3An Industry Perspective on Carbon Management

Publication Details

Brian P. Flannery

ExxonMobil Corporation

Over the past two decades at ExxonMobil, my colleague Haroon Kheshgi and I have invested considerable effort toward understanding climate change. We have paid particular attention to questions of carbon sequestration and the carbon cycle. I would like to provide some information and views that put these issues fully in perspective.

I believe that in the United States, we are beginning an important debate about what the role of the private sector, federal government, and the research community ought to be in addressing the climate change issue. This meeting provides an excellent opportunity for the research community to consider its role in light of the overall issues.

In this context, it may be useful first to recall some powerful examples from the past where the government was heavily involved with energy technology. Two instances that come to mind are nuclear power and synthetic liquid fuels from coal and shale-oil. Both positive and unfortunate lessons come from these exercises. In the climate change debate, we face the specter of these negative consequences happening again. What is the role of research and development? What are the appropriate roles of academia, government labs, and the private sector?

It is becoming important to consider these questions. If climate change proves to be serious over the coming decades and requires a transition to new technologies, those technologies are not likely to be straightforward extensions of ones we know or understand today. On that point, I echo the contribution of Jae Edmonds strongly. These new technologies will have to be “megatechnologies” (i.e., integrated, interacting systems of technologies working within entire infrastructures). Furthermore, they would need to work globally, not just in the United States or in the Organization for Economic Cooperation and Development (OECD). This poses additional challenges. For example, in many ways, the existence of the Kyoto Protocol has been a fundamental stumbling block to action, since it poses such a difficult political challenge and barrier to global involvement.

I frame my discussion in this chapter on the scope of the challenge in the context of the carbon cycle and the global economy, addressing the technology and infrastructure that might be required. To finish, I provide some conclusions and issues. In particular, I address the following:

  • The magnitude of these new technologies;
  • Potential rates of penetration of new technology into the global economy; and
  • Criteria for new technology to enter the marketplace on a large scale.


First I want to review some relevant information regarding the global carbon cycle and the processes that affect atmospheric concentrations of carbon dioxide. There are vast reservoirs of carbon in the system (see Figure 3.1) that can exchange fairly rapidly with the atmosphere, which contains about 750 gigatons (1 gigaton = 109 tons) of carbon (GtC). The terrestrial biosphere and soils contain about 2,000 GtC; the mixed layer of the ocean contains about 1,000 GtC; and the deep oceans, 38,000 GtC.

FIGURE 3.1. The carbon cycle. SOURCE: IPPC (1995).


The carbon cycle. SOURCE: IPPC (1995).

These numbers—averages for the 1980s estimated by the Intergovernmental Panel on Climate Change (IPCC, 1995)—are reasonably well determined, especially in the context of this subject. (There are also larger reservoirs in which exchanges occur on geological time scales, but I do not discuss those.)

Exchange fluxes of carbon among these systems must also be considered. The human contribution to emissions to the atmosphere from combustion of fossil fuels—about 5.5 GtC per year in the 1980s and about 6.3 GtC per year in the 1990s—is reasonably well known to within about ±10%. However, estimates of net emissions from tropical deforestation, shown here as 1.6 GtC per year, are far less reliable. Again, the values I am citing are from IPCC (1995), in the case for the decade of the 1980s. Figures for land use change as a whole, especially considering reforestation in the middle latitudes, are less certain. Nonetheless, the consequences of tropical deforestation are important.

In addition, there are vast natural cycles involving two-way exchanges of CO2 into and out of the terrestrial biosphere through respiration, photosynthesis, and decay. Carbon dioxide is also exchanged into and out of the ocean through the mixed layer, by thermodynamic processes of gaseous invasion and evasion. These processes amount to about 60 and 90 GtC per year, respectively, but these numbers are probably accurate only to within 30-50%.

Although we know the human emissions fairly well, we don't know the natural emissions well at all. Added to this uncertainty is the fact that natural emissions can change as a result of long-term climate changes. From data on the year-to-year fluctuations in the accumulation of atmospheric CO2, it appears that they can also change as a result of volcanic eruptions, fluctuations in sunlight, and other factors this may not be understood. These factors make understanding CO2 in the atmosphere difficult. Adding to this difficulty is what might happen in the atmosphere over the next 100 years if these processes themselves begin to change.

Figure 3.2 shows estimates of human emissions of CO2 from use of fossil fuels in 1990 and from estimates of emissions taken from the IPCC IS92a scenario (IPCC, 1992). This scenario is described more completely in Chapter 1. For our purposes, over this relatively near-term period, the results differ only slightly from scenarios produced by a variety of forecasting agencies. They are similar to projections of what ExxonMobil might produce for the next 20 years. Over this relatively short period, projections depend on trends and technologies that are reasonably well understood. However, for discussions of climate change, the most important times are after 2020, through the next century, and beyond. Here, we all should be very humble about trying to make projections.

FIGURE 3.2. Regional fossil fuel CO2 emissions.


Regional fossil fuel CO2 emissions. SOURCE: IPPC (1992).

Two powerful conclusions can be drawn from the scenario. First, emissions are going to grow rapidly to meet the demands of society for prosperity and to meet basic needs. Critical assumptions that enter these are population growth, which is discussed in earlier chapters, future rates of economic development, and technology change.

The daunting challenge is that emissions are growing most rapidly in developing countries. Countries such as India, China, and Indonesia are going to rely on domestic coal to meet growing needs, especially for electric power, and their emissions are going to grow rapidly. Over the next 30 years, the installed technologies are going to be based on what we know about or can foresee. Over the next 100 years, this may or may not be true, given the different kinds of changes that can occur. Next, let us focus on recent projections for CO2 emissions in the United States from fossil fuel use without including sinks from land use or emissions of other greenhouse gases

Figure 3.3 is based on information from the U. S. Energy Information Administration (EIA, 2000a). In 1990, emissions were about 1.4 GtC per year. The black squares show actual annual emissions. In 2000, emissions in the United States will already be 24% above the Kyoto target, which begins only eight years from now. The insert shows emissions in 1997 broken into three classes—electric power use, transportation, and all other uses combined. In total, these three add up to U.S. CO2 emissions in 1997. Reductions in any one of these classes alone, even if emissions were eliminated completely, would still not allow the United States to meet its target in the year 2000. That's the scale of the challenge. How quickly can you change the infrastructure? How do you achieve this? Note, in the figure, that there was one downturn in annual emissions—1991, a year in which the economy was in recession. Even the recession produced only a slight downturn.

FIGURE 3.3. U.S. carbon emissions: projected versus the Kyoto target.


U.S. carbon emissions: projected versus the Kyoto target. SOURCE: EIA (2000a,).

Next, I want to place the consequences of the emissions reduction called for in the Kyoto Protocol in the context of the full climate change problem.

Figure 3.4, based on simple conventional models shows the possible effects of Kyoto from 1990 through 2100. The results are based on the IS92a scenario, but introducing the Kyoto limitations. In this case, I assume that the developed world reduces its emissions to 5% below the 1990 levels and holds them at this point for the next 100 years and the developing world continues to emit as projected in the IS92a scenario. These are crude approximations. The top curve shows how temperatures might evolve under IS92a. The lower curve shows the consequences of Kyoto. The net effect is to delay the projected temperature rise in 2100 by approximately a decade. The chart should not be taken too literally because the uncertainty associated with the temperature rise is larger than the scale in this graph.

FIGURE 3.4. Climate implications of Kyoto.


Climate implications of Kyoto.

Although society would probably be unable to detect the climatological differences between the two projections, the differing economic consequences would be evident. While it is not my point to say that the Kyoto Protocol has no effect, in terms of addressing the climate change issue, Kyoto does very little to address global CO2 emissions. The conclusion is that more difficult steps would be required if climate change proves to be serious and that these steps must address emissions in developing, as well as developed, countries.

