The Senate Committee on Natural Resources and the Environment held a hearing on carbon capture and storage (CCS) last Friday, shedding light on two current pieces of legislation. Introduced by Senator Jeff Bingham (D-NM), S. 699 proposes a national program to install carbon capture facilities alongside electricity generators, oil refineries, and industrial emission sites. His co-sponsor, Senator John Barrasso (R-WY), has also introduced S. 757, which proposes an innovation prize for technologies that remove and sequester atmospheric carbon dioxide. While Bingham considers the outlook for President Obama’s Clean Energy Standard (CES) as “bleak,” it’s worth re-examining CCS as a politically feasible climate policy mechanism.
CCS economic challenges
A study by RFF’s Soren Anderson and Richard Newell found that CCS could be technically feasible and economically attractive in the presence of a carbon price. However, in the absence a cap-and-trade program to penalize CO2 emissions, any stand-alone CCS program must subsidize the entire cost of carbon capture by itself.
Last year, RFF’s John Anderson reported that installing CCS at an existing coal-fired power plant could increase the levelized cost of electricity up to 80 percent (this accounts for capital investment, fuel costs, operating costs, and financing over the lifetime of the plant). The International Energy Agency (IEA) finds similar cost increases for construction of new coal and natural gas plants with CCS. In other words, the American people would end up bearing CCS’s hefty price tag—either as taxpayers subsidizing the federal CCS program at the front end, or as electricity consumers paying higher rates at the back end.
What about the costs of CCS for atmospheric carbon dioxide? The Royal Society’s 2009 study on geoengineering deems ambient air capture a relatively expensive means of reducing carbonin the atmosphere. Other studies have estimated a price upwards of $100 per ton of CO2 captured, which is significantly higher than the $25 per ton of CO2 anticipated under 2009 cap-and-trade legislation. In new a technical assessment released last week, the American Physical Society finds CCS to be at least $600 per ton of CO2 for ambient air capture. Hence, ambient air CCS subsidies seem less than ideal as a primary carbon mitigation instrument.
The good news for CCS
The above cost figures certainly paint a grim picture for the prospects of CCS. However, there are some rationales behind investing in this policy.
A variety of federal, state, and local policies already exist to reduce carbon emissions and promote cleaner electricity generation. State-level emissions standards and renewables policies impose implicit taxes on fossil fuel generation, and support for CCS would reward conversion to cleaner coal and natural gas facilities. As proposed by the Obama Administration, a federal CES policy would differentiate electricity generators by carbon emissions, largely mimicking the effect of a cap-and-trade system. Coal with CCS would provide increased flexibility under CES, with the potential for future cost reductions.
Such potential can often justify “pump-priming” investment in unproven technologies. Learning-by-doing has greatly improved the cost efficiency and competitiveness of wind power, solar photovoltaic, and other renewable energy sources. Feed-in tariffs have provided strong, consistent support for renewables, and studies credit this policy consistency with encouraging early investment and producing technological advances. Early CCS support could even allow U.S. firms to develop an early-mover advantage to export CCS technology abroad.
Finally, support for CCS ranks among the most politically feasible forms of carbon policy. Carbon capture manages to avoid marginalizing the fossil fuel industry, while also providing a clear environmental benefit in reducing emissions—albeit a relatively inefficient and expensive means of achieving such emissions reductions. But at this stage in the quest for carbon policy, even a suboptimal policy likely represents some small step in the right direction.
