Archive for October, 2012

I came across an article from the Breakthrough Institute which argues for the benefits of government support for new energy technologies. The story is a few months old, but still highly relevant – in any case a related story is back on their front page this week. The technology in question is hydraulic fracturing (fracking) to extract natural gas from shale formations (shale gas). Breakthrough have come to the conclusion that the boom in shale gas is largely the result of considerable early investment in the technology by the US DOE. The article argues that this technology has transformed the USA energy scene, also resulting in a drop in US CO2  emissions. But the crunch point is the comparison with the EU, where the focus on emissions reduction has been through the development of carbon pricing. Breakthrough argues that the US is shifting rapidly to a lower carbon economy on the back of successful technology push policies, whereas the EU has a failed carbon market which is now even seeing a resurgence in coal use, some of it imported from the USA.

The differing experiences in Europe and the United States illustrate the relative efficacy of direct technology push versus carbon pricing in emissions reduction and advanced technological deployment. As we wrote in a February 2012 article in Yale e360, “the existence of a better and cheaper substitute has made the transition away from coal much more viable economically, and it has put wind at the back of political efforts to oppose new coal plants, close existing ones, and put in place stronger EPA air pollution regulations.”

. . . . .

America’s investments in technological innovation contrast strongly with the European Union’s preference for pricing signals. As Europe follows through on plans to build new coal plants that will burn for decades and America leads recent global decarbonization trends, we continue to find little evidence of success from the ETS or any other major carbon pricing schemes around the world.

There is no doubt that from an emissions perspective, the US is benefitting from the current gas boom. Back in June the IEA reported;

US emissions have now fallen by 430 Mt (7.7%) since 2006, the largest reduction of all countries or regions. This development has arisen from lower oil use in the transport sector (linked to efficiency improvements, higher oil prices and the economic downturn which has cut vehicle miles travelled) and a substantial shift from coal to gas in the power sector.

However, the story that Breakthrough is telling is more about linking events after the fact, rather than analyzing the real policy drivers. According to both Breakthrough and an analysis by Associated Press, DOE funding of fracking goes back decades, as does DOE funding for a range of energy technologies. However, this funding wasn’t linked to emissions reduction, but more to the general need for energy supply diversity, energy security and therefore the cost of energy. I have always argued for technology funding, it is an essential part of the policy landscape, particularly for technologies such as CCS. Canada has been active in this regard, with significant funding for CCS demonstration, such as for the Shell Quest project.

But it wasn’t the technology funding on its own that has delivered the change in the US. Price signals have played a key role, it is just that they are less transparent than the carbon price in the EU. Although there isn’t a carbon price mechanism operating in the USA today (across the whole economy), existing coal fired power stations and almost certainly any new ones being considered are still exposed to carbon pricing. This comes from the expectation of carbon pricing in the future, through regulation under the CAA or a later Congress implementing direct pricing. Shell uses such a price premise in its own projects, including those in the USA. We are on record at $40 per tonne of CO2. There are also more price signals for coal, such as from the new mercury rules.

What has worked in the USA is the combination of funding for new energy technologies and a price signal in the market which then drives deployment. It also happens that the coal fleet is old and even the longevity optimists amongst the power producers are starting to count down the number of years before replacement is due. Eventually, the combination of age, cost of natural gas, expected cost of emissions and likely investment required to keep the coal running delivers the knockout blow.

Turning to Europe, the modest resurgence in coal use comes from a similar set of sums, it’s just that the answer is different. The natural gas prices currently seen in the USA aren’t available, coal is getting cheaper thanks in part to US exports and the carbon price signal can even be locked in at relatively low and known levels by using the market. The result is less than desirable from the atmosphere’s perspective, but it is the reality of the current pricing signals. Back in June, Bloomberg reported;

Europe is burning coal at the fastest pace since 2006, as surging imports from U.S. producers such as Arch Coal Inc. (ACI) helped cut prices 26 percent in a year and benefited European power companies including EON AG. Demand for coal, the dirtiest fuel for making electricity, grew 3.3 percent last year in Europe while sales of less- polluting natural gas fell 2.1 percent, the steepest drop since 2009 . . .

None of this means that the EU approach to managing CO2 emissions is wrong or that price signals don’t do anything. Quite the reverse. It’s just that the answers coming out are currently giving some unexpected outcomes.

The Global Status of CCS

The Global Carbon Capture and Storage Institute has just released its 2012 report on the current status of CCS around the world. The headline is that CCS is clearly up and running and CO2 is being sequestered. Around the world, eight large-scale CCS projects are storing about 23 million tonnes of CO2 each year. With a further eight projects currently under construction (including two in the electricity generation sector), that figure will increase to over 36 million tonnes of CO2 a year by 2015. This is approximately 70 per cent of the IEA’s target for mitigation activities by CCS by 2015.

