In late February Peter Coates, Glencore’s non-executive director, appeared at an event in Sydney to make a rare intervention from a mining leader — a full-throated defence of the coal industry, whose very existence is under threat because of its role in global warming.
“Our industry has allowed itself to be cast as the villain too often,” said Mr Coates, a veteran coal executive. “We have allowed the vacuum, about what we do and how we do it, to be filled by celebrity scientists and radical activists whose purpose is not to seek solutions but to divide and destroy.”
Six months later, the industry decided to take action to improve the image of the dirty fuel. Coal21, an industry body in Australia that is backed by 26 mining groups including BHP, Anglo American and Glencore, launched a new advertising $4m campaign. It issued a tender for a campaign on Australian TV, social media, radio and print advertising, according to a document seen by the FT.
“The campaign is targeted at men aged 18 to 39 and women aged 40 and over — ‘soft converters’ identified by previous research as having limited information about the Australian coal industry and open to being convinced of its future role,” the pitch says.
The core idea of the campaign is a technical fix — the concept that coal can be made cleaner by capturing the carbon emissions from coal-fired power stations and storing them underground.
These “low-emissions technologies”, as Coal21 describes them, are now the centrepiece of the $360bn coal industry’s efforts to ensure its survival — a push that supporters believe could play an important role in limiting global warming but which critics believe is an expensive exercise in reputation-laundering.
As well as the marketing push in countries such as Australia, carbon capture technologies have also received backing from President Donald Trump, who has pledged to revive coal mining in the country, as well as Congress, which has given tax breaks to those who install carbon capture and storage facilities.
But the coal industry’s lobbying has raised concerns among critics and investors, who say it is an unwise bid to prolong coal’s life in a world of ever cheaper renewable energy such as wind and solar. In addition, they say technologies to extract carbon from power plants are prohibitively expensive and better suited to other industrial sectors such as oil and gas production.
“It’s a very sophisticated media play — it’s just public relations. There is no such thing as clean coal, our reliance on coal is not compatible with a liveable planet,” Brynn O’Brien, executive director of the Australasian Centre for Corporate Responsibility, says. “It’s an industry in an existential fight and they will do whatever they can to survive. They are making impossible a transition that will make the rest of the economy resilient with the inevitability of climate change.”
Technology to remove carbon emissions and bury them has been around for over 40 years, and is predominantly used in natural gasfields. The Sleipner gasfield in the North Sea, which started capturing carbon emissions in 1996, removes around 1m tonnes of CO2 every year.
As emissions rise, the technology has received renewed attention as a solution to global warming, especially for sectors such as steel and cement, which are energy intensive and hard to decarbonise because of the materials they use. Every tonne of steel, for instance, requires 800 kilogrammes of metallurgical coal, according to Glencore.
However, many in the energy sector are unconvinced about the efficacy of using the technology for coal. There are questions about whether carbon capture and storage should be put on coal power plants because wind, solar and batteries are increasingly competitive on price with coal-fired power.
Analysts at JPMorgan estimate that renewable energy is cheaper than coal in India, China and the US, the three largest coal-consuming countries.
“It’s not a wise use of resources,” says Simon Lewis, a professor at University College London. “It makes no sense to invest heavily in expensive technology that is itself energy intensive to strip the CO2 from the flue gas and pump it underground, just to keep on using coal when there are alternatives available.”
The World Coal Association, the coal industry’s main global lobbying organisation, defends the technology, arguing that it has “a proven 90 per cent capture rate of the CO2 produced from the use of fossil fuels in electricity generation and industrial processes”.
The International Energy Agency’s Clean Coal Centre in London says carbon capture and storage is needed for the simple reason that there are still so many coal-fired power plants in operation. Coal plants currently contribute around a third of CO2 emissions, and half of them are less than 15 years old. Adding carbon capture technology “may significantly reduce or even neutralise CO2 emissions”, the IEA says.
It forecasts that to meet the targets of the Paris climate agreement of keeping global warming “well below” 2 degrees will require some 210 gigawatts of coal-fired plants to be fitted with carbon removal technology by 2040.
“Models showing how best to reach ambitious climate goals like 2 degrees or below continue to show huge amounts of CCS in the coal power sector,” says Toby Lockwood, an analyst at the Clean Coal Centre.
Whatever the theoretical case, the reality is that the coal power industry is woefully behind its own targets for carbon capture. So far, just two large projects that remove carbon emissions are operating at scale, which means just over 2.4m tonnes of CO2 is being removed a year. That compares with the 10bn tonnes of CO2 emitted by coal-fired power plants last year, according to the IEA.
Located in Canada’s coal-rich Saskatchewan province, the $1.3bn, 115MW Boundary Dam carbon capture project was launched in 2014 with a goal of capturing 90 per cent of its CO2 emissions and transporting them to nearby oilfields, where the gas is used to recover oil. The company said it would be the equivalent of taking 250,000 cars off the road.
The plant received backing from BHP, which built a “knowledge centre” at Boundary Dam with the aim of stimulating “broader deployment” of carbon capture and storage technologies.
The $1bn Petra Nova project in Houston is the only other large operation. Backed by a $190m grant from the US Department of Energy, it captures CO2 from one unit at the WA Parish Generating Station power plant, owned by NRG Energy. The CO2 is pumped through an 80-mile tunnel to the West Ranch oilfield, also in Texas, where it is used to boost oil production.
