What if the government set a deadline on non CCS power?

What if the government were to set a decree today that all power generation must be 100% zero CO2 by 2045 (30 years from now).

Running carbon capture on a coal plant (capturing 100% of the CO2) adds (let’s say) 30% to the cost of generating electricity.

That means that electricity costs will rise 1% a year over the next 30 years.

Surely that’s politically achievable?

And by doing this, the entire carbon problem can be solved.

With decarbonised electricity we can go on to have decarbonised transport, heating and cooling; and decarbonise much of industry. We’ll have a problem with aviation (until hydrogen planes) but can probably remove 90% of CO2 emissions. Even long distance driving (beyond the range of electric cars) will be possible with fuel cell vehicles powered by hydrogen.

If all our vehicles were electric powered (or powered using hydrogen, also generated from coal + CCS power stations by gasifying coal), then we’d need more coal or gas power stations in 2045 than we have now. But that’s OK though isn’t it, if they all have carbon capture?

 

Using expertise to reduce emissions cont/d

US CO2 emissions (according to EPA) are 37% electricity, 31% transportation, 15% industry, 10% residential and commercial (I think that means buildings). 6 per cent from other sources.

How can expertise be used to reduce all of these?

ELECTRICITY: decarbonised electricity options widely exist (wind, solar, coal + CCS). They are all more expensive, but the high price is more of a political problem (how can politicians ask people to pay more for electricity) rather than a society problem (can people afford it). The problem is increased by lack of a market mechanism to make it investable – (there are many attempts but none really working). Also solar + wind have an intermittency problem, and electricity storage hasn’t been solved (although there are many ideas). So coal + CCS looks like a ‘low hanging fruit’.

TRANSPORTATION: is perhaps the toughest carbon problem to fix. The easiest way is if people stop travelling but that’s very hard for a politician to acheive and of course not something the public wants. Adding carbon fees to travel costs as a disincentive is a possibility but perhaps not a good one. Electric transportation is a possibility, but is only low carbon if there is decarbonised electricity (see above). Hydrogen power is another possibility, but the hydrogen needs to be created from gas or coal with carbon capture, so unlikely to happen until carbon capture happens. (Or it can be created from renewables).

INDUSTRY: The problem with industrial emissions is that most industry can easily move, and carbon regulations are unlikely to happen globally for a while, if at all.  So adding cost to industry in a rich country drives the industry to move and emissions stay the same. There is some wiggle room perhaps. Another possibility is if the buyers of goods are required to ‘pay’ for the carbon somehow (or at least, be more aware of it) – then it doesn’t matter which country the goods are actually made in.  If decarbonised electricity was available then that makes it much easier for industry to be decarbonised.

RESIDENTIAL AND COMMERCIAL BUILDINGS – technology largely exists to make buildings zero carbon, although there could be some penalty on comfort and cost – smaller windows, thicker walls, less airconditioning in summer or heating in winter. There are big advances in this technology happening all the time. Again, decarbonised electricity can be used for heating and cooling.

One conclusion here is that decarbonising electricity really is a massive step forward in reducing all CO2 emissions. We’re moving as fast as we can (arguably) in renewables. We’re not moving as fast as we can for coal + carbon capture.

 

How can experts reduce CO2 emissions?

Following our theory that perhaps the best route to reducing CO2 emissions is allowing people to develop and use expertise in different fields,

What kind of experts + fields would get there?

One of the most exciting areas, I think, is when a consumer facing company (such as Glaxo Smith Kline) sets itself goals to reduce its carbon footprint and understand it in depth. You have the drive, the capability, the funding, the power.

The continued drive to machinery efficiency is exciting, but limited in what it can achieve. We might make a car which is 10% more efficient in 10 years but not many people believe cars could be massively more efficient.

The realm of wind power has many experts – particularly in financial planning side of it – and in persuading the public to spend more money for wind power.

In the realm of policymaking, we have what sounds like regulation by stealth. My theory is that it is very hard for politicians to increase people’s fuel costs and stay elected, but they can (and do) make rules that new buildings must be more environmentally efficient.

Aviation is virtually impossible to solve. Airlines are in the business of persuading people to take more flights – which all means more CO2 emissions. Unless you curtain their business, which is very politically hard, airlines need to wait for hydrogen or (arguably) biofuel power to be low emission.

Transport emissions is a messy one. The biggest target for reducing CO2 emissions is long drives 15-40 miles – and it would be hard to persuade these drivers to get the train or bus, bearing in mind this usually means increased costs and lower flexibility. But many cities have successfully managed to reduce driving over shorter distances.

For the realm of industry, my best idea is to increase the labelling of where the carbon is. Perhaps one day everyone will calculate their own carbon footprint on an ongoing basis, and if you sell something to someone else, the embedded carbon emissions goes off your ledger onto theirs.

That’s the only way I can think of, of developing a sensible scheme for making it investable for manufacturers of (for example) chemicals, cement and steel to invest in carbon mitigation / carbon capture.

 

Investors are still saying “carbon capture – will that ever make money?”

I just did an interview about private equity opportunities in oil and gas with a director of an investment bank.

We got to carbon capture and he screwed his nose up and sort of said, there could be some business opportunity here but we have no idea what it is!

I’ve seen similar sentiment expressed by other investors this year.

How can we make carbon capture look more investable for people like this?

Perhaps 60% of the decision making for private equity is past performance – they won’t admit it because they can’t justify their fees that way but it is probably true! But that means that CCS will struggle to get PE investment,

But what about the other 40 percent – how do we make it worth investing in or convince them to invest in it?

My best answer is that CCS is investable when you consider it is the only way for EU countries to meet their future targets. But that is still a bit too vague for investors.

Can we come up with a better answer?

How about this way of looking at the carbon problem.

  • We need to have a way of allowing people to develop and use their expertise more in reducing carbon – there are so many ideas and schemes, some inclination, some of it will work better than others, and the pathway forward is to pick the right schemes and drop the weak ones. In this I include technology, business and policy schemes.

 

  • There needs to be a way of keeping score (a bit like money in the commercial world) and ETS is probably good for this, so long as the price of an emission credit is equivalent to the cost of avoiding carbon emissions (which it would be, if there was no surplus of allowances in the market and the ETS cost was a factor in people’s decision making). Many people believe that the money system is bad for society, they have a point, but we still stick with it, even if just as a means for keeping track of who is where! The same with ETS allowances.

 

  • Currently there is an emphasis on ETS as the driver – ETS isn’t really the driver though (like money isn’t the ‘driver’ of business). Eg people should be talking about schemes to cut carbon emissions at lower cost than the ETS price and how they can make a profit that way.

 

  • It all points to getting the ETS system working as the main way forward though, even if other commercial schemes (such as Red Hydrocarbon type scheme) can work in parallel with it (with convertible credits)!