The flip side of this is that the rate of deployment is far below anything that remotely passes for a 2°C trajectory. The report finds that in order to maintain the path to the 2°C target, the number of operational projects must increase to around 130 by 2020, from the 16 currently in operation or under construction. Such an outcome looks very unlikely as only 51 of the 59 remaining projects captured in the Global CCS Institute’s annual project survey plan to be operational by 2020, and inevitably some of these will not proceed.

I have discussed CCS many times in the past. Given the continued abundance of fossil resources, their ease of use for both mobile and stationary energy generation, combined with the fact that they continue to be very cost competitive as new extraction technologies are introduced, it is therefore highly likely that we continue to make use of them. But as the report notes, we need to limit the increase in the stock of CO2 in the atmosphere to 1000 Gt this century (giving a 50 per cent chance of limiting global temperature rise to 2°C) which in turn requires energy-related CO2 emissions to fall to zero by 2075. The only way to square this circle will be large scale deployment of CCS.

One of the surprising aspects of the report is the review of where CCS is actually happening. Conventional wisdom says the EU then North America and that is certainly true for many of the more advanced projects, but close behind is China which has a number of projects in the identification stage of development. In fact the report finds that more than half of all newly-identified projects are located there. Using CO2 for Enhanced Oil Recovery (EOR) is being investigated as a revenue option in all the projects.

  • Daqing Carbon Dioxide Capture and Storage Project (Identify stage) – a super-critical coal-fired power plant that would capture around 1 Mtpa of CO2 through oxyfuel combustion, developed by the China Datang Group in partnership with Alstom.
  • Dongying Carbon Dioxide Capture and Storage Project (Identify stage) – a new build coal-fired power generation plant with a planned capture capacity of 1 Mtpa of CO2, also developed by the China Datang Group.
  • Shanxi International Energy Group CCUS Project (Identify stage) – a new, super-critical coal-fired power plant with oxyfuel combustion being developed in partnership with Air Products, with a capture capacity of more than 2 Mtpa of CO2.
  • Jilin Oil Field EOR Project (Phase 2) (Identify stage) – EOR operations at the Jilin oil field, where around 200,000 tpa of CO2 from a natural gas processing plant are currently being injected, are scheduled to be expanded to more than 800,000 tpa from 2015.
  • Shen Hua Ningxia Coal to Liquid Plant Project (Identify stage) – a new build coal-to-liquids (CTL) facility developed that would capture around 2 Mtpa of CO2.

Perhaps the most disappointing news comes from Europe, where the value of the main CCS capital support mechanism has been reduced to a fraction of its anticipated amount following the collapse of the EU carbon market to some €8 per tonne of CO2. The EC policy objective of having up to 12 commercial-scale demonstration plants operating in Europe by 2015 is no longer achievable, with 4–5 projects operating in the next 5–6 years being a more realistic scenario. I commented on this back in June.

As well as giving a comprehensive breakdown of all the current projects, the report does the same for policy development, support mechanisms, storage potential and the progress in the technology itself. If you want to know more about CCS then this is truly a “one stop shop”.

The report download page with laptop, iPad and Kindle versions can be found here. Alternatively, you can go directly to the PDF version here.

The recent rash of news alerts about the all-time-low, end of summer, Arctic sea ice extent has certainly given new food for thought about the state of the climate. Of course we shouldn’t be entirely surprised by this state of affairs as more rapid warming at the poles was anticipated long before the issue of rising emissions became a reality that we would have to deal with.


 Back in 1895, Svante Arrhenius came to the conclusion that “temperature of the Arctic regions would rise about 8 degrees or 9 degrees Celsius, if the carbonic acid increased 2.5 to 3 times its present value”. Fortunately we haven’t reached this level of atmospheric CO2 or warming just yet, but nevertheless the message was there 120 years ago.


So it was timely to be able to hear from a current expert on the subject of the Arctic at the 34th MIT Global Change Forum held in Canada last week. The speaker was Professor Louis Fortier, Scientific Director, ArcticNet, Université Laval. Somewhat depressingly, the news was worse than the already worrying news of that week, shown above.

Firstly, Professor Fortier showed how climate models verified the findings of Arrhenius. In a 2070 world with CO2 at 550 ppm, warming in the Arctic is seen to be 5°C, compared to 2-3°C in lower latitudes.

But the really alarming news came when the discussion moved from 2D to 3D. Although we think of floating ice in the 2D context, it does have some thickness. This is caused by the buildup of ice from year to year, starting with ice that survives the previous summer melt which then increases in thickness during the winter. Thirty years ago, “old ice” (layers in the pack some 5-10 years old) made up some 50% of the floating pack at the end of the summer melt. Today, there is almost none of this remaining, with the ice at the end of summer consisting of the thin remnants of the winter freeze.

The 2D view shows that September ice extent has declined by about 50% since 1980.


But the 3D view which incorporates the measurements of ice thickness shows an even more worrying trend.  Ice volume has declined by 82% since 1980.