My final information from the climate change arena is shown in Figure 3.5. It further elaborates what the response might mean if society determined that it must stabilize atmospheric CO2 concentrations. Again, the information presented here complements material discussed in Chapter 1. The figure shows what track emissions would have to take for stabilization to occur at a given level. It is divided into two families of curves. The lower family of curves shows emissions only from the so-called Annex 1 countries—developed countries that agreed to emissions commitments in the Kyoto Protocol negotiations. The top family shows three projections of global emissions. In the upper group, the highest curve, rising to about 14 GtC per year, results from the now-familiar IS92a scenario through the year 2050.

FIGURE 3.5. Emission levels required to reach the European Union proposal to stabilize cumulative atmospheric CO2 concentrations at 550 ppm or less.


Emission levels required to reach the European Union proposal to stabilize cumulative atmospheric CO2 concentrations at 550 ppm or less.

The middle curve results in atmospheric stabilization at 550 parts per million (ppm) CO2. The lowest curve in the top family ultimately results in stabilization at 450 ppm CO2 globally. Jae Edmonds has described other scenarios. For example, you could devise other scenarios for stabilization at 550 and 450 ppm, in which emissions remain higher in early years but would have to fall more rapidly in later years to stabilize atmospheric CO2 at a certain concentration.

The topmost curve in the bottom family of emissions corresponds to Annex 1 parties' emissions under IS92a. The next two curves in this family represent what emissions from Annex 1 countries would have to be if developing countries accepted no emissions commitments and the world's target CO2 concentration was 550 ppm or less.

In ongoing negotiations under the United Nations Framework Convention on Climate Change (FCCC), the European Union has taken the position that the Kyoto Protocol should control CO2 emissions such that concentrations will stabilize at 550 ppm or less. The target of 550 ppm was formulated politically. As its objective, the FCCC calls for stabilization of greenhouse gas concentrations at a level that prevents dangerous human interference with the climate system. However, science today cannot draw conclusions about the level of greenhouse gases that would be appropriate as a stabilization target.

The situation is further complicated by the fact that gases other than CO2 are greenhouse gases. If we are worried about climate change consequences at the equivalent of 550 ppm CO2, we must take into account methane and other gases. It may be necessary to keep CO2 below 550 ppm to keep to the climate change consequences associated with that level of CO2.

What would be the consequences for stabilization of CO2 emissions at 550 ppm or less? To achieve this level without obligations by developing countries would require a phase-out of the use of fossil fuels by the middle of the century in the Annex 1 countries. The scale of the problem is enormous. It would require large-scale development and deployment of new technologies that are currently noncommercial. It is clear that at some point, participation by developing countries would be necessary. Achieving the commitments made by developing countries would almost certainly require the transfer of substantial resources from the developed world.


To place changes in the decarbonization of global energy consumption into historical context, we can examine shifts in primary fuels that have occurred in the last 200 years. Figure 3.6 shows trends in the hydrogen-to-carbon ratio of energy use over the past 200 years.

FIGURE 3.6. Two hundred year trend: decarbonization of global energy consumption.


Two hundred year trend: decarbonization of global energy consumption. SOURCE: Adapted from Marchetti (1985); Ausubel (1996); Ausubel et al. (1998).

Transitions between wood, coal, oil, and methane as fuels, represented by their characteristic hydrogen-to-carbon (H/C) ratios, required about 50 years each. The essential drivers in these transitions were performance demands, especially in energy intensity and end use. Environmental drivers were also of some importance. Although they are especially significant now, even in earlier periods environmental drivers such as maintaining a supply of readily available wood were present. The associated efficiency gains were made possible primarily through changes in the form of fuels, as well as changes in combustion temperatures and materials. The transitions required numerous, large-scale upgrades in energy supply and end-use technology, with significant time intervals needed for these changes. Typically, more than one energy system was available at the same time. In many cases, the transition between two energy systems occurred because of obvious economic and performance advantages of the newer systems.

Figure 3.7, shows the progression in efficiency of power generation from motors. Typical doubling times are about 50 years. Materials science and materials technology have been among the key enablers in the progression. Enhanced performance for the end user made the new technology commercially attractive.

FIGURE 3.7. Efficiency of “motors”: historic inventions.


Efficiency of “motors”: historic inventions. NOTE: F = efficiency, where 1 = 100%. SOURCE: Adapted from Marchetti (1985); and Ausubel (1996).

