EnviroEconomics.ca

Quietly, the ecoENERGY Carbon Capture and Storage Task Force released its report on the viability and prospects for Carbon Capture and Storage (CCS) (see coverage here download report here: EcoEneregy CCS Report ). But, there is a continued notion out there that CCS should not be supported,

The Sierra Club of Canada has also criticized the technology as an excuse for industry to increase production rather than efficiency….”It’s in Canada’s best interest to be more efficient,”

This kind of thinking is not helpful. As part of a comprehensive strategy to tackle GHG emissions, CCS has a place along with conservation, efficiency, renewables, and lots more (see my previous post here). CCS therefore needs to be viewed as such, and supported as one way to work ourselves out of the carbon mess we now face. The CCS report released yesterday pegs public cost of CCS at $2 billion, with that much or more coming from industry:

The cash is needed to close “a financial gap” between Tory good intentions and energy firms’ ability to build a carbon capture and storage network….Industry would respond by kicking in $2 billion to $4 billion towards waste-gas cleanup equipment, pipelines and disposal sites if the taxpayers’ money is made available for an array of potential projects,

A 50% subsidy may on face value seem like a lot, but in the grand scheme of things it is not so bad, especially if it reduces carbon and other nasty emissions. With CCS, we see local and immediate air quality benefits, which are important. And it is not just the oil industry that benefits. CCS in Alberta will benefit a whack of emitters including refiners that make our gas and heating oil. And the price, at about $100/tonne (4 billion annualized at 12% capital recovery factor and 5 MT annually) seems to be about where we need to go if large national reductions are to be achieved.

Lets face it, oil sands emissions are large, the industry is growing and international demand has strong long-term prospects. CCS is a viable solution, along with efficiency, but even if we tap all the efficiency in the oil and gas sector emissions will continue to climb and international demand will remain unchecked. Is then nuclear the answer? Do we ban production and lose all those public royalties and jobs? Good luck with movement in either of those directions. So, like it or not we are stuck with CCS.

And yes it is a nascent technology, with uncertain cost and benefits (permanence being one and intergenerational transfers of risk being another), but it is at the top of the mitigation opportunity ladder. And so, it needs pubic support to get it going, to set the rules of the game and to ensure it proceeds with the public interest in mind.

And importantly the sector is willing to make investments, which is more than can be said for the majority of emissions in Canada (that is, you, me and our cars).

Oh those cornucopians. Their teachings to economic grad students everywhere has led to the entrenched belief that simple constraints like environmental quality and finite resources can be solved through technological change and emerging backstop technology. For climate policy, this has led many to advocate delay in action until some radical technological breakthrough emerges to solve our climate woes. But this is bad policy. The time period for technologies to move from R&D to commercialization is long, which means that we can’t expect much before mid-century. And the sheer depth of reductions required to stabilize atmospheric carbon globally across virtually all economic sectors means that no single technology will provide the technological silver bullet.

In Canada, however, the cornucopians at least have got it partially right. Canada needs carbon capture and storage (CCS) and big oil knows it:

An alliance of 15 Canadian oilsands, chemical and power companies proposed yesterday a multi-billion-dollar plan to capture and store greenhouse gases in what would be the country’s single-largest carbon dioxide-reduction initiative. They say they are willing to pay their part — billions, in fact — to get this off the ground. It’s time for governments to do theirs — with the same urgency and conviction with which they embraced the green agenda or, in the case of Alberta, demanded a bigger share of the oils ands’ industry by jacking up royalties.

Recent analysis completed (by MKJA and myself) using the CIMS national energy and emissions model indicates that CCS is a big deal. As the graph below indicates, when all foreseeable technologies are competed in the face of an ever increasing emission price, CCS is the cost-effective technology that delivers a large and increasing share of national reductions. This is not surprising given the trajectory of emissions in oil sands and allied industries, and the CCS opportunities in Alberta and elsewhere. Our modeling indicates that without viable CCS, national emission reduction costs at any emission price rise rapidly.

But, CCS is not quit commercial, given the low price of carbon, and the high capital costs to start, and thus there is a justification for government support. But, government is not the best at picking winners and thus with the private sector involved, perhaps an equity position by government is a good start. Demonstration projects are another. And getting the regulatory frameworks, and rules of the game established are yet another.

So, while economists push for an emission price, there is economic justification to pitch CCS as a climate change technology winner in Canada. Indeed, CCS seems to be one silver bullet that we should all bite.