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AAAS Policy Brief: Coal-to-Liquid Technology
Issue Summary | Resources
High oil prices and the desire to reduce energy dependence
in the United States have brought coal-to-liquid (CTL) technology to the
forefront of the discussion about alternative fuel sources. Nearly 100
years old, CTL processes have long been used by countries lacking access
to oil, most notably Germany, where production peaked during the 1940s;
South Africa, which has been using CTL technology for fuel since the 1950s;
and, more recently, China, where the Shenhau Group Corporation Limited
announced that it intends to produce 1 million tons of coal-based liquid
fuel a year by 2008. The U.S. Government promoted the development of CTL
technologies following the oil shocks of the 1970s, but shelved the projects
after the price of oil fell during the 1980s. In the current economic
and political environment of the United States, with the price of oil
hovering around $65 per barrel, synthetic fuel derived from coal has once
again become economically viable. From an environmental standpoint, however,
the carbon dioxide (CO2) emissions produced throughout the lifecycle of
coal-based liquid fuel make it a less desirable option.
Turning Coal into Liquid Fuel
Costs
Arguments for Coal-Based Liquid Fuel
Arguments against Coal-Based Liquid Fuel
Research Needs
Turning Coal into Liquid Fuel
Coal can be converted into liquid fuel using one of two processes. The
first, indirect liquefaction, is a multi-step procedure that requires
the gasification of coal to produce a "syngas," which is then
cleansed of impurities and subjected to further chemical refinement, called
a Fischer-Tropsch reaction, to produce a sulfur-free diesel or gasoline.
Indirect liquefaction produces a significant amount of CO2 that is removed
from the fuel as a necessary step during the final stages of the Fischer-Tropsch
process. Theoretically, this captured CO2 could be sequestered at minimal
cost.
The second, direct liquefaction, requires creating a chemical reaction
at high temperatures and then using hydrogen gas and a catalyst to produce
a liquid fuel. Direct liquefaction usually produces low-quality liquid
fuel that is expensive to make compliant with U.S. standards for purity.
Therefore, although the process is used in China, it is not a viable option
for meeting the United States' liquid fuel requirements and will not be
discussed for the remainder of this brief.
Costs
In terms of economics, coal-based liquid fuel becomes viable when the
per-barrel price of oil has exceeded the $45-50 range, according to separate
MIT and National Mining Association studies. This is because of high front-end
expenditures-a 10,000 barrel-a-day plant would cost approximately $600-700
million to construct-and the price of CO2 capture. All told, the refinement
process is three to four times more expensive than refining an equivalent
amount of oil. Not included in the above estimate is the cost of sequestrating
the captured CO2, which would increase the price of the end product by
a projected $5 a barrel. The imposition of a strict carbon cap and trade
regime would also raise the cost of fuel produced with CTL technology,
because of the CO2 emissions associated with it. Still, given the current
high price of oil, coal to liquids is likely to remain an economically
sound alternative.
Arguments for Coal-Based Liquid
Fuel
Proponents of using coal-based liquid fuel for the transportation industry
say that it would help the United States achieve energy independence.
Currently, the United States consumes approximately 13 million barrels
of liquid fuels for transportation each day and imports more than 55 percent
of its oil. The more than 250 billion tons of recoverable coal the country
has in its reserves could replace 800 billion barrels of oil, according
to industry analyses. Other benefits of fuel made from liquefied coal
cited by proponents are that it can be used in gasoline engines and that
plants designed for indirect CTL processes can easily be converted to
hydrogen fuel cell production plants, once fuel cell technology becomes
more viable.
Arguments against Coal-Based
Liquid Fuel
Opponents of CTL technology note that the lifecycle of synthetic fuel
derived from coal produces large amounts of greenhouse gas. If the CO2
removed from the fuel during the refinement process is not sequestered,
the quantity of CO2 released by extracting, refining and burning coal-based
liquid fuel is more than twice the amount emitted by conventional hydrocarbons.
Even with carbon sequestration, synthetic fuels derived from coal release
nearly 10 percent more CO2 than oil. Moreover, reliance on coal as a transportation
fuel would increase the other environment stresses associated with coal
mining in the United States and potentially affect other energy markets.
The MIT study estimates that an additional 250 million tons of coal, equivalent
to 25 percent of the United States current annual production, would have
to be mined each year to replace 10 percent of the country's present consumption
of liquid transportation fuel.
Research Needs
Coal-to-liquid technology is a well established process that does not
necessitate future research to successfully produce liquid transportation
fuels. However, making the greenhouse gas emissions of synthetic fuels
derived from coal comparable to those of oil requires further research
into large-scale carbon sequestration. Although sequestering massive amounts
of CO2 is possible in theory, questions still remain about
the length of time the sequestered CO2 would remain in place,
the long-term ecological impacts of sequestration, the costs of constructing
a CO2 storage facility, the geologic formations that make the
best storage sites and monitoring leaks. Because of the United States'
heavy dependence on coal as an energy source, however, these research
steps will likely be taken regardless of whether CTL technology becomes
widespread.
Updated June 13, 2007
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