Energy

(Carbon Sequestration)

Carbon Sequestration Source: Wikimedia Commons

At the present state of technological development in NSW we have few (perhaps no) alternatives to burning coal.  But there is a fundamental issue with the proposed underground sequestration of carbon dioxide (CO₂) as a means of reducing the impact of coal burning on the atmosphere. This is the same issue that plagues the whole current energy debate.  It is the issue of scale. 

Disposal of liquid CO₂: underground; below the seabed; in depleted oil or gas reservoirs; or in deep saline aquifers is technically possible and is already practiced in some oil fields to improve oil extraction.  But the scale required for meaningful sequestration of coal sourced carbon dioxide is an enormous engineering and environmental challenge of quite a different magnitude. 

It is one thing to land a man on the Moon; it is another to relocate the Great Pyramid (of Cheops) there.

The underground volume required to dispose of coal sourced carbon dioxide is over five times that occupied by the coal that produced it. As discussed in more detail below, to liquify and sequester just 25% of NSW coal sourced CO₂ annually (for example that produced by coal fired electricity) would fill a volume of 63 thousand million cubic metres (=251 Km square by 1m deep).  As it is expected that this liquid would be pumped into porous strata, where it will fill interstitial voids to perhaps 10% of the volume, several thousand thousand square kilometers of strata would be required annually. These volumes would also require hundreds of kilometres of high pressure distribution pipeline and hundreds of injection bore holes the diameter and depth of oil wells. 

Within a few years, the underground sequestration site (or sites) required for CO₂ would underlie hundreds of thousands of square kilometres of NSW countryside with high pressure liquid/solid phase CO₂ that would pose probably insurmountable: geological; engineering; environmental; aesthetic; safety; and cost issues.

Power generation metals smelting and the mining that supports them are amongst civilisation’s largest enterprises.  Present installed coal thermal generating plant capacity in NSW is 12.6 GW.  This is the largest electricity generation capacity of any Australian State (32.4% of the total) and bigger than many developed countries including Switzerland, New Zealand and Denmark. But this capacity is dwarfed in world terms. China adds this capacity every few months.  A single project, their three gorges dam, will have double our entire capacity. We are small players on the world stage and what we do makes little material difference.

NSW is heavily dependent on coal. In 2005-6 the New South Wales (NSW) coal mining industry produced around 161.3 million tonnes (Mt) of raw coal, yielding 124.7 Mt of saleable coal in 2005-06. This accounted for $8.5 billion in income, or 73% of the total value of the NSW mining sector. Exports of 89.8 Mt of thermal and metallurgical coal totalled approximately $6.7 billion in value, while domestic consumption of 33 Mt of coal by the power, steel and other industries totalled $1.8 billion in value. The remaining saleable coal was placed into mining stocks.[1] Since that time exports have increased and the coal price has more than doubled.  Coal is presently worth at least $15 billion a year to the NSW economy, disregarding its economic multipliers.

Climate Impact

Carbon dioxide is a trace gas that has a strong greenhouse impact on the Earth’s atmosphere, reducing the re-radiation of the Sun’s heat into space. The total mass of atmospheric carbon dioxide is approximately 3,000 gigatonnes or about 0.04% of the total atmosphere.  But this proportion is presently increasing at a rate of around 0.41% pa exponentially.

The Earth is presently in a warming phase in its long term cycle between ice ages.  The sun is also getting hotter in its cyclical temperature variation. During the past two centuries human population has exploded and mankind has become increasingly dependent on fossil fuels that release CO₂. Warming in turn releases more CO₂ into the atmosphere from natural sources, creating a potential feedback multiplier. With close monitoring over the past 50 years (and evidence from ice cores, sediments and so on) it is now clear that anthropogenic (human generated) CO₂ is the greatest component in the observed increase; and thus a contributing factor in (rather than an outcome of) the global warming presently observed.

For the past 50 years petroleum has been the biggest fossil fuel source of anthropogenic CO₂ but historically coal remains the major contributor and may again overtake petroleum, as oil resources are expected to be depleted first.  Natural gas contributes about half as much CO₂ as petroleum liquids and the calcination of lime (for cement) is a small but significant contributor.

The other great, and often overlooked, source of anthropogenic carbon dioxide is direct human impact on the environment’s natural storage and release mechanisms.  The natural carbon cycle produces and absorbs an order of magnitude more CO₂ than is released by fossil fuels annually.  This natural cycle is being heavily disrupted by human population growth.

Over the past 100 years human population has grown by five billion people, from less than two billion in 1910 and less than a billion in 1810. We will pass seven billion in mid 2012.

