The U.S. government—and major U.S. banks—seem to have lost their appetite for coal. After spending five years and approximately $50 million on preliminary studies as well as selecting a proposed site in Mattoon, Ill., the U.S. Department of Energy (DOE) has scuttled plans to build the so-called FutureGen power plant. The facility would have captured the greenhouse gas carbon dioxide (CO2) that is emitted when coal is burned for electricity generation. Instead, the DOE hopes to help industry add carbon-capture-and-storage capability to advanced coal plants already in the works.

"This restructured FutureGen approach is an all-around better investment for Americans," Energy Secretary Samuel Bodman said in a statement announcing the change. The DOE is asking Congress for $407 million to research how to burn coal most efficiently, along with $241 million to demonstrate such carbon capture and storage (CCS) technologies—at least $900 million less than DOE said it would have cost to complete FutureGen.

Still up in the air is which power plants will be used to demonstrate CCS; few now employ the required integrated gasification and combined cycle (IGCC) technology capable of turning coal into gaseous form and removing pollutants, among them CO2, before the gas is burned. Further, only a handful are planned, because of the rising costs of cement, steel and other materials as well as the additional cost of the technology.

"IGCC is not advancing very well," notes principal research engineer Howard Herzog at the Massachusetts Institute of Technology's (M.I.T.) Laboratory for Energy and the Environment. "There may be one commercial IGCC plant coming, the Duke Energy plant in Indiana, and there's the Southern Company's [demonstration] plant. Beyond that, I don't really see a lot."

He notes that canceling FutureGen will slow the pace of developing this technology, which may prove crucial in demonstrating that coal can be burned without emitting massive amounts of CO2 and other pollutants. "There is no way we will get anything before 2012 on the same type of scale and I'm not convinced that anybody's going to be able to do it cheaper than FutureGen," Herzog says. Either "we have to see the coal industry dwindle and disappear or sit back and see what impacts we get from climate change, both of which are not good alternatives."

The U.N. Intergovernmental Panel on Climate Change (IPCC) identified carbon capture and storage as a critical technology for reducing emissions, not only from power plants but also from industries that manufacture cement, chemicals and steel. Given the scale of the climate change problem—and the relatively short window of time left to address it—delays in demonstrating the feasibility of such technology will be difficult to overcome, notes M.I.T. physicist Ernest Moniz, who co-chaired a recent report on the future of coal. "Gasification looks today to be the lowest cost option with carbon capture," he says.

Although there have been a few demonstrations that it is possible to store relatively small amounts of CO2 deep below the ground—largely to push more oil and natural gas to the surface—there is no commercial-scale power plant that both captures and stores greenhouse gases, Moniz adds. Without such technology, it may prove difficult to get any coal-fired power plants built at all. Investment banks such as Citi, JPMorgan Chase and Morgan Stanley, for example, have drawn up funding guidelines that would preclude capital for new power plants that lack the ability to adapt to future CO2 regulations.

But coal provides more than half of the electricity used by the U.S., and China builds the equivalent of two 500-megawatt coal-fired power plants each week, helping keep these nations at the top of the list of the world's biggest greenhouse gas emitters. "Since the transition away from fossil fuels is likely to take a very long time, we foresee a long-term need to deal with coal-based emissions and, therefore, the sooner we begin to develop [carbon capture and storage] technology, the better," Austin-based energy policy specialist Scott Anderson of Environmental Defense told a Senate panel earlier this year during a hearing on CCS technology. "We aren't champions of coal, but we are realists."

Research into other ways to avoid greenhouse gas emissions from burning coal continues, particularly into so-called post-combustion capture, which captures the CO2 after the coal has been burned. This leads to cheaper electricity prices because it skips the coal-to-gas step, but it is more technically difficult to extract the diffuse greenhouse gas in the smokestack. "If we have a breakthrough in post-combustion capture it would really be a game-changer," Herzog says.

Meanwhile, the FutureGen Alliance—a consortium of 14 of the world's largest coal producers and coal burners behind the proposed plant—plans to continue to pursue the facility, but not without some form of government assistance. One option would be to convince Congress to fund the project directly, Herzog says.

There are also similar efforts underway elsewhere in the world, such as China's GreenGen initiative. More are needed, Herzog says, if catastrophic climate change is to be avoided while coal continues to be a major fuel. "There should be about 10 large demonstrations worldwide, and at least three of them should be in the U.S.," he adds. "How can we expect to build hundreds of these plants when we're having so much trouble building the first one?"

In addition to imperiling efforts to combat climate change, canceling FutureGen also sets back plans for a so-called "hydrogen economy." As originally proposed, the plant would have produced both electricity and "clean" hydrogen from coal, as the CO2 would be captured and stored. No such hydrogen production is planned at any existing or planned IGCC plants. "Why was this such a great idea even a few months ago, let alone five years ago when it was announced?" Herzog asks. "The best way to proceed would be to keep FutureGen alive."