Climate Compass Blog
This year we will witness a number of milestones in technology to capture, use and store carbon dioxide from industrial sources and power plants – technology we need to reach our goals to reduce greenhouse gas emissions. We will need continued policy and financing support, however, to accelerate deployment worldwide. Innovative research in finding uses for captured carbon will also be essential.
In 2016, the Emirates Steel Industries project in Abu Dhabi will be the world’s first steel plant with carbon capture, use and sequestration (CCUS) technology to begin operations. Globally, seven commercial-scale CCUS projects are under construction and many more are in the planning stages.
In the U.S., two notable CCUS projects are expected to come online soon, including the first-ever incorporation of CCUS technology at a bioethanol refinery at the Archer Daniels Midland project in Illinois and the incorporation of CCUS technology at the coal-fired power plant at the Southern Company Kemper project in Mississippi. Not far behind, in 2017, the NRG Energy Petra Nova project in Texas will also incorporate CCUS technology on coal-fired power generation.
These anticipated project developments reflect the fact that CCUS technology is advancing around the world. Fifteen commercial-scale CCUS projects are operating. Eight of those are in the United States, which has been a leader in this area.
Recent North American milestones include the retrofit of the SaskPower Boundary Dam coal-fired power plant project in Canada with CCUS technology in 2014. In April 2016, the company announced it had exceeded the carbon capture reliability goals established for the technology. SaskPower estimates it could cut costs up to 30 percent on future units based on the experience it has acquired. Also in Canada, in November 2015, Shell incorporated CCUS technology on hydrogen production at the Quest project in Alberta.
CCUS technology grows increasingly important as nations begin to implement their emission reduction pledges under the Paris Agreement. The Intergovernmental Panel on Climate Change Fifth Assessment Synthesis Report concluded that CCUS technology will be essential to meet mid-century climate goals of keeping global temperature rise within 2 degrees Celsius of preindustrial levels. In fact, without CCUS, mitigation costs will rise by 138 percent.
Even as nations take on climate change and diversify their energy portfolios, fossil fuels are expected to serve 78 percent of the world’s energy demand in 2040. The most recent Energy Information Administration analysis suggests that global energy consumption is expected to rise by 48 percent over the next 30 years led by significant increases in the developing world. In Asia in particular, power generation from fossil fuels is expected to continue to grow over the near term.
Earlier this spring, the International Energy Agency (IEA) published a study on retrofitting China’s coal-fired power plants with CCUS technology, which will be critical because China has roughly 900 GW of installed coal-fired power plant capacity and has committed to peaking its CO2 emissions by 2030. The IEA study concludes that one-third of the coal fleet in China is suitable for retrofitting with CCUS technology.
Aside from the power sector, CCUS is a critical technology for the industrial sector, which contributes roughly 25 percent of global emissions. Carbon dioxide (CO2) is a by-product of many manufacturing processes for chemicals, steel, and cement production as well as refining. There are no practical alternatives to CCUS for achieving deep emissions reduction in the industrial sector.
In some cases, the cost of incorporating CCUS technology into industrial processes may be lower than in the power sector because the CO2 stream in the industrial sector is often relatively pure, i.e. less mixed with other gases. A number of industrial CCUS projects are already operational including the Uthmaniyah natural gas processing project in Saudi Arabia that came online in 2015. In the U.S., the Air Products Port Arthur project in Texas incorporating CCUS technology on hydrogen production has been operational since 2013.
As new projects begin operating around the world, the Global CCS Institute concluded that policymakers can learn lessons for CCUS from the development of offshore wind in Europe. Those projects benefited from policy support from national governments through feed-in tariffs and long-term offshore wind capacity targets in national energy plans. The report also concludes that a multi-source approach to finance, including project finance, export credit agency support, multilateral institution lending, and green bank funding, will be helpful for CCUS technology.
Finding uses for the captured carbon will also be essential. At the January World Economic Forum meeting in Davos, Switzerland, the Global CO2 Initiative was launched to develop innovative approaches to transform CO2 into commercial products. Promising options include construction materials, plastics, chemicals, and agricultural products.
As researchers continue exploring new uses for captured carbon, CCUS project developments this year and next continue to highlight the significant potential for CCUS technology to contribute to global emissions reduction.
This blog post first appeared in the Summer 2016 edition of The Current, a publication of the Women's Council for Energy and the Environment.