Figure 3.8 shows the growth of transportation infrastructure that enabled widespread use of the new technology for supplying and using energy. The characteristic time scale for the penetration of new technology is 50 years. In many cases, newer technologies were becoming increasingly prevalent even as old ones were still growing.

FIGURE 3.8. Penetration of major U.S. transportation infrastructures.


Penetration of major U.S. transportation infrastructures. SOURCE: Adapted from Marchetti (1985); Ausubel (1996).

While advances in R&D enabled new forms of technology, the widespread use of a technology occurred because it provided qualitatively new service and higher levels of performance. Powerful economic drivers came about naturally through the operation of markets. The same cannot be said about many technologies being championed as potential contributors to address climate change. Rather, to maintain today's performance, new technologies could provide only the same or even reduced service at higher cost. This poses a challenge from the perspective of consumer acceptance and economic consequences.

Figure 3.9 illustrates the scale of today's infrastructure for transportation fuels and the petroleum industry. Overall capacity for today's petroleum and transportation fuels industry supports the production and refining of more than 3 billion barrels per day. This produces 1.8 billion gallons of fuel, including about 1 billion gallons of gasoline and roughly 1 billion gallons of diesel fuel. This massive fuel infrastructure was developed over a period of 100 years, including ongoing development and efficiency improvements.

FIGURE 3.9. Today's fuel infrastructure.


Today's fuel infrastructure.

From the perspective of the climate change issue, it is important to note that CO2 emissions from the use of oil in the world's economy come primarily from end users. Of the total amount of CO2 emitted, about 13% results from energy consumed in production, refining, manufacturing, and distribution of fuels, while about 87% comes from the end use by consumers. The petroleum industry expends considerable effort to control emissions in production, refining, marketing, and other areas because it is in the interest of the industry to do so. However, the real focus for climate change must be on the end use of fuels, not on operational emissions, if climate change proves to be a serious issue.

The discussion in this section highlights the time scales associated with widespread use of new energy technology for supply and end use. Introduction of new technology requires advances in research as a prerequisite, but widespread use requires—above all—consumer acceptance based on economic advantage. In addition, it requires investment and the introduction of essential infrastructure to support the new technology.


Although no one new technology will solve the entire problem, there are a number of promising options for megatechnologies that could make a substantial contribution to limiting or eliminating future emissions of CO2. All of them have to address the challenges of economics, performance, and associated environmental impacts. Consequently, all new technology solutions require extensive research and development to address significant current barriers to their widespread commercial use.

Carbon storage in forests and soils does have the potential to make a substantial difference, but it will not solve the problem by itself. Judging from the recent failure of international negotiations at the Hague (November 2000), the extent to which efforts to store carbon in forests and soils might qualify for credits under proposed international regimes is also unclear. Nonetheless, carbon storage does offer significant potential to allow advances in the removal of CO2 from the atmosphere.

Major technical potential exists for intentional separation and sequestration of CO2 from large combustion facilities. In today's global economy, emissions from large facilities account for about 30% of CO2 emissions. Electric utilities account for the largest portion of this 30%, but refineries, chemical plants, smelters, and other energy-intense industrial operations also contribute.

Analyses of the separation-sequestration approach indicate that separation is the key cost component. Among the critical design considerations is whether to combust in air or in oxygen. In either case, procedures must be designed to remove O2 from air or CO2 from flue gas or both. Additional procedures are needed to compress the CO2 to high pressure in order to move it elsewhere and dispose of it for long periods of time.

In many ways, disposal is the more challenging societal question, although several options may prove to be worthy of consideration. The best options for storage of substantial amounts of CO2 involve oceans and deep saline aquifers. While it is also possible to store CO2 in depleted oil or gas wells, and in some cases to achieve an economic benefit through enhanced oil recovery, their capacity appears to be much smaller than that of oceans or deep saline aquifers. In addition to having a vast carbon-storing capacity, deep saline aquifers appear to be fairly ubiquitous.

