Low Carbon Scenarios vs. Clean Coal Scenarios in China: How to Close the Carbon Gap? Working Paper No. 8 within the project: Lead Markets Funded under the BMBF Programme „WIN 2“ Authors: Chen Qian Chinese Academy of Science (CAS), Institute of Policy and Management, Beijing Klaus Rennings Centre for European Economic Research (ZEW), Research Area Environmental and Resource Economics, Environmental Management, Mannheim Mannheim, October 2012 Non-technical summary: Boasting annual growth rates of nearly 10 percent over the past two decades, China surpassed America in 2010 as the world's largest energy consumer. As the main domestic energy resource that accounts for some 70 percent of the energy supply mix, coal plays the most important role in China's energy strategy, especially in the electricity sector, which is a very large emitter of greenhouse gases and the biggest direct consumer of coal in China. Meanwhile, the indiscriminate burning of coal and other fossil fuels has become a major environmental issue. China, currently the largest greenhouse gas emitter in the world, has plans for transitioning to more green and sustainable forms of development. While China has been taking active measures to reduce its reliance on coal (for example, by developing nonfossil energy), imbalance in resource availability and the low maturity of green technologies make non-fossil fuel generation much less economically efficient. The challenge posed to China by global climate change is how economic growth can be pursued such that it does not undermine climate goals. Due to the above constraints, the transition to greener forms of energy generation is unlikely to take place in China only by using sustainable energies such as solar and wind. The literature predominantly agrees that coal will be the dominant source of energy in China over the next 30 years at least. Against this backdrop, the first question addressed by this paper is how the development of coal power in China meshes with the country’s official low carbon policy. The paper shows that current plans for the expansion of coal power will lead to higher CO2 emissions than targeted under certain low-carbon scenarios. Moreover, the gap becomes larger as time goes by. While the CO2 emission reduction in clean coal scenarios corresponds to 19 to 35 percent of overall reductions in the low carbon scenario in 2020 (depending on the specific scenario), it corresponds to just 6 to 17 percent of reduced emissions in 2030. This gap has implications for Chinese climate and energy policy. There would appear to be three possible options for policymakers: First, reduction targets could be scaled back such that targets are achieved at a later date. A second option would be to make use of more advanced coal technologies. As shown in this paper, however, the second option is quite expensive and would only have a moderate impact on CO2 emissions. If all supercritical plants were replaced by ultra-supercritical plants in 2030, this would only lead to 139 million tons of CO2 reduction, which corresponds to less than 10 percent of the CO2 reduction foreseen under the low carbon scenario. A third option is the widespread deployment of carbon capture and storage (CCS). However, this technology is still expensive for China, but more effective compared to the clean coal technologies mentioned above. Average CO2 avoidance costs with CCS are today, depending on the specific technology, between $27 and $42 per ton of CO2. In light of the size of the Chinese market, this would amount to additional costs between $ 24 and 38 billion in 2030 to meet the necessary CO2-reduction of the coal fired sector in the low carbon scenario. To close the gap between the 450 scenario and the clean coal (SCCC) scenario, the additional cost of CO2 avoided in China would be between $88billion (for oxyfuel technology) and $138billion (for post-combustion technology). Moreover, a lot of uncertainties exist regarding the future development of CCS. And the fact that CCS will not be realized in some European countries such as Germany due to public resistance may have a negative impact on the global diffusion of this technology. The paper concludes that climate policy in China will likely be a process of small and incremental steps, with emissions reductions taking probably longer than expected especially from Europe. Even if CCS technology is introduced in the next two decades, absolute reductions in CO2 emissions can first be expected after 2030. Das Wichtigste in Kürze: Mit nahezu 10 Prozent jährlichem ökonomischem Wachstum in den vergangenen zwei Dekaden ist China auf Platz eins der weltweit größten Energiekonsumenten gelandet. Kohle spielt dabei die wichtigste Rolle als Energieressource mit einem Anteil von 70 Prozent am Energiemix, vor allem für den Elektrizitätssektor, der ein großer Treibhausgasemittent ist und für den größten Teil des Kohlekonsums verantwortlich ist. Durch die Verbrennung von Kohle und anderen fossilen Ressourcen ist China auch zum größten Treibhausgasemittenten der Welt geworden. Dieses Problem ist inzwischen erkannt worden. Die chinesische Regierung plant einen Umbau der Wirtschaft in Richtung grüner und nachhaltiger Entwicklung. Die Herausforderung des Klimawandels besteht für China darin, ökonomisches Wachstum weiterhin zu ermöglichen und trotzdem konstruktive Beiträge zum globalen Klimaschutz zu leisten. Es erscheint unwahrscheinlich, dass der Wandel zu grüner und nachhaltiger Entwicklung ausschließlich auf der Basis von erneuerbaren Energien wie Wind oder Solarenergie stattfinden wird. Es besteht vielmehr Konsens darüber, dass die Kohle auch in den nächsten 30 Jahren der