Putting a Price on Carbon: The Cheapest Way to Make Coal Cleaner

The New York Times ran an article last Friday about how high costs are slowing down the development of technology that can capture carbon dioxide from coal-fired power plants. What the article doesn’t discuss is the best way to drive costs down: put a price on carbon by passing the Climate Security Act.

The Climate Security Act is up for a Senate vote this week, and as a result, there has been a lot of media discussion about the costs of climate change: the price of tackling global warming and the far greater price of not tackling it. But what's been missing from this coverage is the economic reality that charging money for something prompts the market to find cheaper ways of doing business.

Right now, releasing carbon dioxide--the main global warming pollutant--into the air is free. It’s no wonder power companies are hesitant to invest in equipment to capture this unregulated pollutant. Doing nothing is cheaper.

Yet that is a short-term look at the bottom line. Energy experts from MIT have concluded that the longer the coal power industry waits to invest in cleaner technology, the more expensive future efforts to control global warming pollution will be.

It’s a simple case of a pay some now or pay a lot later. Just look at the numbers:

  • According to the International Energy Agency, an average of 10 new coal-fired power plants will be built every month for the next 25 years.
  • If all 3,000 of the next wave of coal plants are built without technology to capture and store carbon dioxide, their lifetime emissions will be 30 percent greater than the total carbon dioxide emissions from all previous human use of coal.

Imagine the exorbitant costs we will face:

  1. Trying to reduce carbon dioxide from those 3,000 plants when retrofitting requires major modifications and
  2. Coping with the floods, droughts, and disease that will intensify as a result of all that excess carbon in the atmosphere.

These are grave prospects, but in the meantime, energy companies don’t have an incentive to make the long-term commitment to cleaner technology. Investors hate uncertainty. And while just about everyone from Wall Street to Duke Energy headquarters recognizes that America must pass a law regulating carbon emissions, a lot remains unclear.

When will the law get passed? How much will carbon cost per ton? How many allowances for releasing carbon will be given away for free?

We can resolve those questions by passing the Lieberman-Warner Climate Security Act. It will put a price on carbon. And as power companies search for ways to reduce their carbon costs, they will drive down prices for technologies that reduce carbon pollution.

We have seen it before. When the environmental community first demanded that the power industry reduce acid rain, companies claimed sulfur dioxide scrubbers were too expensive to install. But after Congress created a cap-and-trade system for sulfur dioxide emissions in 1990, the scrubbers were rapidly deployed at much reduced costs. The industry estimated that it would cost $6 billion a year to comply with acid rain regulations; in fact, it cost only 30 percent of that.

Let the Climate Security Act cap-and-trade program do the same for carbon capture and storage.

About the Authors

Frances Beinecke

Former President

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