The impact of this vastly increased human population through deforestation, broad acre agriculture, pastoral/grazing activities, excessive consumption of water, rubbish dumping, pollution of streams, rivers and oceans, over fishing and fire lighting is thought to exceed the release of CO₂ for energy production.

In 1997 peat burning, in Indonesia alone, may have contributed as much as 10% of the total CO₂ released that year.  The pressures of overpopulation and land degradation in the third world combine with rapidly growing energy demands in the second; and too many over-consumers in the first; to make the present global warming trend a serious threat to the future of humanity.

Rapid global warming poses serious threats to economic crops and species habitat and is expected to result in increasingly rapid species extinctions. Higher atmospheric and oceanic energy levels will increase extreme weather events and change rainfall patterns.  These outcomes are increasingly evident.  The melting of the remaining land based ice and ocean expansion may inundate some economically important coastal areas and habitats. 

Although sea level rise is presently the least evident outcome of recent warming it is the aspect most focussed on in public debates.  Sea level rise appears to have been relatively continuous for the past 7000 years as land based ice has steadily contracted. 

Since accurate satellite based observations began in 1993 sea level change has been quite linear averaging 3.4 mm per year. Satellite observations accord with older tide gauge data and together these suggest that globally mean sea level has risen by about a foot over the past 100 years, in line with the long term trend. This is difficult to confirm accurately as in many places the changes in land elevation, relative to mean sea level, are greater than sea level rise due to movements in the earth’s crust.  In the Mediterranean/Aegean classical ports like Ephesus in Turkey are now six kilometres inland whereas others are under the sea.

The metre or more changes projected by glaciologists for the next 100 years are predicated on very much faster ice melting rates in Antarctica and Greenland due to accelerating warming; not on widely publicised melting of floating sea ice that has no significant impact on sea level (as pointed out by Archimedes).  While these melting effects are not yet producing unusual sea level increases, all sea level rise, particularly that due to expansion as a result of warming, contributes to greater tidal surge, altered currents and more energetic cyclones.

The recent population explosion and the shortening time frame for significant variations in the coastline, from thousands to hundreds of years, could result in mass displacements and migratory (refugee) pressure, as the recent Garnaut Report warns: 

If sea level rises by a metre or more this century and as much again in the first half of the next, and displaces from their homes the people of the low-lying coasts and river banks of the island of New Guinea, it will not be a problem for Papua New Guinea and Indonesia alone.

If sea level rises and displaces from their homes a substantial proportion of the people of Bangladesh and West Bengal, and many in the great cities of Dhaka, Kolkata, Shanghai, Guangzhou, Ningbo, Bangkok, Jakarta, Manila, Ho Chi Minh City, Karachi and Mumbai, it will not be a problem for Bangladesh, India, Pakistan, China, Thailand, Indonesia, the Philippines and Vietnam alone.

If changes in monsoon patterns and the flows of the great rivers from the Tibetan plateau disrupt agriculture among the immense concentrations of people that have grown around the reliability of water flows since the beginning of civilisation, it will not just be a problem for the people of India, Bangladesh, Pakistan, Vietnam, Myanmar and China…

Government Initiatives and Immediate Options

In addition to its 20% target for renewable electricity, the Rudd Government has announced a $500 million National Clean Coal Initiative to invest in the development and application of advanced coal technologies. The Clean Coal Initiative takes over from the Howard Government’s Low Emissions Technology Fund (LETDF) under which earlier pilot projects were funded.

It is interesting to compare the recent Garnaut Climate Change Review Report with the Commonwealth Government’s 1998 ‘National Green House Strategy’. Where the National Green House Strategy addressed the areas in which a change could be made and means of achieving these goals, Garnaut recommends market manipulation to penalise carbon intensive economic activity and reward alternative behaviour.  The marketplace will provide a price incentive that will change producer and consumer behaviour and everything else (innovation, technological change and social change) will follow.  A great deal of the report is spent arguing the case for this economically distorting market intervention (normally anathema to an economist), justified on the need for urgent and dramatic action against global climate change.

The Garnaut Review had substantial input from the Commonwealth Treasury and spends many pages reviewing various options for this economic intervention.  The recommended solution has since been refined into the Government’s proposed ‘cap and trade’ carbon pollution reduction scheme (CPRS).

While it draws widely on scientific advice, particularly in the area of climate science, the Garnaut Climate Change Review is primarily an economic treatise, not a technically literate one.  It assumes that technology is a ‘black box’ that solutions 'fall out of' in response to market forces.