dominante Energieträger in China bleiben wird. Vor diesem Hintergrund diskutiert dieses Papier die Implikationen von Innovationen im Bereich Kohlekraftwerke, d.h. „sauberer“ Kohletechnologien für die chinesische Klimapolitik. Bezüglich der Szenarien zeigt sich eine Lücke zwischen Low CarbonSzenarien, die vor allem für die Klimapolitik erstellt werden, und Clean Coal-Szenarien, die vornehmlich der Energiepolitik dienen. Die Lücke klafft im Zeitablauf mehr und mehr auseinander. Während die CO2-Emissionsreduktionen im Clean Coal-Szenario im Jahre 2020 noch je nach gewähltem Szenario 19 bis 35 Prozent der gesamten Emissionsreduktion des Low Carbon-Szenario ausmacht, sind es 2030 nur noch 6 bis 17 Prozent. Aus dieser Lücke ergeben sich Implikationen für die Klima- und Energiepolitik. Eine erste Option bestünde darin, CO2-Reduktionen zeitlich zu verschieben. Eine zweite Option könnte der Einsatz von moderneren Kohlekraftwerken sein. Diese Lösung – die außerdem sehr teuer wäre – hätte nur eine moderate Wirkung auf die CO2 Emissionen. Würden bis 2030 alle superkritischen Kraftwerke durch ultra-superkritische Kraftwerke ersetzt werden, ergäbe sich eine Emissionsminderung von nur 139 Millionen Tonnen CO2, d.h. 10 Prozent des Reduktionspotentials im Low Carbon-Szenario. Eine dritte Option besteht im Rückgriff auf Carbon Capture Storage-Technologien (CCS), deren durchschnittliche CO2Vermeidungskosten je nach spezifischer Technologie zwischen 27 und 42 $ pro Tonne CO2 betragen. Hochgerechnet auf den chinesischen Kohlemarkt würde dies zu zusätzlichen Kosten führen, die bei den erforderlichen Reduktionen des Low Carbon Szenarios bis 2030 zwischen 24 und 38 Milliarden $ betragen würden. . Um die Lücke zwischen dem 450 Szenario und dem Clean Coal Szenario zu schließen, müssten sogar Kosten zwischen 88 Milliarden und 138 Milliarden $ aufgebracht werden. Zusätzliche bestehen eine Reihe von Unsicherheit bezüglich der künftigen Entwicklung der CCS Technologie. Auch die Tatsache, dass CCS in einigen Europäischen Ländern wie Deutschland auf öffentliche Akzeptanzprobleme stößt, dürfte einen negativen Effekt auf die weltweite Ausbreitung dieser Technologie haben. Es lässt sich das Fazit ziehen, dass sich Klimaschutz in China wird sich vermutlich in kleinen, inkrementellen Schritten entwickeln, und vermutlich mehr Zeit benötigen wird als heute vielfach erwartet. Selbst wenn CCS-Technologie in den nächsten zwei Dekaden eingeführt wird, ist mit absoluten Reduktionen von CO2 erst nach dem Jahre 2030 zu rechnen. Low Carbon Scenarios vs. Clean Coal Scenarios in China: How to Close the Carbon Gap? Chen Qian Chinese Academy of Science (CAS), Institute of Policy and Management, Beijing Klaus Rennings Centre for European Economic Research (ZEW), Research Area Environmental and Resource Economics, Environmental Management, Mannheim Abstract: With an annual growth rate of nearly 10 percent over the past two decades, China has already surpassed America to become the world's greatest energy consumer. As the main domestic energy resource that accounts for some 70 percent of the country's energy supply mix, coal plays the most important role in China's energy strategy, especially in the electricity sector, which is a very large emitter of greenhouse gases and the biggest direct consumer of coal in China. Against this backdrop, the first question addressed by this paper is how the development of coal power in China meshes with the country’s official low carbon policy. The paper shows that current plans for the expansion of coal power will lead to higher CO2 emissions than targeted under certain low-carbon scenarios. The paper then examines the implications of this development for climate and energy policy. There are three possible options for reconciling the gap between coal-power expansion plans and CO2 reduction scenarios: First, reduction targets could be scaled back such that targets are achieved at a later date than currently foreseen. A second option would be to make use of more advanced coal technologies. As shown in this paper, however, the second option is quite expensive and would only have a moderate impact on CO2 emissions. A third option is the introduction of carbon capture and storage (CCS). This technology is still expensive for China, but more effective compared to the other clean coal technologies. This paper concludes that climate policy in China will likely be a process of small and incremental steps, with emissions reductions taking probably longer than currently forecasted. Even if CCS technology is introduced in the next two decades, absolute reductions in CO2 emissions can first be expected after 2030. Keywords: China, climate policy, low carbon economy, clean coal technologies JEL: Q40, Q48, Q54, Q55 1 Introduction With an annual growth rate of nearly 10 percent over the past two decades, China has already surpassed America to become the world's greatest energy consumer (BP, 2011). As the main domestic energy resource that accounts for some 70 percent of the country’s energy supply mix (National Bureau of Statistics of China, 2011), coal plays the most important role in China's energy strategy, especially in the electricity sector, which is a very large emitter of greenhouse gases and the biggest direct consumer of coal in China. In 2009 the sector produced 3.2 gigatons (Gt) of CO2 (i.e. 47 percent of China's total greenhouse gas emissions) and consumed 1 billion tons of coal (close to half of China's total coal consumption) (IEA, 2011a). About 46 percent of coal consumption is attributable to electricity generation in order to meet rapid demand growth. The great trends of urbanization, population growth and an