Well, well, what an interesting idea.
Lord Adair Turner, chairman of the Committee on Climate Change (pictured), has – we are told – written to the energy secretary asking that the Carbon Capture and Storage (CCS) competition be extended to include gas as well as coal projects.
The committee is saying that efforts to tackle global warming require reducing emissions from electricity generation to almost zero by 2030, which should rule out new conventional gas-fired power stations after 2020.
I fear that Richard has missed a little trick here. Yes, of course it\’s insane, yes, of course it\’s economic warfare against us by our own rulers. But there\’s still more to it than that.
For carbon capture from gas is a great deal simpler than carbon capture from coal.
You see, to get the carbon out of coal you\’ve got to first burn it then try to capture the CO2. This isn\’t easy.
However, to capture the carbon out of natural gas you don\’t need to burn it first. What you do is strip the carbon out (natural gas being CH4) and then burn the hydrogen. Or, if you wanted to be sensible, you\’d run your H2 through combined heat and power systems running on solid oxide fuel cells (it really is only a coincidence that my favourite metal, scandium, is used in such fuel cells).You can then, at least I assume you can, burn the C to get CO2 and thus you get a pure stream of CO2, not something you need to capture in any difficult manner. Just a pipe on the outlet of the furnace or turbine.
And, absolutely best of all, it\’s not actually clear that this will cost anything to do. That it might not cost anything is lovely, while the uncertainty over the cost isn\’t of course. And that\’s where I think it gets interesting.
BP (yes, that BP) has been touting a scheme to test this for years. Up at Peterhead (which, purely by chance, is just down the road from St Andrews, the home of Europe\’s leading researcher into scandium based solid oxide fuel cells. Serendipity or what?). Let\’s take natural gas from a N Sea field. We\’ll strip it, burn it and pipe the CO2 down into a near end of life oil field. This gets rid of the CO2. At least, we think it does, but this is something we\’re testing, see?
That CO2 then brings up the last oil in the field….nothing very unusual about the basic idea, all sorts of things are pumped down wells to bring up the last bit. CO2 is novel but then this is an experiment, see?
Now yes, pumping CO2 about has a cost: but getting up oil that we couldn\’t get up any other way is a benefit, a source of income. One covers t\’other. Well, maybe, but this is an experiment, see?
So, why hasn\’t the experiment been done? Well, there\’s that pesky thing called the tax wedge. We\’re almost certain (certain to within the limits that BP is willing to take a flier on it) that the value of the oil coming up plus the electricity generated covers the cost of getting rid of the CO2 (I don\’t know whether this is including a credit for disposing of the CO2 or not, sorry, perhaps I should).
However, BP must pay quite large royalties to The Treasury on each barrel of oil they bring up. This is of course right and proper: Ricardian Rents should be captured by the State, not individual actors. However, oil royalties are high enough that at current levels they mean that the post tax value of the oil does not cover the costs of getting rid of the CO2.
So, what BP asked was, look, this oil that is only going to come up if we bury the CO2….can we pay less tax on that oil please? It\’s not, after all, a loss to The Treasury: if we don\’t get the reduced tax rate then we\’re not going to do the experiment, the oil will stay underground for ever and the Treasury will get nothing.
And what was Gordon Brown\’s answer?
Well, yes, you can guess can\’t you.
So, experiment undone, technology untested, and all because the Laddie loves more tax. Even to the extent of not collecting more tax in aggregate because it would mean lowering a tax rate.
Which brings us back to Adair Turner. It is already possible to test this idea while at the same time increasing revenue to The Treasury. All that has to be done is to offer a lower royalty rate to those already willing to conduct the experiment.
No, I\’ve not gone and looked at his proposals in detail: but I\’d be willing to bet reasonably large sums that he ain\’t. OK, here\’s his letter. I\’m right!
He says that we should \”fund\”, ie spend more of the money we haven\’t got, a gas CCS project. Instead of increase the revenue we get to cover the amount of money we haven\’t got by lowering a marginal tax rate.
Which is, of course, why having Adair Turner poncing about at the head of yet another quango is such a damn bad idea.
Could we please all get with the program? Yes, of course, economics teaches us that free lunches are very rare and precious things indeed: but the most common place to find them is not in getting government to do something, it\’s in getting government to stop what it\’s already doing.