Dear all I feel duty bound (well perhaps a bit strong, more a case of it would be a good idea) to provide some feedback on the comments I received to my previous ramble. Time as usual seems to have flown by and I stopped responding to some individual comments on the basis I was preparing this follow up ramble. So apologies to those who anticipated they were due another response. In deed I find I have the time to complete this ramble as I’m currently holed up with “flu like symptoms” or perhaps more appropriately “Man Swine Flu” but it has got me out of a red eye round trip to Aberdeen at least.
Comments on my previous ramble and carbon capture and storage in particular fell under a number of topics;
Technology was one issue. Should it be pre or post combustion capture? General feeling of government interference in the sense that they were making choices through their competition for projects which should be left to competition. Sorry a very UK centric view. I did detect that most of those who supported post combustion capture seemed to be associated with companies keen to build power stations now and retrofit the carbon capture later, clearly only a post combustion technology works in such circumstances. Surprisingly there was no attack on the storage bit of the technology, my geological credentials must have more substance than I imagined! Personally I feel both pre and post combustion technologies should have their chance but that needs to be driven by economics for which clear price (economic) signals are needed. Which neatly brings us the most debated point, how do you make the economics work?
Economics, at what price of carbon does this make sense? There was a general bemoaning of the vagaries of the carbon market, “the price is too low and with allowances set by politicians (basically you can’t trust them to stick to their guns) there is no market certainty”. All this combines to give an uncertain investment future.
A number of people advocated a carbon tax. I don’t think taxes are a good way of allocating resources and incentivisning people, especially as I always seem to pay a disproprtionate share of them (from my perspective). We would have an inefficient tax impossing the costs upon which people make decissions and in order to achieve the goal of meeting the higher costs of clean generation there would need to be a series of inefficient subsidies to the generators. The way I see carbon taxes they create two sets of missed targetting and opportunities to medle by governments probably with exponential or at least geomtric adverse effects.
So in my mind that leaves us with a market (trading solution). Structurally cap and trade is tried and tested in some markets, however it is crucial in such a system that it has universal application otherwise human nature will lead peopel to circumvent its costs. We all know how difficult that will be to achieve. If its not achieved that will just increase governments propensity to tweak the allowances “so as to be fair” to their own industry. Which is the other big fundamental problemn an inability of politicians to agree upon meaningful levels of cuts and so create a market where carbon prices incentivise the levels of investment needed. In other words the volume caps are too high!
Pricing, there were a number of calls for a floor to the carbon price to help underpin investment decisions. Perhaps if allowances are to be auctioned, the agency selling them could intervene to buy back allowances at a certain floor price thus providing a floor but also further reducing permitted emissions by removing the ones it buys back from the market. On the flipside the USA is set to introduce a carbon cap and trade scheme but politicians are responding to lobbyist by supporting a cap on the price, the very opposite of what is required. However, it is probably the price of getting a scheme in place at all.
Governments, from the above you will see that governments and politicians are critical to underpinning any CCS (or other green) investment. Maybe we are asking too much of them. Afterall in a democracy few politicians want to imposse additional costs on the electorate (especially if it is transparent that they did it, e.g. a tax) it tends to have a negative effect at the ballot box. However, leaving aside the current adverse economics, given the responses I recieved uncertainty of political fickleness remains the single biggest impediment to CCS investments.
Is Climate Change happening, despite my trying to duck this issue in my previous note I inevitably got some feedback from what I think the media would call “climate change scheptics” attacking the underlying science. Well I can’t claim to be a climatologist and clearly there are some sophisticated and complex processess in action in the atmosphere. The geologist in me, from when I was doing the job underground at the working face, always found it best to use the information available to me and interprate it using my knowledge and skill (not that I have much or any (respectively) on this particular issue and am inclined to defer to the climate experts). In this case there seems to be overwhelming evidence supporting climate change and a considerable amount pointing the finger at us. In such circumstances the rational thing is to react to the information as best we can. If we are wrong and man is not responsible for climate change then what will be will be – it won’t be the end of the world, if we are right and man is at least in part responsible then our situation is considerably improved over what it would have been and hopefully it won’t be the end of the world either.
In conclusion still a long way to go, but mainly an issue of politics rather than technology and economics. If the politicians get there act together then the economics will follow and the best technologies should win out.
Regards
Richard Harper
Managing Director
Harper Energy
(o) +441189545726
(m) +447738159962
(e) richard@harperenergy.co.uk
Tags: Carbon capture and storage, CCS
