Lenore Taylor
The Age, June 16, 2012
IT WAS the technology that was going to help underpin the nation's climate change strategy. In 2009, the then prime minister, Kevin Rudd, pledged to ''lead the world'' in carbon capture and storage technology, which traps carbon dioxide emissions, permanently storing them deep underground.
The Rudd and Gillard governments allocated almost $2.5 billion to push the idea, which would be used to ''clean up'' coal-fired power stations in Australia and in the countries to which we will export $44 billion worth of coal this year. But so far there is almost nothing to show for their effort.
Instead, the fledgling technology is struggling. Critical assumptions about when it will be available could be wrong, with dire consequences for efforts to slow climate change and for Australia's revenue base as the world's largest coal exporter.
So far, not one industrial carbon capture and storage project is running in Australia, and even the technology's most enthusiastic backers say that without big changes to government subsidies and policy there won't be one for many decades.
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The only operating project in Australia is at Western Australia's Gorgon gas fields, where carbon dioxide is injected directly back underground. It is the world's largest CCS project, generating much international interest. But it is a long way from proving the capture, piping and storage of carbon dioxide from a power station.
Meanwhile, everyone appears to be blaming everyone else for the failure.
The government says coalminers should be investing more in the technology crucial to the future of their industry. The industry blames the influence of the Greens for blocking crucial subsidies for CCS. The Greens say CCS is a dud, and was only ever advanced as a ''fig leaf'' to justify the ridiculous ''obscenity'' of the ALP's policy to reduce greenhouse emissions at home while approving a massive expansion in coal exports. Whatever the reason, the lack of progress means Australia's climate change policy - and the future of its second largest export industry - is based on an assumption that may prove incorrect.
''It's the big problem at the centre of the policy, which no one wants to acknowledge,'' says Tony Wood, energy program director at the Grattan Institute and a former executive at Origin Energy.
Treasury modelling assumes power plants fitted with carbon capture and storage will provide one-third of Australia's power by 2050. It says if CCS is not used, we will not be able to reduce domestic emissions reductions as much as we have pledged, or only at significantly higher cost.
The International Energy Agency has said carbon capture and storage should account for 25 per cent of global emission reductions by 2050, and that without it, the cost will be 70 per cent higher. But most of the $1.7 billion allocated to kick-start the technology in Australia through the government's carbon capture and storage flagships program is unspent. The fund was supposed to ensure Australia had at least one large working CCS plant by 2015.
Dick Wells, the chairman of the government's expert advisory council on the technology, says that goal was never realistic. Ultimately, he says, no amount of upfront government assistance can make up for the fact that carbon capture and storage is excluded from the renewable energy subsidies without which the business case for any power source in Australia other than cheap coal simply does not add up. A deeply frustrated Wells wrote to Prime Minister Julia Gillard late last year warning bluntly that the government would fail to meet its goals for CCS without some policy to ''bridge the gap'' between Australia's $23-a-tonne carbon price and the $80 or so needed for CCS, in the same way that the renewable energy target and the new $10 billion Clean Energy Finance Corporation give a ''leg up'' to wind power and other renewables. CCS is excluded from both.
Wells has no doubt the reason operational subsidies for carbon capture and storage have not been forthcoming is because of the influence of the Greens. ''I presume they have put pressure on the Prime Minister to exclude CCS … I wrote to the Prime Minister expressing concern and disappointment that it was excluded [from the Clean Energy Finance Corporation].''
Dr Peter Cook, former head of the CO2CRC and now professorial fellow at the University of Melbourne, says progress is being made, particularly in understanding how carbon dioxide can be sequestered.
But he agrees with Wells that ''a $23 carbon price will not drive this investment - you need $100 a tonne or something of that sort to drive it. Other low-emissions technologies get effective support of that order.''
And Brad Page, the new chief executive of the government's ''global carbon capture and storage institute'' says the lack of operational subsidy is hobbling the technology worldwide.
''There has been very substantial sums made available by governments, around $25 billion globally, for first-of-a-kind deployment, usually though capital subsidies,'' Page says. ''But usually there is no assistance when the plants are operating in the market … it costs them more to compete in the market, but the operating costs are almost never recognised, and that's the great gap. Wind has a renewable energy target delivering the equivalent of $90 a tonne. Therein lies the problem.''