California and New York are leaders in setting ambitious climate goals. Both have committed to producing half their electricity from renewable sources by 2030. Both have set identical goals of reducing greenhouse gas emissions 40 percent below 1990 levels by 2030.
Where they part ways, however, is on nuclear power, which supplies the majority of zero-emission electricity in the United States. California is letting its nuclear plants ride off into the sunset while New York, which just approved a Clean Energy Standard that specifically includes nuclear power, is actively trying to preserve them.
This summer, Pacific Gas & Electric Company (PG&E) announced it will close its Diablo Canyon nuclear plant – the last one in the state of California – by 2025. After striking an agreement with environmental and labor groups, PG&E said it will seek to replace Diablo Canyon’s roughly 18,000 GWh of annual electricity – almost 10 percent of California’s in-state electricity – through improved energy efficiency, which will decrease demand, and renewable energy.
Many experts think it will be a stretch to reach that goal, especially by 2025, and that natural gas will have to fill the gap, as it has where nuclear plants have closed elsewhere in California, Vermont and Wisconsin. In New England, emissions increased 5 percent in 2015 after the Vermont Yankee nuclear plant shut down and was largely replaced by natural gas-fired electricity.
Diablo Canyon might have kept going if PG&E had gotten its way in negotiations with the state last year to include nuclear power in California’s renewable portfolio standard (RPS). That standard requires utilities to produce a certain amount of electricity from renewable sources like wind, solar, geothermal and hydropower. Including nuclear would have helped it compete economically with other low-carbon energy.
New York’s path
That’s exactly the path being taken in New York, which gets a third of its in-state electricity from nuclear power. To preserve the low-carbon benefits of its economically troubled upstate reactors and ensure its electricity mix becomes increasingly clean – with no backsliding – New York’s Public Service Commission has approved a clean energy standard (CES), which is essentially an RPS that includes nuclear.
New York’s CES mandate, which will take effect in 2017, is a novel approach that incorporates best practices from other states. It’s designed to incentivize new renewables deployment while also preserving existing clean electricity generation.
New York’s CES has three tiers, each with its own supply-demand dynamics. Tier 1 will incentivize new renewable development. Tier 2 is designed to provide sufficient revenue for existing renewable electricity supply. Tier 3 is designed to properly value the emission-free power from the state’s at-risk nuclear power plants.
Nuclear plant operators have long sought to correct what they perceive as a market failure to compensate nuclear power for its low-carbon benefits. If the at-risk reactors were replaced by an equivalent amount of fossil generation, emissions would increase by 14 million metric tons – increasing the state’s carbon dioxide emissions nearly 10 percent.
New York’s plan isn’t without controversy. There’s concern that it’s too costly. However, an associated cost study by the PSC found that the state could “meet its clean energy targets with less than a 1 percent impact on electricity bills.”
Most U.S. states have a renewable portfolio standard or alternative energy standard. Only Ohio allows new nuclear to qualify. Only New York has provisions for existing nuclear power plants.
Illinois is working to expand its RPS to include nuclear into a low-carbon portfolio standard, similar to New York’s CES, but efforts have stalled in the state legislature. Exelon has announced plans to close two nuclear power plants in the state in 2017 and 2018, which could lead to an additional 13 million metric tons of carbon dioxide emissions for the state.
Across the U.S., nine reactors are scheduled to close by 2025, which could increase carbon emissions by about 32 million metric tons, or 1.7 percent of the current total U.S. carbon emissions from the power sector.
New York’s approach to reducing its emissions is a practical, well-considered model that many other states could be following (Arguably, a national price on carbon would be more efficient, though more challenging to enact.)
New York’s four upstate reactors provide significant environmental and economic benefits. From a climate perspective, it doesn’t make sense to prematurely close these facilities when, in the short- and medium-term, they cannot realistically be replaced by alternative zero-emission power sources. Keeping these reactors operational also buys us additional time to address energy storage and transmission challenges to support more renewable generation.
With reasonable policies in place to support the existing U.S. reactor fleet, it will be easier for the U.S. to reduce its emissions and achieve its climate goals.
A year after the Clean Power Plan was finalized, on August 3, 2015, it is already having a tangible impact on how states are thinking about carbon emissions from power plants - and even other sources - and are working to confront the climate challenge.
Before the Supreme Court temporarily halted the plan in February, most states had launched the required public stakeholder outreach.
As we’ve learned from our engagement with states through the C2ES Solutions Forum, even after the stay, many of those conversations have continued, and they’ll affect how states approach climate change regardless of the outcome of the Clean Power Plan’s judicial review.
