Summary of Key Points
This is an in-depth interview with Liang Xi, an expert in cross-disciplinary practical applications in the carbon sector, which completely breaks away from the superficial hype surrounding the concept of carbon neutrality in the market. By drawing on his more than a decade of experience in implementing carbon capture projects in China, the article addresses real challenges associated with CCUS (Carbon Capture Utilization and Storage) – the only viable technology for decarbonizing industries such as steel and cement, which are considered difficult to reduce emissions. It also discusses common misconceptions about ESG (Environmental, Social, and Governance) reports, the hidden costs of domestic carbon reduction policies, and China’s shortcomings in participating in the development of international carbon regulations. All these issues are examined in terms of specific costs, benefits, and policy details, providing a much more practical and understandable explanation of the complexities surrounding carbon neutrality for the general audience.
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Detailed Analysis of Each Point
1. CCUS is not some high-tech marvel; it’s the only solution for industries with difficult emissions reduction
Many people think that reducing carbon emissions can be achieved solely through wind and solar power, but this is not feasible. The production processes of steelmaking and cement manufacturing inherently generate carbon emissions, and simply switching to renewable energy sources does not eliminate these emissions. In essence, CCUS involves installing large filters at the chimneys of these factories to capture the carbon dioxide emitted, which can then be either used as industrial raw materials or stored deep underground. This is one of the few viable methods for decarbonizing these high-emitting industries.
The main obstacles to the widespread adoption of CCUS are not related to upstream research and development but rather to the commercial implementation. The cost of capturing one ton of carbon from low-concentration emissions (from power plants and steel mills) is around 400-500 yuan, and currently, no one in the market is willing to pay this amount. Additionally, there are legal uncertainties: who owns the carbon that is stored underground in case of leaks, and how is the amount of carbon reduced calculated? As a result, companies are reluctant to invest in CCUS due to these uncertainties.
2. How much “fluff” is there in ESG reports? Many companies use subsidies for activities that would be profitable anyway
ESG reporting has become standard for listed companies, but the reality is that the carbon emissions reported by different companies within the same industry can vary significantly. This is largely due to selective reporting: companies only disclose their direct emissions from production and indirect emissions from electricity consumption, while hiding emissions from their supply chains. Moreover, a large portion of green subsidies and low-interest loans are not used for their intended purposes. For example, companies may include profitable solar and wind power projects in their green initiatives, but the subsidies do not actually contribute to reduced emissions. The real need for subsidies is for difficult-to-decarbonize projects like CCUS, which have low returns and require support to be implemented.
3. Don’t be fooled by comparing carbon prices between China and foreign countries; the prices you see are just a fraction of the actual costs
Some argue that the high carbon prices in the EU indicate a stronger commitment to emission reduction, but this is a misunderstanding. The prices traded on carbon markets represent only a small part of overall carbon reduction efforts. In both China and the EU, the contribution of carbon markets to emissions reduction is less than 20%. In China, subsidies for wind and solar power were once as high as 0.7-0.8 yuan per kilowatt-hour of electricity generated, resulting in hidden carbon costs of over 1,000 yuan per ton of carbon, which is much higher than the current EU prices. Other policies, such as phasing out outdated capacity and fuel taxes, also contribute to carbon reduction costs. Focusing solely on market prices can lead to misjudgment of long-term investment costs, potentially resulting in assets that become obsolete within a few years and no longer meet emission reduction requirements.
4. To determine if a carbon reduction technology is viable, look at its actual implementation scale, not just its claims
There are many claims about revolutionary carbon reduction technologies, such as capturing carbon directly from the air or using it to produce clothing and building materials. The simple test is to check the actual scale of these technologies in operation. For instance, a company that claimed to capture 1% of global carbon emissions by 2025 (300-500 million tons) has only achieved a fraction of this goal so far. While these companies are not entirely fraudulent, they often rely on large corporations like Microsoft and Google to purchase their carbon credits, and their technology is gradually improving. In contrast, many companies that claim to reduce millions of tons of carbon annually have no actual operational projects and are simply using marketing materials to raise funds.
5. If China wants to become a global leader in setting carbon regulations, what’s needed is not just technology but a neutral public platform
China leads the world in wind and solar power capacity and CCUS projects, but it has little influence on international carbon regulations. Foreign ESG ratings and carbon accounting standards are set by European and American organizations. When China promotes carbon neutrality, others may see it as a competitive threat to their industries and reject its standards. The key issue is the lack of a globally recognized, neutral third-party organization like MSCI or the C40 Cities Climate Leadership Alliance. Without such institutions, China’s efforts to develop a universal ESG rating system, a global carbon accounting database, and recognized green standards, its efforts to promote global consensus on carbon regulations will be limited.
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This translation maintains the structure and tone of the original Chinese analysis, using financial and business jargon appropriately to convey the information in a clear and professional manner.