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Putting a Price on Carbon: The Cheapest Way to Make Coal Cleaner

Frances Beinecke

Posted June 5, 2008

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The New York Times ran an article last Friday about how high costs are slowing down the development of technology that can capture carbon dioxide from coal-fired power plants. What the article doesn’t discuss is the best way to drive costs down: put a price on carbon by passing the Climate Security Act.

The Climate Security Act is up for a Senate vote this week, and as a result, there has been a lot of media discussion about the costs of climate change: the price of tackling global warming and the far greater price of not tackling it. But what's been missing from this coverage is the economic reality that charging money for something prompts the market to find cheaper ways of doing business.

Right now, releasing carbon dioxide--the main global warming pollutant--into the air is free. It’s no wonder power companies are hesitant to invest in equipment to capture this unregulated pollutant. Doing nothing is cheaper.

Yet that is a short-term look at the bottom line. Energy experts from MIT have concluded that the longer the coal power industry waits to invest in cleaner technology, the more expensive future efforts to control global warming pollution will be.

It’s a simple case of a pay some now or pay a lot later. Just look at the numbers:

  • According to the International Energy Agency, an average of 10 new coal-fired power plants will be built every month for the next 25 years.
  • If all 3,000 of the next wave of coal plants are built without technology to capture and store carbon dioxide, their lifetime emissions will be 30 percent greater than the total carbon dioxide emissions from all previous human use of coal.

Imagine the exorbitant costs we will face:

  1. Trying to reduce carbon dioxide from those 3,000 plants when retrofitting requires major modifications and
  2. Coping with the floods, droughts, and disease that will intensify as a result of all that excess carbon in the atmosphere.

These are grave prospects, but in the meantime, energy companies don’t have an incentive to make the long-term commitment to cleaner technology. Investors hate uncertainty. And while just about everyone from Wall Street to Duke Energy headquarters recognizes that America must pass a law regulating carbon emissions, a lot remains unclear.

When will the law get passed? How much will carbon cost per ton? How many allowances for releasing carbon will be given away for free?

We can resolve those questions by passing the Lieberman-Warner Climate Security Act. It will put a price on carbon. And as power companies search for ways to reduce their carbon costs, they will drive down prices for technologies that reduce carbon pollution.

We have seen it before. When the environmental community first demanded that the power industry reduce acid rain, companies claimed sulfur dioxide scrubbers were too expensive to install. But after Congress created a cap-and-trade system for sulfur dioxide emissions in 1990, the scrubbers were rapidly deployed at much reduced costs. The industry estimated that it would cost $6 billion a year to comply with acid rain regulations; in fact, it cost only 30 percent of that.

Let the Climate Security Act cap-and-trade program do the same for carbon capture and storage.

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Earl KillianJun 6 2008 01:00 AM

Does it make sense to build even a single new coal power plant, even if it does have CCS? We not only have to keep CO2 under 450 ppm, we have to plan a trajectory to eventually get it back to something like 350 ppm. Coal+CCS still emits too much CO2 to be compatible with these goals: the plant would have to be closed before its operational lifetime was up, and that means the cost per kWh would be too high.

Given that efficiency could reduce electricity consumption even with a rising population, we should be able to close power plants in the US, instead of building them. Perhaps an argument can be made that for every 4 old coal plants we close, we could build 2 coal+CCS plants and one CSP farm, but I still see those 2 coal+CCS plants as potentially having to be replaced within their operational lifetimes.

Rather than talking about coal and CCS specifically, how about a 100 g / kWh CO2e limit per kWh limit on new capacity built before 2020, and give credit for efficiency negawatts? To that add a Federal RPS.

SueJun 10 2008 02:04 PM

I'm in agreement with Earl. From where I sit (within 2000 feet of a mountain top removal strip mine), there is no such thing as "clean coal" no matter how much carbon is captured in its burning. Just the process of mining coal, with its long term removal of forest cover (have you seen real "reclaimed" strip mines -- no trees for decades!) contributes to global warming. Not to mention the devastating impact to ecosystems, watersheds, and the human communities around the mines.

Earl KillianJun 11 2008 11:59 AM

Just to add to Sue's comment: CCS means 25% more mountain tops removed because you need to burn (and therefore mine) more coal to power the CO2 separation, transportation, and injection. Removing the mountains we do today is a crime; removing an additional 25% is a worse crime.

Sue: are you entering info about the mine next to your window into the coal wiki?

Dan TroutmanJun 12 2008 12:23 AM

So what about the Chinese who are building a new coal power plant every 10 days?? I'm pretty sure they're not investing in clean coal! I'm also pretty sure that their Communist central government isn't going to spend money on clean coal technology "just because America is doing it."

It's incredibly naive to believe that we'll never tap America's massive coal reserves. When WORLDWIDE oil consumption in developing nations causes $10/gallon gasoline, it's foolish to ignore Coal-To-Liquid technology that could bring $4/gallon liquid fuel to hard-working American families. At some point, basic needs and economic situations of lower & middle-class American families will trump any desire to fight global warming that might occur 50-100 years from now.

Sad but true. We need a responsible and realistic policy that will compromise on the need for reasonable energy AND environmental protection. Can't have it both ways!

Earl KillianJun 12 2008 04:23 PM

Dan Troutman, coal-to-liquids is likely to hurt hard-working American families far more than any benefit it provides. CTL produces twice the greenhouse gas per mile as does gasoline, and greenhouse gases will soon be a huge problem for Americans (they are already a big problem).

There is also no need for coal; we can replace it with a combination solar and wind, and perhaps someday geothermal.

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