Although it is a vast report it is ‘thin on the ground’ when it comes to the actual technologies it expects to see implemented, the assumption being that the market will sort this out. For example in the transport sector (which is the largest source of carbon emissions) Garnaut is silent on the technologies that might make a difference such as: lithium ion batteries; very fast trains; a 25KV national rail freight network; Metros in Sydney, Melbourne and Brisbane; planning to increase urban density; alternatives to air conditioning etc. 

Instead the report makes the assumption that the pulling of the appropriate economic leavers will bring these changes via the ‘invisible hand’ for example:

“This transformation will take place through three main processes, which may operate in parallel:

• vehicles becoming more fuel efficient and shifting to low-emissions fuels, such as electricity
• a shift to lower-emissions modes, such as rail and public transport, accompanied by changes in the structure of towns and cities (urban form)
• reduction in travel frequency and distances, facilitated by changes in consumption, production and distribution patterns and changes in urban form, and driven by changing relative prices.”

The report acknowledges elsewhere that a transfer to electric vehicles will only be beneficial if ‘emission free’ electricity generation becomes available.

The Garnaut report predicates many of its assumptions regarding Australia’s (and the World’s) ability to meet ambitious carbon reduction targets on the success of what it calls ‘near-zero emissions coal technologies’

Chapter 20 draws up a long list of the Australian economic dependencies on coal, the importance of coal export markets and other countries’ dependence on coal for energy.

It draws attention to the very substantial employment and skills base invested in coal mining and thermal power generation and the flow on this has to other industries as consumers and suppliers. 

It sets great store by ‘near-zero emissions coal technologies’ and states:

“The priority that should be given to the transition to low emissions in the coal industry is further accentuated by the need to resolve whether a near-zero coal future is even feasible, either partially or in total. If it is not, then Australia needs to know as soon as possible, so that all who depend on the coal industry can begin the process of adjustment, and so that adequate and timely investments are made in other industries.”

The report makes it clear that adjustment in the absence of ‘near-zero emissions coal technologies’ would be extremely economically painful with considerable flow-on effects.

It says that these require sequestration and identifies two potential sequestration technologies:

1.  
   1. Geosequestration: underground, below the seabed, in depleted oil or gas reservoirs, or in deep saline aquifers; or possibly in coal seams to drive out gas[2].
   2. Biosequestration:  to produce biofuels from algae, the growth of which is enhanced by access to a constant stream of carbon dioxide.

The first of these is better known as Carbon Capture and Storage (CCS).  The second is a vast undertaking and would require a change of policy towards the widespread release of bioengineered organisms.

The success of sequestration is therefore central to a vision that embraces the continued exploitation of coal the continuance of a coal industry and the intrinsic value of the nation’s substantial unexploited coal resources, in the new world of substantially reduced carbon emissions.

The remainder of this paper examines the likelihood that this success is achievable and, by implication, the viability of an economist’s vision that embraces both continued and growing coal exploitation and reduced atmospheric carbon dioxide.

CCS Opportunities in NSW

The impetus for Carbon Capture and Storage (CCS) technology is the observed impact of CO₂ on climate change.

Implementing CCS represents a significant additional economic and social cost in terms of:

• additional equipment maintenance and other running costs;

• a significant drop in net fuel efficiency and consequent faster resource consumption;

• a significant increase in transportation infrastructure and its environmental impacts; and

• some very real additional dangers and safety issues. 

The climate gains made need to more than offset these costs.

In 2005-6 World fossil sourced CO₂ production is estimated to have totalled around 28,431.7 million tonnes (from all sources including petroleum)[3].  That year NSW sourced coal released 384.3 million tonnes of CO₂ worldwide[4]. NSW coal therefore contributed about 0.13% of the total CO₂ released. Of this total, around 91 million tonnes of coal sourced CO₂ was released in Australia, predominantly in NSW.

Capture

In 2005-6 around 72% of domestic coal consumption was by electricity generators (65.5 million tonnes); 24% by iron making (21.8 million tonnes); and most of the balance to cement manufacture and smaller furnaces.  Lime calcination, the conversion of limestone (CaCO3) to lime (CaO), for cement, releases significant additional quantities of CO₂ (0.8 tonne per tonne of cement produced plus the energy used to heat the process and transport the materials). 

The main metallurgical consumer of coal in NSW is iron smelting at Port Kembla.  This initially produces coke oven and blast furnace gas that is distributed around the plant and used as a furnace fuel and for cogeneration of electricity.  Dissolved carbon in the iron is subsequently converted to COxin the steelmaking process.  While it is conceivable that the CO₂ eventually released by various processes could be captured, the diversity of release points would make capture and subsequent separation very difficult and costly to implement within the present technological paradigm. 

