The Center for Climate and Energy Solutions seeks to inform the design and implementation of federal policies that will significantly reduce greenhouse gas emissions. Drawing from its extensive peer-reviewed published works, in-house policy analyses, and tracking of current legislative proposals, the Center provides research, analysis, and recommendations to policymakers in Congress and the Executive Branch. Read More
Federal agencies trying to meet tougher sustainability mandates can make significant progress toward their goals by taking advantage of more efficient data storage and other information and communication technologies.
At the NextGov Prime 2013 conference, Scott Renda of the White House Office of Management and Budget and I outlined some of the ways these technologies can lead toward a greener government that saves energy – and money.
The first year of the 113th Congress (2013-2014) draws to a close with no passage of climate-specific legislation, but signs that some in Congress understand the importance of addressing this issue. More bills were introduced that support climate action than oppose it. (For brevity, we refer to all legislative proposals as “bills.”)
Here’s a by-the-numbers look at what Congress has done so far this term explicitly referencing climate change or related terms, such as greenhouse gases or carbon dioxide:
- 131 climate-specific bills have been introduced, surpassing the 113 introduced during the entire 112th Congress (2011-2012), and perhaps on track to match the 263 of the 111th Congress (2009-2010).
- 81 of the bills (62 percent) support climate action in some way.
- 31 bills are intended to build resilience to a changing climate, compared with nine introduced in the previous Congress.
- 30 bills have bipartisan co-sponsorship. Of these, 16 support climate action in some way.
- 25 bills, five of them bipartisan, would block or hinder the Environmental Protection Agency’s authority to regulate greenhouse gas emissions under the Clean Air Act. Two such bills have passed the House, though are unlikely to be passed by the Senate and signed into law.
- 12 of the bills supporting climate action were written by Republicans, while eight bills opposing climate action were written by Democrats, showing that climate issues don’t always fall neatly along partisan lines.
- 7 of the 16 bipartisan bills that support climate action promote energy efficiency. The bipartisan Shaheen-Portman energy efficiency bill is considered to have the best chance of enactment of any energy measure in this Congress.
- 3 bills would block or hinder federal agencies from using the social cost of carbon in federal rulemaking.
- 2 bills seek to reduce short-lived climate pollutants.
A year after Hurricane Sandy, more work remains to be done to help families and communities fully recover. But another pressing need, not only for those who were in Sandy’s wake but for all of us, is to learn from the storm’s devastating impacts and reduce the risk of future damage and loss of life.
Hurricane Sandy's estimated $65 billion in damages make it the second costliest hurricane in U.S. history, surpassed only by Hurricane Katrina.
Building resilience to the impacts of major coastal storms like Sandy—and to other types of extreme weather that are becoming more intense and frequent as a result of climate change—will require a commitment to better protect infrastructure and implement policies to help get people out of harm’s way. Both efforts should take into account how future sea level rise can amplify storm surges, potentially making future impacts greater than what we’ve experienced in the past.
When I founded a new nonprofit organization 15 years ago, the United States and the world urgently needed practical solutions to our energy and climate challenges. That need has only grown more urgent.
Earlier today, I announced my plans to step aside as the President of the Center for Climate and Energy Solutions (C2ES) once my successor is on board. As I look back, I find we have come a long way. That said, any honest assessment of our progress to date in addressing one of this century’s paramount challenges must conclude that we have much, much further to go.
When our organization, then named the Pew Center for Global Climate Change, first launched in 1998, 63 percent of the world’s electricity generation came from fossil fuels. Incredibly, that number is even higher today – 67 percent. The concentration of carbon dioxide in the atmosphere, the main driver of climate change, is also higher than it was then – in fact, at its highest level in more than 2 million years.
Scientists around the globe have just reaffirmed with greater certainty than ever that human activity is warming the planet and threatening to irreversibly alter our climate. Climate change is no longer a future possibility. It is a here-and-now reality. It’s leading to more frequent and intense heat waves, higher sea levels, and more severe droughts, wildfires, and downpours.
We at C2ES have believed from the start that the most effective, efficient way to reduce greenhouse gas emissions and spur the innovation needed to achieve a low-carbon economy is to put a price on carbon. It’s a path that a growing number of countries, states, and even cities are taking.