increasing national income will result in major challenges for the supply of electricity in China. As shown in Figure 1, coalfired generation capacity increased at an average rate of 8.66 percent between 1980 and 2009 (IEA, 2011), and is expected to increase further during the next two decades. Figure 1. Size of conventional thermal electricity industry in China: historical and projection data Sources: IEA: Coal database 2011 for historical development until 2010. World Energy Outlook (WEO) (2011) 1 for future projections. Some forecasts, including the World Energy Outlook (IEA, 2011c), even expect total electricity generation (in general and from coal) to triple by the year 2030. This means that China's rapidly growing demand for energy from its largely coal-based power plants will drive a substantial increase in coal consumption. Considering resource abundance and price, this dependency on coal is difficult to change even over the mid to long term (Steenhof abd Fulton, cited in Yu et al., 2011). Meanwhile, the indiscriminate burning of coal and other fossil fuels has become a major environmental issue. For example, the coal-fired electricity industry released 56 percent of industrial SO2 emissions in 2006 (Editorial Board of China Environment Yearbook, 2007) and 47.5 percent of national CO2 emissions in 2009 (Yu et al., 2011). Adding the external 1 BAU.WEO.2011 means the ‘business as usual scenario’ in the 2011 World Energy Outlook. costs of such pollution to total social costs increases the true cost of coal by 150 percent (McKinsey & Company, 2009). The total cost of coal externalities is estimated to have reached €170 billion in 2007 (Mao et al., 2008). China, the biggest greenhouse gas emitter in the world, has plans for transitioning to forms of development that are more green and sustainable (Chinese Academy of Sciences, 2009). While China has been taking active measures to reduce its reliance on coal (for example, by developing non-fossil energy), imbalance in resource availability and the low maturity of green technologies make non-fossil fuel generation much less economically efficient. The challenge posed to China by global climate change is how economic growth can be pursued such that it does not undermine climate goals. Due to the above trends, the transition to greener forms of energy generation is unlikely to take place with sustainable energies such as solar and wind alone. The development of cleaner fossil fuels will also play a major role. The literature agrees that coal will remain a dominant source of energy in China over the next 30 years at least (WangYi et al., 2004; Steenhof and Fulton, 2007; Rennings and Smidt, 2010). As it is quite difficult to achieve significant CO2 reductions with the existing coal combustion technology (Ni, 2010), the development and deployment of innovative clean coal technologies is crucial to mitigate air pollution, energy security problems, greenhouse gas emissions, and promote sustainable development in China. There are two main ways to reduce greenhouse gas emissions and the electricity sector's dependence on coal. First, China could develop cleaner energy sources (e.g. nuclear, solar, wind and small hydroelectric power plants). Second, it could deploy clean coal technologies, particularly integrated gasification combined cycle (IGCC) and carbon capture and storage (CCS). There is agreement in the literature that both options will be important for China. However, this paper focuses on the implications of the second option – i.e. scenarios for the deployment of clean coal technologies – while also discussing the timing of China’s attainment of emission reduction targets. This paper is structured as follows: Section 2 provides background information on China’s development of its electricity sector, including coal utilization trends and various development scenarios. Section 3 calculates the CO2 emission gap between clean coal scenarios, which are mainly done for energy policy, and scenarios for a low carbon economy, which are directed to climate policy. Section 4 discusses solutions to close the gap between these two types of scenarios. Finally, Section 5 presents our conclusions. 2 Background 2.1 The current status of coal utilization in China China is one of the few countries in the world that lacks oil and gas resources and uses coal as its main energy source. In 2010, China’s proven recoverable reserves of coal were 114.5 billion tons or 82 billion tons of coal equivalent (Btce), 13.3 percent of the world total. China’s proven recoverable reserves of oil and gases were only 2,000 million tons (2.86 Btce) and 2,800 billion cubic meters (3.73 Btce), 1.1 percent (for oil) and 1.5 percent (for gas) of the world total (British Petroleum, 2011). The total proven recoverable reserves for oil and gas are only 8.04 percent that of coal. Furthermore, although China has relatively rich coal reserves, the quality of its coal is low. China's coal resource is classified as 29 percent bituminous, 29 percent sub-bituminous and 16 percent lignite (Atwood et al., 2003). Overall, this means that energy sources are a long-term bottleneck and lasting problem for Chinese development. China is currently the world's largest producer of coal, accounting for approximately 45 percent of the world's total annual coal production (XMECC, 2011). It is also the world's greatest consumer of coal, accounting for more than 47 percent of the world's total annual coal consumption. From 1999 to 2010, China's coal production increased from 39200 kilotons (kt) to 6037004 kt, as shown in Figure 2. Figure 2. Annual coal production in China million tons of oil equivalent 700 600 500 