The Aluminium industry also uses carbon to reduce the oxide but the energy required is provided by electricity (from coal fired stations) and the main source of carbon is from petroleum (as petroleum coke). The scale of CO₂ release is an order of magnitude smaller than iron and steel making but capture may be as feasible if the flue gas was processed with that from a nearby a coal burning power station.  Both NSW based aluminium smelters are in the Hunter Valley, near the power generation.

Cement calcination plants are relatively smaller in scale again, and more geographically disperse. They would need additional equipment and energy to capture and process, then transport, the exhaust CO₂ and the difficulties involved would probably preclude capture. 

The best prospects for CO₂ capture in NSW are the coal fired power stations, predominantly in the Hunter Valley.  In theory the full CCS applied to the CO₂ emissions from coal fired electricity generation could reduce overall fossil fuel based emissions from NSW (including those from petroleum and gas) by as much as 25%.  A CO₂ reduction target on this scale requires that all of the CO₂ from coal powered electricity generation (including that from existing power stations) is successfully captured and stored.

There are substantial technical problems (that translate into increased costs) in converting the existing Hunter Valley stations to capture the CO₂.  These stations are air fired so that most of the input (and output) gas is nitrogen (78% of air).  Nitrogen is semi-inert so most passes through the furnace unchanged but it is heated and leaves the plant at above boiling point so energy is consumed.  Raising the combustion temperature by injecting oxygen increases the small proportion of nitrogen that is oxidised to produce troublesome NO_x pollutants.  In addition to nitrogen, CO₂, NO_x, and water vapour; the oxides of sulphur SO_x, ash particles and some other trace elements, including compounds of mercury, are present in the flue gas. If allowed to fall below boiling point before being released the oxides react with the water vapour to make liquid acids that can do serious damage to equipment. Under CCS the CO₂ component needs to be flushed out of this gas mixture (captured) and compressed. Several separation technologies are being trialled with some success, including ammonia absorption, but the potential costs and unsolved difficulties remain daunting.

The capture stage can be facilitated if the nitrogen is not fed into the furnace in the first place.  This requires a tonnage oxygen plant (common in the steel industry) to feed the combustion. This together with preliminary coal gasification can provide other benefits including improved combustion and thermal efficiency (at the expense of additional energy, capital, maintenance and operating expenses expended in oxygen production) but an entirely different furnace technology is required (to that presently installed) to gain these benefits.

To date trials around retrofitting more advanced Chinese furnace technology have been directed towards less efficient brown coal based plant in Victoria.

Geosequestration

Sequestration of CO₂: underground; below the seabed; in depleted oil or gas reservoirs; or in deep saline aquifers is technically possible. But the scale required, to sequester just 25% of NSW coal sourced CO₂ (for example that produced by coal fired electricity), is an enormous engineering challenge.  It is one thing to land a man on the Moon; it is another to relocate the Great Pyramid (of Cheops) there.

Most current work is directed to finding appropriate deep leak proof geological strata below land for the purpose. Undersea sequestration would be an engineering challenge on an even greater scale, and potentially very damaging to ocean organisms coral reefs and fisheries.

Not only is CO₂ over twice the weight of the coal used to generate it; but the volume (after being compressed to a liquid) is around five and a half times greater:

If it was liquefied, the CO₂ produced annually by NSW power stations would compress to a volume of about a quarter of a thousand square kilometers one meter deep.  As indicated in the introduction, disposal of a volume of this size is an enormous challenge.

It can be seen that under carbon capture and storage, getting the CO₂ from a power station to the sequestration site and injecting it is a much bigger job than mining the coal or getting the coal to the furnace.  This means that the existing power stations are the wrong technology in the wrong place for CCS.  They need to be located on good sequestration sites; as opposed to being close to the source of coal.

For these reasons alone, CCS technology is unlikely to be applied (in any but a demonstration or token way) to existing stations in NSW, and for similar reasons is unlikely to be applicable to the majority of current generation coal fired power stations in the World. But there are additional reasons to doubt that CCS can be generally applied even if a new generation of plants make capture economically feasible.

Pumping CO₂ underground is a massive undertaking that is well in excess of the coal mining enterprise providing the coal.  Pumping a few thousand litres down a hole at a test site proves little.  Small scale return of to oil wells has been employed for many years. 

