Sustainable Affairs: Carbon Markets

After US pulls plug, future unclear for 'clean coal'

The US government's decision to end funding for a "zero emissions" coal-fired power plant project has cast doubt over the future of "clean coal" to meet growing global energy needs.

The US Department of Energy in late January decided to pull the plug on funding for the FutureGen project launched in 2003 to demonstrate how coal can be burned cleanly, with carbon emissions stored underground in a process known as sequestration.

Government officials say they remain committed to the idea of clean coal, but a public spat with a public-private alliance raises doubts about any viable project.

FutureGen, a partnership with utilities and coal companies in the US, China, Europe and Australia, announced Thursday it would continue to pursue the project despite the loss of an estimated 1.1 billion dollars in US government funding, or some three-fourths of the project.

The project, which last year selected a site at Mattoon, Illinois, "is in the best position to move ahead with the urgency that the energy and climate challenges demand," FutureGen chief executive Michael Mudd said.

"The board wants to move forward with the project," said FutureGen spokeswoman Carly Baker.

"They believe it is in the best interest of the public."

But FutureGen officials said they would continue to work with the US Congress and administration officials in an effort to secure funding.

US Energy Secretary Samuel Bodman argued that FutureGen no longer needs taxpayer support.

"Innovations in technology and changes in the marketplace have created other viable options," Bodman wrote in a letter to the St. Louis Post-Dispatch. "That diminished the need for a demonstration project."

But FutureGen officials disagree. Baker said the project is developing methods "to get the technology that could be used in future plants around the world."

"There's no other plant," she said, which uses both coal gasification and carbon capture and sequestration to virtually eliminate pollution and greenhouse gas emissions, she said.

Coal has been blamed by environmentalists as a major culprit in global warming because of its high level of carbon dioxide emissions.

But it supplies about half the electric power needs in the United States and two-thirds of energy needs in China, since it costs less than most alternatives and both countries have ample domestic supplies.

President George W. Bush has long been a backer of clean coal technology, and some studies suggest coal could be competitive with other energy sources even with new technology to remove carbon and other pollutants.

Senator Dick Durbin, an Illinois Democrat, said the administration's decision to turn its back on FutureGen after years of planning was a "cruel deception."

Julie Ruggiero, a spokeswoman for the Department of Energy, said the administration remains committed to clean coal efforts but wanted to change course in face of a project with "escalating costs," much of which were to be assumed by the government.

"Coal is our nation's most abundant energy resource, and we want to burn coal more cleanly," Ruggiero told AFP. "This administration has invested over 2.5 billion dollars since 2001 on clear coal research."

Ruggiero said the administration is seeking to restructure FutureGen to establish "multiple commercial sites" and "a better balance of taxpayer and private share" of costs.

Deputy Energy Secretary Clay Sell said the government began reassessing its role after "I learned early last year that the cost estimates for this project had nearly doubled."

Sell said FutureGen would place the government at risk by surrendering the plant to mortgage holders if any of the private companies defaulted.

"Ultimately, we could not come to an agreement with the FutureGen Alliance as to how to restructure the existing project and, ultimately, we believed that the public interest mandated that we restructure our overall approach to accomplish the objectives of the FutureGen effort," Sell told a conference call of journalists.

The deputy secretary said there are over 33 plants that are being proposed using the new technology to store carbon underground.

"This fact, this changing underlying market dynamic, underpins why we believe our new approach is fundamentally better to advance the state of carbon capture and sequestration," he said.

Source: Agence France Pressee

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U.S. President George W. Bush's proposal yesterday to convene talks between the world's biggest emitters of greenhouse gases won't bypass existing negotiations on global warming, the United Nations' top climate official said.

In a speech in Washington, Bush softened his past opposition to setting global goals to cut pollution, calling for talks between the U.S. and major emitters such as India and China to establish a new framework for when the Kyoto Protocol treaty on emissions expires in 2012. That prompted criticism from environmentalists that he was bypassing global talks hosted by the UN Framework Convention on Climate Change (UNFCCC).

``I was initially concerned that this was a new track outside the UN system involving only a very limited number of countries,'' UNFCCC Executive Secretary Yvo de Boer said today in a telephone interview. After a phone call from the White House, ``I was very emphatically reassured that this is not intended to replace the formal negotiations, that it's intended to feed into the UNFCCC climate change negotiations,'' he said.

