December 15, 2008

RAND institute considers producing liquid fuels from coal

It looks like the U.S. government has RAND looking into the implications of using coal to produce fuel: Producing Liquid Fuels from Coal: Prospects and Policy Issues. This could be a big deal, especially considering the size of the industry it would likely create. A CTL industry would undoubtedly yield important energy security benefits -- most notably a lowering of world oil prices and a decrease in wealth transfers from oil users to oil producers. It would also make the U.S. significantly less dependant on foreign oil.

At the same time, however, the advent of a CTL industry would very likely instigate a host of environmental problems. And it would ultimately prove to be a costly and myopic diversion at a time when more innovative energy solutions are required.

RAND speculates that a domestic CTL industry could produce as much as three million barrels per day of transportation fuels by 2030. This would require 550 million tons of coal production annually. While the U.S. has considerable coal reserves, the amount of mining that would be required (most prominently in Wyoming and Montana) would be nothing short of intense. The residual impacts of mining would adversely change the landscape, the local ecology and water quality. In addition, the coal-to-liquid process requires extremely high levels of water consumption -- this at the dawn of a water shortage crisis.

More conceptually, however, the idea of producing liquid fuel from coal seems more reactionary than visionary. This move would not address the green house gas emissions problem and it would be yet another industry that ravages the Earth in search of a non-renewable resource.

While RAND's conclusion is somewhat tempered and cautionary, the institute does suggest that the U.S. engage in an "insurance policy" approach that promotes the early construction and operation of a limited number of commercial CTL plants.

Here's to hoping that the billions of dollars required to create a fully robust CTL industry will instead be directed to something that's less environmentally insensitive and with an eye to the future.

Read RAND's analyis.

No comments: