The capture and permanent storage of CO₂ emissions from coal combustion is now widely viewed as imperative for stabilization of the global climate.  Coal is the world’s fastest growing fossil fuel.  This trend presents a forceful case for the development and wide dissemination of technologies that can decouple coal consumption from CO₂ emissions—the leading candidate technology to do this is carbon capture and storage (CCS). 

China simultaneously presents the most challenging and critical test for CCS deployment at scale.   While China has begun an handful of marquee CCS demonstration projects, the stark reality to be explored in this paper is that China’s incentives for keeping on the forefront of CCS technology learning do not translate into incentives to massively deploy CCS in power plant applications as CO₂ mitigation would have it.  In fact, fundamental and interrelated Chinese interests—in energy security, economic growth and development, and macroeconomic stability—directly argue against large-scale implementation of CCS in China unless such an implementation can be almost entirely supported by outside funding.  This paper considers how these core Chinese goals play out in the specific context of the country’s coal and power markets, and uses this analysis to draw conclusions about the path of CCS implementation in China’s energy sector. 

Finally, the paper argues that effective climate change policy will require both the vigorous promotion and careful calculation of CCS’s role in Chinese power generation.  As the world approaches the end of the Kyoto Protocol in 2012 and crafts a new policy architecture for a global climate deal, international offset policy and potential US offset standards need to create methodologies that directly address CCS funding at scale.  The more closely these policies are aligned with China’s own incentives and the unique context of its coal and power markets, the better chance they have of realizing the optimal role for CCS in global climate efforts.

Project development is particularly challenging in “frontier” environments where alternative technologies, conflicting laws and agencies, and uncertain benefits or risks constrain the knowledge or decisions of participants.  Carbon capture and storage (“CCS”) projects by means of geologic sequestration are pursued in such an environment.  In these circumstances, entrepreneurs can seek to employ two distinct types of tools:  the game-changer, being an improvement to the status quo for all those similarly situated, generally achieved through collective or governmental action; and the finesse, being an individualized pursuit of an extraordinary project that is minimally affected by a given legal, business or technological obstacle.  These techniques are illustrated in the case of CCS as to ownership of property rights, carbon dioxide (“CO2”) transportation economics, liability for stored CO2 following the closure of injection wells, inter-agency and federal-state conflicts, competing technologies, and uncertain economic or legal incentives.  The finesse and the game-changer should also be useful concepts for creative solutions in other applications.

India has been famous for arguing that it (and the rest of the developing world) should incur no expense in controlling emissions that cause climate change. The west caused the problem and it should clean it up. That argument is increasingly untenable — both in the fundamental arithmetic of climate change, which is a problem that is impossible to solve without developing country participation, and in the political reality that important western partners will increasingly demand more of India and other developing countries. India’s own public is also demanding more.

The Indian government has outlined a broad plan for what could be done, but the plan still lacks a strategy to inform which efforts offer the most leverage on warming emissions and which are most credible because they align with India’s own interests.

This paper offers a framework for that strategy. It suggests that a large number of options to control warming gases are in India’s own self-interest, and with three case studies it suggests that leverage on emissions could amount to several hundred million tonnes of CO2 annually over the next decade and an even larger quantity by 2030. (For comparison, the Kyoto Protocol has caused worldwide emission reductions of, at most, a couple hundred million tonnes of CO2 per year.) We suggest in addition to identifying self-interest — which is the key concept in the burgeoning literature on “co-benefits” of climate change policy — that it is also important to examine where India and outsiders (e.g., technology providers and donors) have leverage.

One reason that strategies offered to date have remained abstract and difficult to implement is that they are not rooted in a clear understanding of where the Government of India is able to deliver on its promises (and where Indian firms have access to the needed technology and practices). Many ideas are interesting in theory but do not align with the administrative and technological capabilities of the Indian context. As the rest of the world contemplates how to engage with India on the task of controlling emissions it must craft deals that reflect India’s interests, capabilities and leverage on emissions. These deals will not be simple to craft, but there are many precedents for such arrangements in other areas of international cooperation, such as in accession agreements to the WTO.

Coal is the major primary energy which fuels economic growth in China. The original Soviet-style institutions of the coal sector were adopted after the People's Republic of China was founded in 1949. But since the end of 1970s there have been major changes: a market system was introduced to the coal sector and the Major State Coalmines were transferred from central to local governments. This paper explains these market-oriented and decentralizing trends and explores their implications for the electric power sector, now the largest single consumer of coal.

The argument of this paper is that the market-oriented and decentralizing reforms in the coal sector were influenced by the changes in state energy investment priority as well as the relationship between the central and local governments in the context of broader reforms within China’s economy. However, these market-oriented and decentralizing reforms have not equally influenced the electric power sector. Since coal is the primary input into Chinese power generation, and power sector reform falls behind coal sector reform, the tension between the power and coal sectors is unavoidable and has raised concerns about electricity shortages.

India has been famous for arguing that it (and the rest of the developing world) should incur no expense in controlling emissions that cause climate change.  The west caused the problem and it should clean it up.  That argument is increasingly untenable-both in the fundamental arithmetic of climate change, which is a problem that is impossible to solve without developing country participation, and in the political reality that important western partners will increasingly demand more of India and other developing countries. India's own public is also demanding more. 

