Carbon capture schemes an expensive step into the unknown

If you're new here, you may want to subscribe to our or .

| Sourced From |

As tipped here a month ago, the Federal Government will spend $2 billion to build “industrial-scale” carbon capture and storage projects in Australia.

You would be better off just burying the money, from an environmental point of view, because many doubt the CCS technology will work. The best proponents can say is, it has to. But if it doesn’t, the money is worse than wasted, because the spending will have exacerbated the climate problem by justifying construction of new coal-fired power stations that burn for another 30 to 40 years.

The public could bear the ultimate liability if the technology fails, too, because the Offshore Petroleum and Greenhouse Gas Storage Act - the world’s most comprehensive, according to the Government, when it was passed last November - nicely shifts long-term liability (beyond 15 years) onto the Commonwealth.

There’s loopholes anyway. For example, if a greenhouse gas storage licence holder has “ceased to exist” after a site closure certificate is issued by the resources minister then liability reverts to the Commonwealth.

We’ve seen what lengths James Hardie went to, to avoid its long-tail asbestos liabilities.

Insurance companies would not take on CCS risk at any price, as even the Government recognises. “Obtaining insurance [for CCS] is nigh on impossible because these are pilot schemes,” a spokesman for the Resources and Energy Minister, Martin Ferguson, told the Herald.

Private investment in CCS to date has been minuscule, which is why there is no commercial-scale facility in operation today.

The Australian Coal Association told the Herald that just $25 million had been spent by the end of last year from its Coal21 Fund - the industry’s main vehicle for funding CCS projects - although its members had made legally binding commitments to spend another $496 million. All up the fund expects to invest more than $1 billion over the next decade. The ACA says coalminers are not the prime polluters - it’s the coal-fired power stations - and they should not have to front the expense of CCS.

Ferguson’s office says coal companies had no incentive to invest in CCS under the Howard government. “The reason the coal industry is now starting to make significant contributions toward CCS …is because they now see the Federal Government is going to put a price on CO2 emissions, meaning they now have an economic incentive to invest in reducing emissions,” the spokesman said. Industry reaction to the budget commitment to CCS this week was that it was a mere “down payment” on the investment required - as Dick Wells, the chairman of the Commonwealth-appointed National Low Emissions Coal Council, told one newspaper - or “a bit like peeing in the ocean”, according to Keith Orchison, a columnist and former oil and gas industry lobbyist.

Tony Maher, national president of the Construction, Forestry, Mining and Energy Union, welcomed the government’s CCS spending this week. Two years ago, though, he told a public meeting in Newcastle that - unlike renewables where there was a clear need for Government funding for pilot projects - the coal mining industry was “a very wealthy global private sector industry and it does not need one dollar of public support”.

Maher also admitted scepticism about CCS would “only be overcome once it’s developed … but there’s no reason to oppose the use of the private sector’s money to deploy those technologies. If it doesn’t work, you’ve only wasted Rio Tinto and BHP’s money, and I don’t see that there’s any need to cry about that. If it does work, it’s a tremendous achievement.”

Maher told G-BIZ this week there was no model for private funding for large-scale CCS projects and a hybrid model including public spending was needed.

So having prospered for decades under generous state-based royalty regimes, and having furtively lobbied against effective climate change policy, and having failed to manage the risk that climate change was actually occurring, and having demanded (and won) extensive concessions under the draft emissions trading scheme now that action is urgent, the coal lobby has the hide to demand the public fund the very CCS technology they have been unprepared to back themselves for the last 15 years. And the money needed? Whatever it takes. It’s a bottomless pit.

What do we get for our initial outlay? The Government expects its investment of $2 billion - generating a total investment of $6 billion after 2-for-1 matched funding from industry and state governments - will fund construction of between two and four new CCS-fitted coal-fired power stations generating between 250MW and 450MW each.

By comparison, the $1.2 billion investment in four flagship solar energy stations will generate 1000MW for about $3.6 billion after matched funds are invested, according to the Government’s announcement.

Simply put, CCS is hideously expensive. At Moomba - the biggest known onshore reservoir - it is technically feasible, I am told, and commercially attractive if the carbon price is about $80 a tonne. Well, we’re starting at $10 - so don’t hold your breath. That’s why, speaking on the budget on Lateline Business this week, Industry Fund Services’ chairman and Infrastructure Australia director, Garry Weaven, welcomed the Government’s clean energy expenditure but added he personally had “some question marks over carbon capture and storage as a technology bet”.

WorleyParsons is big in CCS and solar. Last year Worley proposed Australia’s largest solar power project to date, the Advanced Solar Thermal initiative. Backed by Rio Tinto, BHP Billiton, Woodside and others, the project would generate 250MW, for about $1 billion.

That project could qualify for funding under the Government’s solar flagship program, but it would be Worley’s clients that needed to apply. Peter Meurs, managing director of Worley’s sustainable business unit, told the Herald: “The fact is the world hasn’t done enough CCS yet to be very definitive on prices. We need to build more complete projects to get more definitive numbers. My feeling is the Government is doing the right thing, in helping the first large-scale CCS and solar projects get going in Australia.”

My feeling? The solar spending better count, because we’ll never see that CCS money again.