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The Pre-Budget review in early October disappointed green activists. Environmental measures formed a small fraction of the government’s initiatives. It doesn’t look as though Alistair Darling sees climate change as one of the priorities of this administration. But there were two important commitments: a revision to Air Passenger Duty (APD) and (via BERR) a competition to run a commercial-scale carbon capture project.
The APD proposal attracted most attention. The government intends to change the duty so that it is levied on aircraft movements and not on individual travellers. Commentators, and the two main opposition parties, have long suggested that this would be a sensible change. Carbon Commentary disagrees. The proposed revision cannot be implemented without infringing international treaties on the taxation of air travel. The chancellor’s proposed consultation will eventually conclude that APD should remain substantially as it is now.
In the article, we briefly analyse the effects of APD and also show that the duty imposes an effective tax on airlines that is greater than would be levied if air travel were fully included in the European Emissions Trading Scheme (ETS).
The BERR Carbon Capture and Storage (CCS) announcement was worryingly unspecific. It did not even bother to mention a figure for the value of the financial support. It also upset some major companies by only allowing entries for the competition from a limited range of technologies. The government is extremely vulnerable to the charge that it is back in the business of picking winners.
CCS is an extremely important part of any strategy for national reduction of emissions. The UK should be throwing far more money at research and development into the various forms of CCS. The simplest and quickest way to get innovation in CCS would be to include carbon storage as a technology that qualifies under the renewable obligation rules. We need to remove the difference between the financial treatment of renewable power generation and carbon capture. Both achieve the same outcome and both should have the same reward.
***
Air Passenger Duty
APD raises about £2bn a year. The government announced that it wants this to rise by about £500m by 2010/11 after it has changed the tax to apply to flights not travellers. Since UK air traffic is rising by 4-5% a year, this means that the average burden per flight will rise by perhaps 10%, or less than £2, by 2010.
The airlines were quick to argue that at today’s rates they are already paying the full cost of their emissions. They didn’t provide figures but the table below gives some background to their assertion.
| Share of UK emissions from aviation | About 6.3% |
| Total UK emissions including sectors outside Kyoto | About 660 million tonnes |
| Approximate share of aviation | About 40 million tonnes |
| Current price of carbon dioxide in European Emissions Trading Scheme | About €20 |
| Total implied cost of UK aviation emissions | About €800m |
| Total tax raised by APD | About €3bn |
The table shows that at current ETS prices the UK aviation industry ‘pays’ for its pollution. The tax captures almost four times as much money as the industry would be charged if it had to buy permits for all its current emissions. Air travel emits pollutants other than CO2. Many commentators multiply the CO2 by a figure such as 2.7 or 3 to account for these other climate change implications. But even still the APD captures more cash than would be paid under the ETS. No wonder the airlines are lobbying to be included in this scheme.
The chancellor said that he would consult on how best to change the way APD is levied. At the moment it is added to the ticket price by the airlines. Many agree with Chancellor Darling that it would be better to charge per flight. Airlines with high seat occupancy would pay less per person so it would incentivise the operators to fill every seat.
Our view is that the government will not be able to adjust the basis of the tax. The reasoning is as follows:
- The tax must be fair and roughly tied to the emissions generated by each flight. So the government will have to set a tax figure for each journey. Heathrow to Rome will have a benchmark charge.
- Aircraft differ: a 120-seat plane will have different emissions to a 200-seat plane. So the Heathrow to Rome benchmark must have an adjustment factor to reflect this variation.
- Establishing the benchmark sounds simple. It is not. Eventually the calculation will have to be made using typical fuel consumption figures. So the Rome benchmark will be, say, twice the Paris figure largely based on the average fuel usage to each city.
- Calculating the adjustment to allow for the different sizes of aircraft flying a particular route will also be complex. A 120-seat aircraft may or may not have a fuel cost of about 60% of the 200-seat plane. Which of these two options forms the benchmark?
- Eventually, policy-makers will reach the conclusion that the only way to change the tax in a fair way is to base it on the fuel consumption of the airplane from Heathrow to Rome. Nobody can really argue about this. It is transparent and obviously measures the emissions generated on each flight.
- Our view is therefore that any reasonably fair ‘per flight’ tax must eventually be designed in a way that makes it indistinguishable from a per litre tax on kerosene fuel.
