Will China take the lead in carbon capture and storage technologies?

European Union governments are counting on carbon capture and storage (CCS) technologies as a crucial weapon in the battle against global warming. By siphoning off CO2 before it gets into the atmosphere, CCS technologies can sequester up to 90 per cent of the greenhouse gas emissions from the burning of fossil fuels.

But a shortage of funding, combined with public opposition, has stymied the launch of 12 planned CCS demonstration projects in the EU. Most have been cancelled or postponed indefinitely.

What will it take to get CCS back on track in Europe for commercial deployment in the 2020s? With policy makers in Europe and North America intent on reducing short-term fiscal deficits and winning votes, it may come down to China or an industrial consortium to show that CCS is a viable, large-scale commercial option, according to Ronald Oxburgh, member of the House of Lords Select Committee on Science and Technology and deputy chairman of the Singapore Science and Engineering Research Council.

An eminent geologist/geophysicist and a former chairman of Shell Transport & Trading, Oxburgh believes one way to overcome the current impasse would be for several of the world’s largest energy companies to form an industrial consortium with the necessary project management expertise and investment capital to run a commercial large-scale CCS operation.

China needs CCS

The leaders of global industries are worried about the way many governments in the west are proving ineffectual, “both internally and in the ways in which they collaborate with each other on problems of mutual interest,” Oxburgh said in an interview on the sidelines of an academic policy symposium organised by Science|Business in Brussels on April 27th.  “There are now CEOs who have operations in many countries saying, if some of these big projects, which we believe are fundamental, are to come about, global industries with operations in different countries may be the means of implementing them.”

Such a consortium would have to be made up of large companies with big balance sheets and an appetite for risk. While there is a broad consensus that CCS is a robust technical proposition, it is far from clear whether CO2 can be captured and stored safely at sufficiently low cost. If CCS proves to be inherently too expensive, the world may choose to redirect funds to other low-carbon options, such as solar, wind and biofuels. Without CCS, however, the inevitable continued widespread use of fossil fuels will make it impossible to avoid massive increases in atmospheric CO2, Oxburgh warned.

Even if it proves expensive, CCS may still be an attractive option for countries such as China and Australia, which are heavily reliant on coal and generate large volumes of CO2. China is the world’s largest producer of coal, yet it is also one of the countries most at risk from higher temperatures and greater desertification. “I think China is probably going to press ahead and, almost certainly will be the first country to deploy CCS, at a larger scale,” Oxburgh noted. “And they probably won’t worry that much about whether it is conventionally commercially viable. But they will do it.”

International cooperation

The question for European policy makers is whether China will act in isolation or will share its CCS expertise with other countries. Oxburgh believes China and Europe may well co-operate on the development of CCS.  “If the U.S. position on climate change and remedial action doesn’t alter, I can see China taking a more and more prominent leadership role, given its commitment and its five-year plan, and I can see Japan and Europe and the little Asian tigers as the first group lining up with that,” he said. “But whether China is open to full-scale major collaborative projects remains to be seen.” 

In Europe, only a few countries are still working to develop ambitious CCS pilot projects. The U.K. government has invited bids for £1 billion in state funding for one or more projects, while in the Netherlands, 18 companies are involved in a CCS demonstration in Rotterdam, which is scheduled to begin storing CO2 in depleted gas fields under the North Sea in 2015.  Projects financed by the European Commission are also under way in France and Italy.

Oxburgh believes the U.K. and Norwegian governments may be prepared to work together on a large-scale CCS operation, possibly with the support of the Dutch and German governments.  But he cautions that such projects can be undermined by bureaucracy.  “The attractiveness of having a commercial organisation do this, is it would be managed properly as a project,” he said. “As soon as you bring governments together, you get the politics, and you get decisions by committee, which generally means the lowest common denominator.”

Barriers

Robust project management will be important because the successful roll-out of a CCS operation depends on the coordinated deployment of three separate elements – a system for capturing the CO2, some kind of transmission infrastructure and a repository in which the CO2 can be stored safely with minimum leakage. Oxburgh pointed to the opening up of the East Russian gas fields, in which Shell worked with several other major oil companies as an example of the kind of collaborative project needed to deploy a large-scale CCS operation.  “What you do to share risk, is you go in together, but then you don’t run by committee, you set up a new entity that is a jointly-owned to achieve this particular project,” he said.

Of course, the biggest barrier to a consortium of commercial companies investing in a major CCS project is the lack of a convincing business case, including uncertainty around future regulation and CO2 pricing. As Oxburgh points out “no single industry owns the problem of CCS and no single industry even owns the problem of carbon capture.”

Still, there are examples of large companies acting for the wider public good. Oxburgh noted that after the London riots, several companies, including Shell and BP, put some money into a project fund, to provide immediate support to people who had lost their businesses.

Demonstration plants 

In the case of CCS, the question for big companies would be whether to go straight to commercial deployment or build a demonstration operation. There are only a handful of commercial CCS plants up and running today, such as one operated by Norway’s Statoil removing CO2 from natural gas drawn from the Sleipner West field, underneath the North Sea. The CO2 is stored in a deep saline reservoir 1,000 meters also below the sea floor. To encourage oil companies to reduce their carbon emissions, the Norwegian government imposes a $36 carbon tax per tonne of CO2 released into the atmosphere but is planning to double it to $72 per tonne.

Still, Oxburgh advises policy makers and business leaders to be wary of calls for more research and more demonstration plants. He pointed out that academics are always going to be interested in pursuing what is unknown.  “Fundamentally, within academia, research is good and more research is better,” he said.

A sense of urgency 

A few years ago, Oxburgh addressed 80 US business leaders at Colombia Business School in New York on the topic of climate change and what ought to be done about it. “The seven academics, experts in climate change, before me all emphasized what more needed to be done,” he recalled.  “The business leaders in the audience were there with their mouths open – they thought this was an urgent problem….. academics want to know what is unknown, while business leaders want to know what is known.”

For Oxburgh, reducing CO2 emissions is an urgent issue. “All of this is based on a scientific  understanding of climate change and what that tells us, to a best approximation, is that every year we delay in doing something about this, we are prolonging the agony for our descendants for four or five years.” 

In this context, it isn’t clear that the European Union, with its emphasis on building a consensus through a time-consuming co-decision process, is well equipped to accelerate the deployment of new technologies, such as CCS. “What depresses me is the lack of any sense of urgency coming out of Brussels,” Oxburgh said.  “This is why big corporations may possibly be the answer.”