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The Role of Carbon Market in Promoting Carbon Capture, Utilisation and Storage in China
  China

Friday, September 2, 2016

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, 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, there is 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 believes that if CCS is feasible, it will play a larger role in "13th Five-Year", "14th Five-Year" and the 2030 carbon emissions control in China.

Mr. Junfeng Li, director of NCSC, stated that 60% to 70% of energy generated in China is using coal. Even if it will be reduced down to 35% to 40% according to the national plan, there is still a lot of use of coal. Thus, promoting CCS technology is significant in controlling greenhouse gas emissions in China and on international level.

“Today, the discussion on promoting the development of the CCUS in carbon market between experts in CCUS and experts on carbon market MRV could help to push forward the introduction of policy from Development and Reform Commission. The government is actively formulating policies to promote low carbon and energy transformation. CCUS is a new technology, and it aligns with our innovation requirements, said Mr. Li.

“CCUS and carbon trading are important elements in the next ten years in China’s low carbon transformation. Firstly, a major move in China is the establishment of a national carbon market next year,” the British Embassy climate counselor Mr. Neal Carlin said, “we have witnessed CCUS has made great progress in China. The Commission also issued the Chinese CCUS roadmap at summit last year in Paris. I am honored that the UK could help to promote the establishment of the Beijing CCUS Centre. We also supported the development of Sichuan CCS and coal chemical technology, which made a great contribution to the research of CCS.”

As similar fossil fuel user, Australia is also facing the challenge of low carbon energy transformation. The Australian Embassy counselor Mr. Ben Jarvis said CCS and carbon markets are important areas of cooperation between China and Australia from the energy and climate change policy aspects. Carbon market and carbon pricing are important tools to support the development of CCS.

“We are cooperating with the NDC and NCSC to launch some greenhouse gas accounting system, and the method for oil and gas, coal and oil refining industry emissions. We have researched with the DRC and Tsinghua University on greenhouse gas reporting system. With respect to the design of the carbon market, we think rules should be clear, consistent and transparent,” Mr. Jieming Jia said, “CCS should pay more attention to storage. Technical data are often controlled by major oil companies. I hope that policy makers could have better ways of letting these companies share their data. Australia and China will continue to work closely together to reduce our carbon dependence."

As Mr. Yongping Zhai, Asian Development Bank energy technology consultant, said, he is most concerned about the project popularization, emission reduction effect and innovation. This applies to CCS as well. ADB supports CCS technology and Shanghai and Guangdong CCS Centre. He believes that China has a broad market, a complete industrial chain and a strong scientific foundation. Thus, there is hope to reduce the cost of CCS.

“The most important aspect of the whole CCUS is its economic viability, and in fact it can directly address this issue through carbon pricing," said Tim Yeo, former UK Energy and Climate Change Minister.”

Last year in December, Paris Agreement made arrangements for climate change action after 2020.

However, the University College London professor and electricity regulatory commission chief consultant Dr. Michael Grubb believes that countries are not ready to meet the specific target in the agreement. These goals will be impossible to be met if CCUS technology cannot achieve large-scale commercialization.

According to Professor Grubb, most ambitious proposals and regulations 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, but is also requires a very strong carbon pricing. If you raise the price of technology that has high environmental cost, then the market will 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 total trading system or set different prices in accordance with the different sectors of the industry. The carbon market in fact has two functions, on the one hand, it provides funds and on the other hand it establishes a reliable confidence for investors in the carbon market. This will bring enough time and the corresponding funding, infrastructure to promote technological innovation.”

In 2017 before the kick-off of the national carbon market, there are 7 regions in the country that carry out a pilot carbon trading. Professor Maosheng Duan, the director of Tsinghua University National Carbon Market Research Centre said that the design is different between the 7 carbon markets, such as the pilot cities covered third industries. At the same time, they also learnt the lessons from the EU system in the allocation of quotas, use intensity method according to the enterprise actual production to distribution, which is suitable for situation in China.

With respect to the design of the national carbon market, the current plan 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. The design will be fair since the rules of all adopted regions are unified. The central government is responsible for the design of the entire system, and the provincial NRC is responsible for the implementation of the relevant management rules to give some flexibility. In the implementation part, there are comprehensive uses of various means to promote corporate performance, such as the current construction of the national credit system.

The Secretary General of UK-Guangdong CCUS Centre, and Director of Climate Change Centre of University of Edinburgh business school, Dr. Xi Liang and the Global CCS Institute China representative and professor of North China Electric Power University, Professor Qianguo Lin 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, energy saving and emission reduction. CCS is an important technology for china." He said, incorporating CCS into the carbon market will bring confidence to 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 "use (of CCS)" into "(the use to) emission reduction" could mobilize enterprise enthusiasm. He hopes 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 believes 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 technology. Capture projects and transport projects are relatively simple while sequestration projects are fairly complex.

As he said, China has 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 problem, project management, responsibility and long-term risk measurement and verification. (UK-China (Guangdong) CCUS Centre)

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