Boxer-Kerry: Carbon Capture and Sequestration Provisions Are About Right

This post is the third in a series from CPR Member Scholars examining different aspects of the Boxer-Kerry bill on climate change, which was released September 30.

The Boxer-Kerry bill, like the Waxman-Markey bill that passed the House, provides for funding, study, and emissions allowances for Carbon Capture and Sequestration (CCS). In terms of developing a technology in the short-term to significantly reduce CO2 emissions from power plants, this is sound policy. On the other hand, it will be important to ensure that funding, CO2 allowances, and other support for CCS deployment do not shift the focus away from the imperative need to support and develop the necessary transition toward greater energy efficiency and more sustainable energy production.

In both a CPR Perspectives Piece and an earlier CPRBlog entry, I discussed CCS technology and the pros and cons of CCS. The Boxer-Kerry bill (like Waxman-Markey) requires that the Secretaries of EPA and Energy submit a comprehensive report to Congress setting forth a strategy to address the key legal and regulatory barriers to the commercial-scale deployment of CCS and federal, state, or regional legislation that could address those barriers. The bill also creates a task force to study and report to Congress on laws and regulations related to CCS, including those covering liabilities and risk and subsurface property rights as well as insurance and other risk management provisions available. EPA must develop a process to identify, certify, and permit CCS storage sites while safeguarding water and public health. The bill authorizes fossil fuel-based electricity distribution utilities to hold a referendum on the establishment of a Carbon Storage Research Corporation. If approved by entities representing two-thirds of the nation’s fossil fuel-based delivered electricity, the Corporation would be operated as a division or affiliate of the Electric Power Research Institute and would assess fees totaling approximately $1 billion annually for ten years, to be used by the Corporation to fund the large-scale demonstration of CCS technologies in order to accelerate the commercial availability of those technologies. Finally, the bill imposes performance standards related to CO2 on new coal plants. 

In addition to the funding for research and demonstration projects discussed earlier, Boxer-Kerry directs the EPA Administrator to establish an incentive program to distribute allowances to support the commercial deployment of CCS technologies in both electric power generation and industrial applications. It establishes eligibility requirements for facilities to receive allowances based on the number of tons of carbon dioxide sequestered and structures the allowance disbursement program to provide greater incentives for facilities to deploy CCS technologies early in the program and for facilities to capture and sequester larger amounts of carbon dioxide. While legislative language circulated earlier by some senators would have potentially opened a window for coal-to-liquids plants (choosing to employ CCS) to be eligible under the industrial source part of the program, the current Senate bill (like Waxman-Markey) appears to expressly prohibit such plants from being eligible for allowances. Producing liquids from coal, albeit a potentially sound energy security strategy, is a highly carbon-intensive process that could create multiple problems from an emission regulations standpoint.

Although the Boxer-Kerry bill in many ways closely tracks Waxman-Markey, there are a few changes that create broader and more stable circumstances for plants employing CCS. This is not surprising given the lead-up to Boxer-Kerry with regard to CCS. In the weeks prior to the release of the Boxer-Kerry bill, there was pressure by a group of Democrats led by Sen. Robert Byrd of West Virginia to increase the funding and incentives for CCS technology.  Where Waxman-Markey capped bonus allowance amounts to the first 6 gigawatts of electric generation employing CCS, the Boxer-Kerry bill creates a system whereby the first 20 gigawatts of treated electric generation would be eligible for specified bonus allowance amounts. That 20 gigawatts is divided into two tranches with the first 10 gigawatts eligible for up to $96 per ton of CO2 sequestered at a 90-percent sequestration rate and the second 10 gigawatts eligible for $85 per ton at the same rate. Both tranches allow a pro-rated value to be attached to sequestration rates above 50 percent, beginning with $50 a ton and increasing proportionally to the maximum bonus rate.  According to the Senate Committee bill summary, Boxer-Kerry would result in $10 billion over ten years to support research and development of new CCS technology.

With regard to yearly emissions allocations for CCS, Waxman-Markey allocated 2 percent of allowances from 2014 through 2017 and 5 percent of allowances in 2018 and subsequent years to help electric utilities cover the costs of installing and operating carbon capture and sequestration technologies.  Boxer-Kerry contains similar provisions, allocating 1.75 percent of allowances from 2014 to 2017, 4.75 percent of allowances for 2018 and 2019, and 5 percent of allowances for 2020-2050.  One improvement over Waxman-Markey is found in the provisions of Boxer-Kerry that create a certification process for CCS projects and a reduction in reserved emission allocations where the CCS project owner or operator fails to achieve reasonable milestones in commencing construction or operation or fails to capture and sequester the amount that had been estimated in the application for certification.

Ultimately, with regard to both bills, the question is whether these incentives and allowances for CCS are a good thing. In practical terms, yes, at least as an intermediate strategy. CCS technology provides a potential means to significantly reduce CO2 emissions from power plants and industrial sources while the United States and the world attempt to transition to more sustainable sources of energy. Right now, there is no ready substitute for coal in the electric power sector, and countries such as India and China also have vast reserves of domestic coal supplies that are they putting to use at a stunning pace. CCS technology may provide the best option to curb emissions from already existing power plants and industrial sources as well as ensure that any new coal plants are at least climate-responsible. On the other hand, too much focus on CCS-technology allows us to remain dependent on coal (with its environmental harms unrelated to CO2 emissions), could limit funding and the incentives to really make the transition to sustainable energy, and leave future generations with a management responsibility for billions of tons of stored CO2 in the subsurface. So long as we can use the legislation to pursue both the goal of reducing CO2 emissions from power plants and the goal of transitioning to renewable energy, then legislation encouraging and funding CCS technology counts as progress in efforts to reduce climate change.