In my recent posting looking at the changes that could deliver a 17% reduction in US emissions by 2020 (compared to 2005), I introduced 20 GW of carbon dioxide capture and storage (CCS). Notionally this is in the power sector and in my simple model it appeared in the coal fired sector. The issue that faces both the USA and many other countries around the world is how much CCS, how fast and in what form.

A good starting point for this is the CCS Technology Roadmap recently published by the International Energy Agency (IEA). The roadmap makes the case for the global deployment of CCS and spells out the necessary pace of deployment such that CCS can deliver not only on its potential by 2050 but its necessity in contributing to a global emissions pathway which equates to a long term atmospheric concentration of CO2 of 450 ppm. The take-away headline from the IEA Roadmap is that “CCS delivers one-fifth of the lowest cost GHG reduction solution in 2050.

 

The IEA roadmap breaks down the deployment by region and highlights the need for 29 projects in North America by 2020, leading to a very substantial deployment in 2050 where some 590 projects are foreseen. The projects include 11 GW (77 Mt CO2 per annum) in the power sector and a further 12 projects in the industrial and upstream oil and gas sectors, with the latter storing 44 Mt CO2 per annum. This gives a total 2020 storage in North America of some 120 million tonnes per annum, which could equate to 100-110 Mt/a in the USA. This is a less than the 20 GW in my simple model, but equally I have assumed delivery of the 17% on the basis of domestic action. Offsets may well play a role (that’s a subject for another post).

 

As I have mentioned in many previous posts, CCS isn’t a single technology but rather a family of technologies combined in a particular way, with all those technologies in operation at scale today in many parts of the world, but not in large scale CCS applications. Although there is doubtless room for improved technologies, CCS isn’t in need of more fundamental R&D, it is in need of demonstration in a number of large scale projects. Early demonstration projects will almost certainly command a higher price tag per project than those that come later. Economies of scale won’t figure early on as each new project will also have to establish new infrastructure, including storage sites, pipelines, monitoring agencies and so on. This means that early projects will need incentives, such as discussed below.

The question that now arises is “What policy framework that will deliver such a development?”. In that regard it is useful to at least look at the various elements that are now in place in the EU, although it should be noted that deployment is not underway just yet.

  1.  A CCS demonstration programme for the EU was announced, comprising 10-12 major projects across the EU, ideally testing a variety of technologies and geologies.  A timeline for investment decisions is defined through to 2015.
  2. CCS is now recognized as a mitigation option within the EU-ETS, thereby incentivising long-term deployment via the CO2 price.
  3. An EU legal framework is in place to allow CO2 to be stored underground. The process of turning this into national law at member state level will take longer but is underway.
  4. A measurement and reporting framework for CO2 storage has been agreed by EU member states.
  5. An incentive to start the investment programme has been developed. A set aside of 300 million EU allowances for award to early CCS projects (and novel renewables) for CO2 stored provides effective government support for the early higher cost demonstration phase of the technology. This incentive is targeted specifically at the 10-12 project demonstration programme.

Many of the ideas in the EU package of measures have come from the USA. They figure in proposed legislation such as the Waxman-Markey ACES Bill, which also recognizes the demonstration phase of this technology and seeks to support it.

 But key to all of this is the CO2 price, delivered through an emissions trading system. CCS fundamentally needs a driver such as this as there is no business reason to pursue the technology without it. However, other drivers might include a “Best Available Control Technology” (BACT) approach or an Emissions Performance Standard (EPS) for power plants, but none offer the flexibility contained within an approach supported by tradable allowances. Importantly, whilst cash-in-hand to develop a CCS project may be attractive, the operation of the facility requires ongoing resources which must be financed as well, therefore the need for an underpinning mechanism.

Almost irrespective of the policy approach adopted, getting a new large scale industry up and running, even with just a few projects covering a few of the technology options, will be a considerable challenge. Despite a full range of measures now coming into place in the EU delays persist and the recent weakening of the CO2 price through the recession has almost certainly delayed the process further.

Delivering on the early goals of the IEA Roadmap in the USA is by no means a given and will require continued effort by both the private and public sectors over the coming decade.