Friday, 20 November 2009

The coal industry wants your cash to save them
Wednesday 18/11/2009 Page: 1
Managing editor of SourceWatch Bob Burton

A recently released report by the World Coal Institute (WCI) on how to finance the experimental carbon capture and storage (CCS) technology for power stations, reminded me of a cartoon from years ago by the Australian cartoonist, Patrick Cook. In the cartoon, a huge bloated budgie (parakeet) with the letters "BHP Billiton" emblazoned on its chest, was holding a gun to its own head while proclaiming to a cowering politician, "Hand over the loot or the budgie gets it." (At the time, BHP Billiton - - which owned iron ore mines and steel mills - - was haggling for government support for its ailing steel operations).

BHP Billiton ditched its steel interests long ago and is now one of the world's biggest miners and exporters of coal for power stations. It is also a member of the WCI. In its report, titled Securing the Future: Financing carbon capture and storage in a Post-2012 World, the WCI argue that there is an urgent need for massive funding of CCS trials by governments and with a generous slice of revenues from emissions trading schemes. Current funding, the WCI claims, is "too slow to allow necessary global GHG [greenhouse gas] emissions reductions goals to be achieved." Not surprisingly, they identify that "the appetite for this will largely hinge on public acceptance."

What the coal industry realises is that without massive public funding, CCS is dead. Without CCS, the coal industry and power companies locked into coal-fired power stations will, at best, be on life support. The WCI report, just a few weeks ahead of the COP15 talks in Copenhagen, reflects the increasing desperation of a coal industry trying to get someone else to pay for the mess it has created. Everyone knows that if the global community agreed to make deep cuts to greenhouse gas emissions, the biggest loser will be the coal industry.

Years ago, the industry could have invested its own money in researching CCS, but didn't. Instead, from the late 1980's on, they poured money into the pockets of lobbyists and conservative think tanks wanting to derail any move aimed at limiting greenhouse gas emissions. Even today, the coal industry invests pitiful amounts of its own money in CCS research.

Instead, the budgie is back. Having largely succeeded in stalling changes which would have cut coal consumption, the coal industry now hopes that it can harness the public sense of urgency over global warming to have politicians allocate tens of billions of dollars in research funds largely for their benefit.

In its report, the WCI floated a number of ways that everyone other than themselves could be compelled to fund CCS research. Electricity consumers, they suggested, could be subject to a levy on consumption or even a%age of revenues of emissions trading schemes be earmarked. They also flagged that power generation companies could be issued free or even bonus emission allowances if they had plants with CCS technology attached, or even that a levy be imposed on coal-fired power stations that don't have CCS plants attached.

They also suggested that other direct government subsidies could be considered too, including tax credits, loan guarantees and direct payments. Perhaps most audaciously, they have suggested that perhaps CCS-fitted plants could be explicitly included in Emissions Performance Standards (such as the "Schwarzenegger clause"), which mandates carbon performance standards for sources of electricity.

At the heart of the coal industry's current panic is the recognition that few believe CCS will deliver any substantial greenhouse gas emissions anytime soon. The most optimistic think CCS may be deployed at commercial scale by 2020. Others think 2030 is perhaps more realistic. Others think that even if the technology can be made to work at commercial scale, it won't be economically competitive with other emissions-reduction strategies or technologies for a long, long time.

The pessimism about CCS is breaking out everywhere. Last June, Jim Rogers, CEO of the huge power company, Duke Energy, said that "CCS as a magical technology that solves the carbon problem for coal plants is oversold... I think there is a lot to learn, and it is going to take us a lot longer for us to figure it out than a lot of us think." Just last week, former Australian government minister Ian MacFarlane, who had until recently been an enthusiastic promoter of CCS, said that "what happened was nothing happened... The clean coal option has passed us by.

Twenty years to wait before the technology is available. Thirty years before it is commercial. We will need to move on to other options by then." (Macfarlane is now a booster for gas-fired power stations and nuclear plants.) As pessimism about CCS increases, the WCI sees public funding as crucial in creating the illusion that CCS is a viable option. In its report, the WCI argues that "an effective programme to accelerate the widespread deployment of CCS should build public confidence in and acceptance of CCS as a mitigation option." Maybe.

An alternative scenario is that once the scale of public funding becomes obvious and more than a handful of CCS projects go belly up, the public will object to throwing good money after bad. And that is what has the coal industry worried. Of immediate concern to the WCI is the prospect that the COP15 meeting won't agree to include CCS as an option in the Clean Development Mechanism (CDM), a market-based scheme designed to allow private developers to gain credits for emission reductions from projects in developing countries.

