The 21st Century climate challenge

3Avoiding dangerous climate change: strategies for mitigationAt present, conventionalcoal-fired power plants enjoya commercial advantagefor one simple reason: theirprices do not reflect thecosts of their contributionto climate changeBarriers to accelerated development anddisbursement of CCS technologies are rooted inmarkets. Power generation technologies that canfacilitate rapid deployment of CCS are still notwidely available. In particular, IGCC plants arenot fully commercialized, partly because therehas been insufficient R&D. Even if full-scaleCCS systems were available today, cost would bea major obstacle to deployment. For new plants,capital costs are estimated to be up to US$1 billionhigher than conventional plants, though there arelarge variations: retrofitting old plants is far morecostly than applying CCS technology to newIGCC plants. Carbon capture is also estimatedto increase the operational costs of electricitygeneration in coal plants by 35–60 percent. 113Without government action, these cost barrierswill continue to hold back deployment.Coal partnerships—too fewand too limitedSome of the obstacles to the technologicaltransformation of coal-fired power generationcould be removed through carbon pricing.At present, conventional coal-fired powerplants enjoy a commercial advantage for onesimple reason: their prices do not reflect thecosts of their contribution to climate change.Imposing a tax of US$60–100/t CO 2orintroducing a stringent cap-and-trade scheme,would transform incentive structures in thecoal industry, putting more highly pollutingpower generators at a disadvantage. Creatingthe market conditions for increased capitalinvestment through tax incentives is one ofthe conditions for a low-carbon transition inenergy policy.Policies in the United States are startingto push in this direction.The 2005 EnergyAct has already boosted planning applicationsfor IGCC plants by putting in place a US$2billion Clean Coal Power Initiative (CCPI)that includes subsidies for coal gasification. 114Tax credits have been provided for privateinvestment in nine advanced clean coal facilities.Public–private partnerships have alsoemerged. One example is the seven CarbonSequestration Regional Partnerships that bringtogether the Department of Environment, stategovernments and private companies. The totalvalue of the projects is around US$145 millionover the next four years. Another example isFutureGen, a public–private partnership thatis scheduled to produce the United States’ firstnear-zero power plant in 2012. 115The European Union has also movedto create an enabling environment for thedevelopment of CCS. The formation ofthe European Technology Platform forZero Emissions Fossil Fuel has provided aframework that brings together governments,industry, research institutes and the EuropeanCommission. The aim: to stimulate theconstruction and operation by 2015 of up to 12demonstration plants, with all coal-fired powerplants built after 2020 fitted with CCS. 116 Totalestimated funding for CO 2capture and storagetechnologies for 2002 to 2006 was around €70million (US$88 million). 117 However, under thecurrent European Union research framework,up to €400 million (US$500 million) will beprovided towards clean fossil-fuel technologiesbetween 2007 and 2012, with CCS a priority. 118As in the United States, a range of demonstrationprojects are under way, including collaborationbetween Norway and the United Kingdom onthe storage of carbon in North Sea oil fields. 119Emerging private–public partnerships haveachieved important results. However, far moreambitious approaches are needed to acceleratetechnological change in the coal industry.The Pew Center on Global Climate Changehas argued for the development of a 30-plantprogramme over 10 years in the United Statesto demonstrate technical feasibility and createthe conditions for rapid commercialization.Incremental costs are estimated at aroundUS$23–30 billion. 120 The Pew Center hasproposed the establishment of a trust fundcreated by a modest fee on electricity generationto cover these costs. While there are a range offinancing and incentive structures that could beconsidered, the target of a 30-plant programmeby 2015 is attainable for the United States. Withpolitical leadership, the European Union couldaim for a comparable level of ambition.The danger is that public policy failures willcreate another obstacle to CCS development146 HUMAN DEVELOPMENT REPORT 2007/2008