China is the world’s largest carbon dioxide (CO2) emitter and its energy system is dominated by coal. For China to dramatically reduce its greenhouse gas (GHG) emissions over the next few decades, it must either replace most of its uses of coal with energy supplies from renewables and nuclear power or install demonstration-size and then scaled-up carbon capture and storage (CCS) technologies.

With China’s fossil fuel-related CO2 emissions now the highest in the world, at about one quarter of the global total, its participation is obviously crucial to the success of any global effort to significantly reduce GHG emissions by mid-century. But China’s fossil fuel related efforts thus far have been mostly in the opposite direction. Its expansion of coal-fired electricity generation, at an astonishing 12% annually since 2000, has rapidly increased CO2 emissions. Its efforts to slow the growth of oil imports via investments in coal-to-liquids (CTL) technologies (producing synthetic gasoline and diesel) provide an additional and potentially massive source of growing CO2 emissions. Its political leaders continue to note the responsibility of wealthier countries for today’s high atmospheric concentrations of CO2 and other GHGs and argue that these countries should make the initial GHG reductions as well as paying much of the costs of GHG abatement in China and other developing countries.

China’s plentiful coal resources are the foundation of its energy system and made a critical contribution to its economic miracle of the last three decades. Coal currently accounts for 71% of the country’s primary energy consumption and represents 93% of its proven fossil fuel reserves. At a mere 32 million tonnes in 1949, China’s coal production has skyrocketed to about 3.3 billion tonnes in 2010 and the Chinese coal industry notes the potential for production to continuously grow strongly in the coming decades.

There are only two ways for China to reverse this trend and actually reduce GHG emissions over the next few decades. Either it moves quickly to replace almost completely its use of coal with renewable and nuclear forms of energy, or it rapidly applies an ambitious program of CCS to its coal uses in concert with efforts to also increase the market share of renewables and nuclear. Both of these options are difficult to envision from technical, economic, social and institutional perspectives. Moreover, the Chinese government has thus far not expressed a serious interest in pursuing either option. This situation in China, with smaller-scale parallels in India and other developing countries, explains why many observers are pessimistic about the likelihood of the global community acting in time to avert major climate change. This view is reinforced if one simply observes the lack of substantial effort over several decades by wealthy countries, notably the US which is the world’s second highest CO2 emitter.

Nonetheless, there are scenarios under which China would seek to rapidly reduce its CO2 emissions. One possibility is that trade threats from major global economies change its perspective on what is in its self-interest. Another possibility is that its political leaders become convinced that an effort by China would ensure a global effort for which the China-specific costs of GHG abatement are exceeded by the benefits of averting China-specific ecological and economic damages from climate change. Yet another possibility is that wealthy countries provide enough financial support to tip the calculus of costs and benefits for the Chinese and other developing countries, or that global R&D efforts reduce the costs of GHG emissions reduction and likewise tip this balance in favor of taking strong abatement actions. Another possibility is that China comes to see leadership on climate change as a strategic interest from a global diplomacy perspective, even without the threat of emissions-related tariffs, and even though abatement is quite expensive. Finally, it is possible that all of these factors play a role and in conjunction succeed in convincing the Chinese leadership to act aggressively in reducing GHG emissions over a relatively short timeframe of just a few decades.

At this early stage, assessing the potential for CCS in a given jurisdiction, such as China, is a perilous exercise. Like other technological options for GHG reduction, CCS is costly. Governments will only seriously pursue these technologies when they are seriously committed to reducing GHGs. Few governments in the world have shown this type of commitment and certainly not the governments of developing countries. These countries feel less responsible for current atmospheric concentrations of GHGs and also argue that they lack the financial means to bear the high costs of abatement. In any case, an aggressive effort to reduce GHG emissions would undermine their argument that they need financial help from wealthier countries. Addressing the climate risk is a global public good problem with the attendant incentives for individual countries to wait for others to act first and perhaps even free-ride on these efforts. This may explain in part why so many countries talk about taking aggressive action to reduce GHG emissions but have made little progress in implementing the compulsory policies that would actually have a profound effect over the next decades. It may also explain why financial support and other policies favoring nuclear power, energy efficiency, renewables and perhaps especially CCS have thus far been only tentative and preliminary.

But, just as with nuclear, renewables and energy efficiency, this current tentative effort at developing CCS by China and other countries does not prove that CCS will be absent from an eventual aggressive effort to reduce GHG emissions, should that ever occur. As we show in this paper, it will be extremely difficult and expensive for a country like China to phase out its use of coal in the span of just a few decades. Coal is China’s premier energy resource and a key factor in its rapid economic development of the last few decades. The alternatives to coal will be as expensive and perhaps more so. If there is any chance for CCS to be scaled up as a bona fide option for GHG reduction, China is one of the countries (perhaps along with the US) where this technology is likely to be applied.

Coal is extremely important to the Chinese, not a resource that they will easily walk away from. Given the public good nature of global GHG emissions reduction, the current strategy of the Chinese is consistent with a desire to not only keep the CCS option open but even to position China to be a major CCS player in the decades to come, both with domestic application of the technology and with eventual export of the technology and associated knowhow. The Chinese are developing a good number of small carbon separation projects and exploring carbon geological storage potential without committing themselves to a major effort. This enables them to develop the technical capacity while waiting to decide if the country will mount an aggressive effort at CO2 reduction and waiting to see how much of the extensive costs will be borne by wealthier countries.