With Chinaâ€™s phenomenal economic growth, the contradiction between the increasing demand for fossil energy consumption and the increasingly urgent emission reduction pressure is gradually standing out. The CO2 enhanced coal bed methane (CO2-ECBM) technology can inject the CO2 captured into the coal bed to enhance coal bed methane (CBM) recovery and store CO2, increasing the production of clean fossil fuels whilst reducing CO2 emissions. The investment benefits of the CO2-ECBM project in China under various scenarios was evaluated based on real options in this study, and the key factors influencing the economy of the CO2-ECBM technology were also identified. The results showed that (1) irrespective of carbon trading gains, the CO2-ECBM project can yield a profit of RMB 2.58 billion with sales of increased CBM and relevant government subsidies in low CO2 source price (RMB 180/ton) scenarios; (2) if CO2 source prices rise to RMB 300/ton (high CO2 source price scenarios), the CO2-ECBM project has no investment value as its revenues cannot offset the total costs on the technology; (3) for every yuan/ton increase in CO2 source prices, the net present value (NPV) of the project falls by roughly RMB 22.76 million, without regard to the critical CO2 source price of RMB 293/ton in carbon trading; (4) carbon trading can substantially raise the return on investment (ROI) in the CO2-ECBM project and in low CO2 source price scenarios, the current carbon price level (RMB 50/ton) can increase the ROI by around 44.2%, but China has not yet included CO2 utilization technologies in carbon market trading. The results in this study provide theoretical support for CO2-ECBM investment and the relevant policy-making.
Keywords CO2-ECBM, real option, investment assessment, CO2 emission reduction, CO2 utilization