A few states, like West Virginia, have stopped all Clean Power Plan conversations. Others, like Washington and California, are moving forward to reduce emissions beyond what the Clean Power Plan would require.
The vast majority, including states as diverse as Virginia and Wyoming, fall somewhere in the middle – thinking about, discussing, or working on potential implementation options.
Many states, like South Carolina, are talking about cleaner power because of the forces already affecting the sector today. Consider:
- Between 2005 and 2015, U.S. power sector emissions fell 20 percent as a result of a shift from coal to natural gas, increased renewable energy, and level electricity demand.
- Last year, nearly two-thirds of new electric capacity added to the grid was renewables.
- Some states are grappling with how to help the No. 1 source of zero-emission power, nuclear, remain competitive in a changing marketplace.
- Utility regulators are trying to determine how to integrate rooftop solar panels, which are surging in popularity, into the system.
For most programs under the Clean Air Act, the Environmental Protection Agency (EPA) sets emission targets, and the states determine how to reach them. The Clean Power Plan is no different. But as states began thinking through how to develop an implementation plan, they found themselves having new and different conversations with new and different colleagues.
For some state environmental officials, Clean Power Plan outreach was the first time they had spoken with their public utility regulators about electric reliability and with other stakeholders about the effects of electricity rates and energy efficiency programs on low-income communities.
State energy offices, city governments, state legislatures, utilities, clean power providers, and energy users of all kinds have been brought into the discussions, deepening relationships and broadening understanding. For example, Arizona started a robust public input process, including everyone from utilities to civic groups, that is continuing after the stay with three more meetings in 2016.
The energy sector is changing rapidly, and the Clean Air Act requires action to bend the curve toward even lower emissions. These stakeholders will have to work together to reduce greenhouse gas emissions in a meaningful and economically efficient way, and these new relationships will help make that happen.
The Clean Power Plan also prompted some states to examine potential implementation pathways. They often found they could reduce emissions with less expense and policy push than they had assumed. Most modeling efforts (see the Rhodium Group, MJ Bradley and Associates, and the Bipartisan Policy Center) have found even lower compliance costs when regional or national cooperation (e.g. interstate trading) is factored in, with some costs approaching zero.
States have also been learning from one another. Over the past 18 months, C2ES has helped convene stakeholders in conversations across the country to look at common themes and examine how market-based strategies can help states create plans that businesses can support and cities can help implement.
Through the Clean Power Plan process, business leaders and state and city officials across the country have learned about the opportunities and challenges of reducing greenhouse gas emissions.
Continuing to analyze options, do modeling and conduct stakeholder outreach, even if it falls short of writing a state plan, will have tremendous value as states consider their energy futures and when judicial review of the Clean Power Plan is complete. Evolving toward a cleaner energy system has both environmental and economic benefits, so we encourage states to continue exploring pragmatic, common-sense approaches to reach that goal.
The world is increasingly looking to cities to deliver transformative change toward a low-carbon future. Recent studies point to the great carbon reduction potential resting within city limits by cutting building energy use and improving transportation systems. But very real barriers, especially finance, are hindering progress.
Cities need access to dollars to finance both tried-and-true and innovative pilot projects. Nearly 90 percent of local governments consider lack of funding a significant barrier to sustainability efforts in their community, according to a recent survey.
Initiatives are emerging to improve the financial environment. A C40 Cities Climate Leadership Group report released this month characterizes six ways local governments can access dollars: green bonds, city-backed funds, financial institutions/agency finance, equity capital, emissions trading programs, and climate funds.
The first two financing mechanisms are likely familiar to city leaders. Bonds are common tools to catalyze major projects and more local governments are establishing revolving loan funds to promote certain investments. Some of the others may be less understood, and here we take a closer look at two.
Climate funds are buckets of money to finance clean energy and resilience action. Although commonly used in developing countries, there are a few examples in the United States. The most prominent type are state climate funds that use revenue from programs such as the Regional Greenhouse Gas Initiative (RGGI) in the Northeast and California’s cap-and-trade program to support programs like energy efficiency initiatives run by local governments.
A C2ES webinar on financing resilience featured another type of climate fund in the New Jersey Energy Resilience Bank (ERB). The ERB described its work to enhance distributed energy projects for critical facilities like hospitals and utilities by providing low-interest loans drawn from a $200 million federal disaster recovery fund made available after Hurricane Sandy. For example, the ERB is providing a $4.4 million grant and a $3.1 million loan to finance a 2 MW combined heat and power natural gas system at Saint Peter’s University Hospital. The investment will ensure the hospital maintains power – and continues providing life-saving services – even if the surrounding electric grid shuts down in future storms.
