Clean coal projects face political, financial headwinds-report

By Valerie Volcovici

WASHINGTON, Oct 10 (Reuters) - At least 130 projects thatcapture and store carbon emissions at coal power and industrialplants must come online by 2020 if the world is to stay oncourse to keeping the rise in global temperatures below athreshold deemed dangerous by scientists, a new report releasedWednesday said.

In its 2012 report on the global state of carbon capture andstorage (CCS) deployment, the Global CCS Institute warned thatreaching the 130-project goal from 16 in the works will beunlikely amid current investment levels and regulatoryuncertainty.

The institute projected that only 51 of the 59 projectsidentified in its annual survey may be operational by then andsome are unlikely to proceed.

"Since CCS is the only technology available for thedecarbonization of industrial sectors such as iron, steel andcement manufacture, the risk of not being able to limittemperature rises to just 2°C becomes even greater," the reportsaid, referring to the threshold.

The failure of many major governments to enact legislationto cap carbon emissions and make it more expensive forfacilities to pollute undermines private sector investment inthe expensive technology.

In the United States, where the two presidential candidateshave touted the support for the coal industry, there has beenlittle mention of investing in CCS because the boom in shale gasproduction from the fracking process has drastically lowerednatural gas prices, driving greenhouse gas emissions to 20-yearlows.


In the past year, the number of large-scale CCS projectsglobally has increased by just one to 75, according to thesurvey.

Eight projects were cancelled since 2011, but nine newprojects were identified, of which most will use the capturedcarbon to inject underground and recover oil or gas.

The United States leads the number of projects with 24active and planned, followed by Europe with 21 and China with11.

Projects to use carbon capture to recover oil dominates theprojects in development in the United States and Canada.

CCS activity in China saw the biggest growth last year, withfive of the nine new projects identified since 2011 located inthe world's biggest greenhouse gas emitting country.

The report also shows some progress in early-stage CCSdevelopment in developing countries, where greenhouse gasemissions are expected to rise as they become more populated andindustrialized.

Nineteen developing countries are engaged in CCS-relatedactivities but in order to achieve global emission reductiontargets deemed necessary by the International Energy Agency(IEA), 70 percent of CCS deployment will need to occur innon-OECD countries by 2050.


The report cited policy developments in the UK, the UnitedNations and China that have occurred since 2011 that will helpdeploy CCS on a wider scale.

In the UK, the government launched a comprehensive policy topush CCS beyond demonstration scale toward commercial scalethrough reform of the electricity market.

The United Nation's climate change body this summer allowedCCS to qualify as a carbon offset project under its CleanDevelopment Mechanism, enabling developing countries to earncarbon credits for deploying the technology.

In China, CCS was included in China's 5-year plan thatoutlines policy priorities.

But the institute warned that these developments are notsufficient to play a role in reducing carbon emissions andpreventing major temperature increases.

"Funding for CCS demonstration projects, while stillconsiderable, is increasingly vulnerable and the level offunding support still available will service fewer projects thaninitially anticipated," the report said.

The institute warned that governments will need more thanjust carbon pricing legislation to stimulate CCS investment andshould be disadvantaged to low-carbon technologies, such asrenewables, which receive more subsidies and incentives.

"In order to achieve emission reductions in the mostefficient and effective way, governments should ensure that CCSis not disadvantaged," the report said.

(Reporting By Valerie Volcovici; Editing by Richard Chang)

((valerie.volcovici@thomsonreuters.com)(+1 202 8988373)(Reuters Messaging:valerie.volcovici.thomsonreuters.com@reuters.net))