The capture and permanent storage of CO₂ emissions from coal combustion is now widely viewed as imperative for stabilization of the global climate.  Coal is the world’s fastest growing fossil fuel.  This trend presents a forceful case for the development and wide dissemination of technologies that can decouple coal consumption from CO₂ emissions—the leading candidate technology to do this is carbon capture and storage (CCS). 

China simultaneously presents the most challenging and critical test for CCS deployment at scale.   While China has begun an handful of marquee CCS demonstration projects, the stark reality to be explored in this paper is that China’s incentives for keeping on the forefront of CCS technology learning do not translate into incentives to massively deploy CCS in power plant applications as CO₂ mitigation would have it.  In fact, fundamental and interrelated Chinese interests—in energy security, economic growth and development, and macroeconomic stability—directly argue against large-scale implementation of CCS in China unless such an implementation can be almost entirely supported by outside funding.  This paper considers how these core Chinese goals play out in the specific context of the country’s coal and power markets, and uses this analysis to draw conclusions about the path of CCS implementation in China’s energy sector. 

Finally, the paper argues that effective climate change policy will require both the vigorous promotion and careful calculation of CCS’s role in Chinese power generation.  As the world approaches the end of the Kyoto Protocol in 2012 and crafts a new policy architecture for a global climate deal, international offset policy and potential US offset standards need to create methodologies that directly address CCS funding at scale.  The more closely these policies are aligned with China’s own incentives and the unique context of its coal and power markets, the better chance they have of realizing the optimal role for CCS in global climate efforts.

Project development is particularly challenging in “frontier” environments where alternative technologies, conflicting laws and agencies, and uncertain benefits or risks constrain the knowledge or decisions of participants.  Carbon capture and storage (“CCS”) projects by means of geologic sequestration are pursued in such an environment.  In these circumstances, entrepreneurs can seek to employ two distinct types of tools:  the game-changer, being an improvement to the status quo for all those similarly situated, generally achieved through collective or governmental action; and the finesse, being an individualized pursuit of an extraordinary project that is minimally affected by a given legal, business or technological obstacle.  These techniques are illustrated in the case of CCS as to ownership of property rights, carbon dioxide (“CO2”) transportation economics, liability for stored CO2 following the closure of injection wells, inter-agency and federal-state conflicts, competing technologies, and uncertain economic or legal incentives.  The finesse and the game-changer should also be useful concepts for creative solutions in other applications.

Coal is the major primary energy which fuels economic growth in China. The original Soviet-style institutions of the coal sector were adopted after the People's Republic of China was founded in 1949. But since the end of 1970s there have been major changes: a market system was introduced to the coal sector and the Major State Coalmines were transferred from central to local governments. This paper explains these market-oriented and decentralizing trends and explores their implications for the electric power sector, now the largest single consumer of coal.

The argument of this paper is that the market-oriented and decentralizing reforms in the coal sector were influenced by the changes in state energy investment priority as well as the relationship between the central and local governments in the context of broader reforms within China’s economy. However, these market-oriented and decentralizing reforms have not equally influenced the electric power sector. Since coal is the primary input into Chinese power generation, and power sector reform falls behind coal sector reform, the tension between the power and coal sectors is unavoidable and has raised concerns about electricity shortages.

This paper analyzes the potential contribution of carbon capture and storage (CCS) technologies to greenhouse gas emissions reductions in the U.S. electricity sector.  Focusing on capture systems for coal-fired power plants until 2030, a sensitivity analysis of key CCS parameters is performed to gain insight into the role that CCS can play in future mitigation scenarios and to explore implications of large-scale CCS deployment.  By integrating important parameters for CCS technologies into a carbon-abatement model similar to the EPRI Prism analysis (EPRI, 2007), this study concludes that the start time and rate of technology diffusion are important in determining the emissions reduction potential and fuel consumption for CCS technologies. 

Comparisons with legislative emissions targets illustrate that CCS alone is very unlikely to meet reduction targets for the electric-power sector, even under aggressive deployment scenarios.  A portfolio of supply and demand side strategies will be needed to reach emissions objectives, especially in the near term.  Furthermore, the breakdown of capture technologies (i.e., pre-combustion, post-combustion, and oxy-fuel units) and the level of CCS retrofits at pulverized coal plants also have large effects on the extent of greenhouse gas emissions reductions.