ton of carbon is expected to be around $4 per tonne when trading begins, which is significantly lower than in the EU ETS.
Even though the introduction of the China ETS carbon program will not do much to reduce its CO2 emissions right away, in the long term it could unlock financial support to CCUS projects across the country.
What Carbon Capture Development Could Do For China?
According to a Goldman Sachs report, the development of CCUS technology could mark a 60% cut in China’s CO2 emissions by 2050 but would cost the country $450 billion. It is also estimated that carbon capture and storage could eliminate 10% to 24% of emissions as development costs fall by 20% to 60% between 2025 and 2050.
IHS Markit also mentioned that global carbon capture utilization and storage CCUS capacity will have to at least double every 5 years in the next 30 years for the world to keep global warming well below 2 degrees Celsius by 2100. In China, there are currently only 14 CCUS projects and just 2 of them are considered large-scale, with an annual capacity of over 400,000 tons a year.
The implementation of large-scale CCUS projects in China is influenced by a stricter ETS and carbon pricing evolution. Since projects are capital intensive, it will require ambitious decarbonization goals and new business models for the carbon capture industry to grow large enough to make significant cuts in the world’s most CO2-intensive economy.