Techno-Economic Study of Carbon Price Impact on Coal-to-Liquid Technology Coupling CCS in China

To address petroleum security concerns and improve its energy structure, China continues to expand its utilization of coal-to-liquid (CTL) technology. While integrating carbon capture and storage (CCS) is essential to reduce the CO2 emissions from CTL, the high CO2 abatement cost remains one major barrier to its large-scale implementation. Carbon pricing could improve the cost-effectiveness and competitiveness of CTL-CCS. The impacts of the upstream carbon tax and the downstream carbon price are discussed, considering two indirect coal liquefaction routes: a once-through synthesis process with electricity generation from unreacted syngas and a process with recycling unreacted syngas. The financial performance, with or without CCS, was evaluated using process simulation in Aspen Plus 11.1 and a cost estimation model. First, the product cost of recycling synthesis is consistently lower than of once-through synthesis, indicating better economic efficiency. Second, adopting CCS without a carbon price significantly undermines economic performance. To keep the product cost increase below 10%, the upstream carbon tax and the downstream carbon price should be less than 100 and 120 RMB/tCO2, respectively. Third, the upstream carbon tax can quickly increase product costs and reduces NPV and IRR, but fails to incentivize actual emissions reduction. Fourth, the downstream carbon price can effectively drive actual emissions reduction, particularly at a higher carbon price. Finally, without a sufficiently high carbon price, enterprises lack necessary incentive to implement CCS. When the carbon price reaches 196 RMB/tCO2 (approximately 30 USD/tCO2), CCS becomes a cost-effective option for the CTL process.