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Carbon’s Price

After President Bush told the nation it was addicted to oil in the State of the Union address this year, he reeled off several clean-energy research ideas and said we were “on the threshold of incredible advances.” The implication seemed to be that we need these “incredible advances” before we can really get serious about replacing fossil fuels or dealing with climate concerns.

The reality is that we already have several good technological options. The question remains one of policy. No energy company will reduce carbon dioxide emissions unless carbon dioxide has a cost. But because emissions are a classic example of what economists call a “negative externality,” where the cost of a thing is not borne by the parties involved in a transaction (here, energy producers and buyers), the government must impose that cost through regulation. One approach would be a “cap and trade” system – used successfully for sulfur dioxide – in which an overall limit is set on emissions from all regulated sources. Companies work out where best to cut emissions, then trade emissions credits in order to stay under the collective national “cap,” which can be gradually lowered as cleaner technologies emerge.

The first halting steps toward carbon dioxide regulation are being taken. California has moved to limit greenhouse-gas emissions from vehicles – but is facing court challenges from the auto industry. And the European Union has launched a carbon-trading system, now in its initial phase (see “Rocky Start for CO2 Trading”). But in the U.S., there is little imminent likelihood that carbon dioxide emissions from vehicles or power plants will be federally regulated.

In the summer of 2006, there is good reason to think that technology available today can significantly mitigate the carbon dioxide problem. But the technology is not enough. “People think you can do this without the policy, and that’s a myth,” says Herzog of MIT. Without public policy that imposes a cost on carbon emissions, he points out, “it’s always going to be cheaper to put it in the atmosphere than to do capture and storage.” Still, he and Socolow believe that regulatory help may be on the way. “We are at the point where some carbon dioxide policy is going to come out,” Socolow says.

In Great Bend, AEP is preparing for a possible new regulatory climate. It sees clean coal technology as more than ready – in this case, combined-cycle power plants from GE married to gasification technology purchased from Chevron. But without a policy incentive, AEP will not do any carbon dioxide sequestering. As the world digs for more coal, and the atmospheric concentrations of carbon dioxide inexorably rise, the part of the Great Bend plant that would capture and store carbon dioxide – forming a key wedge against worsening climate change – remains an empty space on an engineer’s drawing.

David Talbot is Technology Review’s chief correspondent.

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