Carbon capture and storage (CCS) is among the technologies with greatest potential leverage to combat climate change. According to the PRISM analysis, a technology assessment performed by the Electric Power Research Institute (EPRI), wide deployment of CCS after 2020 in the US power sector alone could reduce emissions by approximately 350 million tonnes of CO₂ per year (Mt CO₂/yr) by 2030, a conclusion echoed by the McKinsey U.S. Mid-range Greenhouse Gas Abatement Curve 2030. But building CCS into such a formidable climate change mitigation “wedge” will require more than technological feasibility; it will also require the development of policies and business models that can enable wide adoption. Such business models, and the regulatory environments to support them, have as yet been largely undemonstrated. This, among other factors, has caused the gap between the technological potential and the actual pace of CCS development to remain large.

The purpose of the present work is to quantify actual progress in developing carbon storage projects (here defined as any projects that store carbon underground at any stage of their operation or development, for example through injection into oil fields for enhanced recovery or in saline aquifers or other geological formations). In this way, the real development ramp may be compared in scale and timing against the perceived need for and potential of the technology. Some very useful lists of carbon storage projects already exist – see, for example, the IPCC CCS database, the JP Morgan CCS project list, the MIT CCS database, and the IEA list. We seek to maintain an up-to-date database of all publicly-announced current and planned projects from which we can project a trajectory of carbon stored underground as a function of time. To do this, we estimate for each project the probability of completion as well as the potential volume of CO₂ that can be stored as of a given year.

Much existing literature champions renewables implementation on India’s Sagar Island as an unqualified rural electrification success story.  Photovoltaic (PV) and wind systems put in place by the West Bengal Renewable Energy Development Agency (WBREDA) have clearly brought benefits to many of the island’s residents. 

The highly-touted community management system governing the projects has been successful at instilling local pride and overcoming the traditionally thorny problem of tariff non-collection.  At the same time, an on-the-ground look at the Sagar Island experience identifies some deeper liabilities of the business model guiding the renewables projects.  Two of the ostensible strengths of the Sagar Island implementation – the harmonious tariff collection associated with community management and the resources, competence, and assertiveness of WBREDA itself – can at the same time be considered weaknesses limiting the scope, sustainability, and replicability of the projects. 

This working paper considers these questions through a case study of a typical Sagar Island facility, the Mritunjoynagar PV power plant.  It finds that Mritunjoynagar’s inability to recoup its full operating and maintenance costs by providing appropriate incentives for profit maximization limits the expansion of the project and threatens its long-term sustainability, or at least the relevance of its business model in the absence of a highly-visible champion like WBREDA to ensure continued support.  For WBREDA and other agencies to sustain and replicate similar projects—and their attendant benefits—throughout India, they must adjust their economic model, as WBREDA is beginning to implicitly acknowledge in exploring a franchise model for future efforts.

This study was presented by PESD research fellows Jeremy Carl and Varun Rai and PESD Director David Victor at the conference “The Future of India's Foreign Policy,” hosted by the Center for the Advanced Study of India (CASI) at the University of Pennsylvania on April 22 and 23, 2008.

The study explores the role of energy in India’s foreign policy strategy and examines the wide gap between India’s need for a strategic energy policy and the government of India’s inability to put such a policy into practice. As a stark departure from the idealized vision, India’s energy supply chains that have grown increasingly creaky and unreliable. Only halting progress has been made towards reform and, without fundamental reform, it is likely that India’s global energy strategy will continue to be a failure.

In particular, the authors examine the relationship between India’s energy policy and its foreign policy by highlighting both themes and vignettes in three different areas of the energy system: oil & natural gas, coal, and electricity. They find that fickle domestic political coalitions dominate energy policymaking in India and that these unstable coalitions, when combined with the weak administrative capacity of the Indian state, leave India’s foreign policy apparatus incapable of making credible commitments in the energy sector.

Mexico's Petróleos Mexicanos, or Pemex, is the world's third-ranked company by oil production. Almost 40% of the Mexican government budget is derived from Pemex revenues, leaving the country highly exposed to a drop in oil prices and the company itself strapped for cash to support much-needed investment. At the same time, the company has been progressively de-skilled over the decades by an exclusive focus on financial returns for the government, constitutional restrictions on foreign participation in the oil sector, and suffocating interference by diverse government agencies and the powerful workers' union.

