The carbon emission cost is nearly 80 million; let’s calculate the carbon emission cost of coal-to-gas production

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The cost of carbon emissions is nearly 80 million. An estimate of the carbon emission costs associated with coal-based gas production. Author/Source: Huahua Network, Coal Chemical Industry; “China Coal Chemical Industry Magazine”. Date: 2019-08-13. Clicks: 53. In 2017, the national carbon emission trading system was launched, with eight industries – electricity, steel, building materials, aviation, non-ferrous metals, petrochemicals, chemicals, and papermaking – included in this trading system in its initial phase. Although the coal-to-gas industry has not yet been included in the scope of mandatory carbon trading, coal-to-gas projects with an annual production capacity of 4 billion cubic meters consume 5.635 million tons of standard coal in terms of energy use, resulting in high levels of carbon dioxide emissions. As the national carbon market continues to expand and **the carbon constraints on enterprises become increasingly stringent, coal-to-gas projects will inevitably fall under emission control measures in the future. With frequent fluctuations in international oil prices, the economic viability of coal-to-gas production still needs further evaluation. If the risks associated with carbon emission costs cannot be effectively managed, it will further undermine the economic viability of such projects. Take the Datong 4 billion cubic meters per year coal-to-gas project of China National Offshore Oil Corporation (hereinafter referred to as the Datong project) as an example. This project uses low-metamorphic bituminous coal from the Datong area of Shanxi as raw material, and employs a combined process of coal crushing under pressure gasification and pulverized coal under pressure gasification to produce crude gas. This crude gas is then purified through partial sulfur-resistant shift reaction and low-temperature methanol washing, and the purified gas is further used in methanation to produce natural gas. The project’s production facilities include gasification units, purification units, methanation units, sulfur recovery units, air separation units, refrigeration units, tar hydrogenation units, and more. The total capacity of the project is 4 billion cubic meters per year of coal-to-natural gas production, with by-products including diesel, naphtha, and sulfur in a total of 300,000 tons per year. The project requires 9.7264 million tons of raw coal per year and 18.72 million tons of water per year. This project produces natural gas from raw coal as well as by-products such as naphtha, diesel, and fuel oil. In accordance with the \"Guidelines for the Accounting and Reporting of Greenhouse Gas Emissions from Chemical Manufacturing Enterprises in China (Trial)\\" (hereinafter referred to as the \"Guidelines\"), greenhouse gas emissions generated by all production facilities within the scope of this project shall be accounted for using that scope as the boundary. The scope of the production facilities for this project includes the direct production system, the auxiliary production systems, and the supporting production systems that serve the direct production. The direct production systems include gasification units, sulfur-resistant shift units, low-temperature methanol washing units, methanation units, sulfur recovery units, air separation units, refrigeration stations, tar hydrogenation units, etc. Auxiliary production systems include power, electricity supply, water supply, laboratory testing, machinery repair, warehouses, transportation, etc. The auxiliary production system includes the production command system (headquarters) and the departments and units within the plant that provide services for production. The accounting boundary does not include the emissions from project-related emission sources (such as vehicles used for internal transportation within the facility), the coal mines and power plants associated with the project, as well as the hazardous waste treatment centers located within the park. In accordance with the requirements of the Guidelines, the project’s carbon emissions must include as indirect emissions the carbon dioxide emissions resulting from the net purchase of electricity and heat. Since the project has not yet been put into operation, it is not possible to obtain data through sampling measurements or statistical analysis. The emission factors for the project are primarily based on the values measured by the enterprise itself as stated in the feasibility study report, as well as the recommended values published by the National Development and Reform Commission; other data are taken from the default values provided in the Guidelines. According to the Guidelines, the total greenhouse gas emissions equal the carbon dioxide emissions from fuel combustion plus the carbon dioxide equivalent emissions from industrial production processes, minus the carbon dioxide emissions recovered and supplied externally by the enterprise, plus the carbon dioxide emissions resulting from the net purchase of electricity by the enterprise and those resulting from heat consumption. The Datong project involves no fuel combustion emissions, nor are there any recovery measures. Therefore, the total carbon emissions for this project are approximately 17.29 million tons. **The \"National Carbon Trading Market Allocation Plan (Draft)\\" formulated by the National Development and Reform Commission specifies that the allocation criteria for quotas in the national carbon market will be based on the \"baseline method as the main approach, with intensity reduction serving as a supplementary measure.