Presentation to Bureau of Economic Presentation to Bureau of Economic Geology (BEG) – University of Texas Geology (BEG) – University of Texas

in Austin, Pickle Campusin Austin, Pickle Campus

Australia, Coal and Carbon Capture & Storage Australia, Coal and Carbon Capture & Storage (CCS)(CCS)

Cameron O’ReillyCameron O’ReillyFulbright Scholar, Australia US Alliance StudiesFulbright Scholar, Australia US Alliance Studies

11 May, 200911 May, 2009

Australia & Coal – factsAustralia & Coal – facts Australia the fourth largest producer of hard coal at 323 Australia the fourth largest producer of hard coal at 323

million tonnes – only USA, China and India larger million tonnes – only USA, China and India larger (Australia’s population 21.5 million – source ABS)(Australia’s population 21.5 million – source ABS)

Australia third (80%) in percentage of electricity generated Australia third (80%) in percentage of electricity generated from coal – only Poland and South Africa are higherfrom coal – only Poland and South Africa are higher

Australia the largest exporter of coal in the world at 244 Australia the largest exporter of coal in the world at 244 million tonnes in 2007 (USA 53 million tonnes)million tonnes in 2007 (USA 53 million tonnes)

Coal exports made up of 112 million tonnes of steaming Coal exports made up of 112 million tonnes of steaming coal exports and 132 million tonnes of coking coal exportscoal exports and 132 million tonnes of coking coal exports

Coal mix includes brown coal/lignite (Victoria) and black Coal mix includes brown coal/lignite (Victoria) and black coal (Queensland and New South Wales) – only black coal coal (Queensland and New South Wales) – only black coal exportedexported

Source – World Coal InstituteSource – World Coal Institute

Australia – other relevant facts Australia also large producer of gas – LNG (mainly Western

Australia) and domestic use Australian gas reserves estimated at 4-5 billion cubic

metres (source Australian Parliamentary Library) Historic gas reserves in Cooper, Gippsland and Otway

basins (gas use higher in Victoria/SA) Growth of coal bed methane in Queensland and NSW

(proposed new LNG trade from east coast) Substantial offshore gas development underway or planned

in North West shelf and Timor Sea Gas availability has meant Western Australia electricity

generation is majority gas fired Australia also has 40% of world’s low cost uranium reserves

(source AUA)

Electricity Generation Sources

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

United States

Australia

Coal Natural Gas Hydro Renewable Oil Nuclear

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

United States

Australia

Coal Natural Gas Hydro Renewable Oil Nuclear

Source: Australian Bureau of Agricultural and Resource Economics (ABARE) & US Department Of Energy, EIA

Black Coal Brown Coal

But Texas electricity is different

Coal 36% Gas 49% Nuclear 10% Wind 4% * Hydro 1%

Texas is the largest electricity market in the USA (10% of US electricity use), the highest user of coal for electricity generation and the biggest wind producer

Australia’s national greenhouse gas emission sources

United States national greenhouse gas emission sources

0

500

1000

1500

2000

2500

ElectricityGeneration

Transport IndustrialProcesses

Agriculture Commercial Residential USTerritories

0

500

1000

1500

2000

2500

ElectricityGeneration

Transport IndustrialProcesses

Agriculture Commercial Residential USTerritories

Source: Inventory of US Greenhouse Gas Emissions and Sinks: 1990-2006, US EPA

Tg

CO

2 E

q.

The Greenhouse gas situation in Australia and the US

Stationary energy contributes more to Australian emissions than it does to US emissions – Australia has less diversified electricity sector

Both countries depend heavily on fossil fuels The transport sector contributes more to US

emissions – far larger vehicle fleet Industrial processes contribute more to US

emissions (and a great deal to Texas emissions) Agriculture still a relatively large emitter in both

countries compared to its share of Gross Domestic Product

Current initiatives Australia

Draft legislation before the Australian Parliament to establish a cap and trade emissions trading system by 2011 (CPRS). Scheme coverage includes 75% of emission sources

Targeted reduction in emissions of 5% below 2000 level emissions by 2020, or up to 25% if a new global agreement is reached. Ultimate aim of 60% reduction in emissions by 2050

Fixed carbon price of $10 per tonne for first year

National renewable energy target of 20% by 2020 to be legislated

Substantial allocation of permits to energy intense industries

United States

Waxman/Markey cap and trade proposal being debated in the House Committee with targeted reduction of 20% below 2005 levels by 2020

Ultimate aim of 83% reduction from 2005 emission levels by 2050

A range of proposals for State based carbon trading schemes covering California, north-west and north-east

National portfolio standard under consideration in 2009 energy bill

A range of direct support for renewable energy research and development in 2009 stimulus package

Solutions – Carbon Capture & Storage? (CCS)

CCS given high priority by Australian Government CCS would give a future to large coal reserves in US and

Australia and alleviate domestic energy security concerns India and China are coal rich and CCS could therefore make

the greatest difference to world emission outcomes US with over 50% of electricity produced by coal likely to be

interested in CCS Over twenty states with coal interests in the US – including

politically significant States for Democrats of Pennsylvania, Ohio, Michigan and Illinois

Major problems seen as potential cost of CCS, scale of infrastructure, risk/liability and timetable

Contentious with environmentalists but has some support from Clean Air Taskforce (CAC)

Global coal reserves 2007. source BP

Global oil reserves 2007. source BP

CCS – Australian Initiatives – Global Carbon

Capture & Storage Institute Announced by Australian Prime Minister Kevin

Rudd on 19 September, 2008 Officially launched 16 April, 2009 – Australian

Government funding of $100 million Claims to have 83 supporters including 16

national governments and 40 corporates Nick Otter announced as interim CEO Former World Bank President James Wolfensohn

the inaugural Chairman of International Advisory Council

Other Australian initiatives Offshore Petroleum and Greenhouse Gas Storage Act 2006

– established property rights for storage of CO2 in offshore waters – 10 zones identified in March, 2009

CO2CRC – Cooperative Research Centre funded by Government and industry – looking at Otway Basin Pilot Project

Coal 21 Program – initiative of coal producers and generators to fund CCS research – funded by levy on producers

Low Emissions Technology Demonstration Fund - $500 million Federal Government fund that will support some CCS pilots – includes project at Hazelwood in Victoria

Hazelwood owned by International Power which is also in Texas market

Other demonstration projects at Barrow Island in Western Australia and Monash Energy Project

Victorian brown coal – the heart of Australia’s CCS challenge

Australia’s second largest State has developed major industrial base off low cost brown coal electricity

Production centred in La Trobe Valley east of Melbourne

Modelling by esaa of a carbon price found that 6,700 megawatts of Australian electricity generation would close – mainly brown coal plant in La Trobe Valley

Will cause major economic disruption and hardship in La Trobe Valley

Federal Government has now allocated $3.9 billion in transitional assistance for brown coal generators as part of ETS

Victorian initiatives

Established own Clean Coal Victoria CEO is Charlie Spiers – La Trobe Valley

history – worked for Loy Yang Power $110 million allocated by Victorian

Government for pre-commercial CCS demonstration projects

$12.2 million for funding to establish CCV Australia’s Federal Energy Minister, Martin

Ferguson, comes from Victoria