Fossil fuels are likely to remain a major part of the global energy mix for decades. Without a way of reducing the impact of burning fossil fuels on our climate there is no credible scenario under which the international community can reduce emissions of greenhouse gases sufficiently to limit global average temperature rise to 2 degrees Celsius, the agreed goal under the UN negotiations. And yet, so far, progress to demonstrate and deploy carbon capture and storage (CCS) technology at scale has been painfully inadequate. CCS technology is not yet mature and is expensive. In the long-term CCS will be viable if it is cheaper to capture and store the CO2 emissions than to release them into the atmosphere. This means there must be a sufficient cost imposed on installations that emit carbon. Estimates suggest that, once CCS technology is mature, a carbon price - the cost of emitting carbon into the atmosphere - of between $44 and $103 will be sufficient to make CCS viable. Although the current price of carbon in the EU (the world's major carbon market) is around €9 ($12), a tightening of the cap on emissions from 2013 means that a sufficient carbon price in the EU is a distinct possibility. Against this backdrop, plans are underway for Qatar to host this year's UN climate change conference in December. If one takes into account recent laws and proposals to set up carbon markets in Australia, China, Mexico, South Korea and California in the US, it is not too much of a leap to imagine a price of carbon high enough to make CCS viable across a range of countries. The problem is not that CCS isn't viable in the long-term; the problem is that, in the short- to medium-term, it is going to require big capital investments to build the commercial scale demonstration projects that will help to bring down the costs to a long-term equilibrium. Until now, with a lack of regulatory certainty about the future price of carbon and the fiscal challenges to governments and businesses in the economic downturn, investments have not been forthcoming on the scale required. First, on the fossil fuel supply side, Qatar and the other Gulf states have a motive. CCS is a great technology for countries that sell fossil fuels. It allows the burning of these fuels in a way that does not damage the climate, thus potentially prolonging the life of the markets for fossil fuels, even in a highly carbon constrained post-2020 world. Second, on the demand side, China's production of a fossil-fuelled power station a week offers the opportunity to bring down costs fast. And with coal and oil-dependent China likely to take on some form of emissions reduction target under a post-2020 climate change deal, it is now in China's strategic interest to commercialize this technology quickly. Finally, the regulatory outlook is more certain. Before the most recent round of UN negotiations in South Africa in December, many commentators thought that the legally binding nature of the UN process would dissipate when the Kyoto Protocol's first commitment period expired in 2012. Durban changed that.
