Coal-to-liquids projects in China under water and carbon constraints

Coal-to-liquids projects have become more and more significant in China, while water and carbon constraints as well as profitability concerns make them highly controversial for policy makers. This article analyzes the situations and shows that the limitation of coal resources could be relaxed through using coal in far regions, especially in Xinjiang, which are less developed at present. Coal-to-liquids projects could greatly reduce the negative influence of transportation costs. The limitation of water resources might also be solved with desalinating fossil water from deep saline aquifers. Since water costs are only a small fraction of the total cost, the economy of coal-to-liquids projects are not affected much. In addition, the use of fossil water could promote carbon dioxide capture and storage (CCS) and reduce CO2 emissions. However, given the current coal and oil prices, the potential profitability of those projects with or without CCS is seriously negative in all major coal producing regions.