But to have any impact on carbon emissions, hundreds of gigalitres of CO₂ would need to be sequestered over the life of each new or converted coal fired power station. Apart from the mass and volumes involved there are handling difficulties. 

At less than 5 times atmospheric pressure liquid CO₂ undergoes a phase transition and becomes a solid, dry ice. To keep it liquid it needs to be kept at a pressure well in excess of five atmospheres[6] at -56.4o C. At ambient temperature it needs to be kept at above 60 atmospheres to remain liquid. To be pumped across the countryside in uninsulated piplines it needs to be above the critical point pressure of 73 atmospheres.  Any loss of pressure, due to a rupture or a loss of power, may well result in its boiling to gas followed by solidification of sections of the pipeline and/or damage the pumps. Ordinary carbon steel corrodes in the presence of moist CO₂ and the pipelines need to be lined or made of stainless steel. A very significant and entirely novel infrastructure of large diameter high pressure pipelines and pumping stations will be required.  The pumps need to move large tonnages and volumes of liquid, comparable to a good sized city’s water supply, at very high pressures.

This will consume a lot of energy. The initial compression of the gas to liquid needs to overcome the latent heat of liquefaction of CO₂ (approx 160 kWh/tonne).  For example according to its Wikipedia entry[7]Liddell power station releases an estimated 14.7 million tonnes of CO₂ to generate 17,000 GWh per year. Assuming no inefficiencies, compressing this gas would consume 14.7 x 160 = 2,350 GWh per year or about 14% of its present electricity output.

To this needs to be added the unknown, but substantial, energy required for transportation to the sequestration sites and for underground injection, as well as vast additional infrastructure; capital and running costs.  Existing gas pipelines burn some of the gas to run pressure booster pumps along the string but these would need to be electric for CO₂, involving additional high voltage lines and inevitable grid losses.

 Clever integrated design may potentially reduce some of these overheads (for example some of the heat released during compression may be recoverable at the compressing power station) but it is probable that the additional infrastructure and energy overheads required for CCS would make any future coal fired station so inefficient and resource consuming as to be impractical.

Safety Issues

There are a number of safety issues relating to an envisioned new generation of coal fired power stations with CCS.  Coal fired power generation is already intrinsically unsafe.  Mine and coal transport accidents outnumber deaths and injuries in any competing technology, ash releases remain substantial (despite the advent of bag houses and precipitators). Acids, mercury and other compounds released from flue gasses cause substantial environmental and health damage.  The US National Council on Radiation Protection and Measurements (NCRP) estimates the average radioactivity of coal is 17,100 millicuries/4,000,000 short tons resulting in a radiation dose to the population from a 1000 MW coal fired plant of 490 person-rem/year; a hundred times more than from a comparable nuclear plant.

The use of ammonia or amides to flush CO₂ from flue gasses (if used) poses additional safety and environmental concerns.  Ammonia is a mildly toxic gas (and liquid) and can cause lung damage and death in humans exposed to concentrations above 400 parts per million. It is highly soluble in water and extremely toxic to aquatic animals (and hence environmentally damaging) if accidentally released; or if traces remain in the CO₂ stream. Ammonia and amide plants also consume relatively high levels of electricity. Alternatives such as membrane technology may solve some of these issues in future.

Adding very large volume movements of CO₂ to this list may be the final ‘show stopper’ for environmental scale CCS.  CO₂ is a relatively non-toxic gas, compared to ammonia, but at around 10% by volume in air it is lethal to humans (anything over 4% is considered very dangerous[8], it is normally under 0.04% in air). The last large natural release of CO₂ was at Lake Nyos in Cameroon in1986.  It killed nearly 2,000 people and all the animals, birds and insects too. It is heavier than air and fills depressions. Depending on concentrations, internal combustion engines may stop, compromising any rescue attempts.  Moving large volumes about the countryside poses significant risks to people and animals.

If CCS is fully implemented for the power industry alone, in just 20 years 1.3 billion tonnes of CO₂ will underlie many hundreds of thousands of square kilometres of NSW, in an as yet unabsorbed state. 

Theory has it that in about 10,000 years it will have been fully integrated with the rocks into which it is pumped.  It might then be safe, unless there is ever an igneous intrusion or meteor impact in the area.  But if in the meantime just some of the sequestered CO₂ escaped somehow, due to a borehole malfunction, miscalculation of capacity or an earthquake, Chernobyl (57 direct deaths and 4,000 potentially injured by future cancers) could look like a picnic; and a fraction of a square kilometre of nuclear waste storage, a trivial problem for posterity.

