Focus topics


Green industries: What are the opportunities for foreign investors? (Part 2)

By Qian Zhou, Asia Briefing

Carbon capture, utilization, and sequestration (CCUS)

Carbon capture, utilization, and storage (or sequestration) (CCUS), also termed as carbon capture, utilization, and sequestration, is an important emissions reduction technology that can be applied across the energy system.

CCUS technology involves capturing carbon dioxide (CO2) from fuel combustion or industrial processes, transporting this CO2 via ship or pipeline, using it as a resource to create valuable products or services, or storing it in the form of mineral carbonates in geological formations or in deep ocean masses for an indefinite period of time. Thus, this technology is of high relevance for countries committed to reducing carbon emissions but anticipated to remain dependent on fossil fuels in the short term.

According to the Global Carbon Capture and Storage Industry report released by Global Industry Analysts in February 2022, by 2026, China’s CCUS market size is forecast to reach US$482 million, trailing an annual growth rate of 11.4 percent, and the industrial separation segment is forecast to reach US$293.9 million.

CCUS is still at an early phase of development in China but is bound to gain prominence. Progressive policy frameworks and sustained government support will pivot China to become among the fastest growing regional CCUS markets.

CCUS sectors that are encouraged for foreign investment:

  • Development of CCUS technology and services
  • Construction and operation of CCUS projects
  • Manufacturing of equipment for capture, use, storage, and monitoring of carbon dioxide

Other green services

China’s green transition has created new green services industries that benefit the environment or conserve natural resources, such as ecosystem services, contract energy management, contract water conservation management, third-party environmental pollution treatment, and environmental custody services.

As per market consultancy Askci Corporation, the size of China’s energy conservation service industry was ¥582. 6 billion ($90.3 billion) in 2020, with 6,859 companies (showing a growth of 4.8 percent year-on-year) and 760,000 employees (an increase of 25.4 percent year-on-year) engaged in the industry.

Foreign firms with experience and expertise in this area have already been actively participating in the Chinese market. One example is the Veolia Group of France, which has established an office in China to offer environmental services. German and UK companies engaging in green services, such as ALBA Group and ERM, are also trying to promote the export of their technologies to China considering the tremendous growth potential of this sector.

Green services that are encouraged for foreign investment:

  • R&D of offshore oil pollution cleaning and ecological restoration technology
  • Prevention and treatment of seawater eutrophication, marine life explosive growth disaster; coastal zone ecological environment restoration technology
  • R&D and application of technologies for energy conservation, environmental protection, and recycling economy
  • R&D and application of technologies for recycling and comprehensive utilization of resources and for recycling of emissions and discharges from enterprise production
  • R&D of environmental pollution treatment and monitoring technology
  • Development of clean production technology and services
  • R&D and utilization of integrated technologies for land conservation and outdoor environment
  • R&D on energy conservation and utilization of water resources, material conservation and utilization of material resources, and indoor environment and operational management of green buildings;
  • R&D and application of disposal technology for radioactive waste
  • Construction and operation of hazardous waste recycling and disposal facilities;
  • R&D of technologies for prevention and control of desertification and desert restoration

Recycling

Recycling forms an important component of China’s plan to transfer to a green, low-carbon, and circular economy.

On July 7, 2021, the NDRC released the Development Plan for the Circular Economy in the 14th Five-Year Plan Period, which put extra emphasis on recycling as a means of maximizing resources use and the life cycle of products. The plan sets several hard numerical targets for the government to reach by 2025, including:

  • Reaching a utilization rate of 86 percent for crop stalks, 60 percent for bulk solid waste, and 60 percent for construction waste
  • Utilizing 60 million tons of waste paper and 320 million tons of scrap steel
  • Producing 20 million tons of recycled non-ferrous metals
  • Increasing the output value of the resource recycling industry to ¥5 trillion ($773 billion)

Moreover, the plan also commits to act on:

  • Recycling park development
  • Improving recycling and utilization of electrical waste and electronic products
  • Recycling used batteries

For foreign investors, standalone recycling is not economically attractive as yet. However, the sector potential may increase exponentially as local governments raise standards for waste management. Businesses engaging in the upstream and downstream industrial chain of the recycling sector, such as R&D and application of technologies for recycling and manufacturing of equipment for recycling or remanufacturing, should expect greater market scope in the medium to long term.

Recycling sectors that are encouraged for foreign investment:

  • Recycling and treatment of waste and used electrical and electronic products, automobiles, mechanical and electrical equipment, rubbers, metals, and batteries
  • Recycling and re-utilization of waste plastics
  • Recycling of building wastes
  • Manufacturing of equipment for recycling, treatment and re-utilization of waste and used plastics, electrical appliances, rubbers, and batteries
  • Manufacturing of equipment for remanufacturing of waste electromechanical products
  • Manufacturing of devices for comprehensive utilization of used and waste tires
  • Manufacturing of equipment for utilization of waste heat, pressure, and gas
  • Manufacture of equipment for the utilization of waste heat
  • R&D and application of technologies for energy conservation, environmental protection, and recycling economy
  • R&D and application of technologies for recycling and comprehensive utilization of resources and for recycling of emissions and discharges from enterprise production

Energy storage

Energy storage will be crucial in China’s green transition, as the country needs an advanced energy-storage system to respond to the challenge of power-generation fluctuations via renewables and to facilitate the development of the local EV market.

China has set goals to boost its non-pumped hydro energy storage capacity to around 30GW by 2025 and 100GW by 2030. Achieving this goal would require enhanced government supports and vigorous investment to the sector, which is expected to drive the boom of the strategic energy storage industry.

Foreign investors are generally not restricted to access this sector while R&D and application of large energy-storage technologies are especially encouraged for foreign investment.

This article first appeared in Asia Briefing, published by Dezan Shira Associates. The firm advises international investors in Asia and has offices in China, Hong Kong, Indonesia, Singapore, Russia and Vietnam.

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