A Climate Catch-22: How a Carbon Tax Could Save Coal

Here's coal's Catch-22: A tax on carbon dioxide emissions, which are driving global climate change, would raise the costs of coal-fired power, negating the fuel's price advantage over cleaner sources, like wind and solar power, and reduce its use.

On the other hand, a tax could provide the impetus for investing in technologies to capture and store carbon that have largely floundered in the marketplace. That could save coal.

Energy Secretary Ernest Moniz, a physicist by training, discussed the subject today at a breakfast sponsored by the Christian Science Monitor, as the Republican-led U.S. House was preparing to vote on an amendment requiring the Obama administration to seek Congress's approval before taxing carbon emissions. The administration isn't seeking such a tax.

Moniz's department is trying another tack: reviving an $8 billion loan guarantee program for fossil-fuel emission reduction projects, including carbon sequestration for coal plants. The program hasn't made any awards since Congress first authorized it in 2005.

"You hear the phrase, 'war on coal.' There is no war on coal. We start by saying we must control CO2 emissions," Moniz told reporters. "When it comes to making coal competitive, at least as a competitor in a low-carbon marketplace, the issue is walking the talk in terms of developing the technologies."

The Obama administration has invested $6 billion in carbon-capture projects, he said, and last month sought to revive the loan program, which could also back energy conservation programs or emissions reduction efforts for natural gas.

Ultimately, restrictions on emissions are needed to make carbon capture viable, Moniz said.

"We have to pursue the innovations and the transformations that give all of our energy resources the potential to be marketplace competitors in a low-carbon world," Moniz said.

He added: "Without some kind of policy that is restricting carbon emissions, it's hard to argue that it isn't less expensive to emit the carbon."

Visit www.bloomberg.com/sustainability for the latest from Bloomberg News about energy, natural resources and global business.

Before it's here, it's on the Bloomberg Terminal.