Why Japan is pushing CCS in Southeast Asia

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In October 2020, Japan announced a commitment to net zero emissions by 2050. This decision was important because the country – the world’s third largest economy and fifth largest CO2 transmitter – rest very dependent on imported fossil fuels and has long been a key investor in fossil fuel projects in Southeast Asia, including coal and natural gas. As part of its commitment, the country has also pledged to reduce overseas coal financing and invest in efforts to help Southeast Asia transition to low-carbon energy.

Day laborers in Dhaka, Bangladesh, empty a charcoal burner. (Photo by StevenK via Shutterstock)

However, instead of promoting renewable energy, Japan is taking the initiative to promote an alternative technology to reduce emissions: carbon capture and storage (CCS), with the powerful Ministry of Economy, Trade and Industry (METI) playing a central role.

“METI…does not understand that renewables can decarbonize most electricity and energy,” says Teruyuki Ohno, executive director of the nonprofit Renewable Energy Institute in Tokyo, Japan.They are stuck in the old idea that they have to keep using fossil fuels and reduce their emissions.

At the heart of the CCS push is the creation of the Asia Capture Capture, Storage, and Utilization (CCUS) network, spear by METI and others in October 2021, with an initial focus on Southeast Asia. This region is a key source for Japanese gas and coal imports. The argument made by METI and its partners is that without CCUS it will be impossible to meet net zero commitments due to reliance on fossil fuels for economic growth.

“In Southeast Asia, fossil fuels accounted for 90% of energy demand growth between 2000 and 2020,” said Carl Greenfield, an analyst at the International Energy Agency. at a recent side event at the Asian Clean Energy Forum 2022. “CCUS provides an opportunity to reduce emissions from existing assets in the region, including those planned or under construction.”

METI officials, in a presentation at an Asia CCUS Network event in 2021, argued that Southeast Asia lacks the wind and solar resources of Europe or North America, which makes their deployment less financially viable. They also argued that a rapid move away from coal, a key energy source, is unrealistic.

“ASEAN [the Association of Southeast Asian Nations] highly dependent on coal-fired power generation, and coal-fired power plants are relatively young, so they cannot be shut down easily,” says Shigeru Kimura, special adviser for energy affairs at the Economic Research Institute for ASEAN and East Asia, a think tank funded by METI and affiliated with the Asia CCUS network. “Coal power plants with DC[U]S could be an option for [South East Asia] to achieve net zero emissions.

Skepticism about Japan’s motives for CCS

Many analysts and energy experts, however, are skeptical of the claims made by METI and members of the Asia CCUS network, and worry about the implications for net zero and Paris Agreement commitments of Japan and the United States. South East Asia.

“It is a misguided strategy to involve many Japanese companies in promoting CCS, which is based on continued dependence on fossil fuels, rather than focusing on renewable energy development,” Ohno says. “This will put Japanese companies at a competitive disadvantage.”

Two major concerns are cost and feasibility. Despite decades of planning and billions of investments, there are very few active CCS projects reducing greenhouse gas (GHG) emissions in North America, Europe or Australia – but there are many setbacks expensive, such as failure of the Longannet CCS project in the UK and Kemper Project in the United States or, more recently, the huge cost overruns and missed targets of Chevron’s Gorgon project in Australia.

Even an old success story showed the limits of technology. The Petra Nova CCS project in Texas, a joint venture between the Japanese company JX Nippon Oil & Gas Exploration and NRG Energy of the United States, was considered a model, but it was closed in 2020 after less than four years of operation due to high costs. This is despite European and American support for CCS with tax credits and government funding, which is unlikely in Southeast Asia.

“We need to be candid,” says Putra Adhiguna, energy analyst at the nonprofit Institute of Energy Economics and Financial Analysis. “If Europe and the United States cannot adopt CCS, it is difficult to argue that countries like Indonesia and Malaysia can adopt it, especially without carbon pricing and [government] funding [support].”

Japan has a CCS project template on the northern island of Hokkaido, but it’s small, capturing just 0.3 metric tons of CO2 from a nearby coastal oil refinery during its three-year demonstration period. It’s a tiny fraction of almost a billion tonnes that Japan emits each year. Recent research from Imperial College London suggests that the amount of CO2 captured by CCS to date is significantly overestimated.

There is a gap between the idea of ​​CCS and the reality that investors need to take into account. “When considering CCS plans, investors should carefully consider the assumptions of its contribution to net zero among Asian companies, to ensure that the deployment of CCS is realistic and does not result in a prolonged use of fossil fuels,” says Valerie Kwan, director of engagement at Asian Investors Group on Climate Change.

It is the potential prolonged use of fossil fuels that worries Putra. “The risk is to delay important decisions and justify [fossil fuel] projects with the hope that one day we will add CCS. »

CCS pilot projects have limitations

There are fears that CCS projects in Southeast Asia will not reduce GHG emissions but create pathways to continue exploiting existing gas fields.

“Southeast Asia has a lot of gas reserves and many countries have not been able to produce [from them] over the past two decades or so,” says Putra, with limited infrastructure and a lack of key investment factors. “They realized that they now needed CCS or [the gas] will never be produced.

JX Nippon Oil & Gas is a ‘supporting member‘ of the Asia CCUS network and has numerous operations in Southeast Asia, including in partnership with Indonesian and Malaysian state-owned oil and gas companies. The CCS is part of of his plans, despite the failure of the Petra Nova project.

Another effort is led by three Japanese companies – J-Power, JANUS and JCG Corporation – in partnership with Indonesian state-owned Pertamina. They launched a feasibility study for a CCS project in Gundih gas field on the island of Java.

“The intention of this project is to make it possible to inject and store underground all of the 300,000 tons/year of CO2 associated with the production of natural gas”, according to a statement from J-Power. “If this project is realized, it can be expected to become a model case for CCS projects in the ASEAN region.”

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However, Putra questions the impact of the project on decarbonisation, since the CO2 will be injected into a gas field – to extract more gas. by Pertamina Press statement states that CO2 will be used for enhanced gas recovery, a common practice that benefits a project’s financial viability but not its climate credentials.

“In Southeast Asia, there seems to be an attenuation of different types of SCC,” says Putra. “The public thinks mostly of the electricity sector, but the reality is that it’s mostly for gas [extraction]and totally unrelated to existing shows.

There is a real risk that the Japanese government’s emphasis on promoting CCS will undermine net zero goals at home and in Southeast Asia. A year after pledging to stop funding coal overseas, Japan is not investing, as many in the region had hoped, in renewables, but instead maintaining its presence in regional gas projects through CCS.

“METI dramatically underestimates Southeast Asia’s renewable energy potential,” Ohno says. “The promotion of CCS is a misguided business strategy.”

A report published by climate think tank Ember in early July 2022 argued that Southeast Asia has “huge potential for renewable energy sources, especially solar and wind,” and that what is missing are aggressive government targets that promote investment and multilateral cooperation. Japan, argues Ohno, could do more to promote an energy transition in the region.

“Relying heavily on CCS, rather than focusing on renewable energy development, would be a fatal mistake from an environmental point of view and it would also become a huge economic burden,” says Ohno.

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