Thanks to Kash Burchett of Datamonitor for this.
Carbon capture and storage research funding: time to call it a day?
In the report, entitled CCS: Progress and Next Steps, the International Energy Agency (IEA) argues that both an international agreement on climate change policy and a price for carbon emissions will be necessary to make carbon capture and storage (CCS) a commercially viable reality. However, as neither of these prerequisites is likely to emerge in the near future, the IEA is instead arguing for continued government funding for research projects, in order to make CCS competitive.
The IEA estimates that, to date, some $26 billion has been committed to CCS demonstration projects. However, the results have been disappointing: the technology has been available for years but the price tag remains too high.
This reality is starting to sink in among governments. Norway – a major CCS proponent – has just announced the indefinite postponement of its two pilot plants at Mongstad, citing ongoing difficulties and the "newness" of the technology. Translated, this means that CCS remains commercially unviable: at around $333 per tonne, the cost of carbon capture exceeds the EU Emission Trading System price of carbon by a factor of 10.
In light of this limited progress, and in the context of an ongoing surge in gas supply (implying low prices), it seems highly unlikely that CCS can even come close to competing with gas as a fuel for generation, without government intervention.
Unfortunately, propping up the coal industry is a vote winner: according to the IEA, global subsidies of coal consumption totaled $50 billion in 2008 alone. Governments across Europe and elsewhere have consistently sought to protect the industry because of the employment it brings. Indeed, Spain plans to resurrect its coal industry by forcing utilities to burn domestically produced coal and banning imports.
Global subsidies of coal are unjustifiable, particularly in light of the high carbon emissions arising from coal-fired generation, not to mention massive fiscal deficits. However, it is these very reasons that also make subsidies of CCS research unjustifiable, especially against the backdrop of low gas prices and the pressing need to reduce greenhouse gas emissions. Governments need to be willing to take unpopular decisions and stop distorting energy markets.