- Law-makers will then be reminded by the airline industry of the several hundred international treaties that prohibit the levying of a tax on fuel for international air travel. After a court tussle, the plans will be dropped, and we will revert to a per ticket levy.
Is APD working? The government says it has a ‘valuable role’. The Pre-Budget review repeats earlier figures that suggest that policy-makers think that it will cut 2.75m tonnes from aviation’s emissions by 2010. This is about 6% of the likely CO2 output from air travel at this date, less than the extra emissions coming from likely air travel increases between now and the end of the decade. At current levels (£10 for a European flight), it is clearly doing very little to alter the price competitiveness of air travel. If the government were serious about reducing air emissions, it would double the tax again next year, rather than leaving it unchanged in this PBR.
Carbon Capture and Storage
There are many ways to stop the CO2 produced by the combustion of fossil fuels entering the atmosphere:
- The CO2 can be caught after it is produced and then either stored or used in another chemical or biological reaction (‘post-combustion’). The gas can be stored in underground reservoirs such as depleted oil fields.
- The fuel can be broken down before it is burnt. In the case of natural gas, which is mostly methane (CH4), it can be split into hydrogen and carbon monoxide by forcing a reaction with water in the absence of air. The hydrogen can then be burnt as fuel and the CO taken off and reacted with oxygen to make CO2. (These techniques are called ‘pre-combustion’.)
The government asserts that its analysis shows that it should only support ‘post-combustion’ techniques, combined with geologic storage and at a substantial power station. It has therefore declared that its long-promised ‘competition’ should only be open to these technologies. The form of the competition is unclear and the government only says it will ‘support’ one pilot commercial project over the next few years.
As we understand it, the entry conditions reduce the number of potential competitors to a small number of existing large coal-fired power stations, led by Scottish Power’s Longannet, which sits over a disused coal mine into which the CO2 can be pumped.
This was the wrong decision on a number of counts:
- We do not know which route is the cheapest way to capture the CO2 from a power plant. All the technologies are in infancy.
- If Longannet wins the competition, the money may be wasted. Scottish Power would possibly carry out the investment anyway. It certainly has already flagged its intention to use geologic storage for the CO2.
- Some possible post-combustion technologies need to be proven at a smaller scale first. American Electric Power, a big coal-fired generator in the US, is installing an Alstom scrubbing technology on part of one plant. It may be that the Alstom technology is also right for the UK, but no subsidy is offered.
- It is completely unclear that geologic storage is right or necessary. The most exciting carbon capture technologies in the world are using CO2 to make biomass. If the Carbon Commentary mailbox is any guide, the most promising technique is to use CO2 as a fertilizer for algae growth. The algae can then be squashed for their oil to make biodiesel fuel. Algae are far better at capturing CO2 than plants, and a surprisingly small area of land is needed to deal with all the emissions from a large power station.
- Using algae to swallow CO2 is still at a very early stage of development, though large amounts of US venture capital have already swung behind the technology. Perhaps readers will be surprised to know that using tomatoes to capture CO2 is more advanced. A series of huge glasshouses at Immingham on the north-east coast collects CO2 from a fertilizer plant and uses it to encourage tomato growth. Sainsbury’s buys the output twelve months of the year. In theory, the CO2 from a power station could be used in a similar way. But the terms of the competition disqualify such a technique.
- Most importantly, the competition doesn’t allow entries from pre-combustion methods of carbon capture. We shouldn’t be surprised. The proposed BP plant near Aberdeen, which would have split methane prior to burning and then disposed of the CO2 into an oil field was cancelled early in the summer of 2007 after the government refused to support it. Perhaps it was clear to BP six months ago that civil servants had already made up their mind against any technology that split the CO2 before burning. If there was economic logic behind this decision, we need to be told.
BP itself has said that pre-combustion CCS imposes a relatively small cost penalty on the generation of electricity. When we say ‘relatively small’ in this context, we mean that it approximately doubles the cost of electricity. This may seem an outrageous increment to pay. But the Renewables Obligation is currently subsidizing electricity generation technologies, such as the burning of energy crops, by approximately twice the amount of the BP CCS cost penalty.
This is irrational: if BP can capture the carbon from burning gas at a cost of £40 per MWh, its plant is at least as worthy of subsidy as E.ON’s energy crop power stations. To state the obvious: the UK isn’t supporting renewable generation because it is inherently better but because it reduces CO2 emissions. If a CCS power plant does the same thing, we should support it to the same level. Government policy must treat CCS as equivalent to renewables.
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Sunday 25 November 2007 at 2.36pm
William Ernest Schenewerk
Carbon Tax May have to be $1000/tonne
Ms/sir:
If goal is to arrest atmospheric CO2 at 2 times pre-industrial CO2 by 2080, then carbon tax must be at least 1.0 $/kg-C ($1000/tonne-Carbon). 1.0 $/kg-C tax doubles the price of electricity generated from fossil fuel. 1.0 $/kg-C tax does not give natural gas a price advantage over coal if natural gas costs more than $5/1000 ft^3. MHD-Coal may be competitive with natural gas regardless of the carbon tax. European auto-fuel taxes already exceed 1.0 $/kg-C ($2/gallon).
Preindustrial CO2 is 0.028% by volume. Starting at 0.001% CO2 in 1850, industrial CO2 has been compounding 3%/year. 1950 CO2 is 0.0300 % (300 ppmv) and 2000 CO2 is 0.037% (370 ppmv), using Mauna Loa data.
Continuing at 3% CO2 (atmospheric carbon) increase per year adds 0.028% to existing 0.028% preindustrial by 2038, giving 0.056% CO2. 0.056% minus (y 2000) 0.037% is 0.019%. The added 0.019% CO2 increase by volume represents 414 Tkg-C (414 trillion kilograms carbon). We are already 1/3 of the way toward CO2 doubling.
Applying 1.0 $/kg-C carbon tax to 414 Tkg-C, collects 3% World GDP between 2000 and 2080. This assumes 3% annual economic growth and CO2 doubling by 2080. If CO2 doubles by 2038, the 1.0 $/kg-C represents 15% World GDP.
Arresting CO2 at twice preindustrial by 2080 requires approximately 400 TWe-y (400,000 giga-watt-years electric) atomic generation between 2000 and 2080. After 2080 World annual atomic power requirement is 25 TWe. This assumes world population is constant after 2030. All non-nuclear scenarios double CO2 between 2038 and 2080, with exponential increase continuing thereafter.
The first 60 TWe-y will have to come from 1500 +/- 500 light-water reactors (LWRs). 60 TWe-y LWRs consume 10 MtUnatural, the estimated World uranium resource base. Plutonium from spent LWR fuel, military plutonium and military HEU is used to load 2500 +/- 1000 fast breeder reactors (FBRs) by 2035. By 2080 there will be 25,000 FBRs operating and power-plant CO2 emission will cease. World energy grows 2%/year until 2080, assuming world population stops increasing before 2030. Hydrogen and ammonia will be produced by electrolysis. Aluminum cars will burn ammonia. Propeller aircraft will burn liquid hydrogen. Phosphate fertilizer, detergent and concrete will be produced in arc furnaces.
1.0 $/kg-C carbon tax increases pulverized coal power cost 0.085 $/kWh more than it increases CCGT (Combined-Cycle gas turbine) power cost. This cost differential is the minimum required to make CCGT less expensive than power generated from pulverized coal. Natural gas is 3 to 6 times as expensive as coal on a BTU basis.
CCGT (Combined-Cycle Gas Turbine) needs 0.05 $/kWh profit to pay its $1500/kW plant cost within 5 years. Decontrolled natural-gas and FERC price-caps require a 5 yr payout on any new power plant that uses natural gas. A “8000 BTU” CCGT pays $5/MMBTU for natural gas. $5/MMBTU fuel adds an additional 0.04 $/kWh to the cost of electricity from the “8000 BTU” CCGT.
