Is Carbon Capture and Storage the Fix?

Promoted in Europe, the technology for storing CO2 emissions underground could someday transform electric utilities and other industry into eco-friendly businesses

By Mark Scott

At a power station in northeastern Germany, several buildings stand alongside the main 1,600-megawatt coal-fired power plant. To the average visitor, the complex—made up of warehouses, silos, and pipelines—is indistinguishable from any other industrial park. But for Swedish utility Vattenfall, which owns the project, it represents a bold new future. That's because the buildings contain a pilot 30-megawatt power plant fitted with new technology that could virtually end carbon dioxide emissions from the world's heavy industry.

The technology is called carbon capture and storage (CCS), and if it fulfills its promise, it could someday turn highly polluting power stations and smelting plants into eco-friendly, carbon-neutral businesses. The premise of CCS is simple: Trap carbon dioxide before it's emitted into the atmosphere, transport it through pipelines to storage facilities, and then pump the CO2 underground where it can't escape into the atmosphere.

All three parts of the process have been commercial for decades, but they haven't been used together in a concerted effort to halt the release of greenhouse gases. Now, with pressure growing to combat global climate change, utilities and other heavy industry are looking more seriously than ever to CCS as a potential solution to their emissions problem.

It sounds like the Holy Grail of climate change policy. But not everyone is convinced CCS is the right answer. Some questions still remain over whether carbon dioxide can be stored safely underground for the long term. And there are rival technologies in the works—some at roughly the same stage of viability—that involve treating or processing fossil fuels before they are combusted to reduce their carbon output.

Implications for Climate Change Policy

Still, CCS looks to have the most momentum at the moment. Pilot projects are under way in the U.S., Canada, and Australia, but it's the European Union that is at the forefront of CCS development thanks in part to its stringent carbon-reduction policies (BusinessWeek.com, 1/23/08), which include the world's largest CO2 cap-and-trade system and a commitment to cut emissions 20% by 2020. That regulatory support, combined with EU financial backing for CCS projects, has allowed European utilities to push ahead of foreign rivals. Companies like Germany's RWE (RWEG.DE) and Italy's Enel (ENEI.MI), as well as oil majors BP (BP) and Shell (RDSA), all have announced CCS plans, which could be up and running across Europe by the middle of the next decade.

"The EU wants to be seen as taking a lead in the development of CCS," says Robin Cohen, an economic consulting partner at Deloitte. "The next step in the process is to create a regime that gives companies confidence to invest in the technology."

If European companies can perfect CCS, its impact on global climate change policy could be immense. Coal power plants, for example, constitute two-fifths of the worldwide energy mix—a percentage that will rise to almost 50% by 2030. Emerging giants China and India are unveiling a new coal-fired power station each week and the U.S. generates roughly half of its annual electricity from coal. Beyond the energy sector, other industries, such as oil refineries and steelmakers, also could use the technology to reduce their CO2 emissions by an estimated 80% to 90%—and someday, to near zero.

The biggest remaining hurdle is economic.