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Washington Coal GroupJanuary 9, 2008
Accelerating Deployment of CCS: A Trust Fund
ApproachBased on papers written by
Vello Kuuskraa; Naomi Pena and Edward Rubin
Pew Center On Global Climate Change Coal Initiative
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The Pew Center’s Coal Initiative
Addressing emissions from coal-fueled power plants
I. U.S. Policy Optionsa) Standardsb) Trust fund (Pena and Rubin)
II. U.S. Technology Solutions (Kuuskraa)
III. State-level OpportunitiesIV.Options for China and India
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Presentation Overview
I. The need for carbon capture and sequestration (CCS)
II. Options to accelerate use of CCSIII. A program that covers incremental
costsA. Program components B. Alternative scales and objectivesC. First order cost estimates
IV. A trust fund to manage the programA. U.S. trust fundsB. Lessons learnedC. Design Features
Considerations for the Coal Community
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The Need for CCS1. 30% of U.S. and 80% of U.S.
electricity sector CO2 emissions come from coal
2. These emissions must be significantly reduced to address climate change
3. CCS is the only suite of technologies that currently has promise to enable coal to be a major electricity-sector energy source while meeting climate objectives.
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Current Barriers to CCS Deployment• High expected costs (~30-70%
increase in cost of electricity)• Large losses in net electricity output• Lack of experience with
technologies, particularly at-scale, integrated use in the utility sector
• Regulatory uncertainty, including liability
• Current lack of regulatory drivers
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How CCS Might be Accelerated
Stringent enough cap on CO2
Mandate on generators or retailers (standards)
Tax credits (must be revenue neutral)
State & regional policies; PUC actions
Program that pays incremental costs of CCS
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Program Description• Cover incremental costs of CCS
(installation; O & M for 5 years; reimburse revenue lost due to reduced generation)
• Test CCS technologies for:– Alternative electric generation
technologies (PC, IGCC, new & retrofit)
– Different coal types– Different geologic settings
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Program Size and Cost
• Sufficient funds for:~10 plants (500 MW) + 5 other large-point
sources~30 plants (500 MW) + 10 other sources
• Average per 500 MW unit– High: $950 million– Low: $730 million
• Total Program Costs (10 -15 years)– Smaller program: $8-10 billion– Larger program: $24 - $30 billion
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How to Pay for the Program?
• Fees on electricity generated – Coal-fueled generation only– All fossil fuel generation– All electricity generation
• Fees on coal• Allowances• Other
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Scale of Fees if per kWh on Coal
Based on current generation from coal:• Smaller program: $0.0004 to $0.0005 per
kWh• Larger program: $0.0011 to $0.0014 per
kWhCosts (and fees) decline as:• As coal-fueled generation increase• Costs of CCS decline Costs (and fees) could be reduced by:• Requiring cost-sharing• Supporting fewer projects per year
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Trust Fund Basics
Trust funds can:• Raise and administer large sums • Ensure that funds are dispersed
only for specified purposes Federally established trust funds use
legislation to determine:• Whether funds go into Treasury
and through annual appropriations or not
• The entity that manages the fund
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Some Successful U.S. Trust Funds• Highway Trust fund: $38 billion over 15
years; built new infrastructure across U.S.
• Propane Education and Research Council – fees enabled by federal legislation; up and running in 2 years
• Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Resources – managed by private stakeholder group under DOE oversight.
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U.S. Experience: Key Lessons
• Establish clear objectives• Establish clear guidelines for program
termination• Ensure reliability of fund dispersal:
– insulate funds from annual appropriations
– do not use tax-credits
• Use independent or quasi-independent entity to manage funds
• Self-financed programs survive
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Well-designed Trust Fund
• Very rapid start-up possible
• Reliable fund dispersal
• Cost-effective: private-sector standards for project selection and management
• Transparent: stakeholder + experts control under federal oversight
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Considerations for Coal Community
Climate legislation is on the way
Possibility of move away from coal if CCS costs remain high
Urgency of gaining CCS experience
Means to quickly and cost-effectively achieve deployment of CCS at coal-fueled power plants
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For Further Information
See papers at
www.pewclimate.org/white_papers/coal_initiative
1. A Program to Accelerate the Deployment of CO2 Capture and Storage: Rationale, Objectives, and Costs. 2007. Vello Kuuskraa
2. A Trust Fund Approach to Financing a CCS Deployment Program. 2008. Naomi Pena and Edward Rubin.
