The Taxing Economics of Carbon Capture

A Bush administration decision to pull the plug on a large-scale project to assess carbon sequestration technology was justified using a mathematical error according to a report today in The New York Times. “The Energy Department made a $500 million math error a year ago when it withdrew its support from a ‘near-zero emissions’ coal plant in Illinois, Congressional auditors will say in a report to be released Wednesday.” The article went on to explain, “The Bush administration said the projected cost had nearly doubled, to $1.8 billion from $950 million; the auditors said it had gone to $1.3 billion, up 39 percent.” It reported that the new energy secretary has said that he will consider renewing support for the initiative, known as FutureGen, but that unspecified changes will be needed.

Carbon capture and sequestration (CCS) involves extracting carbon from waste streams such as flue gases, compressing it, and placing it in long-term storage, either under the ground or beneath the sea.

Processes for removing carbon from various materials have been used for a long time. As in other areas of energy research, the challenges here are devising systems that work are very large scale and that provide attractive economics.

Just as solar and wind power present challenges beyond the generation of the power itself (such as the transmission and variability of the power), CCS entails more than simply efficiently removing carbon from power plant emissions. Other factors include transportation of the captured carbon (by pipeline or ship, for example) and storage. Each presents its own economics and own risks, which are in some cases interdependent. (Transportation costs might be reduced by choosing a storage site located near a power plant, for example. But that storage site might offer lower capacity or present greater risks of leakage than one further away.) A systems approach is required to analyze the costs and benefits.

According to the IPCC, three industrial-scale CSS projects are currently deployed, which together avoid the release into the atmosphere of 3-4 million tons of carbon dioxide annually. I haven’t found number modeling the total global CO2 reductions that could be economically achieved via CSS [please let me know if you come across them] but I presume them to be large enough to be interesting.

While solar and wind have  “point applications”–where power can be generated and used in small scale installations  (on roof tops, for example), there are fewer such applications for CSS. (A recent article in The Economist cites a couple of them.) The most important applications require large scale–fitting big power plants with scrubbers, exploring large-scale geologic storage–comparable in scale to “big energy” projects. Meaning they are costly and take time.

According to the Carbon Capture and Sequestration Technologies Program at MIT, “Interest has been increasing in the carbon sequestration option because it is very compatible with the large energy production and delivery infrastructure now in place.” That includes exploration methods, needed to identify suitable sites for storing carbon, drilling and pipelines for distribution, among other aspects.

But the New York Times blog Green Inc. explains that public funding of CSS is controversial in part because it is seen as a distraction in the move away from coal and other fossil fuels. Every dollar spent on CSS is a dollar that can’t be spent on renewable energy sources. One wonders, though, whether opponents of the oil and gas industry are hostile to CSS in part because the oil and gas incumbents would stand to gain from its development.

Energy is largely about economics, and economics remains a barrier for this technology under current energy policy regimes. According to the DOE one study put costs for CO2 capture at $50–60 per metric ton of CO2 captured. The Economist recently reported a range of cost estimates for CSS:

In 2005 the Intergovernmental Panel on Climate Change, a group of scientists that advises the United Nations on global warming, came up with a range of $14-91 for each tonne of emissions avoided through CCS. Last year, the IEA suggested that the price for the first big plants would be $40-90. McKinsey, a consultancy, has arrived at an estimate of €60-90, or $75-115.

Either way, that is more than the price of emissions in the European Union: about €10 a tonne. America does not have a carbon price at all yet. A bill defeated last year in the Senate would have yielded a carbon price as low as $30 in 2020, according to an official analysis. So CCS might not be financially worthwhile for years to come.

The economic case for case for CCS seems a bit harder to the one for alternative energy. Alternative energy becomes more attractive as fossil fuel costs rise. CCS is interesting from an economic perspective only when carbon costs rise. And those are purely a function of public policy.

Any light to shed on CCS? Feel free to leave a comment.

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One response to “The Taxing Economics of Carbon Capture

  1. Pingback: Hydrogen-Powered Cars Less Likely « Green Research

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