400 300 200 100 Year 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 0 Data source: IEA 2011b In 2011, the rise in coal production in China was still being driven by high coal prices and tight domestic supply and demand conditions. However, China became a net importer of coal for the first time since 2009. China's coal consumption had experienced a rapid and continuous increase, with an average annual increase of 7.36 percent from 1999 to 2010 (British Petroleum, 2011). In 2010, the volume of China's coal consumption reached 32.5 hundred million tons, accounting for more than 70 percent of China's overall energy consumption (Neng Yuan Ju, 2011). The electricity sector alone was responsible for about 50 percent of the country's coal consumption (Wang, J., Y. Dong, et al. 2011). Coal has played a crucial role in China's economic growth. In 2010, coal generated about 80.3 percent of China's power; just 1.77 percent came from nuclear and 1.04 percent from wind (Finance, 2011). 2.2 Clean coal technologies Electrical power plants come in various forms, including thermal, hydroelectric and solar. The most common type is the thermal power station, which includes coal-fired power plants. The most prevalent technological trajectory is pulverized bed combustion (PC), which represents 90 percent of coal-fired capacity worldwide. Consequently, this study focuses on this combustion technique. Coal-fired power stations with pulverized bed combustion are differentiated according to the condition of the steam entering the turbine, although this is not the only property that defines a coal-fired power station. Steam conditions may be subcritical (S), supercritical (SC) or ultra-supercritical (USC). Steam is called supercritical when the steam parameters exceed a critical point. 2 The higher the temperature and pressure of the steam, the higher the efficiency of the power plant. 3 Efforts to improve power-plant technology focus primarily on achieving increased efficiency and decreased emissions. To achieve such improvements many branches of knowledge must be considered, because improvements are often based on incremental changes in a range of technologies, including new materials and improvements in computer technology. Subcritical-pressure power plants have been the mainstream technology since the late 1990s, and their share of the entire coal-fired electricity sector remains steady at about 40 percent. Integrated gasification combined cycle (IGCC) is only a niche technology. Figure 3 shows that, after obvious growth in the last decade, circulating fluidized bed combustion (CFBC), supercritical and ultra-supercritical pressure units comprised 9.7 percent, 12.8 percent and 1.7 percent of the total in 2007, respectively (Editorial Board of China Electric Power Yearbook, 1999–2008). 2 The “critical point” is the temperature and pressure above which the working fluid – in this case water – no longer turns into steam but instead decreases in density when it is heated above “boiling point.” By eliminating the transition into steam (phase change) the efficiency of the process can be improved. For water the actual conditions are temperatures and pressures of over 374°C and 221.2 bar respectively. 3 The rule of thumb in power plant construction is that each additional bar causes a 0.005% increase in the degree of efficiency and each additional degree Celsius causes a 0.011% increase in efficiency. Figure 3. Installed capacity of China’s coal-fired generation technologies IGCC 16000 14000 CFBC 10000 8000 UltraSupercritical 6000 4000 Supercritical 2000 0 Year 1960 1963 1966 1969 1972 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 (Megawatts electrical 12000 Data source: IEA 2011b Subcritical 4 2.3 Scenarios for China developed in past studies 2.3.1 Low carbon scenarios for the Chinese electricity sector As lowering carbon emissions has become an increasing concern worldwide, more and more research is being conducted to forecast Chinese emission trends. Several institutions have developed scenarios regarding China’s carbon emissions, including the Energy Research Institute (ERI), Lawrence Berkeley National Laboratory (LBNL), McKinsey & Company (McKinsey), the International Energy Agency (IEA) and the United Nations Development Program (UNDP). We can basically divide the forecasts developed in past studies into two categories: reference scenarios and comparison scenarios (see details in Appendix 1). There are clear differences between these two types of scenarios with regard to time horizons and emission reduction levels. However, we can find similar trends in both the reference and comparison scenarios: (1) Reference scenarios: the CO2 emission peak arrives around 2040 in the ERI scenario and 2030 in LBNL scenario, while there is no CO2 emission peak arriving before 2050 in the UNDP and IEA scenarios; (2) Comparison scenarios: the CO2 emission peak arrives around 2030 in most scenarios; 5 Compared to the reference scenarios, the most optimistic comparison scenario forecasts lower emissions of 0.8 billion tons in 2010, 5 billion tons in 2030 and 11 billion tons in 2050. Under this scenario, China reduces its CO2 emissions drastically in the coming decades, at least in terms of relative reductions (emissions per unit of output). 