Cost estimation of Non-CO2 greenhouse gas emissions reduction- A bottom-up analysis of coal-bed methane extraction and utilization in Shanxi, China

Abstract

This paper analyzes the synergistic effect of coal-bed methane (CBM) extraction and utilization on greenhouse gas (GHG) emissions reduction in Shanxi Province. Using data from a survey of 87 CBM extraction firms and 61 CBM utilization firms, we draw abatement cost curves of methane emission reduction with the "Conserved Supply Curve (CSC)." Our findings show large diversity among the methane abatement costs of extraction firms, meanwhile cost diversity in the extraction step is mainly due to differences in extraction technologies, rather than mine types. Power generation is the main utilization option for CBM, with much smaller abatement cost diversity than in the extraction step. Most utilization projects are established near CBM sources, with small-scale equipment supplied by domestic vendors. We suggest Shanxi could introduce a carbon pricing mechanism to further encourage CBM extraction and increase its scale. Promoting technology standardization can reduce cost diversity among extraction firms, while developing CBM purifying firms can create standardized products and break the strong integration of extraction and utilization. Strengthening CBM transportation infrastructure can form a competitive market with multi-source supply upstream and efficient transportation downstream. Promoting joint research and development for domestic CBM utilization equipment can also improve its scale.