With all the fuss around the EPA’s proposed carbon dioxide standard for new power plants, you would be forgiven for missing the following line: “EPA projects that this proposed rule will result in negligible CO2 emission changes, quantified benefits, and costs by 2022.” That’s right, the standard will likely have little to no effect before the date by which EPA will be required by law to revise it.
Why? As I recently told the National Journal, because the most credible projections have natural gas so inexpensive for the next several years that very few power companies are planning to build new coal plants – compared with the 150 natural gas power plants in the works. Pulling the proposed standard wouldn’t change that reality. In fact, the one coal plant being built today includes carbon capture and storage (CCS), and is expected to meet the tough carbon standard EPA has proposed. A handful of additional coal plants with CCS may move forward in the next several years, as well.
So what’s all the fuss about?
Environmental Law Institute: President Obama’s Climate Action Plan in the Near Term: Expectations, Risks, and Opportunities
Elliot Diringer joins Dan Utech of the Obama Administration and Jennifer Smokelin of Reed Smith LLP to discuss the president’s Climate Action Plan. They will identify possible shortcomings and areas of emphasis. The panelists will also share their concerns about how the plan will be implemented and their views on risks and opportunities for businesses.
David W. Wagner, Associate, Reed Smith LLP (moderator)
Elliot Diringer, Executive Vice President, Center for Climate and Energy Solutions
Jennifer A. Smokelin, Counsel, Reed Smith LLP
Dan Utech, Deputy Director for Energy and Climate Change, White House Domestic Policy Council
September 30, 2013
12:00 PM to 1:15 PM ET
Environmental Law Institute
2000 L Street NW, Suite 620
Washington, DC 20036
See a video of the ELI panel on Obama's Climate Action Plan.
The U.S. Department of Energy (DOE) oversees federal efforts to advance the deployment carbon capture and storage (CCS) technology. In addition to working on the research and development of CCS component technologies, DOE has provided financial support to multiple commercial-scale CCS projects in the power and industrial sectors. This brief examines DOE’s support for CCS through the American Recovery and Reinvestment Act of 2009 and through its annual budget.
This page discusses EPA's final standards for new power plants issued on August 3rd, 2015. For a discussion of the standards for existing power plants click here.
The U.S. Environmental Protection Agency (EPA) released a final rule to limit greenhouse gas emissions from new power plants on August 3, 2015. The final “Carbon Pollution Standard for New Power Plants” replaces earlier proposals from September 2013 and March 2012. It would establish New Source Performance Standards (NSPS) under the Clean Air Act to limit emissions of carbon dioxide (CO2) from coal- and natural gas-fired power plants. C2ES submitted public comments in response to EPA's proposal for new power plants from September 2013, which can be found here. EPA also simultaneously released a final rule to limit carbon emissions from existing power plants.
How would the standards work?
New Source Performance Standards set limits on emissions based on EPA’s assessment of available technologies. As with many other Clean Air Act programs, EPA establishes a standard for a given category of facility, which state environmental agencies then translate into requirements for individual facilities.
EPA’s final "Carbon Pollution Standard for New Power Plants" was developed under Section 111(b) of the Clean Air Act. Section 111(b) calls for a standard that "reflects the degree of emissions limitation achievable through the application of the best system of emissions reduction which (taking into account the cost of achieving such reduction and any non-air quality health and environmental impact and energy requirements) the Administrator determines has been adequately demonstrated." The emissions limit must take the form of a standard – in the case of power plants, maximum allowable CO2 emissions per unit of electricity – and may not prescribe a particular technology.
The Act ostensibly requires EPA to review the technological options available and, if appropriate, establish a new standard every eight years. In practice, standards have typically remained unexamined and unchanged for much longer than eight years, often because of resource constraints at EPA.
What does the standard require?
The final rule sets separate standards for new power plants fueled by natural gas and coal. New natural gas power plants can emit no more than 1,000 pounds (lbs) of carbon dioxide per megawatt-hour (MWh) of electricity produced, which is achievable with the latest combined cycle technology.
New coal power plants can emit no more than 1,400 lbs CO2/MWh, which almost certainly requires the use of carbon capture and storage (CCS) technology.