A new CCGT must charge 0.09 $/kWh, absent the carbon tax. An existing coal-fired power plant has to pay less than $1/MMBTU for coal, putting its total generation cost at less than 0.04 $/kWh, absent the carbon tax. One Dollar/kg Carbon tax adds 0.13 $/kWh to the CCGT and adds 0.21 $/kWh to the “9000 BTU” coal plant. Under these extreme conditions the new CCGT only has a 0.03 $/kWh advantage over an existing coal plant. Electricity price is more than doubled in the process. Under the same conditions, the simple cycle gas turbine charges roughly 0.08 $/kWh, absent the carbon tax. The simple cycle carbon tax is 0.16 $/kWh, giving 0.24 $/kWh total power cost. This is only 0.01 $/kWh less than the existing coal plant.
CCGT (Combined-Cycle Gas Turbine) is typically two airplane motors (Brayton Cycle) exhausting into a single steam boiler (Rankine Cycle). Airplane motors produce roughly 80% of total electric power. CCGT bottoming Rankine cycle produces roughly 20% of total electric power.
A CCGT is typically an “8000 BTU” plant, using 8000 BTU heat input per kWh electric output. Resulting thermal efficiency is 3412 BTU/kWh/8000 BTU/kWh (42.65 %), based on natural-gas HHV (higher heating value). CCGT heat rates of 7000 BTU/kWh are within reach, absent blade erosion and load following.
Absent cooling water, airplane motors are installed minus a bottoming Rankine cycle. Resulting simple Brayton Cycle heat rate is roughly 10,000 BTU/kWh, burning natural gas. Pulverized coal power heat rate is typically 9000 BTU/kWh, using a super-critical Rankine cycle and cooling water.
Coal can also be gasified, cleaned and fired in a CCGT. Overall heat rate is roughly 10,000 BTU/kWh, because gasification loses 1/3 of the energy. Valuable liquid byproducts improve gasifier economics. A coal-fired MHD Combined Cycle (Coal-MHDCC) may reach 6000 BTU/kWh, a 57% thermal efficiency. Coal-MHDCC carbon tax would be roughly the same as for CCGT.
n-octane, C8H18, is roughly 70 API gasoline at 700 kg/m^3 (5.84 lbs/US-gallon; US gallon = 231 in^3). C8H18 HHV is 5.46 GJt-HHV/kg-mole-C8H18. 1.0 $/kg-C carbon tax on gasoline translates into 2.0 $/US-gallon.
Existing Carbon Mass in Earth Atmosphere
Preindustrial atmospheric CO2 = 0.028% by volume
Post 2008 Carbon = 5.263 Ekg-Air * (12 MW-C/29 MW-Air)
* (560 ppmv - 394 ppmv)/1000,000 p) * (1.0 E+06 Tkg/1.0 Ekg)
= 361 Tkg-C = 361,000 Mt-C
= 361,000 Mt-C/(500 EJt/yr/0.0569 EJt-HHV/Mt-C) = 41 years
CO2 doubling = 2008 + 41 = 2049
Carbon buildup 1800 to 2001 at 2.25% historic annual increase:
ppmvc = 280 + Exp(0.0225 * (year - 1800))
Preindustrial, 275-284 ppm, 1550 - 1800 A.D.
Carbon Dioxide Information Analysis Center
http://cdiac.esd.ornl.gov
C.D. Kelling and T. P. Worf, Carbon Dioxide Research Group,
Scripps Institution of Oceanography, La Jolla CA 92093-0044
cdiac.esd.ornl.gov/ftp/maunaloa-co2/maunaloa.co2,
Mauna Loa Observatory, Hawaii
ppmvc = 280 + Exp(0.0225 * (year - 1800))
Mauna Loa Eq Mauna Loa Eq
1959 316.00 316
1960 316.91 317
1961 317.63 317 1981 339.95 339
1962 318.46 318 1982 341.09 340
1963 319.02 319 1983 342.75 341
1964 319.52 320 1984 344.44 343
1965 320.09 321 1985 345.86 344
1966 321.34 322 1986 347.14 346
1967 322.13 323 1987 348.99 347
1968 323.11 324 1988 351.44 349
