Offsetting Carbon Emissions in Developing Economies
The world is making a transition towards energy generated by renewables, however, it is generally accepted that coal will remain an important strategic fuel for the coming decades. This is due to rising energy demands and the time required for renewables to gain the capacity required to meet these demands. Fossil fuels, particularly coal, will therefore remain important in order to secure global energy supplies. Given the fact that changes in the climate are already taking effect, new clean coal technologies, that aim to reduce the environmental impact of coal energy generation, will play a major role in global strategies to mitigate greenhouse gas (GHG) emissions.
As the Kyoto Protocol is nearing the end of its term and a follow-up is still being negotiated, clean coal developments are being highly scrutinised. This is especially evident when it comes to carbon offsetting in the developing world within the Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC). The CDM is an arrangement under the Kyoto Protocol allowing industrialised countries with a GHG reduction commitment to offset carbon emissions by investing in ventures that reduce emissions in developing countries. Nevertheless, despite the challenges, there are approved avenues under the CDM that provide opportunities for Clean Coal to Power.
Cleaning Up Coal
Within the developing world, China, India and South Africa have a natural abundance of coal and to a large extent rely on this source for their energy supply. With a total annual consumption of around 40 quadrillion BTU (British Thermal Units) of coal, these three countries are the leading coal producers and consumers in the developing world. Realising that the existing power base is dominated by coal and the fact that many new coal based power facilities will be built in the coming decades, the impact of clean coal technologies will be significant.
Numerous clean coal technologies have been introduced worldwide yet there are still only a few which can currently find support under the CDM. On the one hand this is caused by very strict requirements for accuracy and conservativeness. On the other hand not all clean coal technologies address GHG emissions but other emissions such as sulphur dioxide, dust and traces of heavy metals which don”t fall under the CDM framework.
The current CDM framework provides methodologies that can accommodate high efficiency technologies such as super critical coal power plants. A methodology relevant to this was approved in May 2008 and applies to countries whose electricity supply relies on more than 50% of coal. Although the methodology was welcomed by several interested parties in China and India, up to now there is no official public record of CDM projects utilising it.
Furthermore, a recently submitted methodology by EcoSecurities for large scale biomass co-firing was approved by the CDM Executive Board at the 51st meeting in December 2009 . The methodology was developed for a plant in Chile but provides opportunities for co-firing in coal fired plants in general. Biomass co-firing is a well developed technology in Europe.
A third option, which is currently under debate, concerns Carbon Capture and Storage (CCS). This new technology is entering the stage of semi-commercial demonstration. It involves the capture of CO2 from power plant emissions – in most cases from the flue gas after combustion – and subsequent storage underground in deep saline aquifers, oil and gas reservoirs or deep coal seams that can”t be mined.
There have been methodologies developed for CCS but up to now none have been approved. The CDM Executive Board has decided not to evaluate any new methodologies until a political decision has been made on whether CCS will be included in the post-Kyoto mechanisms. Although discussed at the Copenhagen climate negotiations in Dec 2009, the Conference of Parties (COP15) did not provide any clarity and thus CCS will still be on the table during the negotiations in Mexico at the end of this year.
Is CCS really part of the solution?
At present CCS in emerging economies may be looked at with false hope due to the high costs involved and the risks identified in industrialised nations. However, a lot of lessons and technical improvements will come from the early demonstration projects in the US and Europe, planned to be operational between 2012 and 2015. All said, advancements in South Africa and China indicate that CCS technology is seen as a positive way forward “” laying the foundation for future construction.
A CCS centre was established in South Africa in early 2009 with funding provided by local and international private investors. The funding secures a five year commitment to mapping and exploring the possibilities of CCS in the country. To this day no physical drilling has been performed, however a CCS atlas is to be made publicly available by mid 2010. Pre-atlas studies have identified a theoretical capacity of 104 Gt in the Karoo of which South Africa requires 4 Gt to store 40 Mt/yr for 100 years. Even though theoretically the Karoo, a 400,000 km2 semi-desert region, has expansive storage space, there are dolerite intrusions and low porous and low permeable formations that can reduce the theoretical capacity dramatically.
Tony Surridge, head of the CCS Centre, indicates that further research is still in progress to advance from theoretical to practical implementable estimates. The situation today, however, indicates that the best storage location in Southern Africa is likely to be the Outeniqua Basin where the depleted gas fields have a history of gas storage.
The centre currently plans to prepare for a pilot project in the short term and a small demonstration in the medium term, which will eventually lead to a possible large scale demo in 2020. Barry MacColl, chairman of the CCS Centre, highlights the fact that national targets, rather than company targets, are a way in which this process could be implemented. As South Africa is a developing economy, the problem of whether the government could implement such a strategy without any external aid is questionable.
A developing nation, which is actively taking initiatives to reduce GHG emissions is China. China”s government has identified the importance of reducing emissions and a portfolio of stimulating measures has been implemented. China signed and ratified the Kyoto Protocol and currently holds a substantial amount of the CDM projects in operation.
