CCUS As a second-best choice for China's carbon neutrality: an institutional analysis

The climate emergency calls for decisive actions to achieve CO2 emissions reductions globally and in China. Although China has made substantial progress in renewable energy deployment and has promised to achieve carbon neutrality by 2060, the increasing CO2 emissions reflect a paradox in China's energy revolution, suggesting that second-best choices are necessary. Large-scale deployment of carbon capture, utilization, and storage (CCUS) can avoid stranding assets in existing fossil energy industries and thus incur less resistance from incumbents. With an estimated storage capacity of 3120 GtCO2, China has great potential to deploy CCUS. The more quickly CCUS scales up, the less the cost of mitigation in the future. Although China has issued many policies to promote CCUS development and achieved significant progress through demonstration projects, barriers still exist for its large-scale deployment. Barriers include the lack of CCUS-specific legal and regulatory models, relatively high investment requirements, and low public perception and acceptance towards CCUS. To effectively promote this second-best choice, institutional reforms are critical, including enabling climate change legislation, carbon tax policy, risk avoidance and risk sharing measures, compensation, and strengthened public engagement.Key policy insights Large-scale deployment of Negative Emission Technologies will be needed in China and beyond to address the climate emergency.Market distortions impede renewable energy development in China, making large-scale deployment of CCUS an essential second-best choice.Detailed legal and regulatory rule changes can reduce market uncertainties and provide a legal foundation and mandate for CCUS development.Particularly when source control measures – such as renewable energy deployment, industrial restructuring and energy efficiency improvements – face bottlenecks, the scaling up of negative emission technologies is essential.International cooperation on CCUS technologies and deployment should be strengthened to share experience, technology, and deployment modes.