Biosequestration

As previously mentioned the vast proportion of CO₂ in the atmosphere is naturally released and is in turn naturally absorbed.  Some is dissolved in rain and ultimately acidifies the oceans but a great deal is absorbed by plants in the process of photosynthesis; consuming water and usually releasing oxygen. 

This is a natural solar collector.  Plant absorption is increased if CO₂ levels rise and plants have access to sufficient water and sunlight.  Trials have been undertaken at higher CO₂ levels with a number of existing economic plants to determine such things as the ‘fertiliser effect’ higher water uptake and increased solar absorption. 

Obviously producing biofuel or food does not permanently sequester carbon and any credit should only apply the solar energy collected by the process; as this, in turn, reduces dependence on other energy sources. To get a full credit, similar technology might produce cellulose that could be charred and buried to improve soils or other carbon rich materials that could be safely buried in depleted mines or other suitable sites. Charing and burying of bagasse, straw and wood-waste is already a recognised sequestration technology.

It is clear that accelerated CO₂ absorption by conventional agriculture and plants, for example by reticulating CO₂ to greenhouses or forests, would be costly and would not fully deal with the vast quantities of CO₂ involved.  But some plants and bacteria evolved when CO₂ levels were very much higher and it appears to be possible to exploit their genome to modify them or other plants and organisms, to produce economically useful materials; at the same time absorbing large volumes of CO₂.

Several projects are already in underway internationally.  The most interesting involve algae that could be used to produce diesel fuel, directly or as chemical feedstock.  Other, possibly complimentary, options include modifying food crops like rice (to a C4 plant) so that additional CO₂ and sunlight are absorbed (and carbohydrate yields improved).

Again the problem is the scale required to make a difference. A very large solar collection area is required together with plentiful water.  Areas comparable to present broad acre agriculture will be required, probably as shallow lakes.  It would be particularly useful if algae that are comfortable in salt water could be adapted.

Again there are safety issues to be considered. These vast lakes or fields will be filled with genetically modified organisms and the regulatory environment relating to GM organisms and foods will need to be changed accordingly.

Existing Electricity Infrastructure in NSW

Large conventional coal fired power stations represent 65% of NSW electricity generation capacity; hydro electricity 22%; gas 11%; (including natural gas, coal-seam gas and landfill and sewerage methane).  Other sources, including wind and solar, presently represent less than 2% of installed capacity, although some quite large wind installations are planned/ proposed, the largest being a proposed 1,000MW wind farm near Silverton to cost $2.5 billion.

The actual electricity generated (and delivered) by a given installed capacity differs significantly from one technology to the next. For example conventional coal has a high ‘base load’ capacity utilisation and provides about three quarters of the electricity produced. Intermittent solar and wind capacities need to be divided by as much as 5 to be comparable with other technologies that are continuously available.

A number of the new projects (blue shaded below) are still highly speculative and/or face challenges to financial backing; engineering and grid connection hurdles; and/or local environment/planning/land ownership issues.

There are already around a hundred and sixty feed-in generators in operation in NSW (as set out below) and more than a hundred new generators planned or announced (prior to the recently announced chances to the feed in tariff):

Except for hydro, solar and wind, all of these directly produce CO₂.  But those burning methane are disposing of an even more greenhouse active gas and have a positive impact on climate change reduction.  They generally qualify as ‘green technologies’.

Solar and wind are presently exceedingly capital intensive per GWh produced due to their intermittent nature and low utilisation. There is potential for new photo-voltaic technologies (eg on glass or plastic) to lower these costs but such technologies are not yet commercial.  As this capital equipment is very substantially imported, the CO₂ produced as a result of manufacturing is released overseas.  But wind, in particular, is responsible for quite significant local CO₂ release due to very high transport and installation costs (including the construction of extensive concrete foundations) and ongoing maintenance.

Simply to keep up with growth (and without replacing antiquated plant) NSW needs to add around an additional 500MW of generation per year.  Several of the existing alternatives to coal (hydro, landfill etc) are based on limited resources. It can be seen from the above table that the principal technologies expected to make a significant and immediate contribution, in the quantum required to accommodate growth, are conventional coal fired power and gas (from various sources).

In practical terms, and notwithstanding climate change or the Carbon Pollution Reduction Scheme, the short and medium prospect is for a significant increase in CO₂ production in NSW due to electricity generation.

Carbon Pollution Reduction Scheme (CPRS)

The Garnaut Report provides the intellectual basis for the present Australian, national and international, climate strategy.  This work, together with subsequent work by the Commonwealth Treasury, has resulted in the development of a cap-and-trade CPRS scheme for Australia.  This is enshrined in legislation that is currently blocked by the Senate and could provide a trigger for a double dissolution election if the Government decides to resubmit it to the Senate.