\" At present, the carbon emission baseline for the coal-to-gas industry has **not yet been established**. According to existing literature, under current technical levels and processing conditions, the baseline carbon dioxide emission per unit of coal-derived gas is approximately 48 tons of CO2 per 1,000 cubic meters. The carbon dioxide emission intensity of the Datong project is approximately 43.2 tons of CO2 per 1,000 cubic meters, which is better than the standards cited in the literature. Based on this calculation, the project will have a surplus in carbon quotas. Given that the original intention behind establishing a carbon emission trading market was to use market mechanisms to urge companies to implement energy-saving and emission-reduction measures by creating a market where carbon quotas are relatively scarce, it is unlikely that this project will experience a large surplus of carbon quotas in the future. To date, **and Shanxi Province have not announced their annual decline coefficients. The Datong project uses 0.99 as a reference, based on the annual reduction factor for the chemical industry specified in the \"Guangdong Province 2016 Annual Carbon Emission Quota Allocation Implementation Plan\". After the project reaches full capacity and energy consumption continues to decline for 5 years, it enters a stable phase. It is predicted that the load will be 80% in the first year of operation for this project (2022), with full capacity achieved in the second year. Once the project reaches a stable phase, certain energy-saving measures will be implemented. Taking into account the emission reduction potential of the chemical project and its actual conditions, it is predicted that energy consumption will decrease by 1% for 5 consecutive years after the project reaches full operation. At the initial stage of the implementation of the Guidelines, carbon quotas under the national system were mainly allocated free of charge; paid allocation will be introduced in due course, with the proportion of paid allocations gradually increasing. The main factors affecting carbon emission costs include the price of carbon allowances, the fee ratio, as well as the price of China’s certified emission reductions and their usage rules. In conjunction with an analysis of carbon market policies, China National Offshore Oil Corporation organized carbon emission experts to forecast the prices of carbon allowances and China’s certified emission reductions. At present, in the pilot areas where carbon quotas are being tested, the proportion of quotas allocated through paid purchase is mostly zero, with the proportion of paid quotas to be increased gradually in the future. The Datong project is calculated using a 3% rate based on Guangdong Province’s paid quota. Currently, the rules for offsetting certified emission reductions in China’s carbon trading pilots vary. Guangdong, Tianjin, Hubei, etc. are at 10%, Chongqing is at 8%, Beijing and Fujian are at 5%, and Shanghai is at 1%. If factors such as the decline coefficient and the paid proportion for the Datong project are set to the offset ratios of Guangdong Province, where carbon emission reduction pilots are more developed, and considering China’s rules regarding certified emission reductions and their availability, it is difficult to achieve 10%; therefore, the offset ratio is set at 5%. Based on the parameters determined above, the average carbon emission cost over the life cycle of the Datong project is 55.57 million yuan per year; once it enters the stable phase, the carbon emission cost becomes 78.99 million yuan per year. Based on the above analysis, according to the Guidelines, the total corporate greenhouse gas emissions for the Datong project amount to 17.2918 million tons of carbon dioxide equivalent per year. After the project enters a stable phase, the carbon quota deficit amounts to 850,000 tons of carbon dioxide equivalent per year, with an average deficit over the life cycle of 650,000 tons of carbon dioxide equivalent per year. The average carbon emission cost during the project lifecycle is 55.57 million yuan per year, while it rises to 78.99 million yuan per year once the project enters its stable phase. Undoubtedly, this will have a significant impact on the economic efficiency of enterprises. The production and consumption of coal-based gas represent a transfer of resource consumption and environmental emissions, thereby increasing China’s overall coal usage and carbon dioxide emissions. For coal-to-gas enterprises, it is necessary to actively address the impact of the carbon emission trading system on them in order to reduce their carbon emission costs. It is recommended that companies note that the carbon dioxide emitted during the gasification process has a high purity (with a volume fraction of 85%), making it an ideal source of carbon dioxide for carbon capture, utilization, and storage technologies. Coal-to-gas enterprises should make full use of the advantage of centralized emissions, keep track of carbon dioxide recovery and utilization technologies, and effectively reduce carbon emission levels ； Establish a professional carbon asset management team or entrust a specialized agency to handle carbon asset management, develop relevant plans for such management, and use effective strategies to ensure the preservation and appreciation of carbon assets. (The author’s institution is China National Offshore Oil Corporation)