A much more practical kind of carbon capture and storage - that makes jet fuel...

LanzaTech chief executive Jennifer Holmgren and Richard Branson with some of the jet fuel.

National Grid and partners have announced a potential new CCS project for Scotland. But a different form of CCS is soon to be used by Virgin Atlantic to create aviation fuel.

Petrofac, the oil services company, American developer Summit Power, together with the National Grid, have announced they are joining the ￡1bn government competition to build a carbon capture and storage (CCS) project in Grangemouth, Scotland. The project is dependent on securing financial backing from the EU as part of the U.K.'s next funding round for CCS, in which case it could be up and running in 2018.

From carbon capture to aviation fuel

But a far more interesting form of carbon capture and storage technology promises to be up and running much earlier, and capture carbon more cheaply and effectively from industrial processes, and turn the result into aviation fuel, amongst other things.

The revolutionary fuel production process recycles waste gases that would otherwise be burnt into the atmosphere as carbon dioxide.

Virgin Atlantic has signed a deal with its developer, New Zealand company LanzaTech, which was this week named as one of 10 New Energy Pioneers at the fifth annual Bloomberg New Energy Finance Summit in New York.

Several of these winning companies are in the area of smart grid or energy efficiency, while others are in electric vehicles and generating entity from treating wastewater. They were all selected because of their “innovative, proven technologies, robust business models and the ability to demonstrate traction and global scale".

LanzaTech won for its success in using bacteria that absorb and process carbon dioxide and other waste, polluting gases from fossil fuel combustion, and turning the result into biofuel and useful chemicals.

The company has won a string of awards; just last month it was named one of the 50 most innovative companies in the world by the editors of Technology Review Magazine.

LanzaTech chief executive Jennifer Holmgren said the start-up was honoured to get the award, which recognises its technology as a game changer. "By beneficially recycling waste gases, LanzaTech is able to address the three pillars of sustainability by reducing overall carbon emissions and increasing the supply of fuels and chemicals without competing for food or land resources," Dr. Holmgren said.

Its first commercial project is installing its technology on a steel mill in South Auckland, which will be operational as soon as next year.

But the company also has development projects in Shanghai, China, and India (a deal with Mumbai-based renewable energy investment company Concord Enviro Systems), which are expected to be completed and generating income streams in the same timeframe by selling the fuel product to Virgin Atlantic.

"This partnership to produce a next generation, low-carbon aviation fuel is a major step towards radically reducing our carbon footprint, and we are excited about the savings that this technology could help us achieve," Richard Branson says.

"We were the first commercial airline to test a biofuel flight and we continue to lead the airline industry as the pioneer of sustainable aviation."

LanzaTech is 51% owned by Khosla Ventures of Silicon Valley in California, and was founded by Vinod Khosla, the India-born co-founder of Sun Microsystems.

The fermentation technology has been proven using a 100,000 gallon-a-year demonstration plant. At the heart of it is a patented microbe that uses gas feeds as its sole source of carbon and energy for fuel and chemical production.

The bugs can feed off a broad range of industrial offgases, whether they contain hydrogen or not, such as from steel mills, municipal waste, organic industrial waste, syngas and methane, and converts them into ethanol.

Because it is much more straightforward to install, it could be implemented relatively quickly on a wide scale throughout all these industries. If so, it would slash global carbon emissions and provide a sustainable source of fuel in a much shorter timescale than the complex one being envisaged for energy generation plants.

LanzaTech is also working with French company Global Bioenergies to produce the biofuel-precursor chemical isobutylene from waste carbon monoxide, which currently has to be expensively scrubbed from many industrial processes as it is toxic.

If successful, this will be a revolutionary process, because nowhere in nature is isobutylene made using bacteria. The chemical is also used to make kerosene: jet fuel.

Dr. Holmgren said “This work is a natural extension of the Global Biotechnologies and LanzaTech technology platforms.

"LanzaTech’s strategy is to diversify its product portfolio beyond ethanol to key chemical intermediates and drop in aviation fuels through developing key technology partnerships.

"Global Biotechnologies’ technology could contribute to this strategy as isobutene can be directly converted to polymers and jet fuel relevant C-12 molecules.”

The process is not unique. Many companies throughout the world are also competing, whether small fry innovators with large partners: BP and Verenium, OPX Bio and Dow; or two large companies together: BP and Dupont, and Rentech and ClearFuels.