4 IEA (2011), "OECD – Coal balances", IEA Coal Information Statistics (database).doi: 10.1787/data-00552-en (Accessed on 5 June 2012). Except for the low carbon scenario in IEA and emissions control scenario in UNDP. 5 China is now under pressure to achieve its avowed climate goals. Figure 4 shows different scenarios from the IEA, ranging from business as usual (current policies scenario) to a very ambitious scenario from the Intergovernmental Panel on Climate Change (the “450” scenario). To reach the absolute emission reductions foreseen in the 450 scenario, radical changes in Chinese energy and climate policy would be needed. We could also find that CO2 reduction of electricity sector accounts about half of the total reduction. Figure 4. CO2 emissions in China: historic data and projections Total CO2 emissions (history) 14000 Total CO2 emissions (Current Policies Scenario) 12000 Total CO2 emissions (New Policies Scenario) Million tons 10000 8000 Total CO2 emissions (450 Scenario) 6000 CO2 emissions from electricity sector (history) 4000 2000 CO2 emissions from electricity sector (Current Policies Scenario) 0 Year 1971 1980 1990 2000 2009 2020 2030 2035 Data source: IEA (2011a) In the IEA projection in Figure 4, we can see that the electricity sector is expected to reduce CO2 emissions from 5339 Mt in the current policies scenario to 4278 Mt CO2 in the low carbon scenario, which means that annual CO2 emissions should be reduced by 1061 Mt by 2030 6. 2.3.2 Previous work on clean coal scenarios in China We reviewed four articles that forecast future scenarios based on existing coal-fired technology (see details in Appendix 2). We can essentially divide these scenarios into two types: baseline clean coal (BCC) scenarios and clean coal scenarios. In Figure 5, the BCC scenarios assume hardly any development of new technologies such as integrated gasification combined cycle (IGCC) and carbon capture and storage (CCS). In these scenarios, the main clean coal technologies in 2030 are still subcritical and supercritical technologies. 6 More details about scenario can be found in IEA,(2011a). Figure 5. Technology structure in different BCC scenarios in the literature 8000 Other 6000 IGCC 5000 CFBC Terawatt-hours 7000 4000 PFBC-CC 3000 USC 2000 SC 1000 Subcritical 0 200520102015202020252030 BCC scenario 1 2000201020202030 BCC scenario 2 Data source: Yu, F., J. Chen, et al. (2011) and Cai, W., C. Wang, et al. (2007) 7 In Figure 6 we can see that IGCC and CCS are developed substantially in order to meet ambitious CO2 reduction goals. Figure 6. Technology structure in different clean coal scenarios in the literature 8000 7000 Other Terawatt-hours (TWh) 6000 5000 PFBC 4000 IGCC 3000 CFBC 2000 1000 0 2010 2020 2030 clean coal scenario 1 2010 2020 2030 SC/USC units Subcritical units clean coal scenario 2 Data source: Yu, F., J. Chen, et al. (2011) and Cai, W., C. Wang, et al. (2007) In the next section we will explore whether the clean coal technology structure in the clean coal scenarios could help to reduce CO2 emissions to fulfill the targets of the low carbon scenario. We are concerned with two interrelated questions: Is there an emissions gap between the low carbon and clean coal scenarios? And if so, how large is this gap? 7 PFBC means pressurized fluidized bed combustion. Otherwise clean coal scenario 1 includes low and medium pressure (LMP), high pressure (HP), ultra-high pressure (UHP) and clean coal scenario 2 includes thermal power plants (less than 300 MW) and CCS mitigation. 3 The gap between the clean coal and low carbon scenarios In this section we first calculate the amount of CO2 emission in the clean coal and low carbon scenarios. Clean coal scenario means we use clean coal technologies such as SC/USC and IGCC technologies to realize the CO2 mitigation objection. 3.1 Scenario description and main assumptions We use three scenarios in this paper, all of them derived from IEA (2011). They are the Baseline Clean Coal Scenario (BCC) and Strict Control Clean Coal Scenario (SCCC). The data are based on information from 2000. Energy consumption factors, emissions factors and the cost information for each measurement are based on relevant literature, such as IEA (2011), Cai, W., C. Wang, et al. (2007) and Yu, F., J. Chen, et al. (2011). Low carbon scenario in blow means the new policy scenario in WEO (IEA (2011)). In this paper we focus on clean coal technology in the coal power sector. Specifically, we examine the impact of different policies on the choice of coal technology. We assume that the share of coal fired electricity compared to other energy sources such as renewables does not vary between the different scenarios. This assumption is in line with the studies mentioned above, especially Yu. et al. (2011). The amount of coal may change due to the increased efficiency of innovative coal technologies. The major purpose of this assumption is to provide a standardized set for the comparison and analysis of different technology choices (Wang et al., 2007). Our projection for net electricity generation is in line with IEA (2011). Appendix 3 and 4 show the main assumptions in the different scenarios. 3.2 Projected CO2 emissions from coal power in the clean coal scenarios Without considering CCS systems, CO2 emissions in the BCC scenario rise from 3.2 billion tons in 2009 to 4.11 billion tons in 2030 as a result of an increase in installed capacity. However, in SCCC scenario, technological innovation will lead to a lower increase in emissions, with emissions rising to 4.11 billion instead of 4.38 billion tons by 2030 (Fig 7). This lower emissions level is attributable to the development of more advanced coal technologies. Figure 7. CO2 emissions from coal power in different scenarios 8 5,0 4,5 Other 4,0 3,5 IGCC 3,0 CFBC Billion tons 2,5 2,0 PFBC-CC 1,5 USCCC 1,0 SCCC 0,5 0,0 2010 2015 2020 2025 2030 BCC scenario 2010 2015 2020 2025 2030 Subcritical SCCC scenario 3.3 The gap between low carbon scenarios and clean coal scenarios We can see from Figure 8 that even when clean coal