Investment feasibilities of CCUS technology retrofitting China's coal chemical enterprises with different CO2 geological sequestration and utilization approaches

Abstract

CO2 capture, utilization, and storage (CCUS) technology provides an efficient alternative for decarbonizing the coal chemical industry under China's carbon neutrality goal. However, uncertainties such as geological conditions, technology level, carbon markets, subsidy policies, etc., will greatly affect investor confidence in the CCUS applicability in this industry. This study develops a trinomial tree real options based CCUS investment decision model to explore CCUS investment feasibilities for China's coal chemical enterprises with different CO2 geological sequestration and utilization approaches, i.e., CO2 enhanced oil recovery (CO2-EOR) projects, CO2 enhanced coalbed methane (CO2-ECBM) projects, and deep saline aquifer (DSA) projects. The findings show that 1) CO2-ECBM projects have a larger investment benefit compared to CO2-EOR and DSA projects, with a critical coalbed methane (CBM) price for the immediate investment of 1.3 CNY/m³ under the current technology and carbon price level. 2) CO2-EOR projects are immediately investable at a critical oil price of 200 CNY/BBL; DSA projects require the execution of a delayed option with a critical carbon price of 361.8 CNY/t. 3) Provincial investment benefits vary substantially depending on CO2 transport distance and product revenue, particularly for CO2-ECBM projects in Henan and Guizhou, which have significant investment benefits due to high local CBM prices and short CO2 transport distances.