How to Invest in Carbon Capture and Storage

It is inevitable that sooner or later, companies that produce carbon pollution are going to have to either pay a high price or drastically reduce the carbon emissions from their plants. The technology to do this with is carbon capture storage (CCS). There are companies already in this industry you can invest in.

And it is creating a new urgency for the technology called carbon capture storage and has created something called cap and trade. Here is how carbon capture and storage works and which companies are leading the way.

What is Cap and Trade?

Cap and trade is something the government has come up with to reduce pollution. The government sets a cap or limit on how much pollution or greenhouse gases a company can produce. Then the government will issue credits to a company, these credits allow the company to produce pollution. The number of credits a company gets is based on how big the company is and what industry the company is in.

For example, XYX Utility and Coal Company have been issued 10 credits from the government. If XYZ pollutes less than their cap says they can, they would have extra credits. XYZ can then sell or trade their credits to another company who needs more cap room to pollute. This is to give an incentive to companies to cut their pollution and if successful in cutting their pollution, they can also make a profit by selling or trading their credits to some other company. Since this system of cap and trade is most common in carbon emission industries, it is also called “Carbon trading”.

How Carbon Capture Technology Works

Coal fired power plants are the worst producers of carbon dioxide (CO2) pollution. The actual name of this technology is called Carbon Capture and Storage (CCS). This is a process that strips the carbon dioxide from the fossil fuels before or after they are burnt producing energy. This can then be compressed and transported by pipeline to a site where the carbon is then buried underground in secure ‘vaults’ that shouldn’t leak the carbon back into the air. This process has been around for about a decade, the problem is using this on a large scale with large power plants.

Utility companies haven’t had a great incentive to pay for this at this time or pass part of the costs onto their customer. That is why it is hoped the cap and trade will give them incentives to trap their carbon pollution. The less carbon dioxide they emit, the more of their carbon permits they can sell. In 2014 this system will change where companies will have to buy all of their permits that they need. So the more carbon the company can keep from being emitted into the air, the fewer permits they will have to buy.

That is why it is thought that cap and trade will increase the incentive for the carbon capture storage technology. The International Energy Agency said in a 2008 report that carbon capture storage will become the most important technology for cutting polluting emissions. The carbon capture storage industry involves the capturing, compressing, transporting by pipeline and or injecting into the ground technologies.

Oil drilling companies use natural carbon dioxide to force oil to the surface using what is called “enhanced oil recovery”. The captured carbon dioxide from coal plants is piped to oilfields and used instead of using the natural underground carbon dioxide. In fact several companies like EnCana and Apache are doing this now.

The Arguments Against Carbon Capture Storage

There are a lot of arguments against carbon capture storage and some think it is nothing more than a scam that has to do with what they say is the other scam, global warming. Some of the arguments against carbon capture are that it will increase our utility bills by at least 30%. Industry analysts say that it will cost $1 trillion to convert the 400 plants in the United States.

There will be a lot of this captured carbon and there isn’t enough room to store all of it underground. Another argument states that this carbon dioxide cannot stay underground and will leak out of the storage areas. Yet another worry is that pumping liquid into the ground has been proven to cause earthquakes [1].

This past week, the Guardian came out with an article accusing the International Energy Association of playing fast and loose with the oil inventory numbers because of pressure from the US. The U.K. newspaper went on to say that we could be running out of oil sooner than is thought, which would mean a larger reliance on coal, coal that needs to be cleaned to meet the new carbon requirements. Whether we agree with using coal for energy and using carbon capture to reduce pollution, it is here to stay. Investing in this technology could be a wise investment.

Publicly Traded Companies Involved in Carbon Capture Storage

• Cemex Inc. (CX), the countries largest cement and ready-mix company, was picked by the US Department of Energy (DOE) to develop technology for capturing and storing carbon emissions at one of its cement plants. Cemex will design a dry sorbent carbon dioxide capture and compression system. They will also develop the pipeline if needed and the injection station to inject the carbon into the ground. This demonstration project could remove up to one million tons of carbon dioxide (CO2) per year.

• Praxair (PX) is an industrial gas producer but also owns hundred of CCS patents and could be a leader in the carbon capture industry.

• Statoil ASA (STO) Built the first working carbon capture storage facility in the North Sea in 1996. They are partnering with Total (TOT) and Hess Corporation (HES) to further develop their carbon capture storage business.

• American Electric Power (AEP) has a large carbon capture storage facility at a coal-fueled power plant in West Virginia. AEP at this time is capturing and storing 100,000 metric tons of captured carbon per year and injects it underground.

• Royal Dutch Shell (RDS) and ConocoPhillips (COP) are receiving billions of government dollars to develop CCS technology.

• Siemens (SIE) has developed a post-combustion carbon capture process using a special scrubbing agent, which removes 90% of the low temperature carbon.

• Dow Chemical (DOW) and Alstom have started a test program at Dow owned facility in W.V. to capture 1,800 metric tons of CO2 per year.

• Fluor Corp. (FLR) is involved in the construction of these projects.

• General Electric (GE) will be providing the industrial machines and compresses for compressing gases that will inject the carbon dioxide in the earth. This is a $400 million contract for a project in Australia.

Other companies are Spectra Energies (SE), Air Products and Chemicals (APD), NRG Energy (NRG) and Chevron (CVX).

Carbon Capture Companies in the European Union

• ArcelorMittal (MT) the largest and has good trading volume.
• Alstom SA (AOMFF) has at least 10 carbon capture projects around the world.
• Enel (ESOCF) and Endesa (ELEZF) are also EU companies in the CCS industry.

Carbon Capture Using Crystals

The University of California at Los Angeles (UCLA) with financial backing from BASF (BASFY) has developed a cheap and non-toxic way to elimiate the CO2 emission using a newly developed crystal. The crystal is called zeolitic imidazolate frameworks or ZIF’s. These ZIF’s can store up to five times more carbon than current technology can.

There are also companies using carbon capture technology to grow algae and using the algae as bio-fuel. There are the software companies that will be writing the carbon accounting software, including Microsoft (MSFT), Computer Associates (CA), SAP (SAP) and various smaller companies.

© Sam Montana - November 2009

Resources

[1] Nicholson, Craig and Wesson, R.L., 1990, Earthquake Hazard Associated with Deep Well Injection–A Report to the U.S. Environmental Protection Agency: U.S. Geological Survey Bulletin 1951, 74 p.