For some Western firms, China is the place for carbon dioxide utilization

Carbon dioxide capture and utilization sounds amazing. The process upends the logic of climate change by converting CO₂ from an environmentally problematic waste stream into a feedstock for chemicals and fuels. But capturing CO₂ is thermodynamically uphill, and so is converting it into organic molecules, so much so that another name for the concept is power-to-liquid technology.

The chemistry start-ups and other companies trying to develop the energy-intensive processes must prove they can deliver a net climate benefit—and a profit. Much of the early technology and business development activity has occurred in Europe and North America. But a growing number of firms are finding that the best place for them to take the next steps toward industrial scale and business success is China.

One example is Econic Technologies, which is scaling up its technology in China because the country is eager to develop chemical feedstocks that don’t depend on imported petroleum, says Keith Wiggins, the firm’s CEO. Econic’s catalytic process activates CO₂ so that it can participate in ring-opening copolymerization with ethylene oxide or propylene oxide, effectively inserting captured CO₂ into alkoxylation reactions that the chemical industry already uses to make large-volume polymers, coatings, and surfactants.

The most advanced version of Econic’s reaction so far makes polyols, turning captured carbon dioxide into up to 30% of the mass of the product. The balance could be biobased or petrochemical depending on the application and customer demands.

Wiggins says the first customers to license Econic’s technology plan to sell polyols as a raw material for polyurethane, polyether, and polycarbonate coatings. That’ll be followed quickly by polyurethane foams using the same basic chemistry. The company, a spin-off from Imperial College London, recently unveiled a sister process that yields carbonate ethoxylates, a new type of surfactant that Wiggins says is suitable for multiple industries.

Econic’s first license was to the specialty chemical maker Monument Chemical, which expects to commission a CO₂-based polyol production line at its Kentucky site in the next few months. It’s a good project, Wiggins says, but the Chinese polyol maker ChangHua Chemical Technology is building a much bigger plant using Econic’s process. It will start at 80,000 metric tons (t) per year of capacity in the fourth quarter and eventually scale up to more than 1 million metric tons per year.

Manufacturing is at the heart of the way China is growing its economy, Wiggins says, but there’s a hole in that strategy. “They'll need to import 70% of their raw materials because they're not back integrated into fossil fuel or fossil feedstocks,” he says. Meanwhile, CO₂ is abundant and cheap.

“They're really, really hungry to build supply chains around the technologies that can break apart CO₂ and turn it into useful carbon,” he says. Efforts to valorize CO₂ enjoy strong government support in a country where the government has profound control over industry.

Supply chain independence is a high priority for the Chinese government, but so is sustainability, says Emeric Sarron, chief technology officer at Carbon Recycling International (CRI), an Icelandic company with a process that thermochemically converts CO₂ and hydrogen into methanol.

“People in the West tend to have an outdated view of what China is about” when it comes to the environment, he says. “We think of Europe and the US as being the forward-thinking countries. Those concerns are also very real in China as well, and there are strategies in China dedicated to the green transition coming from the highest level of the government.”

And more so than in Europe and the US, he says, “the government has the power in China to tell companies, ‘Well, if you want to keep your operating permit, you need to do something about your carbon emissions.’ And that is happening.”

Sarron says China has started an emission cap-and-trade system, a scheme that many economists regard as the most effective market mechanism for greenhouse gas reduction. The initial emission caps for companies are a bit high, Sarron says, but the mechanism is in place to ratchet CO₂ emissions down over time. In the US, meanwhile, the Republican-written budget legislation working its way through Congress would make it more difficult for companies to trade carbon reduction credits.

As is the case for Econic and other firms converting CO₂ into chemicals, CRI’s process makes climate sense only if it’s powered by energy with a small carbon footprint. China’s rapid deployment of solar and wind power in recent years therefore makes China an attractive market, Sarron says.

Energy industry associations in the country estimate that China will add as much as 115 GW of new wind and 255 GW of new solar power this year. By comparison, the US added about 34 GW total of renewables in 2024, according to the US Federal Energy Regulatory Commission. China is also leading the world in new nuclear power installations.

A good chunk of that renewable electricity supply is, or will soon be, plugged into electrolyzers that split water to make hydrogen, which CRI needs for its process. “You've got a concentration of industries that are able to deliver cheap electricity, cheap hydrogen,” Sarron says, and captured CO₂ is readily available at reasonable prices. “You've got the right conditions, from a technology and supply chain point of view, to build projects,” he says.