In this case study, Ognen Stojanovski leverages extensive interviews with present and former Pemex and Mexican government insiders to paint a detailed picture of the organizational dynamics that drive Pemex's performance and strategy. Particularly important are the manifold interactions between Pemex and a host of intrusive, and yet ultimately non-strategic, government agencies, with the net result being extensive government interference and yet no actual government ownership of oil sector performance.

Facing a steep drop-off in the free-flowing oil from the Cantarell field that long provided easy revenues even in the face of weak organizational and technical capability, Pemex now finds itself scrambling to plug the production gap through new investments in exploration. At the same time, politically-popular constitutional restrictions on foreign ownership of Mexican hydrocarbons limit Pemex's ability to enlist foreign help to rapidly develop offshore oil. Current President (and former Energy Minister) Felipe Calderón recognizes the crises of finances, reserves, and oversight that are now facing Pemex, and on April 8, 2008 he proposed a set of reforms to the Mexican Senate. The PESD case study of Pemex elucidates what is needed on the reform front as well as the formidable obstacles that stand in front of Calderón as he attempts to remake Pemex into a strong performer.

As the United States designs its strategy for regulating emissions of greenhouse gases, two central issues have emerged. One is how to limit the cost of compliance while still maintaining environmental integrity. The other is how to "engage" developing countries in serious efforts to limit emissions. Industry and economists are rightly concerned about cost control yet have found it difficult to mobilize adequate political support for control mechanisms such as a "safety valve;" they also rightly caution that currently popular ideas such as a Fed-like Carbon Board are not sufficiently fleshed out to reliably play a role akin to a safety valve. Many environmental groups have understandably feared that a safety valve would undercut the environmental effectiveness of any program to limit emissions of greenhouse gases. These politics are, logically, drawing attention to the possibility of international offsets as a possible cost control mechanism. Indeed, the design of the emission trading system in the northeastern U.S. states (RGGI) and in California (the recommendations of California's AB32 Market Advisory Committee) point in this direction, and the debate in Congress is exploring designs for a cap and trade system that would allow a prominent role for international offsets.

This article reviews the actual experience in the world's largest offset market-the Kyoto Protocol Clean Development Mechanism (CDM)-and finds an urgent need for reform. Well-designed offsets markets can play a role in engaging developing countries and encouraging sound investment in low-cost strategies for controlling emissions. However, in practice, much of the current CDM market does not reflect actual reductions in emissions, and that trend is poised to get worse. Nor are CDM-like offsets likely to be effective cost control mechanisms. The demand for these credits in emission trading systems is likely to be out of phase with the CDM supply. Also, the rate at which CDM credits are being issued today-at a time when demand for such offsets from the European ETS is extremely high-is only one-twentieth to one-fortieth the rate needed just for the current CDM system to keep pace with the projects it has already registered. If the CDM system is reformed so that it does a much better job of ensuring that emission credits represent genuine reductions then its ability to dampen reliably the price of emission permits will be even further diminished.

We argue that the U.S., which is in the midst of designing a national regulatory system, should not to rely on offsets to provide a reliable ceiling on compliance costs. More explicit cost control mechanisms, such as "safety valves," would be much more effective. We also counsel against many of the popular "solutions" to problems with offsets such as imposing caps on their use. Offset caps as envisioned in the Lieberman-Warner draft legislation, for example, do little to fix the underlying problem of poor quality emission offsets because the cap will simply fill first with the lowest quality offsets and with offsets laundered through other trading systems such as the European scheme. Finally, we suggest that the actual experience under the CDM has had perverse effects in developing countries-rather than draw them into substantial limits on emissions it has, by contrast, rewarded them for avoiding exactly those commitments.

Offsets can play a role in engaging developing countries, but only as one small element in a portfolio of strategies. We lay out two additional elements that should be included in an overall strategy for engaging developing countries on the problem of climate change. First, the U.S., in collaboration with other developed countries, should invest in a Climate Fund intended to finance critical changes in developing country policies that will lead to near-term reductions. Second, the U.S. should actively pursue a series of infrastructure deals with key developing countries with the aim of shifting their longer-term development trajectories in directions that are both consistent with their own interests but also produce large greenhouse gas emissions reductions.