The True Cost of Carbon Offsets
Posted by Max Dunn Fri, 14 Sep 2007 03:29:00 GMT
There is a growing interest in buying carbon credits to offset our carbon footprints. However, there is evidence of widespread failings in the market for carbon offsets. Some of these failings include:
- Widespread instances of people and organisations buying worthless credits that do not yield any reductions in carbon emissions.
- Industrial companies profiting from doing very little – or from gaining carbon credits on the basis of efficiency gains from which they have already benefited substantially.
- A shortage of verification, making it difficult for buyers to assess the true value of carbon credits.
In addition, many carbon offset projects don’t pay for the whole cost of CO2 removal projects they just kick in a little money and claim all the carbon credit of the project. Is this really going to significantly reduce the amount of CO2 in the atmosphere?
Carbon Capture On Coal-Fired Power Plants
In my opinion, the only worthwhile and effective way of cutting back on CO2 increases in the atmosphere is to install CO2 scrubbers on coal-fired power plants.
To put this in perspective, if the developing world struggles and spends all the money needed to reduce it’s emissions per the Kyoto treaty, we would cut our emmissions by almost 500 million tons by 2012. Not bad. However, in the same time period, the 850 new coal plants planned by the US, China and India will generate 5 times more emissions than this, about 2,500 million tons! Planting new trees or building wind generators is not going to put much of a dent in this number.
So paying for carbon scrubbing on coal-fired power plants, especially those in China and India, is the only realistic way to make a dent in the increase in CO2 emmissions.
Here are some references that discuss the importance of this:
- New coal plants bury ‘Kyoto’
- MIT Blueprint for Coal Identifies Carbon Capture and Sequestration as Essential
- Causes of Global Warming
- Global Warming and the Future of Coal
Carbon Scrubbing Costs
How much does carbon scrubbing of coal-fired power plants cost? Hard numbers on this are not easy to find, but here is one set of numbers:
The pilot installation is intended to capture one metric ton of CO2 per hour.
The cost of conventional processes for CO2 capture in the flue gases of large industrial facilities, already operational in Japan, is estimated at between €50 and €60 per metric ton of CO2.
The Elsam industrial pilot is expected to halve the cost per ton of CO2 avoided, to between €20 and €30.
The total pilot project cost of €16 million is about half funded by the European Commission, with the remainder being funded by private partners.
So operating costs to scrub one ton of CO2 from a coal-fired power plant is between $24 and $71. (I used (Euro/Dollar = 1.3, Metric ton/US Ton = 2204.6/2000 = 1.1). If we figure that the equipment has a 20-year life span, this adds another $108 per ton. So taking the average operating costs to be $50/ton adding depreciation of about $100 a ton and storage/sequestration costs of $10/ton (EPRI Briefing, slide #30), then the total cost of adding CO2 scrubbers to coal-fired power plants is $160/ton of CO2.
Carbon Offset Costs
The average American carbon footprint is about 50,000 pounds per year, (References: Carbon Fund, UN=) or about 25 tons.
Some carbon offset organizations will charge you as little as $100 to offset this amount.
However, based on the cost to clean a coal-fired power plant which is probably the only really effective way to make a dent in CO2 emissions, the true cost to offset the American carbon footprint should be $4,000 per year ($160×25) not $100/year!
While Carbon scrubbing should be an effective mitigant, I don’t think it is the only one (as you assert). How about pointing people to the CO2 savings from installing solar panels. My 5kW system will offset 10,000 pounds per year for ~30 years at a cost of $40,000 before rebates. Over the lifetime of the system, it is saving 150 tons for $40k, or $267 per ton of CO2 – a lot more than the Coal scrubbers. However, when you consider that the panels generate FREE electricity (in addition to offsetting CO2 emissions), the cost goes to $0/ton. This is because the free electricity more than offsets the purchase and installation costs (see my other post). Even without California’s generous rebates, a solar system pays for itself in 20 years (vs 14 with the subsidy). So I’d argue that solar panels are a much better CO2 offset – what do you think?
-J.R.
Good point about solar panels. It is interesting that the up-front costs, even with rebates, is more than the coal scrubbing costs but that over the life time of the system, the cost will (hopefully) be almost 0. So having solar panels is a good way to eliminate some of our carbon usage.
But it doesn’t eliminate all of our CO2 footprint. For instance, running through the Nature Conservancy Carbon Calculator, a typical 2 person large house in California with a large car driven 20,000 miles a year would produce about 80,000 lbs of CO2. So you will still need to offset 70,000 lbs of CO2 to be carbon neutral, and I believe coal scrubbers are still the best way to do it.
Rep. John Dingell (D-Dearborn, MI) has created a legislative proposal to reduce greenhouse gas emissions by creating a tax of $50/ton of CO2. This is closer to my $150/ton number than the $15/ton that is normally charged for carbon offsets.
Proposed Carbon Tax
This was an interesting entry; it’s hard to get base figures on fixed and variable costs of carbon sequestration at generation. I’d just add these should form “upper limit” estimates which we would expect to fall with technology advancement. It would be nice to have ballpark estimates on the efficiency of “exotic” solutions like pyrolysis and iron-seeding the oceans.
Though I remain a policy sceptic on AGW (accepting for sake of argument IPCC estimates, abatement costs do not seem to offer good cost-benefit ratios compared to other global welfare options), all sides to the debate could learn from the sober assesments here.
I am reading an interesting book called “Cool It” by Bjorn Lomborg that starts with the assumption that AGW (Anthropogenic Global Warming) is real and then discusses what to do about it. He says that in the UK the marginal costs of removing one ton of CO2 is $23. So I think Allistair is right that my $150/ton is the upper-limit and that there are cheaper ways that can be used at first to start removing CO2.
Using solar energy to replace coal-based energy is great, but 50% of US electricity is coal-based, so if we want to make a real dent, then we have to scrub. If a US utility installs carbon scrubbing equipment today,what kind of investment tax credits does it specifically get on that equipment? What additional new investment tax credits would put it on a level footing with solar equipment, whose capital cost is heavily subsidized by the government?
Here is a page on the DOE web-site that mentions that current carbon scrubbing techniques for coal-fired power plants costs $150/ton.
http://www.fossil.energy.gov/programs/sequestration/capture/index.html
It also mentions that these techniques would add 2.5c to 4c/kWh to the cost of electricity which is a lot considering the average wholesale price of electricity is about 5c/kWh.
To answer beccanel2 question, there currently isn’t any investment tax credits for clean coal technology. However, there is a $2 billion Clean Coal Power Initiative (CCPI) to advance clean coal technology that is currently underway. This program is focused on pollutants like sulfur and mercury as well as CO2 reduction:
http://www.fossil.energy.gov/programs/powersystems/cleancoal/