Economic Impacts Of Obama's Climate Plan: Gauging The Cost Of Carbon Capture

U.S. President Barack Obama outlined an ambitious plan to reduce greenhouse gas emissions at existing U.S. power plants on Tuesday. It's a powerful move aimed at stemming climate change, but one that some skeptics say could raise utility prices and stymie economic recovery. As the U.S. ventures into new energy policy territory and eyes new technology aimed at modernizing power plants, successes and failures in other countries loom large.

The president's plan for an emissions cap at power plants nationwide “provides a clear signal that certain companies need to consider building carbon capture facilities,” Patrick Falwell, an expert with the Center for Climate and Energy Solutions, an environmental think tank, said in a phone interview.

Investments in technology aimed at reducing emissions -- or switching to lower-carbon fuels -- would likely be the chief cost of the new regulations. The most costly investments would fall on the shoulders of the coal industry. Natural gas plants already produce less carbon emissions than coal-fired plants, so it’s easier for them to meet a broad emissions standard.

Opponents of the president's plan say requiring energy companies to take on the extra operating costs of adapting to a carbon cap will kneecap the energy industry.

“I think this is absolutely crazy,” House of Representatives Speaker John Boehner, R-Ohio, said last week, according to NBC News. “Why would you want to increase the cost of energy and kill American jobs at a time when the American people are still asking, ‘Where are the jobs?’”

Obama's plan does contain measures aimed at helping power plants adapt. The U.S. Department of Energy will shortly be drawing up a proposal for $8 billion in loan guarantees to assist projects aimed at technologies to reduce, avoid, or sequester carbon emissions from fossil fuel energy.

If a coal-fired power plant wants to keep operating under an emissions cap, capturing its waste carbon dioxide will be key. Similar technology is already used by the oil industry -- carbon dioxide, mostly from natural sources, is often pumped into aging oil wells to kick-start them. But carbon capture methods are not yet widely commercially available for coal-fired power plants.

Current pilot programs at coal and natural gas power plants scrub carbon emissions away by funneling flue gases through a bath of chemicals called amines, which are derivatives of ammonia, that trap the carbon dioxide. The amine fluid is then boiled to release carbon dioxide, which is then compressed and pumped underground. But this process requires a lot of additional energy, and significant costs.

In a 2010 report, the U.S. Department of Energy estimated that a carbon capture and storage facility for a 550-megawatt power plant would cost anywhere from $400 million to $900 million, and reduce energy output by anywhere from 20 to 30 percent. Estimated costs for capturing carbon dioxide range from $60 to $114 per ton, according to the DOE.

Newer technologies could provide a more enticing alternative. One such model involves a process called absorption. Waste gases pass through a column packed with a material pocked with microscopic pores that acts like a sponge for carbon dioxide. Using zeolites – a common mineral made of silicon and oxygen – to absorb carbon dioxide could dramatically slash the cost of carbon capture, according to a study analyzing the efficiency of zeolites in carbon capture published in the journal Nature Geoscience in 2012.

“It looks like we can beat the current state-of-the-art technology by about 30 percent,” Rice University bioengineer and study coauthor Michael Deem said in a statement last May.

However, there may be ways to cut costs using existing carbon capture methods. China’s Huaneng Clean Energy Research Institute has a facility that captures carbon from the flue gases of the coal-fired Shidongkou power plant, at a cost of about $30 to $35 per ton of carbon dioxide, according to a 2011 report in the news section of the journal Nature. Huaneng uses the amine-based method of sequestering carbon dioxide, but has made some changes to the method to make it more efficient – though it keeps that technological secret closely held. Charlotte, N.C.-based Duke Energy and Canadian company EmberClear are both working to deploy Huaneng’s carbon capture technology in the Western Hemisphere.

For some plants, carbon capture technology may not be enough to meet new emissions standards. While the U.S. Environmental Protection Agency may set a “model rule” for states to follow regarding the carbon cap, there may be some flexibility that allows states to adopt their own strategies, such as carbon credit trading.

A proposed cap-and-trade platform failed in the U.S. Congress in 2010, but the European Union has had its own carbon cap-and-trade system called the Emissions Trading Scheme in place since 2005. Under the ETS, businesses can trade or buy allowances for carbon emissions above their capped allotment. But ETS has been struggling as the price of carbon on the market fell, thanks in part to the recession, and also in part to too many giveaways of carbon allowances.

There was recently a plan on deck to force the price of carbon up through “backloading.” The EU would take a big chunk of allowances off of the market and reintroduce them later, but this was nixed by the European Parliament in April.

“Backloading failed because even in very green Europe, economic concerns seemed to trump environmental ones,” Bryan Walsh wrote for Time Magazine in April.

The most commonly proposed alternative to a cap on carbon emissions is a carbon tax, which incentivizes reductions in emissions rather than requiring it. Advocates typically say a cap along the lines of Obama’s proposal is more effective at addressing climate change because it sets clear targets for emission reductions. But some experts – and not all of them are coil industry lobbyists -- say emissions caps are doomed by nature.

“A hard cap on emissions would inevitably lead to increases in the costs of energy, which will lead to increasing costs throughout the economy,” Roger Pielke, a professor of environmental studies at the University of Colorado, wrote for Yale Environment 360 in 2009. “If these costs are felt by consumers (which is of course what such a policy is designed to do) then they will complain. No elected official will want unhappy constituents, so they will work hard to help people avoid the increasing costs.”