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© IEA Clean Coal Centre www.iea-coal.org.uk
Emission trading; incentive or obstacle to funding of carbon
capture and storage demonstration projects
John KesselsIEA Clean Coal Centre
http://www.iea-coal.org.uk
© IEA Clean Coal Centre www.iea-coal.org.uk
Introduction
Key messagesCoal and the role of Clean Coal Technologies in the futureEconomic instrumentsIs emissions trading working for CCS?Alternative optionsConclusions
© IEA Clean Coal Centre www.iea-coal.org.uk
Key messages
IEA and IPCC clearly indicate mitigation of CO2 emissions is urgentCurrent economic and policy instruments are inadequate to accelerate CCSEmissions trading is a medium to long term option for CCS International action is needed to accelerate CCS via the UNFCCC A new mechanism or fund is needed
© IEA Clean Coal Centre www.iea-coal.org.uk
Why is CCS needed?
The science is robust with IPCC, Stern Report all calling for mitigation options including CCSThe status of coalWhat will be the energy demand?What will be the implications for CO2 emissions?The numbers
GLOBAL CONTEXT FOR COAL
40% of the worlds power is generated from coalCoal is often indigenous and offers energy securityGlobally 6Gt of coal is produced and consumed annuallyCoal is not a scarce resource, for example Alaska could have 5,012 Gt of coal resources surpassing the USA mainland coal reserves by 40%
© IEA Clean Coal Centre www.iea-coal.org.uk
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
1980 1990 2000 2010 2020 2030
Mtoe
Other renewables
Hydro
Nuclear
Biomass
Gas
Coal
Oil
World energy demand expands by 45% between now and 2030 – an average rate of increase
of 1.6% per year – with coal accounting for more than a third of the overall rise
World primary energy demand in the Reference Scenario
(IEA WEO 2008)
CCS is a key option to use fossil fuels safely
Source: http://www.ipcc.ch/
CARBON IN
FOSSIL FUELS
‘Unconventional oil’ includes oil sands and oil shales. Unconventional gas’ includes coal bed methane, deep geopressured gas etc. but not a possible 12,000 GtC from gas hydrates.
1000ppm
750ppm
650ppm
CARBON THAT CAN BE
EMITTED TO ATMOSPHERE
IN THIS CENTURY
450ppm
350ppm
550ppm
© IEA Clean Coal Centre www.iea-coal.org.uk
Using CCT and CCS
Table 1. Regional scenario results
MtCO2/ yr reduction SPCC low SPCC high IGCC low IGCC high CCS low CCS highin 2030 30% 100% 20% 60% 10% 50%China 193 645 129 387 247 1233India 58 193 39 116 74 370Indonesia 26 88 18 53 34 168US+Canada 154 513 103 308 237 1187EU-25 143 475 95 285 220 1100OECD Asia 45 149 30 90 69 345Australia 12 41 8 25 19 95total 631 2104 421 1262 899 4497
© IEA Clean Coal Centre www.iea-coal.org.uk
The numbers• 6.3 billion global population growing to 9 billion
by 2040• 2008 markets collapse with loss of $30 trillion• Insurance $3 trillion per annum• US fiscal package 750 billion• $1 trillion for WB and IFC• 2324 coal fired power stations globally above
50MW• 1.050 billion and part of 300 million EUA
allowances valued currently €8-12• $20 billion for CCS demonstration plants?• 67 the key number in the US
© IEA Clean Coal Centre www.iea-coal.org.uk
How do we reduce CO2 Emissions?
© IEA Clean Coal Centre www.iea-coal.org.uk
Key Economic Instruments
• Emissions trading is the tool of choice, but the current price of €12 is to low for CCS
• Estimated CCS costs including transport and storage are around €35- 70/tCO2 costs could drop with technology development to €25/35/tCO2
• With each years delay in China alone approximately 35x 500 MW coal fired power stations will be built
• Carbon taxes not a realistic option
Other Options for Funding CCS
• Expand traditional “technology policy” options (tax credits, subsidies, etc.)