In the power sector, CCS is in use at a commercial-scale power plant in Saskatchewan, Canada, and will be employed at two commercial-scale power projects under construction in Kemper County, Mississippi, and in Thompsons, Texas. CCS technology is also in place in several industrial facilities, some of which generate as much carbon dioxide as a commercial-scale power plant.
How is this different from the standard EPA proposed in September 2013 or March 2012?
Similar to EPA’s earlier proposals, the final rule requires almost all natural gas power plants to meet an emissions standard of 1,000 lbs CO2/MWh.
In contrast to its proposed rule from September 2013, the final rule requires new coal-fired power plants to meet a less stringent emissions standard equal to 1,400 lbs CO2/MWh from the beginning of the power plant’s lifetime.
Under its proposal from September 2013, EPA would have required new coal power plants to meet more stringent standards with CCS, but a power plant could choose from two different compliance options. New coal plants could either emit less than 1,100 lbs CO2/MWh upon the beginning of operations or an average of 1,000 to 1,050 lbs CO2/MWh within the first seven years of operations.
In March 2012, EPA’s first proposal for limiting carbon emissions from new power plants would have subjected all new power plants to a uniform standard: 1,000 lbs CO2/MWh. Many of the public comments received by EPA on its initial proposal objected to the unprecedented use of a single standard for both coal- and natural gas-fired plants. EPA responded in its proposal from September 2013 by including a separate standard for each fuel.
What are the costs associated with the final rule?
EPA expects this standard to have negligible costs through 2022 (the intended time horizon of the standard), since very few new coal plants are planned, even without the proposed standard, and since developers of new natural gas plants should see minimal, if any, additional costs.
If a developer chooses to build a new coal plant, the proposed standards could add considerable costs to the project because it will have to employ CCS technology. Since CCS technology is just reaching commercial maturity for power plant applications, its costs are still relatively high. However, as with any new technology, costs will come down as developers gain experience and new innovations are made.
What effect is this proposal expected to have on carbon dioxide emissions?
In the near future, the final rule is expected to have very little impact on emissions because so few new coal plants would likely be built even without the standard. Nearly all new fossil-fuel power plants in the planning stages will be fueled by natural gas, using generation technology that complies with EPA’s final standards without any alterations. Power plant developers already have strong incentive to use the most efficient technology to maximize the amount of electricity that can be generated from each unit of fuel.
If a developer chooses to build a new coal plant, the requirement that the plant install CCS technology will drastically reduce its emissions. Increased deployment of CCS technology at power plants will very likely drive CCS costs down and make it a more viable option at other new coal plants. Through experience and innovation, CCS costs may come down enough to be viable on new natural gas power plants, or as retrofits on existing coal plants, to reduce carbon dioxide emissions from the power sector even further.
What can power plants do to reduce emissions?
New natural gas plants can reach the final CO2 standard by employing efficient generation technology. In older steam turbine plants, natural gas is combusted to heat water, which creates steam to turn a turbine and generate electricity. These plants have thermal efficiencies of 30-35 percent, meaning about one third of the chemical energy stored in natural gas is converted to electricity. In contrast, new combined cycle combustion turbines more effectively take advantage of the energy in natural gas to operate with a thermal efficiency above 60 percent.
New coal plants, on the other hand, cannot achieve the final standard through efficiency alone. The most efficient type of coal plants, using ultra-supercritical boilers or integrated gasification combined cycle technology, can currently achieve a CO2 emission rate of around 1,700 lbs/MWh.
Thus, new coal plants can only meet a standard of 1,400 lbs CO2/MWh through the use of CCS, which can capture a significant portion of a power plant's potential emissions. CCS is a multi-stage process in which potential CO2 emissions are captured from a power plant instead of vented into the atmosphere. Captured CO2 is transported via pipeline and injected into an underground geological formation for permanent storage. EPA has established certain regulatory requirements for demonstrating the permanent underground storage of CO2. Certain proposed CCS power plants are aiming to capture nearly 90 percent of potential emissions, which translates into an emissions rate of potentially less than 500 lbs CO2/MWh.
If new coal plants must use carbon capture and storage technology, what will that mean for the future of coal? How far along is CCS technology?
Even if EPA were not moving forward with this standard, very few new coal plants would likely be built, in large part because of the availability of affordable natural gas. The Energy Information Administration lists only four potential coal plants between now and 2018, compared with more than 200 expected natural gas plants.
