Enabling the Legal and Regulatory Framework for Large-scale Carbon Capture, Utilisation and Storage (CCUS) Projects in Guangdong, China

China contributes more than a quarter of global anthropogenic greenhouse gas emissions. Fossil fuel supplies more than 80% of primary energy in China and coal contributes two thirds. Carbon capture, utilisation and storage (CCUS), as the only technology to decarbonise fossil based energy, is therefore important for China’s transition to a low-carbon economy.
China has piloted and demonstrated CCUS technologies in the last decade, but the development of a legal and regulatory framework is still lagging behind major developed economies (such as the EU, US, Canada and Australia). Guangdong is one of the most developed provinces and one of five pilot low-carbon provinces in China. The province is keen to demonstrate CO2 capture, transportation, utilization and offshore storage technologies at large-scale. However, in the absence of a legal and regulatory framework at both national and provincial levels, it will be a challenge to provide the regulatory certainty and assurance needed for the successful commercial deployment of CCUS in the province.
With support from the UK Foreign and Commonwealth Office through the Strategic Programme Fund, Guangdong Development and Reform Commission, Scottish Enterprise, Howden Group, Alstom Group, Shell Cansolv, DNV GL, China Resources Power, China National Offshore Oil Corporation, and Linkschina Advisory.
- Establish a formal full-chain CCUS project permit application, authorisation, and issuance process, and develop a process to certify project completion. To facilitate this, the government may adopt the regulatory test tool kit developed by GCCSI and the Scottish Government (2011: 14) to formulate a regulatory table relevant to China;
- Establish a regulatory framework designed specifically for whole-chain CCUS projects. To do this it may be more efficient to adapt existing laws where relevant, and to pilot the regulatory regime at a provincial level (for example in Guangdong) for the first few large scale demonstration projects.
- Clearly identify and define the responsibilities of the various regulatory departments throughout the lifecycle of a demonstration project, from permitting of the capture plant, to post-closure of the CO2 storage site. The first few demonstration projects should adapt existing regulatory frameworks where possible, and those regulations may be tightened up as knowledge is gained from early demonstration projects.
- Establish a CO2 storage permit management system, including a formal procedure to apply, issue, change and cancel permits, to ensure CO2 is stored safely and reliably, and that monitoring measures are in place;
- In relation to CO2 storage, explicitly define and regulate the liabilities of the operator throughout the operating, closure and post closure phases of the storage site. Clearly define when and under what conditions liabilities can be transferred from the operator to the government. The definition and management of CO2 storage related liability and transfer is critical in securing successful investment in and operation of a CO2 storage project.
- Define what security (e.g. guarantee or bond) a storage site operator needs to post against the liabilities incurred as above. Financial security for CO2 storage has not been explicitly considered in the current environmental liability framework in China. A requirement to give security should incentivise the storage site operator to adopt the best practice for risk mitigation. However, in order to encourage project development and investment, the State and/or Guangdong province should still be responsible for those additional and very long term risks which commercial companies are not normally capable of carrying.
- An integrated CCUS project communication scheme should be established to ensure successful communication with the public and key stakeholders, to increase the likelihood of acceptance by the public.
- Health and safety measures and a best practice framework related to handling CO2 should be adapted from a related industry/foreign practice or if necessary developed new; and CCUS projects and regulators need to put in place measures to protect the health and safety of the public and assess and approve emergency plans before the project is authorised.
- Guangdong should follow up on the capture ready demonstration project based on China Resource Power’s Haifeng plant, and institute a policy that all new large point sources of CO2 should be built with capture ready design.
- CO2 transport and storage infrastructure developed should be open for other industry CO2 sources and capture ready power plants, through enabling a third party access regulation.
- The National and/or Guangdong provincial government must establish dedicated financing measures for early large-scale demonstration projects (such as government subsidies, concessional tax, concessional loans, public funds) to encourage private capital to invest in CCUS demonstration projects, before carbon emission trading or other carbon pricing systems are mature.
- Collaboration with Hong Kong is a key task highlighted in the medium- to long- term development plan in the Pearl River Delta (GDPG, 2009) that could be turned into an opportunity for financing CCUS projects.