The Role Of Carbon Tax In Norway Environmental Sciences Essay

This policy brief examines the function of C revenue enhancement in decision-making of Norway ‘s C gaining control and storage undertakings. The research finds that C revenue enhancement entirely is non plenty to incentivize CCS execution chiefly due to high fringy suspension cost of CCS. Many factors, such as engineering uncertainness, regulative model, and international clime alteration policy, are significantly act uponing the way of CCS undertakings. Government and private sectors must work together to turn to these challenges.

Introduction

Carbon Capture & A ; Storage ( CCS ) , a direct tool for slaking nursery gas emanations, has been given great hope to battle clime alteration and function a 50-year passage to clean energy ( IPCC, 2005 ; Stern, 2006 ; IEA, 2008, 2009, and 2010 ; Haszeldine, 2009 ) . IEA ( 2008 ) states that, without CCS in the C cuneuss, the cost of clime stabilisation would increase 70 % . In order to lend to the betterment of planetary warming through least-cost emanations decrease, one hundred industrial-scale CCS undertakings need to be operational by 2020, and 3,400 undertakings by 2050 ( IEA, 2010 ) . However, by 2011, merely five commercial-scale CCS undertakings are in operation at a planetary graduated table, including Sleipner and Snohvit in Norway, In-Salah in Algeria, Weyburn in Canada, and Rangely in US. Most significantly, CCS development seems to hold suffered a series of reverses and cancellations worldwide over the last three old ages. These cancellations or delaies include big and high profile undertakings such as Statoil ‘s Halten, Karsto , and Snohvit in Norway, Saskpower ‘s 300MW oxyfuel works in Canada and Kwinana undertakings and the restructuring of the FutureGen undertaking in the U.S. by the US Department of Energy. Many publications attribute this phenomenon to economic and regulative barriers, like C policies, regulative model for CCS, liabilities and so on.

This policy brief examines the economic barriers of CCS development in Norway, concentrating on the function of C revenue enhancement. First, Norway is prima universe ‘s CCS development, where has the universe foremost industrial graduated table undertaking: Sleipner. The authorities and statute law are extremely committed to CCS development with full support to the industry since the beginning of 1990s. When Norway launched Karsto and Mongstad Project, the Prime Minister viewed them as Norway ‘s “ moon-landing, ” the technological break-through which will do CCS technologies commercial and which can be used for capturing and hive awaying CO2 at all coal and gas discharged power workss around the Earth. Second, Norway has established regulative model and long-run liability for CCS operations. Three Regulatory authorization related to CCS undertakings was delegated in 2009 to three ministries under statute law: the Ministry of Petroleum and Energy for licensing and regulation, the Ministry of safety responsible for environmental quality proctor, and the Ministry of Labor and Government Administration for wellness, safety and work environment ( IEA, 2011 ) .

Furthermore, Norway introduced a CO2 revenue enhancement on fossil fuels in 1991. The revenue enhancement started at a high rate of US $ 51 per metric ton of CO2 on gasolene, with an mean revenue enhancement of US $ 21 per metric ton ( Bruvoll and Larsen, 2004 ) . Tax was besides applied to diesel, mineral oil, and gas used in North Sea Extraction. Government functionary and crude oil industry declare that C revenue enhancement is the most of import driver for the Statoil to get down CCS at Sleipner. Third, public credence lead by an environmental NGO Bellona is exceptionally high towards CCS compared with other developed states. Fourth, even with these institutional scene, the CCS development has experienced hinderance. In 2010, The Norway authorities and Statoil has defer the Mongstad undertaking to 2016 because engineering and fiscal uncertainness. In 2009, Norway has postponed to incorporate CCS to a gas-fired power works at Karsto , the largest C dioxide emitters in the Norse state. Therefore, understanding the decision-making of these workss from economic position can non merely profit future CCS development in Norway, but besides contribute the planetary CCS activities. This policy brief intends to reply if carbon revenue enhancement entirely can promote the CCS investing in Norway. If carbon revenue enhancement can be major driver, what revenue enhancement rate should be adopted?