Today, there are 13 active commercial-scale CCS projects at industrial plants around the world (eight of them in the United States). The world’s first commercial-scale CCS power plant – the Boundary Dam Power Station in Saskatchewan, Canada – has been in operation since late 2014. Two additional commercial-scale power plants with CCS are under construction. Southern Company's Kemper County Energy Facility in Mississippi is expected to come online in late 2015 or early 2016, while NRG Energy's Petra Nova project in Texas is expected to come online in 2017. All three projects are coal-fired.
Approximately 50 additional commercial-scale CCS projects in the power and industrial sectors are in various stages of development around the world. Learn more about the status of CCS technology here.
How would existing state policies, such as the Regional Greenhouse Gas Initiative, be affected?
The final rule for new power plants would likely be layered on top of existing state programs. For example, a new plant operating in the Regional Greenhouse Gas Initiative (RGGI) territory would have to achieve the final federal standard, and would also have to submit tradable emission allowances annually to comply with the requirements of RGGI.
How does the final rule relate to EPA’s work on a standard for existing power plants?
Section 111 of the Clean Air Act requires EPA to regulate greenhouse gas emissions from new and existing power plants under two separate but related provisions. Section 111(b) requires EPA to set emission performance standards for new, modified, and reconstructed power plants, while Section 111(d) requires EPA to set guidelines for existing power plants. The guidelines for existing power plants cannot be finalized until a final standard is in place for new power plants.
Section 111(b) vests relatively more authority in EPA, and is more straightforward. EPA is required to find emission-reduction technology that has been adequately demonstrated and use this to set federal, numerical performance standards that new power plants must meet. These Section 111(b) standards are implemented by the states, as are most EPA air rules, but states do not have much flexibility to alter the standards set by EPA. On the other hand, under Section 111(d), states have greater flexibility in how they implement the EPA standard. For instance, Section 111(d) allows for the possibility of market-based mechanisms to reduce emissions system-wide, rather than focusing on individual power plants.
Under what authority is EPA regulating greenhouse gas emissions?
EPA is required by the Clean Air Act to develop and enforce regulations on greenhouse gases, much in the way it regulates other air pollutants. This authority was clarified in the U.S. Supreme Court decision in Massachusetts v. EPA (2007). The decision was a result of 12 states petitioning EPA to regulate greenhouse gases from new motor vehicles in 1999. The Supreme Court ruled that greenhouse gases meet the definition of air pollutants under the Clean Air Act and must be regulated if these gases could be reasonably anticipated to endanger public health or welfare. Responding to the Court’s ruling, EPA finalized an endangerment finding in December 2009. Based on overwhelming scientific evidence it found that six greenhouse gases, including carbon dioxide, constitute a threat to public health and welfare. Thus, it is the Supreme Court’s interpretation of the existing Act and EPA’s assessment of the scientific evidence that form the basis for EPA’s regulatory actions.
Once any substance becomes a regulated pollutant under the Clean Air Act, certain other provisions of the Act automatically kick in. Greenhouse gases first became regulated under the Act with EPA’s rule setting new standards for light-duty vehicles. This, in turn, triggered the requirement that major new or modified stationary sources be subject to a handful of Clean Air Act provisions, including Section 111(b).
Has EPA regulated greenhouse gas emissions before?
Yes. In addition to its existing greenhouse gas standards for new light duty vehicles, EPA regulates greenhouse gas emissions from new, large stationary sources through a process called New Source Review (NSR). If a new emissions source, including a power plant, will emit above a certain threshold, it must acquire a permit to emit greenhouse gas. This permit will include a requirement that the source employ the Best Available Control Technology (BACT) to ensure it will take all feasible steps available to limit greenhouse gas emissions. BACT is set on a source-specific basis, and so far EPA has determined BACT for greenhouse gas emissions from power plants to be efficiency improvements. Once EPA’s proposed NSPS is finalized, new power plants will have to comply with both this NSPS and NSR, as well as other permitting requirements already in place.
Why is regulation of greenhouse gas emissions from power plants important?
Electric power generation is responsible for about 40 percent of U.S. emissions of carbon dioxide, the primary greenhouse gas.
