The CO2 Value ChainThe concept of a carbon dioxide (CO2) 'value chain' with large-scale commercial use of CO2 is actually well established practice from the oil industry in the United States. During the past 30 years, naturally occurring CO2 has been used as miscible injection gas for increased oil production. In the past 3 – 5 years we have also observed how declining production from mature oil regions together with international commitments to reduces GHG emissions, has extended that value chain to encompass the following;
Three main drivers currently govern the incentive for commercial companies to invest and develop projects along this value chain. These are;
To date no company may seriously attribute a value on the ‘physical’ CO2 that is substantially beyond $10 per ton. However the cost of moving CO2 along the complete value chain (from ‘conception to grave’) will usually be greater that $30 /tCO2. And yet, we argue that within a decade this value chain could be a major creator of new wealth within the OECD countries, and may provide viable policy alternatives for governments to develop new industrial activity, ensure energy security and help combat climate-change. Seen in such a context it is necessary to understand; (i) why the value chain is important, (ii) who are the stakeholders, (iii) how it can best evolve, and (iv) what it can contribute to the future wealth of society and nations. In a paper (to be) presented at the Seventh Greenhouse Gas Technologies Conference in Vancouver in September 2004 (see abstract here), we describe some of the immediate barriers that are ostensible holding back development of projects along the value chain, and are thereby also impeding more rapid implementation and efficient economies of scale.Why is the CO2 value chain important? Because it shifts the focus of CO2 and GHG emissions away from CO2 being a regulatory problem, over to creating a commercial resource. Wherever a value chain exists, a market will evolve, and with a ‘level playing field’ the most efficient pricing mechanisms will be established. Another words if government is serious about society embracing the true cost of CO2-emission reductions, then creating a commercial value chain will help establish the lowest cost for CO2-avoidance. Who are the Stakeholders? A stakeholder is any person, company or societal body that may have a vested interest in the value chain functioning as efficiently as possible. Furthermore we observe that the perception of being a stakeholder may (in some cases) only be experienced once CO2 is passing along the complete chain in a commercial manner where all participants are achieving their return on investment (ROI) and pre-requisite hurdle rates. How can the CO2 value chain best evolve? There are many ways by which it can evolve, and there are a few specific ways by which it can be impeded and evolve inefficiently. In an early phase, the role of government is to ensure that the market has incentives to choose the most efficient path. Can the CO2 value chain contribute to the wealth of society and nations? The chain is the bridge by which we move from our current fossil energy infrastructure through to a sustainable 'hydricity' (ie. with hydrogen and electricity as the energy carriers) based supply of energy. Essentially the value chain can extend the permissible transition period by several decades to permit development and commercial implementation of renewable energy sources. With efficient handling and secure storage of CO2, then there is no reason why fossil energy should not continue to be a major contributor to satisfy global energy requirements in a sustainable manner well into the latter half of the 21st century. (Last updated 04.06.04) |
