Despite a string of funding challenges in the past year, the picture is not bleak for the carbon capture and sequestration industry.

That message is in a new report being released this morning from the Global CCS Institute, an Australia-based organization that studies the industry. Carbon capture and sequestration (CCS) involves the capture of carbon dioxide from power generators or industrial factories and storage of the captured gas underground.

In its annual assessment of CCS projects around the world, the institute said that 2011 was a year of "measured progress."

While the overall number of large-scale proposals is down to 74 from 77 a year ago because of cancellations or suspensions, there are a greater number of initiatives -- 14 -- that are actually under construction or in operation this year, said the group. In other words, there are fewer plans on paper, but there are more projects actually capturing carbon dioxide or that are planning to in the next few years.

"It is encouraging that if this rate of progress holds steady, we will likely have 20 large-scale integrated demonstration projects operational by 2020, which has been the international community's goal," said institute CEO Brad Page in a statement. The International Energy Agency projects that CCS needs to supply 19 percent of emission reductions by midcentury if carbon dioxide output is to be halved by then.

Together, the 14 operational or under-construction initiatives will prevent 33 million metric tons annually of carbon dioxide from reaching the atmosphere, or the amount emitted by 6 million cars, the report says.

No large-scale projects on coal-fired plants now
Of the 14, there are eight in operation globally, with six more undergoing construction, the institute reported. Ten of the 14 are either in the United States or Canada.

The amount of money available for the industry also is unchanged from last year, with governments making about $23.5 billion available for projects, the report says.

The wrinkle is that some sort of a carbon price is needed in the long term to deploy the technology, the institute said.

Additionally, none of the large-scale projects in operation today are on coal plants, which spew about a third of U.S emissions and a chunk of global CO2. Carbon capture and sequestration has never been proven at scale in the electricity sector, or with coal plants.

Instead, the world's operational projects all are on industrial facilities that separate CO2 as part of a commercial business operation, as is the case with fertilizer production and natural gas processing plants. That makes the capture process cheaper than trying to pull the gas from an emissions stream on a coal plant, where there's a more complex mix of gases coming out of a smokestack.

Most of the existing projects also involve enhanced oil recovery, a process where captured CO2 is pumped into oil fields to yield more crude. Those types of projects are moving forward because companies have a financial incentive to capture CO2 for oil companies.

The challenge for the industry is that CCS will need to work with coal eventually to make a dent in global emissions, analysts say. Captured CO2 also will need to be pumped into deep rock formations underneath the earth -- and not just in oil fields -- if the technology is to be successful, they say.

"It is unlikely that enhanced oil recovery has the required capacity to be a major long-term contributor to CO2 abatement," the report says.

Some of the higher U.S. estimates, for example, say that enhanced oil recovery eventually could store no more than a sixth of U.S. carbon dioxide emissions.

There needs to be more attention on heavy industries such as iron and cement, as well, because they are such large emitters, the report says. Currently, there are no major CCS projects on cement, although the industry is conducting a major study on the issue, said Andy O'Hare, vice president of regulatory affairs at the Portland Cement Association.

But the institute reported some signs of progress in 2011 for controlling emissions from coal, and the electricity sector broadly.

2 future North American coal-centered projects begin construction
Two of the CCS projects that began construction this year -- the Boundary Dam Project in Canada and a Southern Co. project in Kemper County, Miss. -- will capture carbon dioxide from the burning of coal.

They are moving forward when other coal projects are not because of a unique mix of circumstances, said Kurt Waltzer, an analyst at the Clean Air Task Force.

In the case of Southern Co.'s project, the region needed a new power plant anyway, said Waltzer. Additionally, the type of plant being built -- known as an integrated gasification combined cycle, or IGCC, plant -- was able to receive tax incentives not available for retrofits of older coal plants, he said.

"Canada is an early leader with CCS," he said about the other project. "I see it as a model for the United States."

In addition to providing funding, the Canadian government recently released regulations this summer aimed at phasing out coal plants by midcentury unless they burn as cleanly as natural gas plants (ClimateWire, Aug. 22). That was seen as a big boost for CCS, since it is the only option currently to control coal's emissions.

Most of Canada's coal plants are centered in Alberta, providing a good test region for projects, said Waltzer. In the United States, plants are more spread out, he said.

The next year will be important for the global industry, with 11 major projects expected to make a decision about construction, said Barry Jones, the institute's general manager for policy and membership.

A number of those also involve proposed capture at coal plants, such as the "Project Pioneer" capture project planned on a 450-megawatt coal-fired power plant in Edmonton, Alberta.

In the United States, pending greenhouse gas regulations from U.S. EPA on coal-fired power plants are seen as a potential turning point for the industry.

There are also major funding decisions expected in the next two years globally. The European Union, for example, is weighing whether to provide funding for 13 CCS initiatives, with a decision expected by the second half of 2012.

"In the near-term, government policy and funding levels will impact strongly on the rate at which demonstration projects progress and their overall viability," the report says.

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