The Indian government has outlined a broad plan for what could be done, but the plan still lacks a strategy to inform which efforts offer the most leverage on warming emissions and which are most credible because they align with India's own interests.  This paper offers a framework for that strategy.  It suggests that a large number of options to control warming gases are in India's own self-interest, and with three case studies it suggests that leverage on emissions could amount to several hundred million tonnes of CO2 annually over the next decade and an even larger quantity by 2030.  (For comparison, the Kyoto Protocol has caused worldwide emission reductions of, at most, a couple hundred million tonnes of CO2 per year.)  We suggest in addition to identifying self-interest, which is the key concept in the burgeoning literature on "co-benefits" of climate change policy, that it is also important to examine where India and outsiders (e.g., technology providers and donors) have leverage. 

One reason that strategies offered to date have remained abstract and difficult to implement is that they are not rooted in a clear understanding of where the Government of India is able to deliver on its promises (and where Indian firms have access to the needed technology and practices).  Many ideas are interesting in theory but do not align with the administrative and technological capabilities of the Indian context.  As the rest of the world contemplates how to engage with India on the task of controlling emissions it must craft deals that reflect India's interests, capabilities and leverage on emissions.  These deals will not be simple to craft, but there are many precedents for such arrangements in other areas of international cooperation, such as in accession agreements to the WTO.

One effect of the new Obama administration's global charm is that America could be let out of the environmental doghouse. The Obama plan to restart the economy is stuffed full of green incentives, and the new president has earned global cheers for his promise to cut the gases that cause global warming. But hope and change are not easy to implement in Washington, and the first big disappointment is likely to come later this year when the world's governments gather in Copenhagen to replace the aging and ineffective Kyoto treaty.

On climate issues America is less a nation than 50 different states, moving wildly at different speeds.

Pundits have been talking down the Copenhagen summit on the theory that the current financial crisis makes 2009 a tough time for governments to focus on costly and distant global goals like protecting the planet. In reality, the greenish tinge on nearly every economic recovery plan, even China's, show that this crisis offers green opportunity. The real reason Copenhagen will be a disappointment is that the new Obama administration can't lead until it first learns what it can actually implement at home. And delivering greenery in the American political system is harder than it looks-even when the same left-leaning party controls both the White House and Congress.

On environmental issues, America is barely a nation. Under a single flag it uneasily accommodates a host of states pushing greenery at wildly different speeds. In the 1970s and 1980s, this multispeed environmentalism propelled America to a leadership position. The key was truly bipartisan legislation, which allowed Washington to craft a coherent national approach. In fact, most of the major U.S. environmental laws did not arise solely from the environmental left but were forged by centrist Republican administrations working closely with centrist and left-leaning Democrats. Republican President Nixon created America's pathbreaking clean air and water regulations; Republican George H.W. Bush updated the air rules to tackle acid rain and other pernicious long-distance pollutants. In his more moderate second term, Ronald Reagan was America's champion of the ozone layer and helped spearhead a treaty-probably the world's most effective international environmental agreement-that earned bipartisan support at home and also pushed reluctant Europeans to regulate the pollutants.

Ever since the middle 1990s-about the time that the U.S. government was shut down due to a partisan budget dispute-such broad coalitions supporting greenery have been rare. In the vacuum of any serious federal policy, for nearly a decade the greener coastal states devised their own rules to cut warming gases. The United States as a whole let its green leadership lapse. (At the same time, the project to create a single European economy has shifted authority in environmental matters from individual member states into the hands of central policymakers in Brussels, where a coterie of hyperrich and very green countries have set the agenda. Europe, long a laggard on environmental issues, is now the world leader.)

The normal multispeed script was playing out on global warming as the Obama administration took power. Industry, worried about the specter of a patchwork of regulations, has lobbied for a coherent national strategy. But the Obama administration's first major policy on global-warming policy went in precisely the opposite direction: he reversed the Bush administration's decision that blocked California from adopting its own strict rules on automobile efficiency.

Today's challenge, which won't be solved by Copenhagen, is for Obama to stitch these many state environmental efforts together. That's no easy task. Global-warming regulation will probably have a larger impact on the nation's economy than any other environmental program in history, and any plan will have to allow enough room for some states to move quickly while also satisfying industry's well-founded need for harmony. Obama's Democratic Party controls both the White House and Congress, but that does not guarantee success. It will be difficult to craft a national policy that earns broad and bipartisan support while also taking the big bite out of the emissions that the rest of the world is hoping Obama will promise to the Copenhagen treaty. The difficulties aren't just in dragging along wary conservative Republicans. In fact, the most important skepticism about an aggressive national strategy has been from a coalition of centrist Democrats who fear the impact on jobs and economic growth.

One key to success will be crafting a deal with China and other developing countries to show that they, too, are making an effort. But serious efforts on that front are still in their infancy.

The big challenge for Copenhagen will be to find a way to allow negotiations to stretch beyond the unrealistic 2009 deadline while still keeping momentum. America's slowness in getting serious about global warming should be welcome because it is a contrast to its rushed behavior in negotiating the Kyoto treaty. At Kyoto, Bill Clinton's administration promised deep cuts in emissions without any plan for selling them at home, which is why the Bush administration could so easily abandon the treaty. Repeating that mistake would be a lot worse than waiting a bit for America to craft real leadership. If that's why Copenhagen falls short of the mark, then that's good news-real greenery, rather than fakery.