The Petrofac project

The CCS initiative in Scotland is called the Caledonia Clean Energy Project. Under it, a new coal-fired power station would be constructed in the Firth of Forth, fitted with carbon capture technology that would carry 90% of the carbon emissions from combusting the coal via a pipeline into the North Sea.

"The project site has been selected to take advantage of synergies with other facilities for industrial gas supply and to support CO2 capture," said Summit Power in a statement.

"The location provides the benefit of being close to the UK North Sea for both CO2 storage and, later, enhanced oil recovery opportunities, and enables the re-use of existing pipelines."

If it gets the go-ahead, securing the carbon dioxide gas under the seabed would be the responsibility of Petrofac's subsidiary company CO2DeepStore.

Petrofac has an office in Aberdeen, and CO2Deepstore is 50% partner in the Storage Joint Venture at Goldeneye, in the Outer Moray Firth, for CO2 storage from SSE’s Peterhead gas fired power station.

As with the Don Valley Power Project, the gas would be used to pump out oil deposits from the bedrock in the St Fergus oilfield, in a process known as enhanced oil recovery.

Dr Sam Gardner, from WWF Scotland, said that this aspect of the proposal cancelled out its carbon-capturing purpose; therefore the project would only attract their support if this element were to be removed.

Aedán Smith, RSPB Scotland's head of planning, also called enhanced oil recovery “unsustainable" in this context.

The project builds on the experience of a similar demonstration one being developed in Texas by Summit Power with the help of a $450 million grant from the US Department of Energy, which will pump oil from local fields.

Exposed: airlines to make windfall profits from the EU-ETS

Four US airlines didn't hesitate to say they would immediately add $3 to a European flight - each way.

Contrary to complaints that the European carbon tax on flights will harm them, analysis shows that many air carriers could well end up with large profits.

Two studies bear out this claim. The first, from the Journal of Air Transport Management, part-funded by the US government itself, has calculated that if airlines were to pass all costs of the emission certificates on to passengers, then they will make up to $2.6 billion profit over the next eight years because most of the permits will be given away for free.

The authors conclude: "Windfall gains from free allowances may be substantial because, under current allocation rules, airlines would only have to purchase about a third of the required allowances."

American companies have not hesitated to impose costs on passengers due to the EU-ETS, which came into force on January 1st, ahead of all other carriers in the world, while at the same time calling for trade sanctions against Europe.

The US Congress is considering measures that would prohibit US airlines from taking part in the EU-ETS. Secretary of State Hillary Clinton has written to the Commission warning the US will "be compelled to take appropriate action" if the charges are not postponed.

Delta Air Lines, American Airlines, United Continental and US Airways Group and US Airways say they  have already added a $3 surcharge each way on tickets for flights between the United States and Europe.

But actually, in practice, it is impossible to tell what proportion of a ticket price is a result of the EU-ETS, says Rick Searney of the website farecompare.com, which monitors pricing of air travel, since many factors affect ticket pricing and operators won't reveal commercially-sensitive information.

The academic paper's conclusions are backed up by number-crunching from an aviation analyst at UK-based RDC Aviation, Peter Hind.

He has calculated that if Delta were forced to buy every permit in the open market it would cost them around 3 euros ($3.80) per passenger, based on current EU carbon permit prices equivalent to a tonne of CO2 of around $8.55.

“That would, of course, cover all of their CO2 emissions and therefore you could work on the basis that their free permit allocations were a windfall – assuming that it doesn’t damage demand, of course,” comments Hind.

This contrasts wildly with airline industry claims that the scheme will cost it about €1 billion this year, rising to €2.8 billion by 2020.

Many airlines. such as Thai Airways. have already been buying carbon permits in the EU ETS, taking advantage of the current record low prices of around €7.9 per ton of carbon.

The notion that airlines could make windfall profits was predicted by WWF in 2006.

Free credits

The actual figures airlines pay will depend on the fuel efficiency of each aircraft and how many passengers are on board each flight.

Airlines will receive 85% of the permits they need in the first year for free. The EU intends them to use such profits to invest in more efficient aircraft.

The percentage of free credits will then fall to 82% from 2013 to 2020.

