Economic feasibility analysis of carbon capture technology in steelworks based on system dynamics

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Abstract

In the context of the carbon neutral goal proposed by China, the Iron and Steel Industry (ISI) which is responsible for considerable carbon emissions has to take effective actions to emissions reduction. As Carbon Capture, Utilization and Storage (CCUS) has been recognized as an important technical way to reduce industrial carbon emissions in recent years, its application in the ISI is still greatly limited due to the inherent large cost and high economic uncertainty. Besides, there is also a lack of relevant research on the application of CCUS in the ISI. Therefore, it's necessary to study whether steelworks will participate in the CCUS system by applying carbon capture technology. Focusing on steelworks and employing the System Dynamics method, this paper analyzes technical and economic feasibility of applying carbon capture from the perspective of iron and steel supply chain, and identifies three key variables of the system through sensitivity analysis. The results demonstrate that steelworks can successfully apply carbon capture technology under specific conditions. Three key factors include improving the converting efficiency of reinvestment into capture technology, establishing an appropriate scheme of government subsidies, and fostering environmental awareness of downstream consumers to increase their willingness to pay for low-carbon steel.

Introduction

As the most serious effect of climate change, global warming catastrophically not only harms people's living conditions but also causes economic loss by 1.3% with an average temperature rising by 1 °C (UNFCCC (United Nations Forum Convention on Climate Change), 2011). It is proved that CO2 emissions are the chief reason for global warming. To avoid worsening climate impacts, the Intergovernmental Panel on Climate Change (IPCC) recommends a 50%–80% reduction in the global CO2 emissions by 2050 compared with 1900 (IPCC, 2014). Many technologies aiming at decarbonization have been proposed, among which Carbon Capture, Utilization and Storage (CCUS) is considered as the most potential way for meeting the energy demand of economy and achieve the goal of CO2 emission reduction at the same time. Crucially, with IPCC highlighting the importance of net-zero emissions by mid-century in the Special Report on Global Warming of 1.5 °C, CCUS receives much more attention from the academia and the government (IPCC, 2018). Since it is the only large-scale mitigation option available that can deliver the additional CO2 emission reduction which is necessary for the net-zero emissions goal. Now there are 62 commercial CCUS facilities, of which 26 are operating in the world. The CCUS facilities currently in operation can capture and permanently store around 40 Mt of CO2 every year (GCI (Global CCS Institute), 2020).

China has become the largest greenhouse gas emitter in the world and one of the priority spots for global carbon emission mitigation since 2006 (Lin and Tan, 2021; Mi et al., 2017). During the 2015 Paris Summit in France, China made a promise that it would hit the carbon emissions peak by 2030. With increasing urgency of fighting against climate change, China further proposed to reaching carbon neutrality by 2060 with the adoption of more vigorous measures at the 75th United Nations General Assembly. It is essential to lay more emphasis on the carbon emission of the iron and steel industry (ISI) for China to reach the carbon-neutral goal. Because industrial activities account for 30% of the total global anthropogenic carbon emissions (IPCC, 2015) and the ISI is the largest industrial emitter accounting for 31% of the industrial emissions (IEA (International Energy Agency), 2011). With Chinese crude steel production increasing from 36.3% to 49.2% of the world from 2007 to 2017, ISI results in about 15% of China's total CO2 emissions in 2017 (HSBC, 2020; NDRC, 2017; WSA , 2020). For the ISI, an energy-intensive and carbon-intensive industry, two key ways to mitigate carbon emissions are energy efficiency improvement and decarbonizing steel production. However, given the fairly high level of efficiency achieved, the carbon emission in production process is close to the theoretical minimum (Gazzani et al., 2015) and further pursuing energy efficiency improvements is unlikely to reduce emissions on a large scale. Crucially, CCUS seems to be a potential option to reach zero-carbon emission in the ISI (GCI (Global CCS Institute), 2017). Moreover, CCUS does not affect the main manufacturing process of the ISI and can be applied together with other methods to improve energy efficiency.