The Garnaut analysis relies very heavily on ‘near-zero emissions coal technologies’ based on CO₂ sequestration to avoid serious short term economic consequences from the CPRS to the Australian Economy.  But it seems evident, based on the preceding analysis, that the likelihood that CO₂ sequestration technologies can be implemented, on a sufficient scale to provide industry scale tradable carbon credits, is almost certainly illusory. 

If sequestration is not available as a practical solution for removing emissions, the remaining option for limiting CO₂ release to the atmosphere is not to produce it.

In essence the Garnaut report argues that:

• climate change is so important and critical to the future of the world that a very significant restructuring of the economy is justified;
• the best method of achieving this is by means of a broad based market intervention (economic distorting)  mechanism (the preferred method being ‘cap and trade’) ; and
• the scientific and engineering establishment ‘black box’ will respond to the new settings with technological solutions that preserve economic progress (and retain the coal industry).

It is easy to see the attraction of a cap-and-trade solution to an economist.  Similar schemes are already in use for tradable water credits.  If applied arbitrarily (without favour) to all carbon dioxide released, such schemes theoretically allow market mechanisms to achieve similar outcomes to a carbon tax but potentially more efficiently, with lower government administrative overheads (and without a commissariat).

But to avoid serious economic dislocations and misallocations it is very important under a cap-and-trade mechanism (that deliberately distorts markets to make releasing greenhouse gasses more expensive) that all carbon dioxide in an economy is treated equally and that market credit is only allowed for genuine reductions in carbon dioxide release (or its permanent removal from the environment).

Experience with water suggests that the most significant risk in implementing a cap-and-trade mechanism is the initial over-allocation of free credits.  But water is relatively easily defined and audited and all users in a given catchment are caught.  Additional problems exist with carbon dioxide. It is released by a wide range of means and sources (from a domestic gas water heater to motor vehicles, metal smelting and power generation, to a wide range of agricultural and natural processes, including bush fires) and there is no clear demarcation on which means should be caught or how equivalence is determined. Further, several existing schemes (and proposals) allow credits or offsets for supposed and often illusory, or temporary, carbon sequestration.

At present, tradable credits are granted in Europe to scientifically suspect (and essentially short term) carbon sinks like tree plantings (similar to those currently used by companies to claim dubious ‘carbon neutral’ status).  These have already caused considerable economic misallocation and damage to traditional agriculture in places like Portugal.

There is a serious problem in assigning equivalence across different release and absorption environments.  To resolve this, tree plantings should only be allowed as offsets for land clearance.  A total forest carbon balance is unlikely to produce a net carbon sink as clearing still exceeds replanting, bush/forest fires release millions of tons of CO₂ each year and trees are not a permanent sink but part of a natural cycle, eventually being felled or dying and rotting. Similarly other agricultural offsets should only be allowed for like activities; for example, grazing for grazing (eg cattle reductions for sheep increase). 

Any carbon sequestration offsets are problematic and need to be rigorously examined on a full carbon accounting basis.

One pilot project in Victoria proposes ‘carbon sequestration’ by converting lime (manufactured elsewhere) to calcium carbonate ‘for the paper industry’, using power station flue gas.  In the absence of full technical details this appears far less efficient than the conventional combined limestone to calcium carbonate production method (in a single plant with lime and CO₂ as intermediate factors in a closed loop).  The net effect of the proposed scheme could be more net CO₂ being generated than if the flue gas was simply released without processing and the calcium carbonate manufactured conventionally.  Under the CPRS it will be essential that such technologies are properly technically assessed before earning credits.

In the absence of substantial credits for genuine sequestration, a cap-and-trade mechanism (that is effective in reducing CO₂) must rely entirely on substantial reductions in domestic coal, oil and gas consumption.  The mechanism for this reduction must be price driven abandonment of the technologies that are the principle consumers of these fossil fuels. And relative economic contraction in energy related economic activities.

An effective CPRS therefore has significant short to medium term disinvestment implications.

Protecting the industries and consumers from these impacts with a modified cap-and-trade mechanism appears counterproductive, since these are principal sources of carbon dioxide, the limiting of which is the initiative’s whole justification. Without these industries and consumers within its scope the CPRS is simply administrative overhead and its market interventions economically inefficient and substantially futile.  The proposed exemption of agriculture is a case in point.

The proposed CPRS is a long way from the economists’ ideal.  With exemptions for special interest groups and trade exposed industry it is little more than a shadow of the initial concept.

