Update on the Midwestern Greenhouse Gas Reduction Program

A group of Midwestern governors signed on to a greenhouse gas emissions reduction plan. They propose to reduce emissions by 60-80% of 1990 levels by 2050. Details of the cap and trade program have not yet been determined. In the last post, I mentioned that all of the Midwestern states attended the meeting. Only IA, IL, KS, MI, MN, WI, and Manitoba signed the agreement however.

The governors also signed an “energy security and climate stewardship platform”. This calls for, inter alia, a regional regulatory framework for carbon capture and storage (CCS) by 2010, including capture, injection, monitoring, verification, and liability issues. By 2012, a multi-jurisdictional CO2 pipeline should be permitted. Eight coal-fueled facilities with CCS should be built by 2015: three IGCC using bituminous coal, two using sub-bituminous coal, two using lignite, and one post-combustion carbon capture facility at a pulverized coal plant. The governors also committed to having all new coal-fueled power plants employing CCS by 2020. This would result in a complete phase out of coal-fueled power plants not employing CCS by 2050.

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Midwestern Greenhouse Gas Reduction Program

The Midwestern Governors Association is holding an energy summit today–“Unveiling a Midwestern Energy Security and Climate Stewardship Platform“. The Midwestern states (IL, IN, IA, KS, MI, MN, MO, NE, ND, OH, SD, WI) are following in the footsteps of the Regional Greenhouse Gas Initiative (CT, DE, MD, ME, NH, NJ, NY, VT) and the Western Climate Initiative (AZ, CA, NM, OR, UT, WA, British Columbia, and Manitoba). The RGGI states already have a regional emissions cap and trading system underway, and the WCI states plan to have their greenhouse gas trading mechanism designed by August 2008. If the Midwest creates a similar system, more than half of the states will be involved in a regional cap and trade program. It will be interesting to see if the Midwestern reliance on coal for electricity generation leads to differences in the regional programs.

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Flip a Coin or Polygeneration?

E&E News reported today that investors are reluctant to fund new coal generation. They are deferring any decision because they anticipate new laws and regulations. On the one hand, pulverized coal is risky because retrofitting a plant to reduce CO2 emissions is expensive. On the other hand, investors are waiting for more certainty with the legal and liability issues around CCS. These are the two sides of the CO2 liability coin. These twin towers of doubt should cause investors to pause before backing new coal-fired generation. If after careful study one of the two still seems necessary, IGCC with CCS is the best bet. Gasification plants can use a variety of fuels, including biomass, and are more amenable to CCS. They also open up the possibility of other sources of revenue. The proposed Belle Plain polygeneration facility in Saskatchewan (GE, Bechtel, TransCanada) plans to use petroleum coke as a fuel. The gasification process will produce hydrogen, nitrogen, steam, and CO2. Thus, it’s products will be able to make electricity, fertilizer, and oil (via enhanced recovery).

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CRS Report on CCS Transport

I have been procrastinating since 19 April 2007, but here are my thoughts (half a year late) on the Congressional Research Service report “Carbon Dioxide (CO2) Pipelines for Carbon Sequestration: Emerging Policy Issues”. The report contains an important, yet subtle statement:

If policy makers encourage continued consumption of fossil fuels under CCS, then the need to foster the other energy options may be diminished — and vice versa. Thus decisions about CO2 pipeline infrastructure could have consequences for a broader array of energy and environmental policies.

I agree that policymakers need to develop a more coherent energy policy. The fate of CCS as a climate change mitigation measure is bound with the larger issues of energy supply and environmental stewardship.

The report notes that Congressional bills have tended to focus on carbon capture and storage, not transportation of CO2. The authors state that there is a “current perception that transporting CO2 via pipeline does not present a significant barrier to implementing large-scale CCS.” Despite this perception, the development of a more expansive CO2 pipeline network for CCS will raise new regulatory and economic challenges. “There are important unanswered questions about pipeline network requirements, economic regulation, utility cost recovery, regulatory classification of CO2 itself, and pipeline safety.”

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No Conference Committee

Democratic members of Congress have decided not to convene a conference committee to work out differences in the House and Senate versions of an energy bill. Rather, Democratic leaders appear ready to proceed with energy legislation in a more informal manner. This was predicted by a previous post. The contents of the bills were discussed here and here.

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No Energy for an Energy Bill Conference

Senator Reid (D-NV) has delayed convening a conference committee on the energy bill at least until after the Columbus Day recess. That means no conferees will be appointed until at least 15 October. The delay has led to talk among some Democrats of avoiding a conference by striking a deal among their leaders in the Senate and House.

Here is a previous post; there is another.

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The Flip Side of Liability

A colleague and I have been looking at the issue of potential liability for sequestered CO2. Liability might be incurred if CO2 injected into the subsurface damages a resource such as oil, natural gas, or water, or if the CO2 leaks into the atmosphere. Liability is not an insignificant issue if carbon sequestration is to be done on a large scale. If carbon sequestration is to become one of the climate stabilization wedges envisioned by Pacala and Socolow (Science 305, 968 2004), 800 GW of baseload coal-fired power plant capacty would have to sequester a total of 1 Gt of CO2 annually. Currently only 0.01 Gt is sequestered each year. To make up one climate stabilization wedge, the equivalent of 3,500 Sleipner-sized projects are needed. Some people in the energy industry are concerned that such a large undertaking might lead to large lawsuits.

My colleague brought up a good point that is often only considered separately. The potential liability for injected CO2 might be much less and much less probable than liability for continued CO2 emissions. This is no longer an abstract issue. The New York attorney general has issued subpoenas to AES, Dominion Resources, Dynegy, Peabody Energy, and Xcel Energy asking them to explain why the climate change risks associated with plans to build coal-fired power plants have not been disclosed to investors. A group of investors, state treasurers, and environmental groups have petitioned the SEC to clarify that existing regulations require publicly traded companies to assess and disclose their financial risk from climate change. In addition, state public utility commissions have begun to deny permits to construct coal-fired power plants for similar reasons.

You could flip a coin, but I would bet on CO2 emissions becoming a liability.

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