Japan leads charge toward creating Asian carbon-storage trade

, Senior Global Correspondent
Source: Wood Mackenzie

Asia’s nascent carbon capture industry could develop and create new trading dynamics across the region.

This sector is expected to grow steadily there, with Japan, Taiwan and South Korea driving carbon trading over the next three decades, according to research from energy analysis and consulting firm Wood Mackenzie.

Technology capturing carbon dioxide from polluting smokestacks, ranging from coal plants to cement facilities, is considered key to reducing emissions in a world still heavily reliant on fossil fuels and other emitting industries.

Japan, Taiwan and South Korea are all planning to decarbonize their industrial economies in significant part using this type of technology, but none has enough capacity at home to store as much carbon as they plan to capture.

As a result, Japan, for one, will have to ship about 80% of the 55 million metric tons of carbon dioxide it plans to capture per year by 2050 to other countries, paying about one quarter more than it would if it could store liquified carbon dioxide at home, Wood Mackenzie figures.

Meanwhile, other Asian countries, including Indonesia and Malaysia, will have extra storage capacity, according to Wood Mackenzie analyst Hetal Gandhi. Those nations could be the first recipients of captured carbon; they would use liquified carbon dioxide to help extract valuable oil from aging and depleted oil wells.

The controversial practice, known as enhanced oil recovery, is how most captured CO2 is used today — simultaneously storing it underground and utilizing it to push out more oil to sell to global markets. The recipients of the captured carbon would likely charge little for the shipments or even accept them for free, at least for a while.

Japan, South Korea and Taiwan, on the other hand, have no significant oil or gas reservoirs and will have to construct any storage they want to use in their countries, an expensive prospect. Instead, the countries are investing in ships that can carry liquified carbon dioxide to other destinations likely to emerge as storage hubs, including Indonesia and Malysia, but also Australia and perhaps others.

The two biggest powerhouses in Asia — China and India — will capture far more carbon than the rest of the region, but they also have plenty of potential places to store it and won’t need to rely on a regional carbon trade.