He says governments are going to have to face up to the problem some time. The world, he says, cannot meet its ambition for limiting global warming to 2 degrees without CCS. ''There is so much coal and gas that will be burnt,'' he says. ''There is no point saying the world should go renewable - in the medium run that won't happen. So at some point many countries, including Australia, are going to have to come to grips with this serious policy question. You can't roll these things out without serious policy intervention … it can't work.''
But the Greens say carbon capture and storage does not deserve funding because it does not work. They say renewable energy has ''won the race''.
''It was never going to be viable,'' Greens leader Senator Christine Milne tells The Saturday Age. ''You are never going to be able to find the areas to store it at scale, nor are you going to be able to afford the pipes to take it from one end of the country to another. So the fact is it is not going to work … it's too expensive, it's last century and we don't need it because we have got renewables … Why would you stick with the horse and buggy era when you can move on?''
Asked about the assumptions made in the carbon pricing scheme that carbon capture and storage would be available, Milne says that is Labor's problem. ''It's a problem for the government because it is all about legitimising ongoing coalmining and expansion and coal exports overseas … If you admitted in Australia that CCS is a complete failure and is not going to continue, then how can you justify a position which says I am serious about addressing climate change, however, I am digging up coal and I am exporting it in larger and larger amounts to other countries to keep polluting the atmosphere?
''Carbon capture and storage is the fig leaf that covers for the government the complete obscenity of saying, on the one hand, we want to reduce greenhouse gas emissions and … on the other, we want to ratchet up coal exports, have them burnt overseas and make the situation worse.''
But some climate advocates agree carbon capture and storage has to be part of the climate change fight. ''It has to be one of the clean energy options available,'' says Climate Institute chief executive John Connor. ''All the modelling says that to avoid temperature rises of more than 2 degrees Celsius we have to take carbon dioxide out of the atmosphere … and for CCS that might mean some kind of subsidy is necessary.''
Climate Change Minister Greg Combet says it is coalminers themselves who should ''quite significantly lift their game'' in investing in the technology.
''I would hope companies in the fossil fuel sector see the commercial desirability of it. If you are sitting there investing in a coalmine that might have a life of 40 or 50 years, and you are not taking into account the development of carbon pricing internationally, the development of legally binding [greenhouse gas reduction] obligations on all countries, including China and the US, from 2020, and not recognising that has implications for the fossil fuel sector … then you are not being a very sensible business person,'' he says.
''I think it would be wise for them to do so. Coal is their product. If they are thinking about the future market of their product … I think they could lift their game quite significantly.''
The coal industry imposed a 20¢-a-tonne levy on miners in 2006 to establish what it said would be a $1 billion fund over 10 years to help develop the technology. So far $289 million has been committed.
Australia is not alone in its lack of progress. The British government recently relaunched a £1 billion competition to try to revive its carbon capture and storage industry, after its first try failed to find a successful bidder. The US has some operating projects that inject CO2 in order to retrieve more oil reserves, but US Energy Secretary Stephen Chu said recently that without a carbon price, US companies were unlikely to invest in regular CCS projects.
In Australia, Tony Wood agrees it is fair for the industry to demand government policies to underpin carbon capture and storage, as they do for other low-emission technologies, but he also says the industry should be doing more.
''If you accept the science of climate change, there is no future for coal without CCS … If the industry took this seriously they would be out there clamouring for carbon pricing and for support for carbon capture and storage, but instead they take the short-term position of not supporting a carbon price at all,'' he says.
The experience of the $1.7 billion CCS flagships program - one of Labor's biggest funding allocations for carbon capture and storage - suggests something needs to change. The program, begun in 2009 with $2 billion (it was cut by $250 million after the Queensland floods) initially selected four domestic projects, Queensland's ZeroGen (which went into liquidation in 2011), the Wandoan power plant (now deferred), the Collie Hub south-west of Perth (still in the early stages) and a Victorian project called CarbonNet (also still at ''feasibility stage'').
Experts hold out little hope the two remaining projects will do much more over the next few years than try to ''prove up'' the underground storage sites for CO2 injection. Another Queensland demonstration project, Callide Oxyfuel, is expected to be operational next year.
But without big changes in policy, Australia will not be able to use carbon capture and storage as planned. That means it will need to rework the assumptions underpinning its crucial carbon tax reform - among them the role of coal-fired electricity generation in Australia, the cost of emission reductions, and the idea that we can be part of a global effort to limit global warming while continuing to export billions of dollars worth of coal.