With regard to CCS, studies have been incorporated into key national research and development plans including China”s National Climate Change Programme and China”s Scientific & Technological Actions on Climate Change. China has assessed the CCS potential in the Northeast, Central and Southwest China, whilst the South needs further exploration. Currently the total storage capacity is estimated at 1445.8 Gt for approximately 400 years. China has emphasised that incorporating international cooperation is of eminent importance. A new type of CO2 storage being investigated is called Enhance Coal Bed Methane (ECBM). CO2 is injected and stored in un-minable coal seams whilst at the same time displacing methane from the pores and generating a gas stream comparable to natural gas. Several regional pilots concerning ECBM as well as the capture of CO2 from power plant flue gasses are on the way.
India is also investigating the geological CO2 storage potential they may have. A total of 572 Gt has been identified with the majority coming from deep saline aquifers and volcanic rock.
Carbon Commerce
A need to reduce GHG emissions globally saw the birth of a carbon trading system. The selling and buying of carbon credits from under-emitting nations to high emission operators, has been positively embraced as it assists in short to medium term planning.
The carbon trading arena has witnessed rapid, exponential growth. ABI Researchers have forecasted that the global carbon emissions trading market will reach $395 billion transactions in 2014, which is three times the allowances traded in 2008. With the introduction of a diversity of players, the market is able to expand creating incentives for more players to enter into the process. Even though the market has shown immense growth and development, some still have reservations concerning the effectiveness of the system.
A cap and trade system implemented in South Africa or China could prove costly “” not to national bodies but rather to the consumers who would have to foot the bill. Currently, China and South Africa have extremely low per capita incomes. Hence, increases in electricity bills and gas prices would potentially lead to a reduction in the standard of living of a large proportion of the population.
The global downturn that occurred saw a readjustment of focus away from the carbon market as industrial output declined considerably. EU carbon credit prices saw a decline of nearly 60% from 2008 and felt a 21% drop in 2009. A non-conclusive agreement at Copenhagen further depressed the market as stricter carbon emission caps would have increased the demand for carbon credits, resulting in higher prices. A single, high price on carbon to create incentives for investment and trade needs to be reached. A price of $40 per ton of CO2 equivalent has been suggested. The price, combined with effective policies, regulations and advancements in the CCS technology would bring CCS into commercial viability. All considered, the global market for carbon credits rose to $136 billion last year. If the market follows past patterns, carbon is set to become a commodity.
Future evolution
Even though the inconclusive outcome from Copenhagen may have left some in dismay, a crucial result did occur”" the developing world has found a voice. The engagement of the whole world is an important step, as a successful solution needs both industrialised and emerging countries to collaborate and work together.
The summit recognised the importance of the CCS technology, yet until further solutions have been found to the issues raised the technology cannot be unconditionally approved by the CDM Executive Board. However, it has been placed on the agenda for the next summit in Mexico in 2010.
Paul Soffe, Head of Research and Development and Associate Director at EcoSecurities commented “There is a need to structure a financing mechanism for CCS in developing countries under climate frameworks that provide financial incentives for long term sequestration. The CDM is one such mechanism; it can provide carbon funding to developing countries and has a very robust monitoring and verification (M&V) system. However, if the CDM is politically too difficult, then an alternative mechanism can be developed using a similar M&V system, either under the UNFCCC or bilaterally between the EU and key countries such as China and South Africa.”
Previously the CDM offered a preliminary solution to the issues surrounding financing in developing nations. Copenhagen saw a development in this regard by the commitment of $30 billion dollars per year by 2012. The funding of this has been divided, with most funds being provided by the EU and Japan.
At the final address in COP15, President Obama turned to rapidly emerging economies such as South Africa, India and China as essential participants in the future of climate change. This is a significant advancement from the initial Kyoto meeting which saw the exclusion of these emerging economies.
Following the summit, the emerging nations had significant pledges. South Africa committed to a 34% emission reduction below business-as-usual by 2020 and 42% by 2025. President Jacob Zuma, however, stipulated that these actions will be conditional on a fair, ambitious and effective outcome of international negotiations surrounding climate change. He further added that financial and technological support was needed from international participants.
Chinese Prime Minister, Wen Jiabao, insists that China”s efforts are voluntary rather than binding. Hence, they would do their share regardless of the outcome from Copenhagen with a tremendous pledge to reduce China”s carbon intensity by 40-45%.
As Asia”s third largest energy consumer, India guaranteed a reduction of 25% by 2020 from 2005 levels. The employment of forestry and an increase in energy efficiency would be pursued to reach this goal.
Even though funding has been committed to developing nations, global synergy would be the most optimal solution. The synergy would create incentives for industrialised countries to dramatically reduce their emissions and for emerging economies to grow their low carbon technologies. The synergy would occur through the continuation of the CDM process and the consideration of a global trading market with a global carbon price.
Following Copenhagen, the meeting in Mexico in 2010 should and must result in a legally binding international protocol. As stated by Rwanda”s President Kagame, at the UN heads of state meeting on Climate Change in September 2009, “Africans want to be part of the solution “” not part of the problem”. Developing nations must be equipped with the tools necessary to facilitate successful implementation of climate change targets.
About the Author:
The article is written by Jade Feinberg and Lodewijk Nell at EcoSecurities, a leading company in the business of sourcing and developing carbon emission reductions.
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