Analysis

This research surveies three undertakings based on their present position and the CO2 beginnings ( Table 1 ) . Sleipner is the first industrial-commercial undertaking from a natural gas processing works, allegedly drove by C revenue enhancement. Mongstad is the first proposed CCS undertaking from a combined heat and power ( CHP ) works. Norway authorities considered the Mongstad undertaking as Norse “ Moon Landing. ” However, in 2010, the authorities announced that the concluding determination for the large-scale gaining control unit at Mongstad would be postponed to 2014, and in 2011, the undertaking has been announced the hold of the decision-making to 2016. Government besides launched an rating of a CCS undertaking combined with a 420 MWe gas-fired power works at the Karsto in 2007. The authorities aimed to hold all-out CCS from the power works in gait by 2009. Nevertheless, in 2009, the authorities decided to halt the advancement of the CCS installation. Therefore, analyzing the function of C revenue enhancement among the three different undertakings is representative. Inflation rate is non considered in this survey.

Undertaking

Operator

Get downing Year

Injection Rate

Sleipner

Statoil

1996

Natural Gas Production

1 MT/year

Karsto

Statoil

Suspended

Gas-fired power works

1.2 Mt/year

Mongstad

Statoil

Suspended

Combined heat and power

0.1 Mt/year ( P1 ) /2.5 Mt/Year ( P2 )

Table Undertaking Status of Sleipner, Karsto and Monstad

Sleipner

Undertaking Summary

In 1996, Statoil and its spouses at the Sleipner Gas Field in the North Sea started the universe ‘s first large-scale undertaking dedicated to geological CO2 storage in a saline formation. Presently, major existent or planned commercial undertakings are associated with major gas production installations that have gas watercourses incorporating CO2 in the scope of 10-15 % by volume ( IPCC, 2005 ) . The natural gas from Sleipner is non an exclusion, incorporating about 9 % CO2 that is far higher than the sale demand: 2.5 % CO2. Statoil separated and injected CO2 into a big deep saline formation 800 m below the ocean floor of the North Sea. The engineering of capturing the CO2 was amine-based, a well-established procedure for CO2 gaining control. The Saline Aquifer CO2 Storage ( SACS ) undertaking proctor and research the CO2 storage with 4D seismic. Since 1996, 1 MtCO2 is removed from the produced natural gas and injected belowground yearly in the field. Over the estimated undertaking life-time of 25 old ages, around 20 Mt CO2 is anticipated to be stored in North Sea.

Cost Analysis

When Statoil planned the Sleipner gas production around 1996, there are basic three picks to manage with CO2. Norway introduced CO2 revenue enhancement on crude oil activities in 1991. So first, Statoil can breathe the excess CO2 and pay the emanation revenue enhancement, around $ 40. EOR ( Enhanced Oil Recovery ) , a long-run engineering to increase the sum of rough oil from oil field, was the 2nd option. However, Statoil failed to happen field suited in size or timing to suit production rate. Underground injection emerged as the 3rd option. An ideal infinite filled with salt H2O situated right below the Sleipner Field, plus its capacity to hive away the 25 Mt CO2 ( Torp and Brown, 2006 ) . More significantly, the 3rd option of shooting CO2 can maintain off from Norway ‘s high CO2 revenue enhancement.

Statoil calculated the excess fringy costs of different stages, including site word picture, CO2 compression, and CO2 injection ( Table 1 ) . The consequences represented the enormous advantages than paying emanation revenue enhancements. The investing cost, $ 97 million, has been paid back within two old ages since the start of this undertaking, given the one-year $ 60 million C revenue enhancement avoided. The CO2 gaining control procedure of natural gas production, including a fluid smasher membranophone, a compressor, a ice chest and a gas turbine driver, is costly compared with other outgos. It accounts for 84 % of entire cost. Interestingly, the policy brief find that the technological options of compacting are of certain in the Sleipner undertaking. Therefore, Statoil can exactly carry on benefit-cost analysis, taking the first industrial-scale undertaking. Carbon revenue enhancement played a important function in the decision-making, plus the technological certainty. Injection presently costs $ 17 US/Tonne CO2.