1969 324.60 325 1989 351.44 350
1970 325.65 326 1990 354.19 352
1971 326.32 327 1991 355.62 354
1972 327.52 328 1992 356.36 355
1973 329.61 329 1993 357.10 357
1974 330.29 330 1994 358.86 259
1975 331.16 331 1995 360.90 360
1976 332.18 332 1996 362.78 362
1977 333.88 334 1997 363.84 364
1978 335.52 335 1998 366.58 366
1979 336.89 336 1999 368.28 368
1980 338.67 337 2000 369.39 370
2001 370.93 372
cdiac.esd.ornl.gov/ftp/trends/co2/siple2.013,
Friedli et al. (1986)
Siple Station Ice Core, Physics Institute,
University of Bern, CH-3012, Bern, SW
Year 1744 1764 1791 1816 1839 1843 1847
Bern 276.8 276.7 279.7 283.8 283.1 287.4 286.8
Curve 281 282 283 283 283
Year 1854 1869 1874 1878 1887 1899
Bern 288.2 289.3 289.5 290.3 292.3 295.8
Curve 285 285 286 287 289
Year 1903 1905 1909 1915 1921 1927 1935 1943 1953
Siple 294.8 296.9 299.2 300.5 301.6 305.5 306.6 307.9 312.7
Curve 290 291 292 293 295 397 301 305 311
Try ppmv = 280 + Exp(0.0225 * (Y - y-1800))
Justification for 1.0 $/kg-C Carbon Tax
Assume: World GDP grows 3%/year, US yr-2000 GDP = 10 T$ and
World GDP = 4 * US GDP:
World GDP = 10 T$ USA * 4 World/USA * Exp(0.03*(yr - 2000))
Assume World must pay 1.0 $/kg-C as it releases 414 Tkg-C
from 2000 to yearend 2080. Atmospheric CO2 increases from
370 ppm y-2000 to 560 ppm y-2080, adding an additional
414 Tkg-C.
Carbon Tax = 1.0 $/kg-C * 414 Tkg-C = 414 T$
414 T$ Carbon Tax/Cumulative GDP Between 2000 and 2080
= 414 T$/(Cumulative World GDP yr-2000 to yr-2080)
= 414 T$/(10 T$ * 4 * [Integral{Exp(0.03 * (2080 - 2000))}])
= 414/(10 * 4 * [(1/0.03) * (Exp(0.03 *(2080 - 2000)) - 1)])
= 0.03 * 414 / (10 * 4 * (Exp(0.03 * (2080 - 2000)) - 1))
= 0.03 * 414 / (10 * 4 * (11.02 - 1))
= 0.031 [3% Carbon tax] , where
[Integral{Exponential equation} limits are 2000 and 2080].
Notation and Conversions
atm = atmospheric pressure = 101325 N/m^2
BTU = British Thermal Unit, energy unit
Cal = calorie, energy unit (= 4.1868 Joules)
g = acceleration of gravity (= 9.80665 m/sec^2)
HHV = Higher Heating Value, combustion steam is condensed
J = Joule, energy unit
LHV = Lower Heating Value, combustion steam not condensed
kWh = electric kilowatt hour = 3600,000 J
MHD = Magneto-Hydrodynamic
MMBTU = Million BTU, MM is Roman Numeral 1000 times 1000
MMBTU = 1055.06 MJ
NM = Nautical Mile = 1852 m = 1 degree/60 at equator
scf = standard cubic natural gas at 60 F and 30″ Hg
t = metric ton = 1000 kg = long ton = tonne
k = kilo = 1.0E+03 (thousand)
M = mega = 1.0E+06 (million)
G = giga = 1.0E+09 (billion)
T = tera = 1.0E+12 (trillion)
E = exa = 1.0E+18 (ecto)
Z = zetta = 1.0E+21 (zillion)
1 BTU = ((lb-H2O-F) * (1000 g/kg/2.2046226 lb/kg)
* (C/1.8 F) * Cal/gm-H2O-C * 4.1868 J/Cal = 1055.056 J
Air Molecular Weight = 29 kg/kg-mole
H Molecular Weight = 1.00797 kg/kg-mole
C Molecular Weight = 12.01115 kg/kg-mole
S Molecular Weight = 32.064 kg/kg-mole
Natural Gas Carbon Tax
Natural gas is burned in an “8000 BTU” Combined Cycle CCGT.
Natural Gas standard cubic foot (scf) is calculated at
30″ Hg (101592 N/m^2) and 60 F (288.70556 K):
1 kg-mole natural gas at standard conditions
= 1 kg-mole * 288.70556 K * 8314.5 J/kg-mole-K/101592 N/m^2
= 23.6283 m^3 (834.43 scf)
Natural Gas volume fraction: 0.94 CH4, 0.03 C2H6, 0.01 CO2.
