Synthetic diesel fuel from coal

Any U.S. energy and environmental policy effort must come to grips with transportation. Some two-thirds of U.S. oil consumption is in the transportation sector, the only sector of the U.S. economy wholly reliant on oil. The energy price shocks of the 1970s helped spur growth in natural gas use for home heating, and drove the electric utility sector and the industrial sector to reduce their dependence on petroleum. But roughly 97% of all energy consumed by our cars, sport utility vehicles, vans, trucks, and airplanes is still petroleum-based.

The transportation sector remains one of the largest sources of urban air pollution, especially the oxides of nitrogen that are a precursor to ozone smog and particulates that do so much damage to our hearts and lungs. Vehicle emissions of such pollutants, however, have been declining steadily, and by 2010, federal and state standards will make new U.S. cars exceedingly clean.

Yet, even as new internal combustion engine vehicles dramatically cut the emissions of noxious urban air pollutants by automobiles, their contribution to global warming has begun to rise. In the 1990s, the transportation sector saw the fastest growth in carbon dioxide emissions of any major sector of the U.S. economy. And the transportation sector is projected to generate nearly half of the 40% rise in U.S. carbon dioxide emissions forecast for 2025.3

Internationally, the situation is equally problematic. As Claude Mandil, Executive Director of the International Energy Agency (IEA), said in May 2004, “In the absence of strong government policies, we project that the worldwide use of oil in transport will nearly double between 2000 and 2030, leading to a similar increase in greenhouse gas emissions.”4 If by 2050 the per capita energy consumption of China and India were to approach that of South Korea, and if the Chinese and Indian populations increase at currently projected rates, those two supergiant countries by themselves would consume more oil than the entire world used in 2003.5 It is being acknowledged that a global problem is arising and will affect all countries if something is not done. Next year, a convention is being held in London with all major countries attending to discuss the problems that we are all facing.

Since oil is a finite, non-renewable resource, analysts have attempted to predict when production will peak and start declining. Some believe this will occur by 2010. In his 2001 book, Hubbert’s Peak: The Impending World Oil Shortage, Princeton geophysicist Kenneth Deffeyes, writes “There is nothing plausible that could postpone the peak until 2009. Get used to it.”6 Royal Dutch/Shell, a company itself downgrading reserve estimates, adds only a few years to this forecast. According to Shell, “A scarcity of oil supplies—including unconventional sources and natural gas liquids—is very unlikely before 2025. This could be extended to 2040 by adopting known measures to increase vehicle efficiency and focusing oil demand on this sector.

Whether we will adopt these known measures or not remains to be seen. The purpose of this paper is to discuss and compare the various measures. Shell’s other hedge, “including unconventional sources and natural gas liquids,” is environmentally problematic. Making liquid fuels out of unconventional sources of oil (such as Canadian oil sands) is relatively energy-intensive, and relying on these sources will significantly increase greenhouse gas emissions. Indeed, Canada's increasing use of natural gas to extract its heavy oils is one reason that its exports of natural gas to United States are projected to shrink in coming years.

Both the U. S. Energy Information Administration (EIA) and the National Petroleum Council (NPC) project a sharp decline in net imports of Canadian natural gas by 2025.8 Making conventional liquid fuels out of natural gas is also a questionable use of natural gas from an environmental perspective. In particular, for those who are concerned about global warming, it is critical that whatever strategy the United States adopts to reduce greenhouse gas emissions in the vehicle sector does not undermine Two-Thirds of World Coal Capacity in 2030 is NOT Yet Built our efforts to reduce greenhouse gas emissions in the electricity sector.

The nation has been sprinting to build new natural gas power plants. As of 2003, the U.S. had more than 800 gigawatts (GW) of central station electric power generation. “Of the 144 gigawatts added between 1999 and 2002, 138 gigawatts is natural-gas-fired,” as EIA noted in 2002.9 Rising demand coupled with supply constraints has led to soaring natural gas prices. Remarkably, in its most recent Annual Energy Outlook 2004, EIA concludes that in the electricity sector, "the share from coal is projected to increase from 50 percent in 2002 to 52 percent in 2025 as rising in natural gas prices improved the cost competitiveness of coal-fired technologies.

AEO2004 projects that 112 gigawatts of new goal-fired generating capacity will be constructed between 2003 in 2025." At the same time, utilization of existing coal plants is projected to rise, so that by 2025, coal consumption by electric generators will be 50% higher than today.10 EIA projections are made assuming no change in U.S. policies, such as a cap on carbon emissions, and as such are often wrong. Yet, they underscore the critical need for a different energy policy and for using any incremental natural gas production/imports or renewable energy for

Displacing new coal fired generation, rather than for making alternative fuels for at least the next two decades. Both the EIA and NPC project that far more of this country’s growing demand for natural gas will be met from imported liquefied natural gas (LNG) than from increases in production. Thus, we should start thinking of the natural gas resource base as a global one when we contemplate using natural gas for purposes other than displacing increased coal generation. That’s especially true because projected growth in global coal consumption is an even bigger greenhouse gas problem than projected US growth in coal consumption.

By 1999, the world had just over 1000 gigawatts of coal-fired electric generating capacity, of which about one third was in United States. Between 2000 and 2030, over 1400 GW of new coal capacity will be built according to the International Energy Agency, of which 400 GW will replace old plants (see Figure). 105664814420500100015002000250019992030GW CoalNew CapacityBuilt After1999Pre-1999CapacitySource: IEA, WEO 2002

These plants would commit the planet to total carbon dioxide emissions of some 500 billion metric tons over their lifetime, unless “they are backfit with carbon capture equipment at some time during their life,” as David Hawkins, Director of Natural Resources Defense Council’s Climate Center told 4 the U.S. House Committee on Energy and Commerce in June 2003.11 Hawkins continued: “To put this number in context, it amounts to half the estimated total cumulative carbon emissions from all fossil fuel use globally over the past 250 years!”

So again, it is critical that whatever strategy the world adopts to reduce greenhouse gas emissions in the vehicle sector does not undermine our efforts to reduce greenhouse gas emissions in the electricity sector. With this caveat in mind, we will explore the five pathways most widely discussed for reducing or replacing oil while significantly reducing transportation greenhouse gas emissions: efficiency, electricity (particularly plug-in hybrid-gasoline vehicles); ethanol from cellulosic biomass; synthetic diesel fuel; and hydrogen. To achieve greenhouse gas reductions, one or more of these pathways may require permanently sequestering carbon dioxide underground.