Coal-to-liquid is a dead end if there’s a price on CO2
“Coal-to-liquid is just a dead end, from a climate perspective,” added Joseph Romm, a senior fellow at the liberal-leaning Center for American Progress. “Liquid coal will not have a future in this country, no matter how much money Congress squanders on it.”
Well, I guess “liberal-leaning” is better than “liberal.”
Why is liquid coal a dead end? Because, as I explain in my testimony, even a relatively low price for carbon dioxide is fatal to liquid coal’s economics, as made clear in two recent report by the U.S. Energy Information Administration:
In its January 2007 report, “Energy Market and Economic Impacts of a Proposal to Reduce Greenhouse Gas Intensity with a Cap and Trade System” (PDF), EIA examined the impact of a draft version of Sen. Jeff Bingaman’s global warming bill. That bill has a safety valve, which limits the price of carbon dioxide permits. In the EIA analysis, the permit price starts around $4 a ton of carbon dioxide in 2012, rises to $7.15 in 2020 and reaches only $14.18 in 2030. This is a relatively low price for carbon dioxide. Indeed, this 2030 price is considerably lower than the current price for carbon dioxide in the European Union — and the first budget year for Kyoto isn’t even until next year. In this scenario, EIA finds:
[I]n 2020, CTL [coal-to-liquids] production is 0.2 million barrels per day (74 percent) lower than in the reference case. By 2030, the change is 0.6 million barrels per day (85 percent) lower than in the reference case.
In short, a relatively low price for carbon dioxide wipes out the vast majority of projected CTL.
In July 2007, EIA released “Energy Market and Economic Impacts of S. 280, the Climate Stewardship and Innovation Act of 2007” (PDF), an analysis of the global warming bill by Senators John McCain and Joe Lieberman. S. 280 sets considerably more stringent reduction targets than Sen. Bingaman’s draft bill — ultimately reaching 60 percent below 1990 emissions levels by 2050. This bill has no safety valve. As a result, the permit price reaches $22.20 in 2020 and hits $47.90 in 2030. The report finds:
None of the 15 coal-to-liquids plants built in the reference case are projected to come on line in the main S. 280 cases. In the reference case [business as usual], coal consumption at CTL plants reaches 109 million tons in 2030.
A moderate price for carbon dioxide wipes out all projected CTL.
Since it is all but inevitable that we will have a low-to-moderate price for carbon dioxide by 2020, and at least a moderate price by 2030, CTL will not achieve any significant market penetration. No amount of federal research and development investment or tax credits or loan guarantees are likely to change that equation.