Untie Utilities' Hands on Coal

   Can we have coal power and a stable, healthy environment, or do we have to choose? That question will be front and center today as Sens. Pete Domenici, R-N.M., and Jeff Bingaman, D-N.M., convene the Energy and Natural Resource Committee to consider the future of coal power generation.

    The United States is blessed with abundant domestic coal reserves, and today about half of our electricity comes from coal. But it has become abundantly clear that the carbon dioxide (CO2) coal power produces is a chief culprit in global warming and the resulting destabilization of our environment.

    The good news is that new technologies could generate power from coal without releasing CO2. The bad news is that without action from Washington, these technologies will not be deployed in time.

    The Bush administration continues to oppose any mandatory reductions in the CO2 emissions that cause global warming. But a variety of factors are converging to make that position unsustainable in the long term.

    Around the world, political pressure from the 144 countries that have signed on to the Kyoto Protocol will build as their economies start to make more sacrifices to reduce emissions. The already strong scientific consensus that CO2 and other greenhouse gases are changing the Earth's climate is growing ever stronger, and public awareness has become correspondingly stronger as well.

    A recent report by the bipartisan National Commission on Energy Policy recommended the establishment of a mandatory, economywide system of tradable permits to limit CO2 and other greenhouse gases, with a cap on permit costs to keep potential costs constrained.

    Although political support for CO2 regulation may still be insufficient to pass legislation, the notion that the United States needs to take action on CO2 is gaining momentum in Congress, as demonstrated by the current holdup of the administration's Clear Skies legislation due to its failure to include CO2 limits. And key political players in both the public and private sectors now acknowledge that it is inevitable that the United States will regulate CO2 emissions eventually.

    Until that happens, however, critical technical decisions are being made by U.S. companies that impact their financial futures and the nation's future CO2 emissions. The inevitable yet elusive nature of U.S. CO2 regulation puts companies in an awkward position, increasing the risk of their technology investment decisions and complicating their strategic planning for environmental compliance.

    Many companies are ready and able to make changes to reduce their CO2 emissions, but they are reluctant to act because the regulatory framework may punish them for making forward-thinking investments in CO2 reduction technologies.

    The coal industry will be dramatically affected by eventual CO2 emissions regulations. Coal-fired power generation and industrial coal use are responsible for 36 percent of U.S. fossil CO2 emissions, and these industries have evolved with no costs or constraints on their CO2 emissions.

    Once the government sets limits on them, the added cost to production will prompt an adjustment within these industries, resulting in a new mix of energy sources and technologies. Renewable energy will become more economically attractive, while new incentives will encourage deployment of new technologies to clean up coal and gas-fired power plants by capturing the CO2.

    In the power sector, pressure to build more coal-fired power plants is growing because of high natural gas prices and abundant domestic coal supplies. Coal gasification technology, particularly Integrated Gasification Combined Cycle (IGCC), allows for more effective capture of CO2 than conventional coal combustion.

    IGGC technology is often more efficient and also produces fewer other pollutants, including particulates, sulphur dioxide and mercury. But without any CO2 regulation, IGCC is not commercially competitive because of its limited operational history.

    Given the 50–70 year lifetimes of power plants, and the inevitability of CO2 regulation within that timeframe, new coal plants built in the United States should employ gasification technology with the capability to capture and store CO2.

    To make this happen, the federal government has to offer financial incentives for IGCC deployment and additional support for commercial scale CO2 capture and storage demonstration projects. This will open the door to a future of environmentally-responsible coal power. U.S. industry will benefit from leading the way, as huge markets for these technologies will emerge in other major coal-consuming countries including China and India.

    Given the political and economic importance of sustaining the use of our abundant domestic coal reserves in a climate-constrained world, the U.S. government's current failure to more aggressively support innovation in these technologies is mystifying.

    Let's hope Domenici and Bingaman's efforts help remedy this situation, so that we can reconcile our need for a stable, healthy environment with our growing national energy demands.

    Jennie C. Stephens is a research fellow with the Energy Technology Innovation Project at Harvard's Kennedy School of Government. Kelly Sims Gallagher is the director of the Energy Technology Innovation Project and teaches at the Fletcher School of Law and Diplomacy.