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Debating a 'Clean Coal' Future

March 19, 2009
This publication is now archived.

Introduction

Coal is a vital energy source for many countries, and its use is on the rise in some of the fastest-growing developing states. Yet burning coal produces significant amounts of the greenhouse gas emissions believed responsible for accelerating global climate change. Coal use thus poses some of the most vexing questions for policymakers concerned about taking swift action to mitigate climate change. Some experts say the world's two largest consumers of coal--China and the United States--must find common cause in reducing its harmful environmental effects. Many are hopeful about the potential of carbon capture and storage, but that technology is still years away from being proven commercially and environmentally viable.

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Despite increasing calls for cleaner energy, coal remains in wide use because it is cheap, abundant, and reliable.

Where Coal Is Still King

Coal is responsible for about 40 percent of global electricity generation as well as 40 percent of greenhouse gas emissions. It is present in seventy nations, with the United States, Russia, and China possessing the largest reserves (PDF). Coal produces a varied spectrum of energy and pollutants depending on its quality--ranging from low-quality lignite to pure coal. The U.S. government's Energy Information Administration (EIA) projects modest increases in coal use for most of the world by 2030 but significant increases in Asia, particularly in China, where coal power generation is expected to more than double between now and 2030. Though China and India are pursuing other forms of energy, both possess large reserves of coal, making it a natural choice to fuel their rapid growth and acute energy needs. Analysis by CFR Senior Fellow David Victor shows coal is currently the cheapest way for China to generate power (PDF), with hydropower a close second.

China is the largest coal consumer in the world, using double the amount of the United States, the second-largest consumer according to EIA data. China and the United States account for about 60 percent of all coal consumption. Unlike the United States, about half of China's coal use is for its industrial sector because of limited oil and natural gas resources (PDF).

Despite increasing calls for cleaner energy, coal remains in wide use because it is cheap, abundant, and reliable. As a 2007 Massachusetts Institute of Technology report on coal's future points out, producing energy with coal costs from three to twelve times less (PDF) than with natural gas. Power generation from a nuclear plant can be within coal's cost range, but the costs and timetables for new nuclear construction are well beyond those of coal plants. Nuclear power also faces political obstacles because of concerns over proliferation and waste storage. Development of another relatively cheap energy source, natural gas, is complicated by logistical hurdles like securing pipeline access.

Crisis Guide: Climate ChangeRenewable energy sources such as wind and solar are approaching coal's cost range, but a lack of concentration in wind and solar generation can make it difficult to connect these power sources to existing electrical transmission networks. These forms of energy also have reliability problems. A typical wind farm, for example, operates at about 30-40 percent of capacity in comparison with a coal plant, which operates at 80-90 percent capacity constantly. As a result, it would take at least double the amount of wind power generation to equal the power output of a similarly scaled coal plant. Barbara Freese, a clean energy and climate policy advocate for the U.S.-based environmental group Union of Concerned Scientists, says several technologies are in the works that address these intermittency issues. Further, she notes that coal's low cost will only continue in the United States in the absence of a cap-and-trade program. Such a system encourages emissions reductions by fostering a market-based price on carbon emissions. Freese says models show cap-and-trade will bring down coal use in the near term, but it will start climbing again following the expected deployment of greenhouse gas abatement technologies.

The War on Coal Emissions

Pollutants from coal power can have harmful environmental effects and cause respiratory illness and heart disease in humans. Some coal plants now have technologies that limit the emissions of toxic pollutants, such as sulfur dioxide, nitrogen oxides, and particulate matter. However, only one-third of U.S. coal plants have scrubbers specifically targeting sulfur dioxide (PDF) and another 45 percent do not have the latest nitrogen dioxide scrubbers, according to a March 2009 congressional testimony by David G. Hawkins of the environmental group Natural Resources Defense Council. One successful policy used to encourage coal pollution reductions, the U.S. Environmental Protection Agency's acid rain cap-and-trade program, is now a blueprint for limiting greenhouse gas emissions. The acid rain program is hailed as a compliance success gained at a fraction of the original anticipated costs. But unlike toxic pollution control technologies, which were mature when the acid rain program was envisioned, the regulatory push for climate change is well ahead of commercially-viable methods to reduce greenhouse gas reductions from coal plants.

The biggest hope for coal's greenhouse gas problem is carbon capture and storage (CCS) technology, many experts say. Adding carbon capture technologies could reduce a coal plant's greenhouse gas emissions by as much as 95 percent.

In the absence of effective emissions-curbing technology, tougher regulations loom for coal-powered plants in the United States. Several U.S. states have adopted or are contemplating moratoriums on new coal plants until carbon capture and storage is commercially viable. New federal regulations that may be proposed by the Obama administration and a possible new climate law from Congress could also make it harder to build new coal plants. The administration's first budget request already assumes that the "biggest polluters," which would include coal power, will be forced to purchase emissions credits from a U.S. cap-and-trade program beginning in 2012.

Some lawmakers and power producers worry that these requirements will make existing coal power generation expensive and in some cases force coal plants to shut down. Amid environmental lawsuits and investor uncertainty, U.S. power companies have scrapped plans for many coal plants initially set for construction in 2006 and 2007. A 2008 report by energy consultant Synapse Energy Economics, Inc. likens the investment debate swirling around the U.S. coal sector to what nuclear power faced in the 1970s (PDF). "The industry is in paralysis," says Thomas A. Johns, senior vice president for the international energy development company Sithe Global. "They don't know what to do because there are no price signals." At a March 2009 congressional hearing, Hal Quinn, head of the National Mining Association, warned that unless climate policy coincided with the deployment of needed technologies the industry could face a "valley of death" (PDF).