Natural Gas HHV = (0.98 kg CH4 * 16.04303 * 50010 kJ/kg
+ 0.03 kg C2H6 * 30.07012 * 47470 kJ/kg + 0.01 CO2 * 0)
* 1.0 MJ/kJ / (1055.056 MJ/MMBTU * 834.43 scf/kg-mole)
= 0.000942 MMBTU/scf
1 $/kg-C (Natural Gas Carbon Tax)
= 1 $/kg-C * 12.01115 kg-C/kg-mole-C
* (0.98 * 1 + 0.03 * 2 + 0.01 * 2) kg-mole-C/kg-mole-gas
/ (834.43 scf/kg-mole-gas * 0.000942 MMBTU/scf)
= 15.9 $/MMBTU-natural gas
“8000 BTU” Combined Cycle Gas Turbine (CCGT) carbon tax
= (8000 BTU/kWh * 15.9 $/MMBTU) / 1000,000 BTU/MMBTU
= 0.13 $/kWh
“10000 BTU” Simple Cycle Gas Turbine (SSGT) carbon tax
= (10000 BTU/kWh * 15.9 $/MMBTU) / 1000,000 BTU/MMBTU
= 0.16 $/kWh
Pulverized Coal Power Plant Carbon Tax (Rankine Cycle)
Pulverized coal is burned in an “9000 BTU” pulverized coal steam plant. Overall thermal efficiency is 38%, based on fuel HHV (higher heating value).
Coal is assumed to be 80% (C-H-S0.01). 0.01 sulfur in the formula give 2.4% sulfur coal. The remaining 20% coal mass is incombustible water, bound oxygen, bound nitrogen and ash. Coal thermal energy is based on 1 kg-mole Carbon:
Coal mass/kg-mole-C
= (12.0115 kg-C/kg-mole-C
+ 1.00797 kg-H/kg-mole-H * 1.0 kg-mole-H/kg-mole-C
+ 32.064 kg-S/kg-mole-S * 0.01 kg-mole-S/kg-mole-C)
/ 0.80 kg-fuel/kg-coal
= 16.675 kg-coal/kg-mole-C
Coal HHV/kg-mole-C = 393 MJ/kg-mole-C
+ 142 MJ-HHV/kg-mole-H * 1.0 kg-mole-H/kg-mole-C
+ 301 MJ/kg-mole-S * 0.01 kg-mole-S/kg-mole-C
= 538 MJ-HHV/kg-mole-C (= 13,800 BTU/lb-coal)
Coal HHV/kg-C
= 538 MJ-HHV/kg-mole-C/12.01115 kg-C/kg-mole-C
= 44.8 MJ/kg-C
1.0 $/kg-C (Coal Carbon Tax)
= (1 $/kg-C/44.8 MJ/kg-C) * 1055.56 MJ/MMBTU
= 23.6 $/MMBTU
“9000 BTU” Pulverized-Coal Power Plant Carbon Tax
= (9000 BTU/kWh * 23.6 $/MMBTU) / 1000,000 BTU/MMBTU
= 0.21 $/kWh
“6000 BTU” Coal-MHDCC Power Plant Carbon Tax
= (6000 BTU/kWh * 23.6 $/MMBTU) / 1000,000 BTU/MMBTU
= 0.14 $/kWh
4.10.3 Composition of 1 kg coal, C-H-H2O-S-dirt. HHV is higher
heating value, water is condensed. Heat of Reactions are
from Reference 12. Ref 20, page 13-5 Illinois Bituminous
Volatile B, 13388 BTU/lb is roughly:
Component kg-mole MW kg HHV HHV *
MJ/kg-mole kg-mole
C 0.062 12 0.744 393 24.4
H 0.048 1 0.048 142 6.8
S 0.0006 32 0.019 301 Ref 20 0.2
H2O 0.0048 18 0.086 0 0.0
Bound O 0.0002 16 0.003 -197 -0.0
N 0.0001 14 0.001
Ash 0.099 0
Total 1.000 31.4 MJ/kg (13499 BTU/lb)