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Gloria Gonzalez

Gloria Gonzalez

Gloria is a writer for Environmental Finance.Environmental Finance is the leading global publication covering the ever-increasing impact of environmental issues on the lending, insurance, investment…

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US CCS plan slated for lack of ambition

A US interagency blueprint for commercial-scale deployment of carbon capture and storage (CCS) argues that challenging obstacles can be overcome, such as the lack of a national carbon price and questions over long-term liability.

However, the plan is not decisive or ambitious enough to succeed, according to the Clean Air Task Force (CATF).

In February, US President Barack Obama established an interagency task force to speed the commercial development and deployment of CCS technologies. The task force, co-chaired by the US Department of Energy (DOE) and the Environmental Protection Agency (EPA), last week proposed a plan to overcome the barriers to the widespread, cost-effective deployment of CCS within 10 years, with a goal of bringing five to 10 commercial demonstration projects online by 2016.

CCS projects face economic challenges related to climate policy uncertainty, first-of-a-kind technology risks and the current high cost of CCS relative to other technologies, according to the report. In the electricity sector, estimates of the incremental costs of new coal-fired plants with CCS relative to new conventional coal-fired plants typically range from $60 to $95 per tonne of carbon dioxide avoided.

“Without a carbon price and appropriate financial incentives for new technologies, there is no stable framework for investment in low-carbon technologies such as CCS,” the report said.

The DOE is pursuing multiple demonstration projects using close to $4 billion in federal funds, matched by more than $7 billion in private investments. But that investment is far short of the amount needed to fully deploy CCS, according to advocacy group CATF. In comparison, the wind sector has received far greater support from the federal government, with $6 billion in tax credits in 2010 alone.

In the absence of federal legislation, the administration should require CCS on all coal and natural gas power plants under the provisions of the Clean Air Act and support a $20 billion pioneer programme through 2020 to fully commercialise CCS technology, according to CATF.

“We are disappointed that the plan does not call for decisive action on CCS, at a time when bold thinking is required to lay out a plan that will transition this country from uncontrolled greenhouse gas emissions from coal and natural gas-fired power plants to a near zero-carbon future,” said John Thompson, head of the coal transition project at CATF. “Instead of calling for requirements to drive technology and create incentives to lower the costs of low-carbon technologies, the administration has only recommended greater interagency cooperation on a patchwork of existing relatively modest incentives.

Questions over the long-term liability associated with CCS projects were also identified by the report as a key barrier to full-fledged deployment. Open-ended federal indemnification, meaning CCS firms would not be held financially responsible for potentially costly incidents such as the release of a hazardous substance during the CCS process, is not a viable option.

But the task force suggested four potential alternatives: relying on existing state and federal laws that define or allocate liability, placing limits on claims, creating an industry-financed trust fund to support CCS activities and compensate parties for losses or damages that occur after site closure, and transfer of liability to the federal government after site closure with certain contingencies. The federal agencies will continue to evaluate these options and present recommendations by late 2011.

By. Gloria Gonzalez

Source: Environmental-Finance

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