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Continued: Funds for clean coal burn little more than cash

  • Article by: THE ECONOMIST
  • Last update: March 9, 2009 - 4:00 PM

"Factories of death" is how James Hansen, a crusading American scientist, describes power stations that burn coal. Coal is the dirtiest of fossil fuels, producing twice the carbon dioxide that natural gas does when it is burned. That makes it a big cause of global warming.

But some of the world's biggest economies rely on coal. It provides almost 50 percent of America's and Germany's power, 70 percent of India's and 80 percent of China's. Digging up coal provides a livelihood for millions of people. And secure domestic sources of energy are particularly prized at a time when prices are volatile and many of the big oil and gas exporters are becoming worrisomely nationalistic. It is hard to see how governments can turn their backs on such a cheap and reliable fuel.

There does, however, seem to be a way of reconciling coal and climate. It is called carbon capture and storage (CCS), or carbon sequestration, and entails vacuuming up carbon dioxide from the smokestacks of power plants and other big industrial facilities and storing it safely underground, where it will have no effect on the atmosphere. The technologies for this are already widely used in the oil and chemical industries, and saltwater aquifers and depleted oil fields offer plenty of promising storage space. Politicians are pinning their hopes on clean coal: Angela Merkel and Barack Obama, among others, are keen on the idea.

But CCS is proving easier to talk up than to get going. There are no big power plants using it, just a handful of small demonstration projects. Utilities refuse to make bigger investments because power plants with CCS would be much more expensive to build and run than the ordinary sort.

They seem more inclined to invest in other low-carbon power sources, such as nuclear, solar and wind. Inventors and venture capitalists, in the meantime, are striving to create all manner of new technologies -- bugs for biofuels, revolutionary solar panels, smart-grid applications -- but it is hard to find anyone working on CCS in their garage (although some scientists are toying with pulling carbon dioxide directly out of the air instead of from smokestacks). Several green pressure groups, and even some energy and power company bosses, think that the whole idea is unworkable.

With the private sector sitting on its hands, Western governments are lavishing subsidies on CCS. Some $3.4 billion earmarked for CCS found its way into America's stimulus bill. The European Union, which already restricts greenhouse-gas emissions through a cap-and-trade scheme, unveiled further incentives for CCS last year. Britain, Australia and others have also vowed to help fund demonstration plants partly because they reckon the private sector is put off by the huge price-tag on a single CCS power plant, and also in the belief that the cost of CCS will fall with experience.

Tax rather than subsidize

The private sector, however, is reluctant to fork out not just because of the upfront cost of power plants, but also because, ton for ton, CCS looks like an expensive way of cutting carbon. The cost of it may fall, but probably not by much, given the familiarity of the technologies it uses.

Politicians should indeed encourage investment in clean technologies, but direct subsidies are not the way to do it. A carbon price or tax, which raises the cost of emitting carbon dioxide while leaving it up to the private sector to pick technologies, is the better approach. CCS is not just a potential waste of money. It might also create a false sense of security about climate change, while depriving potentially cheaper methods of cutting emissions of cash and attention -- all for the sake of placating the coal lobby.

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