Boundary Dam says it has removed 2.8m tonnes of CO2 since it launched, while Petra Nova says that when it is operating at 100 per cent capacity it removes 90 per cent of the CO2 at its plant, or 5,200 tonnes per day — the equivalent of taking 350,000 cars off the road.
But David Schlissel, of the Institute for Energy Economics and Financial Analysis, says both plants have not lived up to their hype. The Petra Nova plant captures just over a third of the total flue gas from just one of four coal-fired units, he says. And Boundary Dam has an overall capture rate of 51 per cent, he says — well below the 90 per cent target.
Mr Schlissel estimates that the cost of adding carbon capture and storage to an average US coal plant is almost four times the cost of solar and storage in parts of the US. In addition using the CO2 to extract oil only adds to emissions when the oil is burnt, he says.
“It’s really expensive and the coal plants can’t compete,” he says. “It’s basically a plan to keep uneconomic coal plants operating. It’s a fantasy.”
In China, the world’s largest coal consumer where the power sector accounts for around 40 per cent of its total carbon emissions, carbon capture and storage has moved no faster. Seven small carbon capture and storage projects are planned or have started operations, according to consultancy CRU China. But they capture less than 5 per cent of the CO2 emissions by the seven plants.
The consultancy estimates the technology is only viable if the CO2 can be sold to other industries. Without that the cost of the technology needs to fall by 50 per cent to make pure CO2 storage economic. “The current state of the technology development means that it is unlikely to make a significant contribution to lowering Chinese CO2 emissions,” says Lize Wan, an analyst at CRU.
Lauri Myllyvirta, a senior coal campaigner at Greenpeace, says that carbon capture capacity does not yet match the emissions of one large coal-fired plant let alone the estimated global capacity, which is equivalent to 2,000 large-scale plants.
“The reason why mining companies promote the concept is to try and reassure investors that coal has a future even in a world that takes climate change seriously,” he says. “They have a way out. It’s only about hyping up the hypothetical possibility as a response to strengthening climate policies. But nobody in their right mind is proposing building plants with CCS [carbon capture and storage] equipment now.”
None of this scepticism is stopping investment in carbon capture by the mining companies, which face growing investor pressure to divest from coal as well as falling prices. This year, prices for seaborne coal have dropped 35 per cent as natural gas supply has increased.
In July BHP, the world’s largest mining group, pledged to spend $400m over five years to reduce its emissions and those of its customers, and said carbon capture and storage on coal remained part of the solution, both for steel and for power plants.
The miner is a member of Coal21, which is funded by a voluntary levy on Australian coal production. But some investors are growing uncomfortable with BHP’s membership of coal lobbying groups and worry that the industry is using publicity campaigns to avoid making hard decisions about the long-term future of its coal assets.
“There needs to be much firmer detail on exactly what role CCS will play and how viable it is,” says Adam Matthews, director of ethics and engagement for the Church of England Pensions Board. “Coal21 has gone beyond the research and the role it was set up to do to a much broader role of lobbying for sentiment towards coal. That is an increasingly questionable use of shareholder funds to support such activity.”
Glencore, the world’s largest coal exporter, is building a pilot carbon capture and storage project in the Surat basin, a vast sandstone geological basin in Australia, backed by money from Coal21 and Canberra. The project aims to store 200,000 tonnes a year of CO2 from a nearby coal-fired power plant.
But it too has come under pressure from investors concerned about climate change. Mr Coates’s speech came the same month that Glencore agreed to cap its coal production for the first time, at 150m tonnes a year, a sharp turnround for a company that had been acquiring coal mines.
Mr Coates said it was unrealistic to think about a world without heavy use of coal. The fuel remains the “lowest cost option and is the energy source of choice for the developing world”, he said. There are over 2,300 coal-fired power stations under construction or planned worldwide, especially in south-east Asia, he said, according to a transcript of the speech.
“More not less coal will be used in the future,” said Mr Coates.
The UK experiment: Gas surge ends carbon capture plans for coal
In 2013 the Aberthaw coal-fired power station in Wales trapped its first tonne of carbon — in a pilot project that was hailed as a way to reduce harmful emissions from coal burning.
This August, however, the plant’s owner, German utility RWE, said the Aberthaw plant would shut in 2020, leaving just four remaining coal-fired plants in the UK. This year renewable energy sources of power are set to surpass coal in the country for the first time since the industrial revolution.
“Market conditions made this decision necessary,” Roger Miesen, chief executive of RWE Generation, says.
The decline of coal in the UK, which has happened much faster than anticipated due to cheaper natural gas as well as plunging prices for wind and solar, reads like a cautionary lesson for other countries still dependent on the fuel.
“Part of the original ambition in the UK was to develop CCS [carbon capture and storage] as a way of keeping the coal industry going to feed our domestic industry of coal-fuelled electricity,” Stuart Haszeldine, a professor at the University of Edinburgh, says. “But circumstances conspired so that became no longer necessary and we discovered natural gas. Coal plants became less and less economic.”
Instead of coal, this February UK power company Drax captured carbon from the burning of biomass at its North Yorkshire power plant, the first time carbon has been captured from a wood-burning power plant globally. Drax, which was opened in 1975 to use coal from the nearby Selby coalfield, started switching its units to burn compressed wood pellets in 2013. Today two-thirds of its power is from burning wood pellets, and the remaining one-third from coal.
Adding carbon capture technology to Europe’s ageing fleet of coal-fired power plants is not economical, Mr Haszeldine adds.
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