*We all want carbon capture and storage to work as a neat method of fighting climate change, but Dan Lewis says we should not let this enthusiasm blind us to the problems.*

Recent suggestions that the UK may be sitting on a carbon dioxide storage bonanza in the North Sea worth £2-4 billion a year and up to 60,000 jobs should give us all pause for thought. Is the world's newest energy industry, carbon capture and storage (CCS) from coal and gas-fired power stations really on the cusp of a boom?

According to the British Geological Survey, rock formations beneath the seabed have enough room to store up to 300 years' worth of emissions from Europe's power stations. Add to that the news that a powerful carbon capture consortium has formed comprising Shell, ScottishPower and National Grid and presumably we have the ingredients for take-off. Or do we?

As with all new industries, the challenge is to separate the technically feasible from the financially viable. A new report from Future Energy Strategies, The Global State of Carbon Capture and Storage, explores the CCS market and aims for just that.

*Carbon capture an established industry*

The first surprise for some readers is that capturing carbon dioxide for commercial gain is nothing new. It is used in the carbonated drinks, agricultural (accelerating growth in greenhouses) and dry ice industries and has a great future as a feedstock for algae, which can then be processed into biofuels or even plastics.

Clearly, to start sequestering billions of tonnes of carbon from coal and gas-fired plant is of a different magnitude. In this respect, CCS is far from geared up. There are 77 projects worldwide in a planning or development stage. It is unlikely that all will come to fruition. To date, only six plants are in operation, and perhaps surprisingly, only one of them, Vattenfall's Schwarze Pumpe Germany, captures carbon from coal.

While great emphasis is regularly given to these early plants, one must pay attention to where CCS is not happening in any shape or form and why. And that is why there has to be some focus on China and India.

*Little CCS in China and India*

China consumes 40 per cent of the world's annual coal production, but CCS in China is very small scale. Huaneng Beijing cogeneration power plant, which opened in July 2008, captures a mere 3,000 tonnes of carbon each year and uses the captured carbon for carbonated drinks and dry ice, meaning that it is captured, but not stored. Other works that are promised in China - but have yet to appear - are a plant in Shanxi which will capture carbon and use it as a fertiliser and another that may pump carbon into oil deposits to extract the fuel.

India's coal consumption is expected to grow rapidly from a relatively low base. There are currently no drivers whatsoever towards CCS in India. This might change if CCS were to be included and eligible for permits under the Clean Development Mechanism (CDM) of the Kyoto Protocol, as India is one of the biggest recipients of CDM cash.

As a relatively recent technological development, CCS was not considered for inclusion in the CDM or the European Union's Emissions Trading Scheme. Like nuclear power, it has not readily found favour with traditional advocates of low-carbon energy.

*ETS inclusion*

Unlike nuclear power however, the EU has recently seen fit to include it in the ETS: its allocation of up to 300 million allowances makes its financing future much more certain. The same is not true for the CDM. It may well be that the successor treaty to Kyoto, to be discussed at the UN Climate Change Conference in Copenhagen in December, will redress this imbalance - if an agreement on a successor treaty is reached at all.

*Safety issues*

So what are the safety issues with CCS? Hard core CCS advocates will try and tell you that this is ultra-safe technology, but that is not quite true. According to the UK's Carbon Capture and Storage Association, there are still issues of health and safety that require standardisation and closer attention.

These include:

* the migration of carbon to potable ground-water supplies;

* the leakage risk assessment methodology;

* the corrosive effects of carbon on plant ­materials;

* the absence of prescribed UK standards - which cover other gases - for carbon pipes;

* the setting of standards for the handling of high pressure carbon, pipeline materials, and the requisite valves, venting and pumping.

Although handled on a much smaller scale than natural gas or hazardous liquids, the US Department of Transport recorded just 0.32 incidents per 1,000 kilometres of carbon pipeline per year between 1990 and 2001: neither fatalities nor serious injuries resulted from these incidents. That record compares well with that of hazardous liquids, which recorded 0.82 incidents on the same basis, but less well than natural gas with 0.17 incidents.

*Health hazard*

But it would be quite wrong to ignore the dangers posed, especially by carbon dioxide leakage. As a toxic gas, the ideal situation is to ensure that carbon dioxide never leaks, since it can be very dangerous. Air contains only 0.038 per cent carbon dioxide and, according to the US Occupational Safety and Health Administration, the safe limit is 0.5 per cent. If carbon levels rise to 8 per cent, consciousness will be lost within 5-10 minutes. At 17 per cent, death occurs in seconds.

So safety is a risk not to be underplayed. However, the chief risk for project managers appears to be financial, followed by fickle government support, whereas the technological and geological risks are relatively low.

*Markets can't deliver alone*

Like renewables and nuclear power, CCS is going to need support in some form from governments worldwide. Markets alone will not be willing or able to risk investment on largely unproven new technology and new thinking. The danger is that market conservatism will default to easier but less carbon-positive options in the power generation sector - such as CCGT gas without CCS, or on a promise of it at a distant later date through capture ready technology.

All in all, a careful study of the facts suggests that CCS is a new industry that can grow fast from a small base, but with current restrictions on cost, technology and regulation, nothing like as fast as some of its advocates fervently believe.

*High costs*

And the cost challenges are real. A paper published in July by the Harvard Kennedy School entitled The Realistic Costs of Carbon Capture put the likely range of costs of abatement for capture - and excluding transport and storage - at between $100-150 per ton of carbon abated for first-of-a-kind plans and plausibly $30-50 per ton for later plants. With carbon prices at a fraction of that and only visible a few years ahead, government subsidies will be with CCS for many years to come.

Dan Lewis is chief executive of Future Energy Strategies.

The Global State of Carbon Capture and Storage is available from www.future-es.com