Technology portfolio of China liquid fuel industry to address energy security and environmentally friendly development

Efforts to secure alternative technologies for producing liquid fuel from biomass, oil shale, and coal have been intensified in recent year. Different levels of dependence on oil imports and carbon prices have a great impact on the development of new technologies. How should China configure its liquid fuel industry in the future considering these factors? This paper proposes a model to optimize the technology portfolio and capacity configuration of these technologies by minimizing their total accumulated cost from 2015 to 2045. With different scenarios for carbon prices and the level of dependence on oil imports, we find that oil refining will remain dominant in China’s liquid fuel industry over the next three decades, and the coal to liquid fuel (CTL) process will be competitive in low carbon price; otherwise, biomass to liquid fuel (BTL) will be more competitive than CTL. When decreasing the level of dependence on oil imports, biomass to liquid fuel (BTL) and CTL can be established as technology stocks for energy safety, but the share of BTL and CTL adoption does not continue to monotonically increase. Further implies that reducing the level of dependence on oil imports might also be a good decision for reducing the system total cost, since it could might result in more adoption of renewable resources and clean technology.