Do we need a CPRS?

The Garnaut Report is silent on ‘the elephant in the room’: the role of nuclear power in achieving lower carbon emissions in other countries.

No doubt the silence on nuclear power is politically astute and/or avoiding controversy.  As indicated above Garnaut is not concerned with the actual methods employed and assumes that whatever technology becomes profitable will be used.

Almost all power engineers acknowledge that nuclear power is currently the only practical alternative to coal. There are now several hundred new nuclear power plants in planning and under construction worldwide and China alone is projecting 300.

If carbon sequestration is impractical on a scale that would make a difference, and this paper asserts this is so, it is virtually certain that the impact of an effective CPRS would be to make nuclear power inevitable in the new energy mix. This mix would no doubt include increased use of other economic alternatives like solar and wind.  Photovoltaic solar and some other alternative technologies are already competitive with nuclear power in some circumstances and may replace part of our electricity needs if technological progress allows but they do not provide this energy continuously at present and are not a realistic replacement for coal.  Nuclear electricity is the ‘next best’ economic alternative to coal and as outlined above the engineering challenges involved are trivial compared to CCS. 

If this is so, we have a good idea of what the world aught to look like. Why go through the difficulty of implementing economy distorting mechanisms with unknown side effects, when we can simply identify the technology changes we want and implement them? 

When changing to a new phone or television standard we do not tax the old technology to make the new attractive; we simply say that from such and such a date we will no longer use the old and everyone needs to make the appropriate transition arrangements.

One gets the impression that if the authors of the Garnaut Report had been engaged to design and build the Sydney Harbour Bridge they would have proposed, instead, a tax on ferries.

To achieve the desired outcome of a transition to nuclear electricity without hidden economy distorting market mechanisms, NSW (and other states, perhaps with explicit Loan Council support or Commonwealth transition funding) could simply take action to progressively replace the present coal burning power stations with similar or possibly larger nuclear stations in the same or similar locations. Existing transmission and other generator independent infrastructure could then be used minimising cost. Local employment impacts would be minimised, employees and local residents would be healthier and safer. With appropriate advice and information this improved greenhouse, safety and employment environment would minimise any ‘not in my backyard’ objections to the changes.  The new stations would provide carbon free electricity to support existing industrial and residential purposes and provide for future growth, at a price competitive with that under the CPRS. 

Additional electricity capacity could be provided for electric trains, public road transport and private cars. These will inevitably become more attractive as oil prices rise and government infrastructure catches up with almost every other comparable city and country in the World.

We will know we have caught up when Sydney (and possibly Newcastle) has a proper Metro network of several intersecting lines linking up-market residential, retail and employment nodes across the city; the State has an updated 25KV electrified freight rail network; and there is a separate very fast passenger train service, at least down the east coast.  These will substantially reduce the transport use of fossil fuel and encourage urban consolidation around the new stations.  New industrial lands could be developed around freight hubs. Technological progress and local industry will be encouraged and stimulated by moving the State’s infrastructure into the 21st Century.

The relative cost of energy is, in any case, expected to increase under existing (undistorted) market mechanisms, encouraging increased energy efficiency.  Most experts predict that oil will increase in price relative to coal and together with new battery technology will encourage the development of new electric and hybrid transport. 

As nuclear power would only replace coal for electricity generation and indirectly for transport, coal would continue to be sold overseas (just as we presently sell uranium but do not consume it; conscious that NSW coal will remain a tiny fraction of the coal consumed worldwide) and used (at an undistorted price) in local metals smelting where there is no alternative.

Conclusion

Carbon Sequestration and Storage is very likely a non-starter as a real solution to climate change and the implications of this for the Garnaut analysis and the CPRS are dire.

For the CPRS to have a real impact on carbon dioxide release, and consequent accelerated climate change, the existing NSW energy dependent economy must seriously contract.

In the absence of CCS and to avoid serious negative economic impacts, the original CPRS concept needs to be castrated by exempting (or issuing free allocations under the cap to them) the largest carbon users in the economy; effectively removing its constraints on carbon dioxide release particularly in the energy and trade exposed sectors.  This modified CPRS will discriminate against small-scale domestic industries and consumers, distorting the economy in unpredictable and, very likely, harmful ways.

A viable alternative is to immediately take steps to introduce nuclear electricity generation in NSW (and Australia).  This would obviate the need for a CPRS.

Richard McKie
2008/10

Footnotes: 

[1] http://www.dpi.nsw.gov.au/minerals/resources/coal/coal-industry