And they are building. CRI started with a demonstration plant in Iceland, and executives initially thought they’d scale up there. The country has abundant geothermal and hydroelectric energy, perfect for producing the low-carbon hydrogen that CRI’s process needs to claim a net reduction in carbon dioxide emissions.

But even if CO₂-derived chemicals could make a lot of sense in Iceland, China is the market that’s responding. A CO₂-to-methanol plant producing 170,000 t per year and owned by the Chinese clean energy developer TianYing Group is on track to start production this fall with purchased green hydrogen. It will be CRI’s third plant in China, and Sarron says the methanol from all three will be used mostly as fuel for maritime shipping vessels.

Waste gases from China’s huge industrial clusters offer another opportunity for turning CO₂ into chemicals. That’s the feedstock that enticed Synata Bio to build its first plant in China’s Henan province instead of somewhere closer to its headquarters in the suburbs of Chicago.

The firm is commercializing a fermentation process that makes ethanol from hydrogen, carbon monoxide, and carbon dioxide. Synata’s plant at Henan Energy and Chemical Industry Group’s coal-to-methanol complex has an annual capacity of 50,000 t of ethanol, which CEO Tim Cesarek plans to sell locally as a low-carbon feedstock for chemical production.

The plant, the first of several the firm hopes to build, is getting ready to open now. “We're going to test drive it along the way and learn considerable amounts,” Cesarek says.

Synata’s reactor has access to consistent streams of its three input gases thanks to the large-scale, 24/7 operations of Henan’s chemical plant. That reliability enables careful control of the fermentation stoichiometry, allowing Synata’s microbes to produce ethanol selectively, which in turn keeps down the cost and carbon footprint associated with distillation.

“We will make a synthetic ethanol that is lower cost than the alternative,” Cesarek says, even before sustainability incentives come into play.

Cesarek sees a lot of room to expand using the CO₂, CO, and H₂ by-products that are currently vented or flared. Just at the Henan site, “There's enough waste gas there that we can go from a 50,000 t facility to a 500,000 t facility,” he says, and Synata has been scouting other locations in the country. Unlike most firms looking to convert CO₂ into low-carbon fuels and chemicals, Synata doesn’t depend on solar and wind power, Cesarek says.

“China has this genuine will to innovate around additional energy,” Cesarek says. That means scaling up renewables and nuclear, but it also means squeezing more out of conventional fossil resources. “They're very mindful of how effectively to monetize those waste streams as they think about energy addition. We fit nicely into that overall will to add more energy to their footprint.”

Ease of obtaining permits is another powerful force driving cleantech development in China, says Pragathi Darapaneni, a chemical engineer and consultant focused on materials science and clean energy. In the US or Europe, a company looking to build a chemical plant has a long list of compliance tasks to complete and often will need construction and operating permits from multiple levels of government. In China, she says, the permission structure is consolidated, the to-do lists are short, and the requirements aren’t always strictly enforced.

And the government is willing to put its finger on the scale for projects that align with national priorities, Darapaneni says. Cutting CO₂ without hobbling the economy is one of them. Chinese President Xi Jinping has repeatedly stuck by the national target he set in 2020: a peak in greenhouse gas emissions before 2030, followed by carbon neutrality by 2060.

Emissions from the nation’s power sector have already begun to decline, according to a Carbon Brief analysis of statistics provided by the Chinese government. But emissions from the chemical industry rose by about 3% over the past year because of increased output and the use of coal as a feedstock.

“That's why the cleantech projects get off the ground faster, like a year or year and a half,” Darapaneni says, compared with multiple years in the US or Europe. “It does come at the cost of weaker environmental assessments, limited public consultation, and less transparency and oversight,” she adds.

China’s industrial strategy in past decades often emphasized well-trod manufacturing technologies made competitive with scale and low labor costs, Econic’s Wiggins says. Now the nation is also using its size and structure to seize a leadership position in emerging technology types, including carbon dioxide utilization.

“The new China—the quality of people, the quality of their technological understanding, and their ability to scale quickly—is beyond belief. I've never seen anything quite like it,” Wiggins says. “They've embraced CO₂ as a raw material, and they're making it happen.”