Price floor needed to justify cost of CO2 capture

Monday, April 20, 2009

What could persuade you to pay billions of dollars to build a refinery twice as big as Wembley Stadium to extract a gas of value to no one and then have it put it in a hole below the North Sea?

This is what the Government is asking Britain's utilities to do. Unsurprisingly, they are shuffling their feet. The technology to extract CO2 from power station flues and from the original fuel (coal, coke or natural gas) is proven, but no one has done it on a scale to decarbonise a 2,000 megawatt electricity generator.

Costs spin out of control in first attempts, but the problem is greater because we are asking power companies to add cost for no return. Carbon capture and storage (CCS) is commercial nonsense, but government has decreed that CO2 has a value - not a positive one (it is a mainly useless gas) but negative. Power companies fear that if they build fossil-fuel power plants without CCS, they will soon be punished. Businesses can work with negative value, but must know the potential harm. They want to see the carbon price that must be paid. Otherwise, carbon is another wild variable, like oil prices, and even worse because it is political.

A carbon price floor, a tax or a mandate to buy CCS-abated electricity, is the answer and it is interesting that companies are now seeking competitive advantage; National Grid wants to ship CO2; BP is pitching itself as a hydrogen supplier and CO2 storer. The ball is in the Government's court.

This story was featured on The Times Website.

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