The free allocation is based on figures submitted to the EU detailing airlines' share of passengers and cargo transported in 2010 that is expressed using a revenue-tonne-kilometre metric.

"If you look at the impact on the ETS, that only starts kicking in at the end of the year. It's very clear that they're (airlines) looking for excuses in more or less the same way as the power companies did when the ETS started," said Dutch Green member of the European Parliament Bas Eickhout.

The situation looks like becoming reminiscent of that for the European energy intensive industries.

Analysis by Sandbag and others has shown that the top ten "Carbon Fat Cats" in these industries share between them 240 million surplus allowances with a value of around €4.1bn.

Their report concludes that "the fact that the ETS has provided substantial windfalls to some participants and a money making opportunity for many others has not prevented industry from attacking it whenever it can and from successfully lobbying to keep it in its current state".

Many airline operators are now following the example given by these existing participants.

The International Air Transport Association (IATA), has asserted that the ETS will cost airlines $1.15 billion in 2012, forecasting a 49% fall in 2012 industry-wide profit to $3.5 billion.

However, the weak global economy and high fuel prices are more likely to be behind this drop.

EU position

The EU position says that it is only right that airlines, like other industries, should pay for the carbon they emit.

They have had since 1997 to come up with their own solution, when the Kyoto Protocol on tackling climate change asked developed countries and the UN's International Civil Aviation Organisation (ICAO) to find a way to reduce aviation greenhouse gas emissions, and have not done so on their own.

The EU will impose financial penalties of up to €100 per tonne of CO2 on non-compliant carriers, or even ground them.

"From our point of view it is quite simple," a spokeswoman for EU climate commissioner Connie Hedegaard has said, "there is a law and we expect people to follow it."

The measure is hoped to save around 183 million tonnes of CO2 each year by 2020. But this may be counteracted by growth in air travel: the Commission expects traffic to rise more than double from 2005 levels.

The Commission's own figures state that complying would add between €2 and €12 per passenger, depending on how much airlines decide to pass on to their customers.

Thomson Reuters Point Carbon data calculates that the impact will only begin to happen from 2013 to 2020, when airlines are expected to buy about 700 million permits.

This could help to drive up the carbon price, which is necessary to finance low carbon infrastructure.

Jean Leston, head of transport policy at WWF-UK, said more credits needed to be auctioned, with the receipts funnelled towards efforts to combat climate change, such as the UN's $100bn Green Climate Fund.

Other airlines' responses

Lufthansa is amongst European airlines that has said it will raise ticket prices as a result of the EU-ETS, but it will not do so yet. It says it will need to buy 35% of the permits it needs for 2012 on the open carbon market.

The world's second largest long-haul carrier after Dubai's Emirates claims that the cost of the credits will be €130 million this year, but will not disclose how this is calculated.

Singapore Airlines Ltd. (SIA), the world's second-most valuable airline, is adopting a more progressive stance, saying it would try to offset the impact of the ETS by improving fuel efficiency and reducing its carbon emissions, which would lower the carbon charges.

This is exactly the response hoped for by the European Commission. In practice it is likely that most airlines will follow suit, though they will not shout about it.

Cathay Pacific has said the ETS would add about $6.44 to a ticket between Hong Kong and Europe.

“The airlines will never admit to the reason for a surcharge because they will say they don’t discuss pricing decisions,” he said.

"Fares are dynamic. They are going up and down all the time according to market conditions. Carbon is just another cost," adds Bill Hemmings, manager of environmental lobby group Transport & Environment.

China's position

The China Air Transport Association (CATA) is also mulling whether to take legal action against the EU on the tax and has declared a policy of non-compliance.

The EC says that a 17,000-kilometre flight from Frankfurt to Shanghai would generate about 678 kilograms of carbon, using the UN's ICAO carbon calculator.

Assuming a price of €17 per tonne (around double the current level) and the full value of emissions being passed to fares, that would increase a ticket price by €11.50.

China, the world’s biggest emitter, has a target to reduce greenhouse gas emissions per unit of output by 40-45 percent from 2005 levels by 2020.

Its policies to achieve this include implementing energy efficiency and energy intensity measures, but poor inter-ministerial coordination is hindering development of a carbon trading scheme.

The National Development and Reform Commission (NDRC), which has overall responsibility for carbon emissions, hopes to launch pilot schemes in seven cities and provinces next year.