Senators Rockefeller (D, WV) and Voinovich (R, OH) released their Carbon Capture and Storage Deployment Act this week. This is an ambitious proposal that would help the technology to be deployed at a wide scale. A good few of the provisions are similar to those that we have seen in the various climate bills to date. Context is important, however, and some provisions are new or noteworthy, so let's take a closer look.
Very briefly, the bill:
- Devotes up to $0.85 billion to research and development programs for CCS;
- Funds early CCS projects through a wires charge on fossil-based electricity generation, by collecting around $2 billion/yr for up to 10 years. This is along the lines of the Waxman-Markey provisions passed last year by the House, which survived in the Kerry-Boxer and Kerry-Lieberman proposals in the Senate.
- Extends existing loan guarantees of up to $20 billion for projects related to CCS infrastructure (with fairly loose eligibility criteria), as well as tax credits, for up to 10 gigawatts (of which half can be in industrial, non-power sector projects) of CCS deployment;
- Creates an incentive program for up to 62 gigawatts of CCS capacity, through tax credits and bond interest payment assistance;
- Creates a new emissions performance standard for new coal-fired powered plants initially permitted between 2010-2020;
- Creates a post-closure liability relief regime and trust fund for injection projects.
CCS can be an important technology for climate mitigation. This is something that NRDC has believed for a long time, and we do not disagree with the Senators here. However, while we have been supporting large-scale deployment of CCS technologies, we see no real prospect for deployment on the scale contemplated by this legislation in the absence of policies that limit carbon pollution. Taxpayers will rightly question why we should devote such large subsidies to a carbon control technology like this if Congress has not decided to place limits on carbon. At a total of around $200 billion, enacting a program like this largely on taxpayers' backs as opposed to funding it through carbon allowances within a cap is unwise.
It is also unclear how the significant capacity of plants that is contemplated in the bill would fund its ongoing operating costs in the absence of a cap and price on carbon - assistance with capital costs helps, but without an ongoing signal, investment in these plants might still remain uneconomical.
An even stronger contradictory signal would be sent if Congress were to pass Senator Rockefeller's separate proposal to delay and interfere with EPA Clean Air Act rules to cut carbon pollution. The performance standard for new coal plants in the CCS bill also does not extend beyond 2020, in contrast to the equivalent standard in Waxman-Markey or the Senate climate bills.
Another provision of this CCS bill that we believe must be modified is the provision for post-closure liability relief for geologic sequestration projects. Such liability relief could lead to design decisions and operational practices that create avoidable risks, and that could result in damages decades later. Holding corporations liable for their decisions is an important means of avoiding risky short-term decision making. A well sited, designed and operated sequestration project will likely carry a very low risk and the liability implications for such projects are so low that commercial risk management instruments like insurance should be entirely sufficient to make the projects viable over the long term.
The task today is to make executives, investors and insurers familiar with this practice and its risks. There are prudent and measured ways of helping the market develop that do not involve such broad liability relief provisions and that avoid the real danger of creating moral hazard. Ironically, a sweeping liability relief provision will undermine public confidence in the relatively novel technique of carbon sequestration by creating a perception that the risk is much higher than it actually is.