CCUS consists of four stages: carbon capture, carbon utilization, carbon storage, and carbon transportation, details for each stage are illustrated in Fig. 1 (MOST (Ministry of Science and Technology of the People’s Republic of China), 2019). Carbon capture aims to separate CO2 from exhaust gases and is the core step of CCUS. The capture methods mainly include pre-combustion capture, post-combustion capture, and oxygen-enriched combustion. Among which the post-combustion is most applied carbon capture technology in the ISI since steel plants are considered medium-concentration and multiple point CO2 sources (Ren et al., 2021). Another important step in CCUS is carbon utilization which greatly increases the economic value of CCUS projects and makes it possible to commercialize CCUS technology. For now, the most promising form of CO2 utilization is injecting CO2 into oil fields as an oil displacement medium to enhance oil recovery (EOR) (Mac Dowell et al., 2017; Chen et al., 2020). With increasing oil and gas production, part of CO2 would be permanently sequestrated underground.

However, although the idea of CCUS has been proposed and the CCUS projects are promoted for many years, the large-scale application of CCUS is still greatly limited as a result of inherent large cost and high economic uncertainty, especially for the ISI. The cost of carbon capture process accounts for at least 70% of the high cost of CCUS and varies widely across industries (Liu et al., 2021; Cheng and Wang, 2017; Leeson et al., 2017). As the carbon capture cost is much larger relative to the steel production cost and is inherently uncertain due to different technologies used, there are few CCUS projects of the ISI in the world and even no CCUS pilot or demonstration project in the steel sector of China (Ding et al., 2020; Mi and Ma, 2019). Thus, under the background of pursuing carbon neutrality, it is necessary to investigate the investment value of CCUS projects and put forward effective measures to promote the implementation of CCUS in the ISI. Based on System Dynamics (SD), this paper establishes a dynamic model of CCUS project in the ISI, considering the comprehensive business model including steel production, carbon capture and utilization, financial support, policy incentives such as carbon trading and carbon tax. Through system dynamic modeling, we found that CCUS projects in ISI can stand on their own, provided that certain conditions are met.

Section snippets

CCUS of the ISI in China

Current studies of CCUS technology mainly focus on two topics, namely the technical feasibility and economic feasibility of CCUS implementation. Some researchers discussed the CCUS technology innovation and its potential for carbon emissions reduction, especially the feasibility and efficiency of various carbon capture technologies have attracted much attention. The efficiency of various carbon capturing technologies is 90% on average with the highest reaching 97% (Garcia and Berghout, 2019).

Reason of system dynamics application

System Dynamics, coined by Jay Wright Forrester in the 1960s to address industrial issues (Forrester, 1961), is a powerful methodology for obtaining insights into problems of dynamic complexity. The SD model is applicable for complicated systematic problems in which exists information-feedback among different links (Kong et al., 2019). In terms of CCUS application, the implementation of carbon capture technology in steel mills is exactly a complex system containing dynamic changes of

Simulation results

Based on the model construction and parameters selection, this article uses VENSIM software to simulate scenarios for analyzing the economic feasibility of carbon capture implementation for steelworks. The simulation lasts for 50 years with the interval of month. The time interval in months allows a more detailed picture of the changes of economic variables. It should be noted that these results are not intended to be a realistic and accurate forecast of the future application of CCUS

Sensitivity analysis and discussion

In theory, there are some relatively important variables in the system that greatly influencing the system state. The sensitivity analysis shows that the technology conversion factor, government subsidy, and low-carbon steel added value acceptance can bring the system into an alert state more easily than other variables. Therefore, this section focuses on how these three variables affect the economic feasibility of promoting carbon capture, taking the above model as the reference model. Table 2

Conclusion

Reducing carbon emissions and mitigating the greenhouse effect is of vital significance for global environmental protection and sustainable development. This paper focuses on the steelworks and analyzes the technical and economic feasibility of developing carbon capture technology from the perspective of the supply chain by employing SD method. The model proves that the steel mills can successfully apply carbon capture technology under specific conditions to realize the value of the captured CO2

Declaration of competing interest

The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.

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