technologies are developed, there is still a large gap between low carbon and clean coal scenarios. Furthermore, the gap becomes larger with time. 8 Clean coal scenario 1 includes low and medium pressure (LMP), high pressure (HP) and ultra-high pressure (UHP). Figure 8.Coal-power CO2 emission forecasts in three different scenarios 6320 CO2 emissions in BAU scenario 5820 Million tons 5320 4820 CO2 emission in SCCC scenario 4320 3820 CO2 emission in low carbon scenario 3320 2820 2320 Year 2015 2020 2025 2030 CO2 emission in 450 scenario Source: Authors’ calculations As shown in Table 1, CO2 emission reduction in the clean coal scenario only comprise 19 to 35 percent of overall CO2 emission reductions in the low carbon scenarios in 2020, and only represent 6 to 17 percent of reductions in 2030. A primary reason for this declining percentage is the ever-lower efficiency gains obtainable from clean coal technologies. Table 1: Gap between the low carbon and clean coal scenarios Unit: millions of tons 2020 2030 CO2 emission reduction in clean coal (SCCC) scenario 175.9 273.3 CO2 emission reduction in low carbon scenario 493.0 1539.0 CO2 emission reduction in 450 scenario 894.0 4.094.00 Gap between the low carbon and clean coal (SCCC) scenarios 317.1 1265.7 Gap between the 450 scenario and clean coal (SCCC) scenarios 718.1 3820.7 4 Closing the gap between low carbon and clean coal scenarios 4.1 Options for closing the gap In the previous section we highlighted the large emissions reduction gap between the clean coal and low carbon scenarios. In this section, we will explore the implications of this gap for climate and energy policy. A first option for reconciling the reductions obtainable with clean coal technology with the avowed goals of climate protection policy would be to delay the timeline for emissions reduction: If climate protection policy relies exclusively on clean coal technologies, the carbon reductions in China’s electricity sector will be realized later than is discussed and expected today (particularly in European forecasts). A second potential option for closing the gap is the deployment of more advanced coal technologies (in a more strict clean coal scenario). For example, if all subcritical plants were replaced by supercritical power plants in 2020, there would be an additional 43 million tons of CO2 reduction. And if all the supercritical plants were replaced by ultra-supercritical plants in 2030, there would be another 139 million tons of CO2 reduction. However, this solution would not only be expensive, but would only have a moderate impact on emissions (see Fig. 9). Figure 9. The CO2 emissions gap between clean coal and strict clean coal scenarios from 2009 to 2030 9 CO2 emissions in BAU scenario 7000 CO2 emissions in SCCC scenario 6000 million tons 5000 CO2 emissions in low carbon scenario 4000 3000 CO2 emission in clean coal scenario (more strict clean coal scenario ) 2000 1000 Year CO2 emission in 450 scenario 0 2009 2015 2020 2025 2030 Source: Authors’ calculations A third option is large-scale deployment of carbon capture and storage (CCS). According to the literature, CCS could be an important part of the solution since it combines continued coal utilization with significant CO2 reduction (Hengwei Liu, 2010). 4.2 The cost of CCS in China CO2 capture and storage (CCS) is an emissions reduction option that has been receiving significant attention worldwide, but there are two notable barriers to implementation: First, CCS is not yet ready technologically for commercial use (and faces serious resistance in several countries). Second, it is a very expensive technology. Like most developing countries, China is concerned that CCS is too costly. The Chinese government has indicated that it may be willing to support CCS if more funding was available. China has included reference to CCS as an important frontier technology in its Outline for Medium and Long-Term Science and Technology Development (2006–2020). 10 Currently, significant R&D activities and a number of pilot projects are underway to provide technical knowledge, training and further research into CCS technologies. The cost of deploying CCS in China could vary significantly depending on the projects in question, from relatively low-cost early opportunity projects to more expensive large-scale 9 According to the strict clean coal scenario, all subcritical plants will be replaced by supercritical plants in 2020 and all supercritical plants will be replaced by the ultra-supercritical plants in 2030. 10 See http://www.gov.cn/jrzg/2006-02/09/content_183787.htm (in Chinese) industrial undertakings. An integrated CCS system involves three main phases: in the first phase, CO2 is captured and compressed at a large stationary source, such as a coal-fired power plant or steel factory. In the second phase, it is transported off-site. In the third phase, the captured CO2 is sequestered through storage in geological formations or through transformation into carbonates in reactions with metal oxides. There are three main types of CO2 capture technologies: post-combustion, oxyfuel and precombustion (Rennings et al., 2009). Post-combustion involves scrubbing the CO2 out of flue gases from combustion process. Within the oxyfuel technological process, fuel is combusted in recycled flue gas, and then the gas is enriched with oxygen (Bliss, 2010). Pre-combustion uses a gasification process followed by CO2 separation to yield a hydrogen fuel gas (IEA, 2009). Depending on the technology, adding CCS is estimated to increase the cost of generating coal-fired power by 40–80 percent. 