T h e C h i n a S u s t a i n a b l e E n e r g y P r o g r a m中 国 可 持 续 能 源 项 目

Accelerating Clean Coal Technology Diffusion in China

May 6, 2008Fuqiang YANG

Reducing energy intensity by 20% by 2010 implies 1.6 Gt CO2 emission reduction

Coal Update by March 2008 • Coal output +13% • Net coal importation, 11.3 m

(i)/10.2 m (e)• Coal price at mine + 25%• Power generation profit

-55%, shut down 14.5 GW in 2007 and 13 GW in 2008

• 360 m coke consumption in China, 60% of global total

• Output of iron and steel +13.9%

Desulfurization in the Guohua Power Group

0%10%20%30%40%

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90%100%

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2002 2003 2004 2005 2006 2007 2010

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国华电力历年脱硫安装率

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国华电力SC/USC发电技术应用

TotalSuperUtra Super

Super and Ultra-Super Power in the Guohua Power Group

Opportunity: CTG, CTL and Polygeneration with CCS

• Electricity/Coke/Chemical– IGCC/Polygeneration/CCS– Allows removal of pollutants– Higher thermal efficiency– Generating valuable byproducts– CO2 capture and sequestration– Cheap and technology availability

• CTL/liquid Fuels– Indirect liquefaction/CCS– Allows removal of pollutants– CO2 capture and sequestration

Two Scenarios for Primary Energy Supply

Coal Polygeneration

Technology BAU Scenario Advanced CCS Technology Scenario, 30% oil and gas importation

Carbon Emission Reduction 6.6 Gt

Source: Ni Weidou, Tsinghua

Polygeneration Development Policy

• Polygeneration is a key technology in National long term science and technology development plan

• National polyfeneration demonstration is in the list of 863 national program

• State budget 360 million yuan and enterprise investment 30 billion yuan

• 7 different types of polygeneration demonstration pilots

9 key technology demonstration projects2000 tone/day liquid coal mix technology2000 tone/day high pressure dry coal powder technology1500 tone/day CTL for high contents of ash, sulfur and temperatures Retrofit technology for gas turbine with low pollutant syngas

Polygeneration Key Technology

100,000 – 1 million tons of syngas F-T liquid fuel technologyPolygeneration operation and control technologyPolygeneration system optimization and design technologyLiquid products and polygeneration system testing demonstration IGCC system demonstration and testing

Polygeneration Key Technology

200 MW IGCC demonstration pilot in Tianjin by 2012400 MW Commercial IGCC by 2015R&D of CCS in the national labs

Private Sector Involvement - Huaneng

• Market-based Instruments– Green Credit Policy– Green Insurance– Environmental scrutiny of IPOs

• Judicial Enforcement– Independent Environmental

Court• Training Program• Over All Policy Analysis

– All-in Cost Pricing• Health Impact Analysis• Database build up• Methodology to estimate

Economic Analysis of health impact damage

– EIA / RIA / etc

Strengthen Environmental Regulatory Program

• Strengthen capacity building for environment regulatory system

• Build up strong legal system

• Promote clean coal energy technology development, energy efficiency and CCS

Total True Cost of Coal: Price, Fiscal and Tax

Price, Fiscal and Tax • Price and Internalize

Cost• Reserve Tax• Environmental Tax• Energy Tax• Ecological

Compensation• Carbon Tax

China Low-Carbon Finance: A Key for CCT and CCS

Scenarios & National Energy Policies:

• China’s National Energy Law• China’s 2050 Energy and

Climate Scenario Research• Post-Kyoto Climate Policy

Response

• MOST Climate Change Technology Roadmap 2008

Financial Needs:

• $100-200 billion by 2020

• $200-300 billion by 2030

• $400 billion by 2050

• MOST 7 Billion Yuan for EE, CCT/CCS and mitigation

Investment resource of environmental protection and energy efficiency

• Reform in financial systems aims to support sustainable development, such as quota requirement for banks, venture capital and stock market

• To Enlarge the governmental budget Pie in EP and EE categories and legalize proportion of government budget in EP and EE

• Policy bank and investment institution should take EP and sustainable energy development as a main strategic program

• Policies and regulations will encourage commercial banks to support and invest in EP and EE with quota requirement in loans

• Governmental discount and tax Policies, such as higher depreciation rate to EP and high energy efficiency equipments

• To diversify investment resources and encourage private sector to invest in EP and EE

• To increase levy gradually, impose energy tax, environmental tax and carbon tax

• International financial market, GEF and CDM• To establish development fund for the

environmental protection and energy efficiency• New investment and financing channels, such

as VC

Investment Resource in the Environmental Protection and Energy Efficiency

Carbon Fund and Trade Market

• Create carbon trade market with $1 -2 trillion

• The carbon trade market covers one third of the total carbon emissions

• Pilot demonstration in Shanghai and Guangdong

• The carbon trade agency in Tianjin

• In 2007, SFB, CNPC and China Green Forest Fund established China Green Foundation for Forest Development with RMB 300 million. It should be increase above $100-200 billion.