China’s transition to clean energy faces significant hurdles

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The World Energy Transitions Outlook 2023 released by the International Renewable Energy Agency (IRENA) on March 28 restates the urgency of reducing carbon emissions by 2050 to fight climate change. 


“Current pledges and plans fall well short of IRENA’s 1.5°C pathway (the goal to limit global temperature rises to 1.5°C), and will result in an emissions gap of 16 gigatons by 2050…. However, most climate pledges are yet to be translated into detailed national strategies and plans. …(Therefore), the emissions gap is projected to reach 35 Gt by 2050.”


It is now urgent for countries to take comprehensive measures to translate their pledges into words and make more ambitious plans.


In China the road to a full transition is still long and formidable. Large state-owned power generation groups are still dominated by coal power. Even at State Power Investment Corporation, which produces the highest proportion of clean energy among all state-owned power companies, only 66 percent of energy comes from clean sources. 


From the future energy-transition plans announced by major Chinese power generation companies, it is clear that giving up coal will be difficult for them.


Xu Dong, director of the New Energy Research Institute of the China Energy Group, said, “Under the dual-carbon goal, coal power is still an important support for power generation under extreme conditions, safeguarding energy security… by 2060, China will still need to retain 800 million to 1 billion kilowatts of installed coal power generation to ensure China’s basic energy consumption needs are met.”


To realize carbon neutrality by 2060, power firms in China must establish their carbon capture, utilization, and storage (CCUS) system and reduce the cost of using such a system.


The US and EU have been leading the way in terms of CCUS deployment. In 2021, the two accounted for approximately three-quarters of the newly developed CCUS projects globally and approximately 63 percent of all CCUS projects.


So what are the business models for CCUS? In what ways can China benefit from CCUS?


The carbon dioxide captured by CCUS mainly goes to the chemical and oil and gas extraction industries. The main business models for CCUS in China are the uses of carbon dioxide to make methanol for the chemical industry and for oil and gas fracturing. 


Carbon trading is another business model. However, due to the trading price and lack of diversity among market participants, this model faces strong headwinds in China.


In an interview, Liang Xi, professor of sustainable finance and infrastructure transformation at University College London (UCL), pointed out, “At present, China’s CCUS projects are mainly funded and operated by a single company, often state-owned enterprises, with relatively little investment from private entities. The investment and cooperation model should be diversified in the future.”


Developing CCUS in China faces two major hurdles. One is that the set-up cost of CCUS projects is high, which requires a huge amount of investment. The other is that the development of the necessary technology for CCUS in China is in its early stages and widespread adoption seems a long way off.


Experts in this field suggest that the Chinese government put forward more supportive policies and subsidies, design a comprehensive national strategy for CCUS, and allow private entities to participate in the carbon trading mechanism. 

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