Investment Evaluation of CCUS Retrofitting for Coal-to-Liquid Industry in China

Abstract

Coal-to-oil (CTL) combined with carbon capture, utilization and storage (CCUS) can significantly reduce the CO2 emissions generated in the production process to achieve clean coal utilization. Taking CTL enterprises as sources and deep saline aquifers and oil fields as sinks, this paper establishes a source–sink matching model, which is combined with a trinomial tree real-option model of carbon price fluctuation, and evaluates the investment decisions of CTL. The results show that 36 pipelines with an average transportation distance of 319.13 km and predominantly small diameters must be constructed for CO2 capture and storage combined with enhanced oil recovery (EOR). Under the current carbon price, 83.33% of enterprises can invest immediately when adopting EOR; when utilizing storage in a deep saline aquifer (DSF), even with a 50% subsidy and a decrease in costs due to the learning rate, enterprises still need to execute the deferred option investment. Government subsidies and technological advances can greatly increase the value of investment. The critical carbon price of CTL-CCUS projects is sensitive to government subsidies, technological advances, and CO2 transportation distances. Therefore, China should reasonably guide the development of the carbon market and give play to the role of the carbon market in emission reduction incentives. In addition, the Chinese government can provide direct financial support for the CTL-CCUS project to increase the enthusiasm of CTL enterprises for CCUS transformation and promote technological progress.