Carbon capture and storage projects are expensive, and investors know it, but that’s not the whole problem driving the lack of large-scale demonstration of the technology, according to United States Energy Association Executive Director Barry Worthington. The problem is that governments are not stepping up to do their part to drive the cost of CCS down. “If you’re an investor, and you’re looking at the array of investment options that are available to you, you are going to pick the investment choice that has favorable government policy, not the investment choice that does not have the favorable government policy,” Worthington said.
CCS is in the “have nots” column of favorable government policy while renewables sit firmly in the “haves” column, Worthington said during a keynote presentation at the ExchangeMonitor’s annual Carbon Capture, Utilization, and Storage Conference.
Governments have numerous fiscal tools at their disposal to help advance the CCS sector, tools that have been used successfully for the renewable industries. These include accelerated depreciation, price stabilization, contracts for difference, and feed-in tariffs.
In the U.S. the disparity between renewables and CCS is clearly illustrated by Department of Energy grants. These are tax-free for renewables but not for any fossil energy project, Worthington explained. “If you have a grant for a fossil energy project, it is taxed to the corporation as income. So for every dollar to a renewable project, you get a dollar, for every dollar to a fossil project, you get 66 cents,” he said.
Such disparity also exists within international programs, according to Worthington. The United Nations Framework Convention on Climate Change’s Green Climate Fund, a mechanism for investment in low-emission, climate-resilient development through mitigation, has yet to accept a CCS project. “Eight projects have been put forward, three in Africa, three in Asia-Pacific, two in Latin America and the Caribbean, not a single one of these projects is a CCS project, not a single one,” he said.
The goal of expanding the use of these fiscal tools to CCS is not to distort the marketplace, but to bring an already distorted marketplace back into balance, Worthington said. “These fiscal tools that I’ve described, every one of them distort the marketplace, every one of them,” he said. “If you look at your goal – being reducing CO2 emissions – if you have similar tools available to all supplies, all resources, you’re going to have less market distortion than what you do by government picking winners and losers.”
Reaching policy parity for CCS becomes even more important with the realization that fossil energy is not going anywhere. Refusing to extend to CCS the support given to other low-carbon energy sources will not change that simple fact, Worthington said. “We all know that the world is going to continue burning fossil fuels and for a very, very, very, long time, maybe 100 years, maybe more than 100 years, but countries are going to develop their domestic resources rather than spend their money out of their economy to buy something from somebody else. Those that have coal, those that have natural gas, are going to use it,” he said.