Undertaking Summary

In 2006, the Norse authorities and Statoil made an understanding to construct a CO2 gaining control trial Centre ( 2012 ) and later all-out CCS from a combined heat and power ( CHP ) works at Mongstad ( 2014 ) . The trial installation is owed by the Norse Government ( 75.12 % ) , Statoil ( 20 % ) , and Sasol and Shell ( 2.44 % ) ( CCS @ MIT, 2011 ) . The program aimed to cut down costs and hazards for the all-out gaining control unit. Therefore, two post-combustion gaining control engineerings ( aminoalkane and chilled ammonia engineering ) are designed for trials at the same time up to 100,000 dozenss of CO2 gaining control capacity, utilizing exhaust gases from the gas-fired CHP unit and the refinery that has a CO2 content of around 12 % ( Koeijer et al, 2009 ) . The CO2 that is captured within the proving procedure is non to be stored.

Originally, the large-scale CCS works with a gaining control capacity of about 2 Mt of CO2 per twelvemonth is to be established by 2014. However, in 2010, the authorities announced that the concluding investing determination for the large-scale gaining control unit at Mongstad would be postponed to 2014. One twelvemonth subsequently, the Ministry of Petroleum and Energy postpone the undertaking one time once more. The determination whether to put is now delayed until 2016.

Cost Analysis

The survey merely focuses on the cost of gaining control phase because the trial Centre Mongstad does non include CO2 storage. The expected CCS installings are designed to capture 1.2 million dozenss of CO2 from the power works by utilizing ammine engineering and 0.8 million dozenss from the refinery with chilled ammonium hydroxide engineering. In 2010, CCS installings for the power works and the refinery together required the investing demands of estimated at $ 5 billion ( NOAH, 2011 ) . 50 % of these go to gaining control at the power works, 20 % go to gaining control at the refinery and 30 % are common public-service corporation systems for both gaining control workss. The one-year operating cost is estimated at between $ 0.19 and $ 0.3 billion ( NOAH, 2011 ) . This fluctuation is caused by the energy costs vary in conformity with future energy monetary values. Energy costs represent 50-70 % of the operating costs ( NOAH, 2011 ) . However, this cost assessment $ 5 billion is every bit 38 times as the authorities original proposal of 2006.

Assuming the CO2 revenue enhancement will remain $ 40/t, the one-year CO2 revenue enhancement avoided is $ 80 million based on 2 Mt CO2 yearly. The investor would non do net income after 150 old ages. Even though the Ministry stated that the hold of Mongstad is due to the wellness concern of aminoalkane engineering, the fiscal hazard is enormous. Additionally, Bellona, the taking Environmental NGO in Norway, argues that there is no grounds asking delay because the aminoalkane engineering is merely one of many methods for dividing CO2 out of its emanation ( Kristensen and Tveit, 2010 ) . As a consequence, this suspend of the Mongstad undertaking are largely caused by the spiking cost. Based on the estimated investing and operating costs, Statoil disclosed that the fringy suspension cost of CO2 is from $ 216 to $ 299 in 2008. This abettal costs is far higher than the revenue enhancement rate. Particularly, this computation does non include the cost of transit, storage and other relevant substructure. Under this circumstance, C revenue enhancement itself is non plenty to incentivize the enterpriser, even if the authorities shoulders 85 % costs in Mongstad.

Karsto

Undertaking Summary

Government began to measure a CCS undertaking integrated into a 420 MWe gas-fired power works in 2007 at the Karsto site. Government ab initio planned to hold all-out CCS from the power works in topographic point by 2009, with an one-year decrease of 1.2 million tones of CO2. The power works started electricity production without C gaining control and storage in 2007. Carbon gaining control from the power station programs to happen in post-combustion. Similar to the Sleipner and Mongstad, the installation intends to follow amine-based engineering. The information of cost is non available for this survey. However, the Ministry of Petroleum and Energy decided to halt the scrutiny procedure for the CCS installation given the considerable costs. A pre-feasibility survey was carried on in 2009 and completed in 2010. The survey indicated the engineering is executable ; nevertheless, it failed to advert the fiscal hazard. Osmundsen and Emhjellen ( 2010 ) conclude that compacting and pumping CO2 requires significant energy ingestion. With this tremendous energy punishment, entire power ingestion for the gaining control works will be 27-30 MW. The undertaking would demand more than $ 1.7 billion in subsidies, or in surplus of $ 133 per twelvemonth. The fringy suspension cost of CCS is about $ 333, which is about 8 times the C revenue enhancement in Norway, 20 times the international C emanation monetary value. Therefore, C revenue enhancement dosage non map at all in determination devising like this undertaking.