• Set new regulations requiring CCS (e.g., generator CO2 performance standards) (as in California CO2 stds)
• Adopt stringent cap-and-trade program w/ CCS bonus allowances and/or a tech. fund (e.g., from auction of allowances)
• Feed in tariffs has worked with Renewables
• Set up a similar fund to ITER for financing 12 demonstration CCS projects
© IEA Clean Coal Centre www.iea-coal.org.uk
Europe: 12 CCS projects
12 full-size pilot plant in EU by 2015
EU finance and other support for coal based CCS
€1.050 billion for CCS split at 5*180 million€ for each of 5 member states
Germany – 2 candidates – IGCC & oxyNetherlands – 3 candidates – IGCC & 2*PCPoland – 1 candidate – PCSpain (& Portugal)-1 candidate – oxyUK – 4 candidates – 3*PC & IGCC
Kingsnorth, Tilbury, Longannet, HatfieldItaly €100 million for a coal plant at Porto TolleFrance €50 million for industrial carbon capture
projectAlso, 300 million EUA allowances to be divided with innovative renewable projects and the 12 CCS demos
© IEA Clean Coal Centre www.iea-coal.org.uk
© IEA Clean Coal Centre www.iea-coal.org.uk
UNFCCC and coal
• No CCS projects under the Kyoto Protocol• A new UNFCCC sectoral mechanism
recommended by the EU, could cover the power sector and include CCS
• There is little incentive for investment in CCS, the EU ETS EUA price collapse to €8- 12 will send the wrong signal
• To many cooks spoil the broth and with a new mechanism some countries must be excluded
What policy is needed to get CCS operational?
0
10
20
30
40
50
60
70
80
90
100
CCS overall cost journey – reference case €/tonne CO2 abated; rounded to €5; European rollout scenario
Lowest
Highest
Ranges for technology / fuel and onshore / offshore combinations (reference cases)
Cost of CO2abatement
2015 2020 2030
90
60 50
35
45
30
Demonstrationphase (2015)
Early com-mercial phase
(2020+)
Mature com-mercial phase
(2030+)
Subsidy
Regulation?Carbon market
Source: McKinsey
© IEA Clean Coal Centre www.iea-coal.org.uk
Three Possible Pathways Forward
Initial three CCT paths to include in thenew UNFCCC mechanism in stages:(1)Power plant efficiency improvements through
the deployment of supercritical Pulverised Coal Combustion (SPCC) and IGCC technology.
(2) Include Coal Mine Methane in the new protocol the CDM does include CMM but it would be better to include all coal related activities that reduce emissions under one protocol
(3) Carbon dioxide capture and storage application in existing conventional pulverised coal combustion (PCC) power plants and advanced SPCC and IGCC technologies.
© IEA Clean Coal Centre www.iea-coal.org.uk
Need to Act now otherwise Carbon Lock-in
New and replacement fossil fuel power generation capacity (GW)
2010 2020 2030 World 520 967 1205 OECD 160 309 363 Developing Countries 343 587 750 Transition Economies 16 72 90 European Union (25) 39 105 132 North America 83 141 171 China 162 210 260 India 24 66 97 Russia 5 27 34
© IEA Clean Coal Centre www.iea-coal.org.uk
Key messages
IEA and IPCC clearly indicate mitigation of CO2 emissions is urgentCurrent economic and policy instruments are inadequate to accelerate CCSEmissions trading is a medium to long term option for CCS International action is needed to accelerate CCS via the UNFCCC A new mechanism or fund is needed
© IEA Clean Coal Centre www.iea-coal.org.uk
THE END THANK YOU FOR LISTENING
IEA CCC www.iea-coal.org.uk+44 (0)20 8780 2111 (tel)+44 (0)20 8780 1746 (fax)
John Kessels [email protected]
