Macroeconomic impacts of carbon capture and storage in China

Carbon capture and storage (CCS) is a key technology for reducing greenhouse gas emissions. But a CCS facility consumes vast amounts of energy and capital. With this in mind we analyze macroeconomic consequences of a large scale introduction of CCS in China. We modify and extend the DRC-CGE, a macroeconomic CGE model of the country that is used for long-term planning and policy analyses. We analyze an internal finance scenario of domestic funding, and an external finance scenario of international funding. In the external finance scenario CCS is installed on 70 percent of all power plants by 2050. This increases demand for coal in 2050 by one fifth and import of coal by one fourth. The strain on coal resources may be an important political concern for China. In the internal finance scenario coal resources are not strained since this scenario introduces a price on carbon that lifts prices of energy. Moreover, because the price on carbon cuts across the board the internal finance scenario is much more effective at reducing CO2. On the other hand, in this scenario GDP goes down about four percent, which also raises political concern.