Cost Summry

A figure of esteemed energy research centres have addressed the cost of CCS, including the IPCC, the IEA, the MIT, the WRI, and Mckinsey. This research finds the appraisal is far off from consensus, with a broad scope of cost based on different ingestions. For illustration, IPCC ( 2005 ) indicates the fringy abettal cost from $ 20 to $ 270/t CO2. IEA ( 2004 ) speaks of “ likely costs ” about $ 5 to 120 /tCO2. MIT ( 2006 ) arrives at $ 48-71/t CO2 for a assortment of works types. Considered the features of CCS undertaking, this appraisal is apprehensible. However, it brings tremendous challenges to policy-makers and enterprisers.

Second, it is clearly CO2 gaining control from burning procedure is more expensive and energy-intensive than CO2 separation from national gas Wellss. The Sleipner undertaking in Norway has given clear grounds. IEA ( 2006 ) calculated that typical costs of CCS in power workss ranges from US $ 30 to 90/t CO2 or even more, depending on engineering, CO2 pureness and site. CO2 separation cost from natural gas Wellss depends on the CO2 concentration in the natural gas and on well locations. The cost may be every bit low as $ 5-15/tCO2 for onshore and offshore sites, severally. My survey find the fringy suspension cost at Sleipner is $ 7/t CO2 based on the entire cost of $ 175 million and the entire suspension of 2.5 million. This computation does non number rising prices rate and present value. Therefore, the existent fringy suspension cost might higher than $ 7/t CO2.

Decision

First, the Norse instances illustrate that C revenue enhancement entirely is non plenty to promote the development of CCS. At present, carbon revenue enhancement in many states is non even shut to the estimated fringy suspension cost of CCS from power coevals ( Table 3 ) . In pattern, C revenue enhancement can ne’er be the current fringy suspension costs in future. The alternate manner is to cut down the fringy suspension cost through engineering invention and diffusion. Knowledge sharing in international community can besides lend to cut down the fringy suspension of CO2. In add-on, uniting C revenue enhancement with other public policy or incorporating domestic clime policy into the planetary market can assist the advancement of CCS since. Furthermore, the fringy suspension cost itself is debatable to day of the month. The appraisal of costs is excessively broad for public policy shapers to measure determinations. Furthermore, the cost appraisal of different organisations is non transparency. Different histrions make ratings harmonizing to their premises and on behalf of their involvements. The international community must happen a manner to get the better of these hurdlings in order to implement CCS on a planetary graduated table.

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Table Carbon Tax in Europe ( Beginning: Climate Connect Research )

Second, companies might see going engaged in the CCS undertaking merely if the fiscal support from the authorities could endorse them up. This research finds that both Mongstad and Karsto are operated by Statoil, having enormous fiscal assistance from authorities. The Norway taxpayers cover all the disbursal of research and development at Karsto , and portion 85 % of costs at Mongstad. However, one time public committedness psychiatrists, the industry is more likely to hold the operation. Therefore, in the procedure of decision-making, the private sector must seek to gauge future clime policy because of policy uncertainness. The Norse authorities seems to be confronting a policy quandary. On the one manus, authorities feels its duty to back up clean engineering ; on the other manus, engineering uncertainness and continuously increasing cost push authorities off from over-spending taxpayers ‘ money.

Third, even with two rescheduled CCS undertakings, Norway is still taking the planetary leading in developing CCS engineerings. The Norse authorities and governments can be regarded really engaged and proactive spouses for the Norse industry. The authorities has allocated important support to back up CCS presentation ( Van-Alphen et Al, 2009 ) . The support degrees for RD & A ; D on C gaining control and storage are significant and have increased over the old ages. However, Norway must retain the current fiscal support for CCS research, development and presentation, including for the large-scale development at Mongstad and Karsto . Learning-by-doing procedure could play a important function in implement farther CCS undertakings. Over all, this policy brief suggests that the Technology Centre Mongstad should be established in clip in order to verify gaining control engineering and so travel frontward to the planned large-scale CCS works at Mongstad.