In the recently concluded COP 17 in Durban, a less well known outcome was the addition of Carbon Capture and Sequestration (CCS) as a Clean Development Mechanism (CDM) project.
The addition of CCS was a major coup for coal lobbyists. Although it was not a desired outcome for environmentalists, the use of coal as a major energy source is here to stay. First for the facts – coal in 2010 supplies almost 30% of the world primary energy needs – 12 billion toe (from bp energy outlook 2011). China itself generates more than half its electricity from coal burning.
By 2030, the world energy demand is expected to increase 45%. Whilst there will be an increasing use of renewables and gas, this is not expected to displace coal as a major energy source. Coal as a percentage supply of primary energy is expected to decrease only marginally to 26%. (Source: bp)
The recent Fukushima nuclear accident has further shifted nuclear energy dependence to other sources of energies including renewables and gas. Wind and solar energy – the two main forms of renewables are intermittent sources of energies and cannot fully compensate nuclear energy as a base load. The tapping onto the reserves of unconventional gas – that of coal bed methane and shale gas has been offered as a solution, although the environmental impact of hydraulic fracking for shale gas is presently under investigation.
A portfolio approach of reducing emissions is thence the only solution forward – that of broadening the energy source base to low emissions fuels, energy policies (taxation and cap and trade) and increasing energy efficiency. A policy scenario target motioned by the IEA is to limit atmospheric concentration to 450 ppm of carbon dioxide and thence temperature rise to not more than a critical threshold of 2 degree Celsius1. This has been remarked as ‘hard to achieve’ due to the lock-in of existing infrastructure (eg power and industrial plants and use of fossil fuels in existing car fleet). In a New Scenario policy report (in the World Energy Outlook 2011 by IEA), CO2 emissions is expected to reach 35 Gt in 2035 resulting in a 650 ppm CO2 concentration and a temperature rise of 3.5 deg Celsius. CCS is a swing measure that has been identified as a critical technology to reduce emissions from coal power plants by the IPCC 4th assessment report.
CCS is not a new technology having been used to enhance recoveries in oil fields. However its use in coal fired power plants has not been commercially tested, albeit pilot plants are in USA and Norway. See the world coal association link on available CCS technologies. In China, coal fired plants alone contributed 6.5 Gt of total 7.7 Gt carbon dioxide emission in 2009. In its latest 5-year Plan in Apr’ 11, an objective of the government is the reduction of environmental pollution. This can be substantially achieved through the replacement of inefficient and pollutive coal power plants. By including CCS to the list of CDM additionality projects, the private sector can also be economically motivated to modernise existing coal plants in developing countries. These measures will hasten the commercialisation of CCS through technological learning by doing. CCS can presently be classified as a ‘back-stop technology’.
The use of coal for power generation is here to stay for the foreseeable decades, and a pointed policy measure is to use it in a sustainable manner.
1 – this was purported in the IPCC 4th AR, although the climate science linkage has been disputed recently.
Being the major producer of fossil fuels which are the single important contributor of carbon emissions, OPEC role in climate change is pivotal. The key to reducing greenhouse emissions is the use of renewable and alternative energies and less use of polluting fossil fuels. Whilst OPEC has to ensure the future profitability of its oil revenue, it at the same time wants to be perceived to be an advocate of climate change issues.
Change in OPEC stance
In the early 2000s when climate change starts to gain global attention, there were initial rumblings among members of OPEC. There were fleeting suggestions of compensation for schemes like carbon trading and carbon tax that would have reduced the attractiveness of crude as a fuel source. OPEC wanted an assurance that even as it invested in its capacity, future demand would be assured.
Over the past decade, even as climate change talks stagnated and gained more prominence, OPEC has changed its stance. In 2007, it adopted a $3b climate change fund to fund research in carbon capture and sequestration (CCS) technology, especially in the area of enhanced oil recovery. This research is envisaged to reduce the carbon emissions from the use of fossil fuels and increase its attractiveness. Such technology is more suited for immovable facilities like power plants and industrial facilities (eg refineries). At the moment this technology is prohibitive and will be cost effective only if carbon price reaches more than $60/tonne. (Comparatively, the present EUA on the european trading scheme is about $22 at time of writing.)
The electric vehicle and transportation fuels
The advance of CCS technology is not likely to make an immediate significant reduction in carbon emissions due to the exorbitant costs to modify existing industrial facilities, and potential fuel switching to the less pollutive and cheaper natural gas.
A recent Apr 2011 report by the IEA highlighted the progress of the use of renewable fuels. However, since the strong production growth of 2010, its growth (including bioethanol and biodiesel) has slowed to less than 2mb/d. The use of such biofuels is also strongly dependent on mandates and subsidies, making it an unattractive proposition.
An analysis of the usage of fossil fuels indicates transportation fuels to be the main demand driver. Gasoline, jet fuel and diesel constitute 21.3 mb/d, 6.9 mb/d and 21.2 mb/d or 55% respectively of 90 mb/d global demand (notwithstanding bunker fuel which will change to use marine diesel in the next decade).
It is the advent of the electric vehicle that may potentially displace the major use of transportation fuels and thence fossil fuels. It is this area that OPEC will probably be watching. The use of such vehicles will take time to filter through as old vehicles are replaced. Further it requires infrastructure to be built for the re-charging and maintenance of expensive batteries. A research by Goldman Sachs estimates this revolution to slowly take place over the next 5-10 years. For its use by the mainstream consumer, this will take an even longer time.
In the interim period, the insatiable global demand for crude oil from the emerging economies is expected to increase, creating a temporal period of imbalance in demand/ supply. The world is not going to wean itself of dependence on fossil fuels in the medium term. This will continue to incentivise OPEC to invest in existing capacity.