11 According to the IEA’s Technology Roadmap for CCS (IEA, 2009), achieving sustainable levels with this technology (the so-called BLUE Map level of deployment) will require over US$1.3 trillion of additional global investment and US$5 trillion in total investment from 2010 to 2050, of which at least 15 percent will fall to China. Further costs will be incurred for the construction of CCS transport pipelines: the capital costs of constructing a 100-kilometer pipeline are between US$18 million and US$102 million in China, depending on the amount of CO2 transported. NZEC Work Package 3 (2009) have carried out case studies on capture for supercritical/ultra supercritical (SC/USC) in China, and the results show that the investment cost of power generation with capture is around 7000– 9000 RMB/kW (1000–1300 US$/kW) before taking into account loan interest and taxes, etc. (Chen, W., 2011). According to the IEA World Energy Outlook 2011(IEA, 2011c), regarding the total cost of CCS (including capital cost and operation and maintenance (O&M) costs), there is no cost reduction for SUB/SC/USC technologies from 2015 to 2035 and slight reduction for IGCC in 2035. Besides, the cost in China accounts 39% to 53% in Europe regarding SUB/SC/USC technologies and 43% to 53% regarding IGCC in 2035. Based on Finkenrath (2011), average CO2 avoidance costs with CCS are today between $27 (for oxy-fuel technology) and $42 (for post-combustion technology) per ton of CO2. CO2 avoidance costs for IGCC in China are not available. We can estimate the avoidance costs which are necessary to close gap between the clean coal and low carbon scenario. As mentioned above, if it is assumed that 80% of the reduction from the electricity sector is from coal-fired power plants (as is their share today), then the CO2 emission reduction needed by the electricity sector is 901 million tons in 2030 compared to the low carbon scenario, and the additional cost of CO2 avoided in China would be between $ 24 billion (for oxyfuel technology) and $38 billion (for post-combustion technology). In order to close the gap between SCCC scenario and 450 scenario, 3820 million tons of additional CO 2 mitigation are needed. Accordingly, the additional cost of CO2 avoided in China would be between $88billion (for oxyfuel technology) and $138billion (for post-combustion technology). 11 IPCC Special Report on Carbon Dioxide Capture and Storage, 2005 and Carbon Capture and Storage: A Key Abatement Option, IEA, 2008. 5 Summary and Conclusions In coming decades China will continue to rely on coal and other fossil fuels for power generation. Yet there is a large gap between the CO2 emissions that are forecasted in low carbon and clean coal scenarios. Moreover, the larger the forecast horizon, the greater this gap becomes: while CO2 reductions in clean coal scenarios are equivalent to 19 to 35 percent of overall reductions in low carbon scenarios in 2020, in 2030 clean coal corresponds to just 6 to 17 percent of such reductions. This gap has several implications for climate and energy policy. There would appear to be three possible options for policymakers: First, reduction targets could be scaled back such that targets are achieved at a later date than currently foreseen. A second option would be to make use of more advanced coal technologies. As shown in this paper, however, the second option is quite expensive and would only have a moderate impact on CO2 emissions. According to the strict clean coal scenario, if all supercritical plants were replaced by ultra-supercritical plants in 2030, this would only lead to 139 million tons of CO2 reduction, which corresponds to less than 10 percent of the CO2 reduction foreseen under the low carbon scenario. A third option is the large-scale deployment of carbon capture and storage (CCS). This option may become indispensable if significant CO2 reductions are sought. CCS would be still expensive for China, but more effective compared to the clean coal technologies mentioned above. Average CO2 avoidance costs with CCS for China are today between $27 (for oxy-fuel technology) and $42 (for post-combustion technology) per ton of CO2. To close the gap between the low carbon and clean coal (SCCC) scenario, the additional cost of CO2 avoided in China would be between $24billion (for oxyfuel technology) and $38billion (for postcombustion technology). And for closing the gap between the 450 scenario and clean coal (SCCC) scenario, the additional cost of CO2 avoided in China would be between $88billion (for oxyfuel technology) and $138billion (for post-combustion technology),. Moreover, a lot of uncertainties exist regarding the future development of CCS (Watson, 2012). The fact that CCS will not be realized in some European countries such as Germany due to public resistance may have a negative impact on the global diffusion of the technology (Kolhoff, 2012). 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Comparison of scenario settings in the five low carbon scenarios studies ERI Reference scenarios Comparison scenarios Current scenario: considers current emission reduction policies Low carbon scenario: considers the sustainable development of China, with more efforts to realize low carbon economy IEA The Current Policies Scenario, which assumes no change in government policies and measures beyond those that were enacted or adopted by mid-2011, is considerably worse, and is consistent with a long term temperature increase of 6°C or more. LBNL Continued Improvement Scenario (CIS): Chinese economy will continue lowering its energy intensity as a function of GDP to achieve levels that are common in industrialized countries UNDP Business as usual: Imposes certain extra policies, but compulsory emissions