A recently released report (large pdf) commissioned by the Global carbon capture and storage Institute, a pro-CCS agency, stated that "in the absence of a mechanism such as the CDM it seems unlikely that investment in CCS will be achieved in many developing countries within the timeframe proposed by the G8." (At its June 2008 meeting in Japan, the G8 agreed that "20 large-scale CCS demonstration projects need to be launched globally by 2010, taking into account varying national circumstances with a view to supporting technology development and cost reduction for the beginning of broad deployment of CCS by 2020.") There are numerous governments - - including the United States, Norway, Australia, Canada and Saudi Arabia - - enthusiastically supporting including CCS in the CDM. There are also the business lobby groups such as the International Chamber of Commerce, the carbon capture and storage Association and the International Emissions Trading Association, all cheering for the inclusion of CCS in the mechanism as well.

Other countries are less enthusiastic. Brazil and India oppose its inclusion, as do the Alliance of Small Island States. The Executive Board of the CDM was also equivocal, noting (pdf) that there are a host of complex technical, legal and economic issues that still need to be addressed.

One thing that both supporters and opponents of including CCS in the Clean Development Mechanism agree on, is that the main beneficiaries would be countries that are major producers and/or consumers of fossil fuels for power generation. That being the case, the risk is that new CCS projects approved under the Clean Development Mechanism would generate so many emission credits they could undermine the price of carbon and end up perversely deterring the development of renewable energy and energy efficiency technologies. Worse still, this could undermine the prospects of increasing energy efficiency and expanding renewable energy in the very countries that are least reliant on coal power generation.

The likelihood is that COP15 will struggle to reach agreement on anything beyond a broad outline of what could be included in a successor agreement to the Kyoto Protocol. It is also likely that the debate over whether to include CCS in the Clean Development Mechanism will not be resolved at the Copenhagen conference.

But the coal industry, like Patrick Cook's big bloated budgie, will be back demanding more public money. And the odds are that the coal-lobby funded think tanks will be conspicuously silent about the big government handouts their sponsors want for their pet CCS projects.


Jem said...

Users of fossil fuel should pay for carbon capture not taxpayers.

I am not a lobbyist for the coal industry; my proposal would make coal much less competitive relative to natural gas because of its high carbon content and lower initial cost for a given heat output. Both would become less attractive compared to zero carbon technology and energy saving.

Energy saving, nuclear, renewables, electric cars etc. are only ways of filling the energy gap that cutting carbon dioxide emissions will create and mankind has been very effectively filling energy gaps for centuries without the aid of agreed national or global strategies, taxes or caps. Carbon capture is different. It is a way of stopping pollution and will always add cost. You can legislate to stop pollution (which is economically inefficient) or you can use market forces by giving credits in a cap and trade system, credits against a carbon tax or by paying directly in fuel prices as I propose. If we drive carbon capture in these ways all the other things will happen too.

We should oblige fossil fuel producers and importers to contract for the capture and sequestration of a quantity of carbon dioxide equal to a proportion of that produced from the fuel they supply. The proportion could start at a few percent and build up. This would increase fuel price encouraging energy saving, nuclear, renewables, electric cars etc. and provide full, immediate funding for carbon capture and storage.

The contract might permit capture to be delayed for a year if the quantity captured were increased by 10%, and for another year for another 10% etc. This would not only help with plant problems, but would also allow contracts to be placed today, providing a huge incentive to get carbon capture and storage up and running as soon as possible. It is not lack of know-how that is holding back carbon capture but the lack of an incentive to apply it.

So what will it cost? The simple answer is that carbon capture and storage could cost up to 50 euros per tonne of carbon dioxide emission avoided. This is equivalent to $32/barrel of oil but the contract would only cost a proportion of that.

The complicated answer is that it is only practical to capture carbon dioxide from large point sources like power stations. Forcing 75% capture on the global market through my proposal would drive fuel price up and electricity price down until we switched from fuel to electricity for some industrial, domestic and transport applications.

The simple cost is modest compared to recent price changes so why are we waiting? Perhaps within as little as twenty-five years we could be defining the proportion of carbon to be captured, based on fossil fuel production at the time, such that global emissions were contained at the level that the oceans absorb annually. That is about 2.2 billion tonnes of carbon per year (25% of current emissions). Atmospheric carbon dioxide concentration would then stop rising.