On July 16, 2014 a coalition of heavily polluting countries called the BRICS (Brazil, Russia, India, China and South Africa) met for their annual meeting and agreed to form a new international financial system called the New Development Bank.
A Financial Union of Coal Friendly Countries
This announcement caused particular controversy given that the group of countries is renowned for investing heavily in coal (one of the leading sources of Co2 and the main contributor to global warming).
A recent article by Foreign Policy confirms that China uses as much coal as the rest of the world combined, while India’s economy is powered by coal. South Africa and Russia are also big coal exporters.
It comes as no surprise therefore that the focus of this bank (with a capital reserve of $50 billion) will be to motivate investment in advanced clean-coal technology.
The New Development Bank: A Trigger for the Development of Cleaner Energy
As the Foreign Policy article explains, the silver lining behind the creation of the bank is that it will allow countries such as South Africa and India, who currently suffer from an unreliable energy supply that results in frequent power outages, to invest into infrastructure and energy and lead their countries to prosperity.
The solution they favor is carbon capture and storage (CCS), a technique whereby the carbon dioxide emitted by power plants from the burning of coal and gas is injected into rock formations far beneath the surface rather than being release into the atmosphere.
By circumventing international finance institutions such as the World Bank, the coalition believes that it will be able to avoid the red tape that is now associated to any energy venture tied to a polluting energy source such as coal. Indeed poor countries, such as those in sub-Saharan Africa, need energy to power development and growth and therefore would welcome the opportunity to keep the lights on while reducing their greenhouse gas emissions.
So what would the adoption of this new energy source mean for the world?
TheGuardian newspaper confirms that according to Britain’s Department of Energy and Climate Change, power facilities that have been fitted with CCS can capture 90% of their CO2 emissions. In another article, the newspaper states that, according to the International Energy Agency (IEA), with 3,000 CCS plants the technology could provide 20% of the carbon cuts needed by 2050. The IEA also predicts that 70% of the energy used between now and 2050 will come from fossil fuels, emphasizing the importance of CCS. Without it, renewables, energy efficiency and nuclear power would have to significantly overshoot their already challenging targets.
For coal dependent countries, the principle of using CCS seem like a no brainer for development purposes. Unfortunately, one crucial element continues to prevent its global implementation: the cost.
CCS: a costly energy venture
At the present moment, only the wealthiest developed states seem to be the countries with sufficient resources to implement the technology. For example, the US (largest global GDP) has the largest amount of projects, because former President George W Bush “wanted to do something for coal” in the early 2000s, whereas Norway (4th largest global GDP per capita) has the largest CCS test facility in the world at Mongstad.
Despite each step of carbon capture and storage being well understood, the combined technology remains relatively expensive, with costs estimated between $50 and $100 a ton of CO2. The value placed on CO2 at present is far below that range, meaning that for the technology to flourish the carbon price needs to rise or the costs need to fall.
The building of more plants will lead to technology improvements and cut costs, but depend heavily on state funding for now. International climate negotiations may push up carbon prices, but have been moving at a slow pace in recent years. Another issue is whether people living near onshore CO2 burial sites will accept the technology – they did not in the Netherlands – although many such sites are under seas, or in remote areas.
The New Development Bank, funded by the BRICS, will most likely bring about a welcome increase in CCS facilities in carbon dependent countries such as China. This resolves a long standing dilemma for these rapidly industrializing countries as they seek to grow their economy while complying with their national carbon emissions reduction targets. However, in the face of cheaper renewable sources of energy, the viability of this technology as a long standing global solution to global warming remains to be seen. Indeed, it is unsure whether people living near onshore the CO2 burial sites will even accept the technology…