Scientists say that emissions of greenhouse gases such as carbon dioxide are ``very likely'' the main cause of global warming, which may cause an increase in floods, droughts and extinctions. That's prompted politicians in the European Union to say emissions should be halved by 2050 in order to limit warming to 2 degrees Celsius (3.6 Fahrenheit) from the 18th century.

``By the end of next year, America and other nations will set a long-term global goal for reducing greenhouse gases,'' Bush said in the speech. ``In addition to this long-term global goal, each country would establish midterm national targets.''

`Totally Unacceptable'
Countries including Japan, Germany and the U.K. welcomed Bush's proposals, with U.K. Prime Minister Tony Blair hailing it as a ``huge step forward'' for the U.S.

Environmentalists criticized Bush's proposal. Greenpeace's climate campaigner Robin Oakley yesterday called the plan a ``classic spoiler,'' while Tony Juniper, director of Friends of the Earth, said Bush remains a ``block'' on reaching a global agreement. Saleemul Huq, head of climate change at the London- based International Institute for Environment and Development, said Bush was trying to detract from the UN talks.

``It's derailing the ongoing UN process, trying to stop it from taking place rather than actually trying to come to a solution,'' Huq, who is also a member of the UN Intergovernmental Panel on Climate Change, said today in a phone interview. ``It's bypassing the multilateral process, taking a few countries on board and making deals behind the scene: totally unacceptable.''

G-8 Talks
Bush has historically been opposed to emissions reduction targets and in 2001, he rejected Kyoto, which would have required the U.S. to cut emissions by 7 percent from 1990 levels by 2012.

The administration has also been seeking the removal from a draft Group of Eight declaration of targets for reducing greenhouse gases and language stressing the need for urgent action to fight climate change.

The G-8 meeting takes place June 6-8 in Heiligendamm, Germany. Items the U.S. wants deleted from the text include a reference to limiting global warming to 2 degrees Celsius (3.6 degrees Fahrenheit), targets for a reduction of greenhouse gases to half of 1990 levels by 2050, and language that says tackling climate change is an ``imperative not a choice.''

Carbon Markets
De Boer said the White House officials he spoke with didn't give an assurance the U.S. will commit to absolute emissions reductions targets. Bush didn't indicate what the targets might be, or whether they will be compulsory.

``President Bush's proposal is flawed on all counts,'' former U.K. Environment Minister Michael Meacher said. ``The proposed U.S. long-term target is unspecified, but will almost certainly be based on voluntary targets which have always been ineffective and prevent carbon markets operating -- the only realistic way of cutting carbon emissions on the global scale.''

De Boer also expressed concern that Bush's initiative doesn't mention a role for the carbon market.

Under carbon trading, companies are set caps on the amount of greenhouse gases they can emit. If they exceed those caps, they're able to offset by buying carbon permits assigned to other companies that undershoot their targets, or by purchasing UN credits that guarantee emissions are cut by investments in projects that reduce emissions in developing nations.

`Lacking'
``The thing that is at least at the moment evidently lacking in Bush's proposal is this notion that you also need a carbon market that puts in place incentives that will allow developing countries to be more ambitious'' in reducing emissions, de Boer said. ``The notion of subsidizing the Chinese to act on climate change is politically difficult for the U.S.''

China has said it's up to developed countries to act, because they are responsible for the bulk of historic emissions. The country's State Council, or cabinet, today approved a resolution to curb its emissions. The statement didn't mention the Bush initiative.

``Climate change has no borders,'' a panel including Premier Wen Jiabao said in the statement. ``In reacting to global climate change, the world faces a huge challenge, and it depends on the hard work of every country.''

It isn't realistic to immediately require developing nations to set compulsory emissions reductions targets, though a number of other goals could be set, De Boer said.

``There could be national targets to limit emissions growth, there could be targets to improve energy efficiency in certain industries, there could be targets to put in place renewable energy policies,'' he said.

De Boer, who as a member of the Dutch government helped to negotiate Kyoto, said Bush's talks may be similar to those that preceded the protocol, which also didn't involve all countries.

``We spent a lot of time in Kyoto just behind closed doors with the EU, the U.S. and Japan,'' de Boer said. The first round of U.S.-led talks may take place in the autumn, he said, adding that decisions from those discussions will be taken ``to the UN convention as the place where all of the nations' interests are addressed.''

Bloomberg
by Alex Morales and Mathew Carr