Illustrating the coal dilemma, many European countries are also opting out of new coal plants but still may keep older plants online through 2020 to balance emissions reduction obligations with power needs. Meanwhile, China continues to bring coal plants online at an average rate of two per week, but the government has mandated efficiency standards for new plants over six hundred megawatts and is phasing out less efficient power plants as new ones come on line.

The Promise of Carbon Capture and Storage

The biggest hope for coal's greenhouse gas problem is carbon capture and storage (CCS) technology, many experts say. CCS is a process by which carbon dioxide emissions are captured during other industrial processes such as burning coal or extracting oil, and then stored, usually underground. Adding carbon capture technologies could reduce a coal plant's greenhouse gas emissions by as much as 95 percent, according to some estimates. Luke Warren, policy manager for the London-based World Coal Institute, an international coal advocate, says carbon capture and storage is expected to give the "second-biggest [emissions] abatement potential after energy efficiency." He adds: "If you look at all the stimulus packages, they all have a considerable component for CCS, showing that politicians now understand how essential the technology is." The Obama administration devoted $3.4 billion to it in the 2009 stimulus package. Lawmakers also have revived federal funding for the FutureGen project (WashPost), which was scuttled at the end of the Bush administration. The public-private partnership would build a "first-of-its-kind, coal-fueled, near-zero-emissions power plant." Still, energy consultant David A. Schlissel cautions that these pilot programs have a long way to go. "It's only tests," Schissel says.

Experts say up to twenty big U.S. demonstration projects will be needed in the next few years to move research forward. "What we don't want is to see large-scale deployment because the technology has gotten ahead of itself," says Freese of the Union of Concerned Scientists. Jeffrey Bielicki, a fellow at Harvard's Belfer Center for Science and International Affairs, says public acceptance will be needed in addition to good research, particularly for carbon storage, drawing parallels to the opposition faced by the proposed nuclear waste repository at Yucca Mountain in Nevada. Bielicki says environmental groups may have particular concerns about groundwater contamination and gas leakage from carbon storage.

The administration's first budget request already assumes that the "biggest polluters," which would include coal power, will be forced to purchase emissions credits from a U.S. cap-and-trade program beginning in 2012.

Lowering costs for carbon capture and storage is necessary to make the technology palatable to developing nations. A January 2009 report by two U.S.-based policy institutes, the Pew Center for Climate Change and the Asia Society, note that China and the United States "share a uniquely common interest in devising strategies to allow them to continue their reliance on coal in a carbon-constrained world" (PDF). While acknowledging that carbon capture and storage may be at least a decade away from deployment, a CFR Task Force Report on climate change encourages greater cooperation on demonstration projects with China as well as development of the required regulatory frameworks. CFR Senior Fellow Elizabeth C. Economy notes the Chinese don't see carbon capture and storage as a silver bullet and are much more interested in interim efficiency technologies for coal plants. Though China already plans several demonstration projects of its own, the 2009 Pew and Asia Society report says China "is wary of pressure to demonstrate and adopt a technology not yet in commercial use in the developed world."

Challenges for CCS

As the 2007 MIT coal report indicates, there are a number of possible carbon capture technologies for coal plants with varying costs in both investment and plant efficiency. Like pollution control technologies, carbon capture technologies take energy and may reduce the efficiency of coal plants by as much as 40 percent. These technologies also require lots of extra physical space, which may limit the number of existing plants that can be retrofitted. While more expensive than traditional plants, some energy experts argue that a number of these technologies could be commercially viable immediately. However, Sithe Global's Johns says the economics of adopting capture technology will not be attractive without a cap-and-trade system that leads to a relatively high carbon price. As the Economist points out, estimates for a carbon price needed to make a power plant with CCS profitable range from $40 to $115 per ton; meanwhile estimates for trading in a U.S. carbon market are around $30 to $44 per ton by 2020.

At the same time, geological storage presents significant logistical challenges. There are only four "large-scale" storage projects around the world (Norway, Germany, Canada, and Algeria) that capture carbon and then store it. Bielicki notes the term "large-scale" only refers to the technology involved and does not encompass the scale of gas mitigation needed. A November 2008 working paper from Stanford University's Program on Energy and Sustainable Development notes a huge gap (PDF) between even the significantly smaller storage volumes of proposed projects and the feasibility estimates for storage volumes worldwide in the next fifteen years. In addition to problems retrofitting existing plants, significant pipeline networks may be necessary depending on the distance and geology between plants and storage sites.

A big obstacle for storage may be legal and environmental liability, particularly in the United States. Craig Hart at Harvard's Energy Technology Innovation Program writes that many of the smaller demonstration projects underway in the United States "acknowledged to involve little or no risk" have faced significant legal and regulatory hurdles ranging from clean water laws to long-term liability (PDF). U.S. nuclear power and Japanese liquefied natural gas (LNG) both had tremendous government intervention in their early years, including in the case of nuclear power transferring liability to the government.

Further, scaling up nuclear power and LNG did not lead to lower costs for the industries (PDF). As commercialization proceeds, "policymakers must remain mindful that cost reduction is not automatic--it can be derailed especially by non-competitive markets, unanticipated shifts in regulation, and unexpected technological challenges," a Stanford working paper report concludes.

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