Without a High Price on Carbon, Energy Ministers’ Wish for ‘Clean Coal’ Boom is Elusive

At meeting in Asia, expectation of a long future for coal as a primary energy source

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Last week energy ministers from the Asia-Pacific region convened at a hotel in Fukui, Japan to detail what it is that they should do to increase cleaner energy supply and energy security in their nations. As expected, carbon capture and storage (CCS) technologies figured prominently on their wish list. The big hurdle remains how to pay for a CCS boom that would be massively expensive.

CCS, also called “clean coal” by industry groups, works by catching carbon dioxide from power plant smokestacks and injecting it under the earth’s surface. It remains a divisive and speculative technology option, particularly since it has been slow to get off the ground and has proved expensive to deploy. Environmental groups see it as a stalling technique to prop up coal in a carbon-constrained world.

The promise of CCS is far from being realized and on-the-ground results have been disappointing. The Group of Eight (G8) industrialized nations set out a goal in 2008 to build 20 large-scale CCS plants this year. To date, five such facilities are operating in the U.S., Canada, Algeria and Norway, but all were commissioned before the G8 summit. Four of the five inject CO2 from natural gas production facilities, not coal.

But the 21 members of the Asia-Pacific Economic Cooperation (APEC) — which cover about two-thirds of the world’s energy demand and include the U.S. and China — are laying out plans to change that, and everyone seems to agree that they’re going to need a very high price on carbon to succeed.

While APEC’s Fukui Declaration called generally for more carbon-free energy staples — solar, wind, fuel-efficient cars and energy efficiency — it urged “redoubled efforts to develop and deploy” CCS, as a way to clean up the coal-fired pollution that is expected to continue for years to come.

“Fossil fuels will continue to play a key role in the APEC energy market as economies develop new and unconventional energy sources,” the nations declared.

“Cost-effective technologies for carbon capture and storage (CCS) are essential to reducing carbon emissions from power generation within the many APEC economies that still rely on coal and other fossil fuels for a significant portion of their electricity generation.”

That belief in the persistence of coal is backed up by industry statements, at least in the U.S., the world’s second largest producer of the fossil fuel source. According to a recent poll of electric utility participants by Black & Veatch, a Kansas-based engineering consulting firm, 77 percent of those surveyed said coal has a long future ahead of it.

Turn Away from Coal Not Until 2050

Andy Byers, the in-house expert on government policy regarding environmental regulations at Black and Veatch, told SolveClimate that the industry sees 2050 as the turning point when the transition away from coal will be made. In other words, “We’re going to have generation of fossil fuel combustion around for quite some time,” he said.

But the question remains: Can CCS be expected to at least control much of that new coal pollution?

In the U.S., Byers said, it is a question of passing federal legislation that would limit greenhouse gas emissions. “A price on carbon would certainly be probably the best driver.” In the absence of that, he added, “it’s a whole lot of carrots out there trying to lead people down the line. The “stick” is “what’s going to allow the industry to take off.”

“Right now in the United States … all we’re really doing is providing incentives, usually from the federal level and primarily from the stimulus act, to allow the research and development to proceed,” he said.

Tom Guenther, a project manager with Black & Veatch’s power generation services group who works directly with CCS, said the technology, at least, is not a huge hurdle at this stage.

“The technology for sequestration is perhaps lagging the technology for capture somewhat, although sequestration as part of enhanced oil recovery is already being practiced. There is also ongoing research to find newer capture methods that may improve efficiency and reduce cost,” he told SolveClimate.

It’s a similar story worldwide, supporters say. A deployment boom on the scale envisioned by the G8 is technologically “achievable,” but it’s crunch time now on incentives, according to a new report released last week from the Paris-based International Energy Agency (IEA).

“Heightened urgency on the part of all stakeholders is needed to realize the number of large‐scale projects that constitute the critical first steps in the deployment of CCS,” according to the report, “Carbon Capture and Storage: Progress and Next Steps.” Its findings will be presented at the next G8 meeting in Toronto, Canada on June 25-26.

A high-enough price on carbon must be introduced immediately and be applicable in both poor and rich nations, the IEA said.

“Recently, the price level in CO2 markets [in the EU Emissions Trading System] was in the range of USD 15 to USD 35 per ton of CO2,” said the IEA. That’s “insufficient to make CCS competitive employing today’s technology.”

High Price on Carbon Needed for CCS Deployment

Meanwhile, efforts to enact cap-and-trade schemes that would establish a carbon price signal in the U.S., Australia and Japan have all been sidelined so far this year.

For CCS to make “economic sense” now in the U.S., estimates range from $50 to $80 per ton of carbon, Byers said. The price of carbon under the Kerry-Lieberman American Power Act, a cap-and-trade bill now stalled in the Senate, “would take quite a while” to rise up to that level.

Under that bill, however, other incentives would exist to give CCS a boost. For instance, every new power plant that gets built would be required to achieve a reduction in greenhouse gas emissions of at least 50 percent through 2019. After 2020, the industry must reach a 65 percent reduction for its facilities.

The IEA report said that without CCS, the economic costs of staving off catastrophic climate change would increase by 70 percent.

And despite the call to action from the agency, it said “significant progress has been made,” citing the $26 billion of public money that has been committed by governments, as well as announced intentions to construct between 19 and 43 large-scale demonstration projects by 2020. The study also said 80 plants are on the drawing board in various stages across the world, with seven in developing countries, mainly China and the Middle East.

100 Plants by 2020

Around 100 plants would have to be up and running by 2020, however, to have a meaningful impact in containing carbon output, IEA said. And about half of those would need to be built in developing nations.

To date, the most “notable efforts” can be found in the U.S., Canada, the EU and Australia, the IEA said.

Currently, efforts to plough research dollars into CCS R&D in the U.S. and Canada are on par with those in the EU, but the big difference is that “Europe has a regulatory driver,” said Byers.

The U.S. stimulus package included $2.4 billion for carbon capture and storage projects. The American Power Act includes $2 billion each year to give the sector a boost.

While climate change legislation could be a year or two away at best, the Environmental Protection Agency could step in sooner and require the fossil fuel industry to install carbon controls, analysts say.

“The EPA now has the authority to regulate greenhouse gases,” said Byers. “They could step in certainly on new power plants and start requiring as part of best available control technologies the installation of carbon capture.”

However, from an industry perspective, one thing that is unlikely to make electric utilities in the U.S. move is the BP oil gusher, the nation’s worst environmental disaster, Byers said. That’s despite the rhetoric from Washington that the calamitous spill should spur the development of new energy technologies, such as CCS, and force a rethink of the fuels of the future.

“You can hear those correlations being made in the halls of Congress, but I’m not sure that we’re really having such a direct impact here in the industry.”

See also:

Report: Potential of “Clean Coal” to Reduce Emissions is Overstated

Coal Barons Urge Capitol Hill: No Carbon Regulation Until CCS Is in Place

Obama: The Making of a Clean Coal President

CCS: A Piece of the Puzzle

Will West Virgina’s CCS Demo Make a Dent in ‘Clean Coal’s Problems?

Coal Mine Where 25 Died Had Been Fined Repeatedly for Safety Violations

British Progress Toward Carbon Capture and Storage Drags