CCS Development Strategy and State of CCS Projects in Australia

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1 CCS Development Strategy and State of CCS Projects in Australia International Zero Emissions Coal Workshop Tokyo 23 February 2009 Mr John Hartwell Acting Deputy Secretary Department of Resource, Energy and Tourism

2 Australia-Japan interrelationship The interdependence between Australia and Japan on coal goes beyond that of a seller and buyer of coal. It reflects: Strong long term trade relationships that have built up over many decades. Australia is the largest supplier of coal to Japan Japan is Australia's largest market Japan is also a major investor in Australian coal mines. The important contribution that coal makes in both our economies For Australia, coal is the largest commodity export and accounts for 80% of domestic power generation For Japan, coal accounts for around a fifth of power generation and is a vital input in steel production. History of working together to address the many policy, technical and environmental challenges facing the supply and use of coal.

3 Australia's Climate Change Policy The Australian Government's climate change policy is built on three pillars: reducing Australia s greenhouse gas emissions- long term target of 60% of 2000 levels by adapting to climate change that we can t avoid and helping to shape a global solution.

4 Carbon Pollution Reduction Scheme (CPRS) What it covers CPRS White Paper released on 15 December It is the key vehicle for achieving the Government's emissions reduction target of 60 per cent below 2000 levels by A medium term target range to reduce emissions by between 5 and 15 per cent below 2000 levels by Legislation will be introduced in It will be a cap and trade scheme with a mix of auctioned and limited free permits. Covers around 75% of national emissions. All sectors covered except for agriculture, land use and international fuels. Agriculture delayed until at least no offsets. Deforestation (land clearing) is outside of the scheme. Forestry to voluntarily opt in for Transport covered by upstream suppliers with carbon offsets.

5 CPRS-What it covers (continued) threshold for direct obligations under the scheme apply to entities and facilities which have a direct emissions of tonnes of CO 2 equivalent or more An initial price cap of $40 dollars a tonne increasing at 5 % per annum in the first five years is aimed at providing a reasonable level of cost certainty. Scheme is designed to allow international linkages with other schemes. By harnessing the innovation and efficiency of the market, the Carbon Pollution Reduction Scheme will allow Australia to meet these serious targets at the lowest overall cost to our economy.

6 Transitional arrangements White Paper sets out a comprehensive new package of financial assistance to households, business regions and workers, electricity sector and emission intensive trade exposed industries, worth billions of dollars in the first five years. Support will go to: Households; Business, Regions and Workers under Climate Change Action Fund; Of the $750 million specifically allocated under the Coal Sector adjustment Scheme $250 million over 5 years will go towards helping the sector to promote emissions abatement. $500 million over 5 years for direct assistance to gassy coal mines to assist them adjust while they explore abatement opportunities. Electricity Sector under a Electricity Sector Adjustment Scheme; and Emissions intensive trade exposed (EITE) Industries.

7 Role of CCS Coal accounts for 80% of Australia's electricity supply. Coal's share of total electricity will decline in favour of renewables and natural gas. However low emission technologies will be needed to achieve longer term greenhouse targets while maintaining energy security. Australia faces similar challenges as the rest of the world. IEA estimates that in order to achieve 50% cut in greenhouse gas emissions, 20% of abatement will need to come from CCS technologies. Greenhouse abatement will be more expensive the longer it takes to deploy.

8 Low Emissions Coal Technology Low emissions coal technology such as carbon capture and storage (CCS) must be brought to market faster to reduce greenhouse gas emissions while maintaining energy security. Australia is making a leading contribution to the development of CCS for coal power. Projects underway include: Storage: Otway, world's largest pilot Oxyfuel: Callide A, world's first retrofit; Post Combustion Capture; pilot projects at power stations in Australia and China; Gasification: Coal Gasification research facility, QLD and Zerogen.

9 National Low Emissions Coal Initiative (NLECI) The Australia NLECI is a new initiative aimed at: establishing a nationally coordinated strategy to accelerate the development and deployment of low emission coal technologies; achieving large reductions in greenhouse gas emissions from coal; and enhancing coal's contribution to energy security and to the economy. The Australian Government is providing $500 million and will work in cooperation with the coal producers $1 billion Coal21 Fund and investment from State Governments and other stakeholders.

10 Commonwealth Legislation- Overview The Offshore Petroleum and Greenhouse Gas Storage Act 2008 will provide for the injection and geological storage of greenhouse gas substances (GHG) in Australian offshore areas. Received royal assent on 21 November 2008 Uses Offshore Petroleum Act platform Responsible Commonwealth Minister (RCM) has regulatory responsibility Deals primarily with: Provision of access and property rights for GHG activities; Provides management system for ensuring safe and secure storage; and Balances the rights of new industry with petroleum industry.