Figure 1: 2013 U.S. CO2 Emissions
Source: Energy Information Administration
Since the federal government adopted new vehicle standards in August 2012 to reduce transportation-related emissions, the power sector represents the next opportunity to achieve significant carbon reductions.
Coal and natural gas are used to fuel around two-thirds of U.S. electricity generation, and are responsible for nearly 100 percent of power sector CO2 emissions. As shown in Figure 2, the United States currently obtains 30 percent of its electricity from natural gas. Since 2000, however, natural gas has accounted for over 90 percent of new fossil generation capacity, and most new generation planned for the next few years will be fueled by natural gas.
Figure 2: 2012 U.S. Electricity Generation
Source: Energy Information Administration
Figure 3: Proposed U.S. Fossil Generation Capacity
Source: Energy Information Administration
Congressional Testimony of Judi Greenwald on the Future of Coal: Carbon Capture, Utilization and Storage
Testimony of Judi Greenwald, Vice President for Technology and Innovation
Center for Climate and Energy Solutions
Subcommittee on Energy
Committee on Science, Space, and Technology
U.S. House of Representatives
July 25, 2013
Click here to view video of the testimony.
Hearing on The Future of Coal: Utilizing America's Abundant Energy Resources
Carbon Capture, Utilization and Storage
Madam Chairman, Rep. Swalwell, and members of the Subcommittee, thank you for the opportunity to testify on carbon capture, utilization, and storage. My name is Judi Greenwald, and I am Vice President for Technology and Innovation at the Center for Climate and Energy Solutions (C2ES – formerly known as the Pew Center on Global Climate Change).
My testimony today will focus on the most important climate and energy solution that no one knows about. I will emphasize two main points:
- Carbon capture and storage (CCS) is a critical technology for solving climate change, while allowing continued reliance on fossil fuels.
- Carbon dioxide enhanced oil recovery (CO2-EOR) can advance CCS, while boosting domestic oil production and generating net federal revenue.
C2ES is an independent, nonprofit, nonpartisan organization dedicated to advancing practical and effective policies and actions to address our global climate change and energy challenges. We perform multifaceted research and analysis of the scientific, technological, economic, and policy aspects of these issues. Our work is informed by our Business Environmental Leadership Council (BELC), a group of 34 major companies, most in the Fortune 500, that work with C2ES on climate change and energy risks, challenges, and solutions. The views I am expressing, however, are those of C2ES alone.
C2ES has been analyzing CCS for over a decade and has recently focused on how CO2-EOR can advance CCS. With the Great Plains Institute, C2ES co-convenes the National Enhanced Oil Recovery Initiative, or NEORI, a coalition of businesses, environmental NGOs, labor representatives, and state officials advocating for incentives to use captured CO2 in EOR. You can find more information on NEORI at www.neori.org. I would like to submit NEORI’s CO2-EOR analysis and consensus recommendations for the record. In addition, C2ES serves as the advisor and facilitator to the Sequestration Working Group of the North America 2050 Initiative, a collaborative of states and provinces exploring options for CCS regulations and incentives. C2ES recently completed a summary of state-level regulations and incentives that can be found at www.na2050.org/sequestration.
C2ES also has authored research and publications related to CCS and CO2-EOR. For example, C2ES developed a comprehensive framework for calculating CO2 emissions from CCS based on input from experts in industry, academia, and the environmental community. C2ES also publishes a CCS Climate TechBook, a brief report that explains in layman’s terms how CCS technology works, why its development is needed to address climate change, and how it might be advanced.
CCS is a critically important technology
The United States and the rest of the world are getting 80 percent of our energy from coal, oil and gas, and our dependence on, and overall use of, these fossil fuels globally is growing rapidly. Under a business-as-usual scenario, the Energy Information Administration expects fossil fuels will continue to provide more than 65 percent of U.S. electricity in 2040 – with 35 percent coming from coal-fired generation. Globally, coal consumption is expected to increase nearly 60 percent over the next two decades, led by developing countries like China and India, which together will comprise 62 percent of the total global coal demand in 2035. This poses an enormous challenge, because the CO2 emissions from the combustion of these fossil fuels are the major contributor to global climate change. While we can and should become more energy-efficient and shift our energy mix toward inherently zero-emitting sources like nuclear power and renewables, it will be difficult to do that fast enough and at a reasonable enough cost to avoid the worst climate impacts.
Hence the critical need for CCS, a suite of technologies that captures CO2 and stores it deep underground in geological formations. CCS can capture up to 90 percent of emissions from stationary sources, such as power plants and industrial facilities, thereby allowing coal and natural gas to remain part of our energy mix. The International Energy Agency (IEA) and others have demonstrated through detailed technology and economic scenario analyses that CCS is likely an essential component of an affordable and effective response to global climate change. In fact, IEA estimates that CCS could provide one-sixth of the requisite GHG emissions reductions by 2050.
What is needed to advance CCS?
CCS has been established and commercialized for the capture of CO2 from some industrial processes such as natural gas processing, chemical, fertilizer and ethanol production, and the gasification of coal. The use of man-made CO2 in EOR has been practiced for several decades. However, CCS in other contexts – for example, coal- and natural gas-powered electricity generation – is a relatively expensive technology that is just reaching maturity. Further R&D is important, but the key challenge for CCS is to get a sufficient number of commercial-scale projects up and running to demonstrate the emerging technologies at scale and bring down their costs. The first large-scale commercial CCS power projects are under construction. Yet, it is still unclear whether more commercial-scale CCS projects will be built after these initial projects are completed. After the collapse of climate legislation in the United States in 2010, a number of CCS projects were cancelled.
CCS is being increasingly thought of as carbon capture utilization and storage, or CCUS. Instead of seeing CO2 as a waste, utilizing and selling captured CO2, primarily for EOR, improves the economics of CCS projects and is an important market driver. Almost all of the existing or planned CO2 capture projects in the United States have been developed with the intention of marketing captured CO2 for use in EOR. Still, in many cases, additional drivers are needed. Those projects operating or underway today are being financed though some combination of U.S. Department of Energy (DOE) grants, utility cost recovery from ratepayers, private finance, sales of CO2 for EOR, other revenue streams from chemical production, and existing tax credits.
DOE’s role in CCS development has been and will remain critical. DOE is working with the private sector on the leading innovative CCS projects in the United States today. This collaboration is beginning to yield results. In late 2012, the DOE-supported Air Products’ Port Arthur CCS project, where CO2 is captured from refinery-based hydrogen production and sent for use in EOR, began operations. Through its Industrial Carbon Capture and Storage (ICCS) Program and with funding from the American Recovery and Reinvestment Act of 2009 (ARRA), DOE agreed to fund $284 million of the Port Arthur project’s $430 million total investment cost. The Port Arthur project is expected to capture up to 1 million tons of CO2 per year and enable EOR production of 1.6 million to 3.1 million barrels of domestic oil a year in East Texas.
DOE is also working on applying CCS to the power sector. Southern Company’s coal-fueled Kemper County energy facility in Mississippi is now under construction and will be the first commercial-scale CCS power project in the United States. DOE selected the Kemper project to receive more than $290 million through its Clean Coal Power Initiative (CCPI). A later round of the CCPI made possible through ARRA funding selected three additional coal-fired CCS power projects for funding. They are Summit Power’s Texas Clean Energy Project (TCEP), NRG Energy’s Washington Parish Project, and SCS Energy’s Hydrogen Energy California project. TCEP is nearing financial close and, when completed, will capture 90 percent of its emissions and supply approximately 2.5 million tons of CO2 for use in EOR.
Given the high costs and uncertainties of CCS investment for the private sector and the urgent need for CCS, it is extremely important that the federal government continue to support CCS research, development, demonstration, and deployment. Beyond DOE’s pivotal role, other forms of federal financial support, such as tax credits, should be reformed and expanded. States too can play a key role in advancing CCS through incentives and well-informed regulation.
Background on CO2-EOR
CO2-EOR is a means of commercial oil production that could play a key role in the development of CCS and in increasing our domestic energy security. CO2-EOR has the potential to increase American oil production by tens of billions of barrels, while displacing imported oil and safely storing billions of tons of CO2 underground.