Emissions Trading Programs
Emissions trading programs are typically created for major emitters and implemented by state and national governments. So how would a city participate here? Well, emissions trading programs accomplish a unique thing, which is to create new monetary value, in the form of credits, for clean energy projects. This would involve projects like solar installations; energy efficiency programs for neighborhoods, commercial buildings, and even water treatment facilities; methane capture projects at landfills; basically, the kinds of projects cities facilitate or even spearhead. The credits awarded to such projects can be sold to the polluters who have to meet certain quotas.
Outside of municipal utilities in California and RGGI states, there are currently no local governments participating in emissions trading programs in the United States. An interesting opportunity on the horizon is the Environmental Protection Agency’s (EPA) proposed Clean Energy Incentive Program (CEIP), which is nestled within the currently stayed Clean Power Plan.
The CEIP is meant to incentivize renewable energy projects and energy efficiency investments in low-income communities by offering tradable credits to project developers. This program could establish a financial incentive that local governments can benefit from directly or indirectly by drawing development dollars and jobs to cities, but whether that happens is up to each state (more on that process here).
Ultimately, for the CEIP to become a funding source that appeals to local governments, a number of challenges will have to addressed. There will need to be:
- Certainty around Clean Power Plan and the value of credits to minimize the risk associated with the post-project financial incentive,
- A clear definition of "low-income community,"
- Certainty around available credits, and
- Guidance on attracting CEIP projects.
Besides the six types of finance discussed by the C40 report, there are other financing mechanisms available to cities that intrepid leaders have used to overcome this barrier to action. However, given the competition for government attention and resources, it is no surprise that lack of access to finance results in lower prioritizing of sustainability projects. This is an outcome we cannot afford.
The latest round of negotiations under the Montreal Protocol concluded late Saturday night in Vienna with key elements of an amendment to phase down hydrofluorocarbons (HFCs) beginning to take shape. The progress in Vienna sets the stage for a final agreement at the Meeting of the Parties scheduled for October in Kigali, Rwanda.
Countries are now closer than ever to a historic breakthrough that can dramatically reduce the risks of global climate change.
Because they are potent greenhouse gases rapidly expanding in their use in refrigeration and air conditioning, HFCs are a critical target in international efforts to achieve the goal established under the landmark Paris Agreement of keeping temperature increases well below 2 degrees Celsius. An ambitious HFC amendment could reduce global temperatures by an estimated 0.5 degrees by 2100 compared to business as usual growth.
The highlight of the meeting was a call to action delivered by U.S. Secretary of State John Kerry. His appearance, along with several days of morning to late-night engagement by Environmental Protection Agency Administrator Gina McCarthy, underscored the critical importance the United States places on using the HFC amendment to build on the momentum achieved in Paris.
Two key issues were the focus of the negotiations in Vienna: the baseline (the level of HFCs from which controls are based) and timetable for limiting HFC emissions, and the guidelines for providing financial support for developing countries in meeting these obligations. While more work remains to be done before the October meeting, real progress was made on both fronts.
The proposal for developed countries centered around setting a baseline of 2011-2013 with a 10 percent reduction from there by 2019. Most of these countries have already begun limiting HFCs though domestic regulations.
For developing countries, where HFC use is only now ramping up, a wide range of proposals was put forward. A large number of countries (African Group, Pacific Island countries, a number of Latin America countries, the United States, Japan, Canada, Australia, New Zealand, and the European Union) supported a baseline of 2017-2019 with a freeze at 2021. India, China and Gulf Cooperation Countries offered less ambitious proposals. India’s proposal would allow the longest unrestricted use with a baseline of 2028-2030 and a freeze at 2031.
On funding issues, there was broad agreement on using the Protocol’s Multilateral Fund as the institution for administering financial support to developing countries. Secretary Kerry emphasized that over 75 percent of the fund’s donor base of developed countries has already publicly stated their intention to provide additional funding to implement an HFC amendment. The key points of contention relate to important details concerning what aspects of costs will be paid and over what period of years.
Despite the progress made last week, closing the deal on an HFC amendment in October will not be easy and is by no means assured. With continued U.S. leadership and a willingness among all nations to cooperate in confronting the clear and present danger of climate change, an HFC amendment in 2016 should be achievable.