It’s no secret that we urgently need to address climate change. The IPCC’s Sixth Assessment Report called for net-zero carbon dioxide emissions from all human sources to stabilize the global climate.
Perhaps more surprising are two takeaways from the 23rd World Petroleum Congress, held last month in Houston and featuring top executives at the world’s leading oil and gas companies as speakers or panelists. First was the effort to reposition Houston as not the old-school energy capital but as the leader of the global energy transition. Next came the industry’s focus on carbon management solutions for the energy transition, particularly carbon capture, utilization and sequestration.
Despite its technological maturity and viability, carbon capture has had limited success as a climate solution so far, largely because not all the pieces in the process — from capturing carbon emissions from industrial sources to costly pipeline transportation to either securely storing the carbon or converting it into a commercially viable product — are economically aligned. This is true even in places like Houston where many low-cost and viable industrial sources of capture exist.
Dual-use shipping could change that by creating a global carbon market, and by lowering the cost of transporting carbon from high-emission nations in Asia to the Gulf of Mexico, where geological formations provide readily available and secure storage.
Dual-use shipping — combining liquefied natural gas and carbon dioxide transportation using the same ship — could dramatically cut the cost of decarbonization and accelerate the energy transition. Consider this: It takes about 25 days for LNG shipped from the U.S. Gulf Coast to reach South Korea or Japan. The ship then returns cargo-free, taking another 25 days and incurring the same fixed crew, maintenance and hull costs as the laden ship, while fuel costs for sailing the empty ship are only about 20 percent lower. Forgoing this cost-saving, the returning ship can be laden with carbon dioxide captured at power plants or refineries close to LNG import terminals in Asia and then be sequestered offshore in the Gulf of Mexico as the ship returns to the LNG-exporting facilities. Our analysis indicates this novel transportation mechanism between the largest U.S. export terminal at Sabine Pass and the import facilities at Samcheok, South Korea, or Joetsu, Japan, can reduce the effective cost of transportation to $2.5 per ton of carbon dioxide.
75 percent lower than if carbon dioxide captured domestically within the U.S. were to be transported via pipelines for sequestration in the Gulf of Mexico.
Our focus on East Asia for carbon sources and deployment of dual-use shipping, despite its distance from the U.S., is deliberate. Japan and South Korea are among the top four carbon-emitters in the Asia-Pacific region. At present, both countries import about 95 percent of their energy needs, relying predominantly on LNG. The current outlook for natural gas promises a strong rebound with a projected annual growth rate of 1.5 percent for LNG trade up to 2025. The Asia Pacific region will drive half of this demand, and the U.S. will have the largest LNG export capacity by 2022.
As global manufacturing leaders, Japan and South Korea’s emissions are expected to remain at current levels or even increase over the next decades, making carbon dioxide trading inevitable and an attractive proposition to meet their Paris Climate Agreement objectives. They have established carbon pricing through the Japanese carbon tax and Korean Emissions Trading Scheme, respectively, and are backed by public awareness and support for carbon capture. Opinion surveys indicate that about half of those surveyed in Japan and South Korea were aware of carbon sequestration, compared with 8 percent of the public in Sweden, 3 percent in the United States and 2 percent in the UK. Those factors make Japan and South Korea excellent, scalable and viable carbon sources, but they lack effective sequestration capacity.
That’s where the United States can offer its services. With close to 3,000 billion metric tons of currently accessible sequestration sites, the U.S. has the largest carbon dioxide storage capacity both onshore and offshore, far greater than the country’s annual carbon emissions. The Gulf Coast accounts for 60 percent of this capacity. The potential for safe and permanent offshore sequestration in the region has been established through years of research and is ready for deployment. Moreover, one of the greatest advantages the Houston region can offer is its highly skilled workforce that can support carbon management better than anywhere else in the world.
The U.S. is also well-positioned to participate from a policy perspective, although dual-use shipping will necessitate some modifications. While it does not directly advantage carbon capture or transportation, Section 45Q of the federal tax code, which incentivizes carbon dioxide sequestration, can currently provide adequate support for the full carbon-management value chain when combined with carbon pricing policies in East Asia. However, 45Q is restricted to carbon dioxide captured within the U.S. at present. Its U.S.-centric focus must be altered to help meet the policy objective of addressing global climate change.
We have our work cut out for us. It is time for the United States, and Houston especially, to accelerate the global trade of carbon dioxide, find incentives to complete its value chain, and rapidly and equitably transform our climate action strategies.
Krishnamoorti is chief energy officer at the University of Houston. Datta is a researcher at UH Energy, and a doctoral student in the department of political science studying public policy and international relations.