reduction measures are not put in place Strict low carbon scenario: based on global emission reduction goals New policy scenario: which takes account of both existing government policies and declared policy intentions (including cautious implementation of the Copenhagen Accord and Cancun Agreements), would result in a level of emissions that is consistent with a long-term average temperature increase of more than 3.5°C. 450 scenario: The trends and implications of the 450 Scenario, a scenario based on achieving an emissions trajectory consistent with an average temperature increase of 2°C. Accelerated Improvement Scenario (AIS): Assesses the impact of actions already taken by the Chinese government, planned or proposed actions, and actions that may not yet have been considered, in order to evaluate the potential for China to control energy demand growth and mitigate CO2 emissions. In addition, there are also scenarios with CCS (CIS and AIS assume no CCS) Emissions controls scenario: Foresees implementation of a package of industrial and energy structure policies to reduce growth-related energy consumption Emissions abatement scenario: Foresees policymakers setting 2030 as the year China will reach peak emissions, with the maximum possible reduction in emissions achieved by 2050 Appendix 2. Comparison of scenario settings in the four clean coal scenarios studies Reference scenarios Yu, F., J. Chen, et al. (2011). "Trend of technology innovation in China's coalfired electricity industry under resource and environmental" Wang, H. and T. Nakata (2009)."Analysis of the market penetration of clean coal technologies and its impacts in China's electricity" Cai, W., C. Wang, et al. (2007). "Scenario analysis on CO2 emissions reduction potential in China's electricity sector" Baseline scenario: Assumes governments introduce no new energy and climate policies Comparison scenarios Planning policy (PP) scenario: Significant penetration of advanced technologies are objectives in planning for 2010 and later. SC and USC will be the mainstream generation technologies, while IGCC and PFBC-CC will begin operation after 2020. These two technologies will both make up 5 percent of newly built power plants. FGD is compulsory for coal-fired power plants with capacities more than 300 MW, and CCS will be implemented in some IGCC plants after 2025. Strict control (SC) scenario: Rigorous management and strong promotion of efficient technologies, aimed at achieving a significant decline in resource consumption and environmental effects. Compared with the PP scenario, the development and application of immature technologies, including IGCC, PFBC-CC and CCS, will be more vigorous. Five percent of newly built IGCC plants will install CCS system after 2020. All of the new coal-fired power plants install FGD systems, and air cooling is mandatory in water-deficient areas (as in clean coal scenario 2). Baseline scenario: Sulfur emission tax (Stax) scenario: In this scenario, more strict environmental policies Reflects current and regulations are implemented. The effectiveness of sulfur fees to promote clean government policy coal technologies and improve environment quality is tested by applying different tax rates. Carbon emission tax (Ctax) scenario: Clean coal technologies are assumed to be equipped with CCS in order to offset the influence of a carbon tax. The capture efficiency is assumed to be 90 percent. Subsidization (SUB) scenario: 15 percent of the capital costs of all three clean coal technologies are subsidized by the Chinese government. The variable cost subsidy is not considered in this research. Similar to the Stax and Ctax scenarios, two different subsidy rates, 5 percent and 45 percent, are utilized in the SUB scenario for the purpose of comparison. The main options Scenario 2: Installed capacities of current power plants have been enlarged and smallare focused on scale facilities have been phased out of the market. Advanced generation technologies demand-side have been widely introduced, such as PFBC and IGCC. management, Scenario 3: All plants less than 50 kW have to be closed before 2003 and all plants less improving energy than 100 kW have to be gradually phased out of the market. Supercritical turbine efficiency of end- generators will be used in projects from 2015. Carbon capture and storage (CCS) starts users, SO2 and NOx service in 2020, and can mitigate 60 million tons of CO2 nationwide by 2030. Other control, and advanced coal-fired technologies will be used to a larger extent than in scenario 2. refurbishment of (as in clean coal scenario 2). old coal-fired plants. Generation ratio of renewable energy grows slowly. Appendix 3. Main technology parameter: Gross standard coal consumption of different generation technologies in China (gce/kWh) 12 Year Subcritical SC USC CFBC PFBC-CC IGCC 2000 322 320 291 315 – – 2020 312 298 280 315 290 255 Source: Yu, F., J. Chen, et al. (2011) Appendix 4. Main technology structures in different scenarios for coal electricity generation(GW) Scenarios SCCC Year 2005 2010 2015 2020 2025 2030 2005 2010 2015 2020 2025 2030 Subcritical 43.5 43.9 43.9 44 44 44 43.5 37.8 28.7 22.9 20.5 18.4 5.2 18.5 21.9 24.1 24.9 25.7 5.2 23.1 29.3 29.7 26.7 23.9 USC 0 3.7 4.9 5.7 6 6.2 0 10.5 19.8 30.6 36.6 41.8 PFBC-CC 0 0 0 0 0 0 0 0 0 1.3 2.4 3.3 CFBC 8.4 11.2 12.1 12.6 12.9 13.1 8.4 10.2 10.4 10.1 9.6 9.2 IGCC 0 0 0 0 0 0 0 0 0 1.3 2.4 3.3 42.9 22.7 17.2 13.6 12.2 11 42.9 18.4 11.8 4.1 1.8 0.1 SC Other 12 BCC PFBC-CC stands for pressurized fluidized bed combustion combined cycle. PFBC-CC and IGCC are not available in 2000 in China.
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