To enable the deployment of CCS at a commercial scale in the Unites States, in addition to the widely discussed technical hurdles, the greatest challenge may in fact be managing risk and long-term liability. The specific manner in which these issues are addressed – politically as well as legally – will determine whether governments’ massive long-term investment (the US government alone would pledge $60 billion under various legislative proposals, and spent $3.4 billion in the stimulus) in CCS will pay dividends. Though this emerging technology has significant business interest and political support, CCS still faces an array of hurdles, most notably, concerns about financial risk management. Currently, there is no comprehensive framework of any kind in place to manage the financial risk associated with CCS, particularly the long-term risks of CO2 storage. Because the CCS debate is playing prominently in the political debate over coal – and could determine the future of a US climate bill generally– concerns regarding CCS risk and liability issues are particularly urgent.
Renewed Coal Debate Points to the Importance of CCS
The political debate in Washington this week illustrates the central position the CCS question holds in the negotiations over climate legislation. At a hearing this week on Capitol Hill, where coal mining executives were pressed to support climate legislation, they said that a price for their support of such legislation would be greater federal funding of CCS. The Waxman-Markey American Clean Energy and Security bill that passed the House last year includes $10 billion for CCS research and development plus $50 in bonus allowances for CCS installed before 2025. The bill also would provide deep concessions for coal-using industries, such as utilities, in the form of free carbon emission allowances and a ban on EPA regulation of carbon emissions under the Clean Air Act. The Senate’s version, which could finally be unveiled by Sen. John Kerry (D-MA), Sen. Joe Lieberman (I-CT), and Sen. Lindsey Graham (R-SC) next week, is expected to support fossil fuels even more strongly than the House’s. The coal industry wants KGL to include funding levels for CCS at least equal to those proposed by Waxman-Markey and to maintain the ban on EPA regulations, while shielding the coal sector from federal emissions reduction requirements until CCS technology is fully deployable. Recently, this debate has centered on the Rockefeller-Voinovich language to boost government funding for CCS, which is now being offered as a bargaining chip for KGL. But, that debate shows that the level of continued government support for CCS is contingent on a wide range of factors, particularly how the ongoing negotiations over climate legislation will play out.
The Role of CCS in Climate Mitigation and Ongoing CCS Projects
Several studies have explored the enormous potential value of CCS as a climate change mitigation option. There is an emerging consensus around a few points. The cost of CCS is likely to drop after a set of first mover projects is developed. In addition, there is value in having the flexibility to select the most appropriate option – be it energy efficiency, renewable energy, nuclear energy, CCS, or other means of reducing carbon from energy. But CCS is clearly central: IEA analysis suggests that without CCS, overall costs to reduce emissions to 2005 levels by 2050 increase by 70%. The actual range of ongoing CCS activity is limited, however, and there has been a consistent call, by leaders like Boyce and Arch Coal CEO Steven Leer, for more demonstration projects to be deployed. Today, only four commercial scale CCS projects, located in Algeria, Canada (Alberta), Norway and the Norwegian Sea, are in operation worldwide.
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15 April 2010