Aug. 6 (Bloomberg) -- China, the world’s biggest carbon- dioxide polluter, is balking at the cost and effectiveness of extracting greenhouse gases from hundreds of coal plants and storing them underground.

China can achieve larger emissions cuts instead by spending money improving the energy efficiency of buildings and vehicles and investing in alternative power sources such as wind and solar, said Su Wei, director-general of the climate-change unit at China’s National Development and Reform Commission.

“Carbon capture and storage, particularly for China, is not one of the priorities -- the cost is an issue,” Su said in an Aug. 4 telephone interview from Beijing. “If we spent the same money for CCS on energy efficiency and the development of renewables, it would generate larger climate-change benefits.”

In 2008, coal burning in China added 366 million tons more to the world’s CO2 emissions than in 2007, almost two-thirds of the global increase in output of the gas from burning dirty fossil fuels, Bloomberg calculations from BP Plc data show. The U.S. and European nations tout CCS as vital to fight climate change while allowing coal to remain a part of their energy mix.

At the demonstration stage, the technology costs as much as 90 euros ($130) to keep a ton of emissions from the atmosphere, the consultants McKinsey and Co. estimate. Once commercialized, that can be cut to as little as 30 euros by 2030, according to the New York-based firm.

U.S.-China Cooperation

China and the U.S. on July 28 signed a “memorandum of understanding” in which the two nations pledged to work together to fight climate change, sharing research on technologies including carbon capture and storage. U.S. companies working to develop the technique include American Electric Power Co. and Duke Energy Corp.

“The locus of common interest between the two countries is the fact that they have significant economies that depend largely on fossil fuels and they have large coal reserves,” Professor Robert Stavins, director of Harvard University’s Environmental Economics Program, said in an Aug. 3 telephone interview. “Those factors would suggest that a key technology will be carbon capture and storage.”

Coal makes up 70 percent of China’s total primary energy consumption and its use of coal last year represented 40 percent of the world’s total, according to the U.S. Energy Information Administration. About 49 percent of U.S. electricity was generated by coal in 2007, according to the agency.

Biggest Coal Producers

China is the world’s largest producer of coal and has the third-biggest reserves after the U.S. and Russia. The country consumes about 3 billion tons of coal annually.

The scale of China’s coal reserves means it will need to deploy carbon capture if it’s to reduce greenhouse-gas emissions, according to Michael Donnermeyer, who heads IZ Klima, a Berlin-based association of energy companies including E.ON AG and RWE AG that promote the use of carbon capture and storage.

“It’s enormously important that China employ CCS because it’s not going to be able to manage and reduce its emissions without this technology,” Donnermeyer said in an interview. “China has large coal reserves and it’s using them and will continue to do so. Obviously efficiency is important but it’s not going to be enough.”

The environmental group Greenpeace has said carbon capture is a “scam” because it’s an unproven technology that aims to extend the use of fossil fuels blamed for worsening global warming.

No ‘Magic Solution’

“CCS is not a magic solution: It is not a mature technology,” said Li Yan, a Greenpeace climate and energy campaigner in Beijing. “The Chinese government is taking a pragmatic approach.”

Even though carbon capture isn’t proven, is expensive and CO2 reductions can be better achieved with other measures, it’s still a technology that China needs to look into “very carefully,” Su said. “It’s rather early to talk about commercial demonstration and development.”

Su is China’s lead negotiator at the ongoing United Nations-sponsored climate talks. The National Development and Reform Commission is China’s main economic planning agency.

To contact the reporters on this story: Alex Morales in London at amorales2@bloomberg.netJeremy van Loon in Berlin at jvanloon@bloomberg.net

Last Updated: August 6, 2009 10:09 EDT