Tuesday, August 22, 2006

Climate change: the cost of coal

That's the cost of the CO2 emissions from their proposed 150 MW coal-fired power plant at Birchfield on the West Coast. The plant would burn 500,000 tonnes of Stockton bituminous coal a year. By my calculations, that would add 1.33 million tonnes of CO2 to our annual emissions, increasing annual CO2 emissions by 4% and total gross emissions by 2%. When we're trying to cut emissions by around 10% annually, that is not something we need.

Those emissions will have to be covered by the purchase of carbon credits on the international market. Without a carbon tax, the cost of those credits will be borne by the New Zealand government. Even at the ludicrously low Treasury estimate of NZ$9/t, that works out to $12 million a year. If OTOH we use a more credible price of NZ$30/t, based on the current price on the European market of 15 - 16 Euro per ton, we are looking at NZ$40 million. That's a lot of money we could be spending on other things.

Currently, we have no climate change policy. We have no carbon tax or price on carbon to ensure that companies pay the full cost of their activities, while regional councils are forbidden from considering greenhouse gas emissions under the RMA. There's every chance then that this proposal will slip through the policy gap, lumping us with increased emissions and an ongoing carbon liability we will be paying for for years to come. We should not let this happen. Jeanette Fitzsimons's Resource Management (Climate Protection) Amendment Bill, which would put greenhouse gas emissions back into the RMA, is due to be reported back from committee next month. I think Solid Energy's proposal shows that there is a clear need to pass it.


BTW, if anyone is wondering about the calculation: According to Wikipedia, bituminous coal has an energy value of 24 to 35 MJ / kg (= GJ/t). The latest inventory report (p 105) gives an emissions factor for bituminous coal of 88.8 t / TJ. Going with a midrange figure of 30 GJ/t, that gives CO2 emissions of 2.664 t CO2 / t coal. Multiply this by 500,000 tons of coal, and you get 1.332 MTCO2 per year. Obviously, I can firm this up if given more information about the energy content of the coal in question.

Also interesting: according to their annual report [PDF], Solid Energy delivered a net profit of only $6.3 million last year, and $33.7 million the year before, on production of 4.46 and 4.21 million tons respectively. So, one power station, making up less than 10% of their coal production, could eat a significant fraction of or their whole profit. What suggests that they are an environmentally subsidised, loss-making enterprise which is only economic by virtueof dumping their costs on others. We gave up subsidising such businesses in the 80's; maybe we should stop subsidising Solid Energy as well?

Posted by Idiot/Savant : 8/22/2006 02:00:00 PM

Perhaps hefty subsidies for the installation of private solar/wind power generation would be a better option. The normal pay-back of those can be too lomg to be attractive. If we want to reduce the need for plants like this though, we may have to consider subsidies.


Posted by Anonymous : 8/22/2006 03:23:00 PM

M'Lud: wind doesn't need subsidies - it's perfectly economic at today's prices. The problem is that we are continuing to provide an environmental subsidy to coal, by allowing coal plants to externalise their costs onto society and escape the full costs of their activities. That's simply not something we should be doing - and adding more subsidies into the mix won't make the situation any better.

(I also find it ironic that supporters of the Revolution are suddenly so keen on corporate welfare. Anything so long as it channels public money into private pockets, right?)

Posted by Idiot/Savant : 8/22/2006 03:49:00 PM

Decent subsidies on cavity and roof insulation for our pitifully cold housing stock might be a better way to spend the money though.

Posted by Anonymous : 8/22/2006 04:06:00 PM


The building code really needs to be upgraded. Things I put into my buildings that are not in the code are:

1. At least R3.2 ceiling and R2.4 wall insulation.

2. Double glazing and thermal curtains.

3. Ventilation.

4. Heat pump heating.

5. Domestic fire sprinklers.

All up it costs me about $10,000 extra for the average 3brdm unit. I only do it on principle, everyone else thinks I am mad to shell out this extra cash for features that yield me little in the way of cash flow. On the other hand I get a rebate on my fire insurance and so far I've had an almost 100% occupancy rate over the last four years because my tenants quite like living in them. I think in the long run it will pay off, but it is really not the sort of thing the average developer or speculator is going to do unless they have to.

Posted by Anonymous : 8/22/2006 09:13:00 PM

But does that mean we should also ban the extraction and export of this stuff?

I mean if we export it - China and India or whatever burn it, then the effect on climate change is there.

Is the argument to ban coal exports?

Posted by Anonymous : 8/23/2006 11:20:00 PM

yes, and it is an even better argument than preventing burning.

Posted by Anonymous : 8/24/2006 07:08:00 AM