11 Need for concerted global action on carbon capture and storage is broadly accepted via G8-IEA-CSLF recommendations Demonstrating CO2 capture and storage and bridging the financial gap Commitment by 2010 to at least 20 fully integrated industrial-scale demonstration plants, for broad deployment of CCS by 2020 Addressing financial gaps and risks in early CCS projects Taking concerted international action Fostering international action to partner, financially support, build capacity and share information Including CCS in the CDM in December 2008 Creating a value for CO2 for commercialisation of CCS Creating long-term policy certainty Introducing appropriate instruments to create a value for CO2 and incentives for RD&D Establishing legal & regulatory frameworks Necessary for large-scale geological storage of CO2 Communicating with the public Dedicating resources to disseminate information and public outreach Infrastructure Developing perspectives for the availability of a CO2 transport infrastructure Retrofit CO2 capture Development of new fossil fuel power stations should have regard to what might be required for retrofit of CCS Areas for global co-operation Source: Hokkaido G8 Summit recommendations

12 Many CCS projects have been announced However only one integrated coal boiler project is operating Capture Integrated projects Kurosaki JAP Loy YangHazelwood NSW/VIC Vattenfall GER Sargas NOR Williston Antelope Iwaki JPN Enel 1 ITA Mongstad NOR Power generation and industrial applications Teeside E.ON GER Mulgrave GE POL Hypogen EU Endesa ESP GreenGen CHN EPCOR CAN Coolimba Powerfuel Nuon NLD Aust. Pilots Tenaska WA Parish White TigerProj. Link VNM UAE Fairview Yantai CHN Bndry DamImminham Kimberlina CAN Ft Nelson CAN Lacq FRA Callide RWE GER AEP Alst.? FutureGen ZeroGen Appalach. DF1 FuturGas Wallula DF2 Pernis NLD Hamm GER Ferrybr. Kingsn. DF3 Draugen NOR SaskP. CAN Tilbury HRL Killing. Stripped from natural gas / other Capture-only projects Storage-only projects Zama Link CAN Permian Daiquin CHN K12b NLD Ketzin GER Quinshu CHN Otway Frio Brine Altmark GER In Salah ALG Nagaoka JAP JAPEX JAP Snohvit NOR Entrada San Joaq. Sleipner NOR Gorgon Bintulu MAL Weyburn CAN/US Cranfield Monash Decatur TAME Moomba Mt Simon Complete Operating Announced No storage solution Captureready Storage solution Storage Dormant or cancelled Source: IEA, Fossil fuel-fired power plants and CO 2 capture and storage; CSIRO, Australian CCS Commercial and R&D Projects, 2007; Gassnova, International CCS Technology Survey 2008; Carbon Capture and Sequestration MIT, RET interviews

13 No integrated industrial-scale projects have commenced Capture Sargas NOR Williston Iwaki JPN Enel 1 ITA Mongstad NOR Integrated projects Power generation and industrial applications Teeside E.ON GER GE POL Hypogen EU Endesa ESP GreenGen CHN EPCOR CAN Powerfuel Nuon NLD Tenaska White TigerProj. Link VNM UAE Imminham Yantai CHN Ft Nelson CAN RWE GER Appalach. Wallula Stripped from natural gas / other Capture-only projects Storage-only projects Permian Daiquin CHN In Salah ALG Entrada Sleipner NOR Gorgon Bintulu MAL Weyburn CAN/US Cranfield Monash Moomba Operating Announced No storage solution Storage solution Storage Note: Industrial-scale defined as more than 250 MW power production and/or greater than 1 Mtpa CO 2 storage Source: IEA, Fossil fuel-fired power plants and CO 2 capture and storage; CSIRO, Australian CCS Commercial and R&D Projects, 2007; Gassnova, International CCS Technology Survey 2008; Carbon Capture and Sequestration MIT, RET interviews

14 Global Carbon Capture and Storage Institute To accelerate the global adoption of CCS Proposed Mandate To drive towards a diverse portfolio of 20 integrated, industrial-scale demonstration projects operating by 2020 To work with existing bodies; establishing new programs as required To be an active clearinghouse and standard setter for CCS information

15 Australia is prepared to make a major commitment We will host the Global CCS Institute Australia's commitment We will provide up to $100m per year to fund the Institute We welcome the participation of countries, including researchers with a major interest in CCS.

16 Conclusions Conclusion Coal will continue to play an important role both economically and as an energy source both in Australia and the wider world. However, concerted national and international effort is needed to develop and deploy low emission technologies involving CCS. The Australian Government is addressing these challenges through the NLECI at the national level, and the GCCSI at the international level. Both these measures are aimed at ensuring CCS technologies are available for deployment by THANK YOU

17 Any Questions?