How does CO2-EOR work? Even after conventional primary and secondary oil recovery, most of the oil in a typical oil field is left in the ground. When injected deep underground, CO2 can make it possible to recover more oil and extend an oil field’s life. The best available evidence indicates that by using best EOR industry practice and existing rules governing underground injection, the overwhelming majority of the injected CO2 remains underground, incidentally and safely storing CO2. Commercial injection of CO2 for EOR is regulated under EPA’s Underground Injection Control Program, and under current federal greenhouse gas reporting rules for air emissions, EOR operators may document this incidental CO2 storage through additional monitoring, reporting, and verification requirements to qualify as geologic sequestration. There is a range of views as to what additional state or federal rules are needed to ensure that CO2 is stored permanently.
The United States has been a global leader in CO2-EOR for 40 years. We currently obtain six percent of our domestic oil production through this method. While most CO2-EOR activity occurs in the Permian Basin of Texas, there are also projects in the Gulf Coast, the Rocky Mountains, Oklahoma, and even Michigan. Estimates of the potential for CO2-EOR to increase oil production and store CO2 have been increasing in recent years. According to the National Energy Technology Lab, using existing techniques, CO2-EOR could double or triple U.S. oil reserves and store 10 to 20 billion tons of CO2, which is equivalent to between five and 10 years of emissions from all U.S. coal-fired power plants. More advanced techniques could yield much higher oil production and CO2 storage.
The key role of CO2-EOR in advancing CCS
For those CO2 capture technologies that have not reached full commercialization, especially in electric power generation, selling captured CO2 for use in EOR can provide a revenue stream that helps reduce the financial risks and uncertainty of investing in emerging technology. About 75 percent of the CO2 used in EOR currently comes from naturally occurring CO2 reservoirs. The rest comes from man-made CO2 sources. Somewhat oddly, the EOR market lacks sufficient CO2. By expanding carbon capture from man-made sources, we can increase domestic oil production, promote economic development, create jobs, reduce CO2 emissions, and drive innovation in CCS technology.
It is because of these multiple benefits that we have been able to bring together the National Enhanced Oil Recovery Initiative, or NEORI, a diverse coalition favoring the reform and expansion of existing tax incentives to use captured CO2 in EOR. Among the members of NEORI are Arch Coal, Summit Power, Tenaska, the Natural Resources Defense Council, AFL-CIO, and The Wyoming Outdoor Council. Some of NEORI’s participants are primarily interested in job creation, others in increasing domestic oil production, and others in protecting the environment. But all agree that advancing the capture of man-made CO2 for use in EOR makes sense. NEORI has been briefing members on both sides of the aisle in both houses of Congress on its proposals.
EOR operators in some regions are willing to pay upwards of $30 per ton for CO2. At the same time, industrial facilities and power plants are emitting billions of tons of CO2 into the atmosphere as a waste. CO2-EOR therefore offers the opportunity to transform this waste into a marketable commodity and transform an environmental problem into an energy production solution.
In a few cases, revenue from selling CO2 for enhanced oil recovery is sufficient to pay for CO2 capture and transport. Thanks to the efforts of the private sector and DOE, many CO2 capture technologies are already commercially proven, and only a modest incentive is needed to help close the gap between the market price of CO2 and the costs to capture and transport it. In the case of emerging technologies, however, companies need a larger incentive to help shoulder the additional financial and operational risk of deploying new, pioneering capture projects for the first few times at a commercial scale.
By combining private EOR operators’ willingness to pay for CO2 with a tax incentive, society leverages its public investment. Perhaps most importantly, according to our analysis, such tax incentives would more than pay for themselves by driving increased domestic oil production and associated taxable oil revenues. Increased CO2-EOR production will generate federal revenue that more than pays for the cost of new incentives within a 10-year timeframe. Under existing tax treatment, CO2-EOR directly yields revenues from three main sources: corporate income taxes, individual income taxes on royalties from production on private land, and royalties from production on federal land. Our analysis indicates that federal revenues from incremental CO2-EOR production would exceed the fiscal cost of new incentives by more than $100 billion over 40 years.
CCS is a critical technology for reconciling our continued dependence on fossil fuels with the imperative to protect the global climate. Our best hope at the moment for CCS advancement is carbon capture, utilization, and storage, or CCUS. The best example of CO2 utilization we know of is enhanced oil recovery (CO2-EOR). Solving our climate and energy problems will require a portfolio of technologies, and all must be pursued vigorously. But we are focusing here today on CO2-EOR, because it is the most important climate and energy solution that no one knows about.