Overall, economic costs are dominated by capture and transport to disposal sites. There are serious questions surrounding public acceptance of CO2 capture and disposal. While ocean disposal may be promising, many environmental groups have already begun to mount campaigns to challenge this option. In every case, scientists and their research can contribute to the analysis of potential options for disposal and to the debate surrounding their acceptability to the public.

The capture and disposal of CO2 from large facilities has the potential to apply to the roughly 30% of global CO2 emissions produced by electric power plants and other large industrial facilities, but this potential can be realized only if the technology is used in both developed and developing countries.

An additional 30% of total global CO2 emissions results from the transportation sector. Advanced vehicles hold a good deal of promise for reducing emissions. Vehicles powered by hydrogen fuel cells garner most of the attention in the context of climate change. Some version of this type of vehicle may enter the economy to a large extent in the next several decades. However, advances in the internal combustion engine and in the diesel fuel engine are also going to be significant over that time frame.

To provide fuel for fuel cell engines, several options exist, including the use of onboard reformers to convert liquid hydrocarbons to hydrogen. The essential advantage of fuel reforming would be to eliminate of the need for a massive and costly infrastructure for hydrogen production and delivery—a new infrastructure that would coexist with conventional gasoline and diesel for several decades. Hydrocarbon-powered fuel cell vehicles could hasten the widespread commercial use of fuel cell vehicles by decades compared with options that rely directly on hydrogen.

Production of low-carbon fuels from fossil fuels is receiving a lot of attention and will be addressed more fully in other chapters of this report. As an example, it is possible to generate hydrogen from fossil fuels in large facilities where CO2 separation and disposal approaches could then be used. Although such systems present a wide array of challenges, they also present opportunities for potential synergies within the global economy. If hydrogen can be made abundantly and the means for its transport and use in end-use devices can be worked out, a synergistic relationship is created. This situation has the ultimate potential to address 100% of the power needs of the global economy at some point in the future. Such systems are not yet economical, but with research and development, it is conceivable that they could become so by the middle of the twenty-first century.

Another option worthy of research is geoengineering. In particular, the technology that shows the most promise right now is the enhancement of marine fertilization to promote removal of CO2 from the atmosphere. I am not advocating the introduction of marine fertilization today, but I would advise that it be studied further as an option. If the consequences of climate change require dramatic action, all options would have to be considered. Geoengineering, with emphasis on marine fertilization, continues to be an option that shows some promise.

To this point, renewable sources of energy have not been stressed on this list of “mega-options.” With the exception of hydropower, renewables succeed only in niche applications in today's markets. Renewable energy simply is not competitive with conventional fossil fuels in cost and reliability. Many sources of renewable energy face their own environmental problems as well. For example, using biomass and wind for energy would present environmental problems if deployed on a scale that would make a significant difference to the global economy. In estimating the cost of renewable energy it is essential to recognize that the intermittent supply produced by renewable power sources necessitates additional cost to provide conventional backup power. Such costs must be included in any realistic analysis of renewable energy.

Any of these new megatechnologies requires the introduction of significant enabling infrastructure if the technology is to gain widespread commercial acceptance. Why do large-scale infrastructure changes take so long? In addition to the technology itself, all related enabling technologies must be developed as well. Capital also must be invested to achieve substantial market penetration. Historically, in the examples of technology transition discussed earlier, public concerns were not a major factor. In those cases, the public generally encouraged the development of new technologies.

The case may not be the same today. In addition to the technical, scientific, and environmental challenges, the development of new technologies would each have a set of public perception issues to address. Consider, for example, gas handling. In a CO2 sequestration era, CO2 pipelines and accompanying permits would present problems because of the “not-in-my-back-yard” attitude. Hydrogen production, supply, and storage face safety concerns. The development of a given technology would face resistance from groups who advocate their own preferred approaches.

Moving Technology from Introduction to Widespread Use

The rate of market penetration of a new technology will be a function of technology development as well as the success of potentially massive investment—an uncertain prospect. The central issue may be how to introduce new technologies into a market on a small scale and then get them to grow into widespread commercial use. Most analyses envision a desirable final state, with everything up and running. A more relevant question may be, How does a new technology evolve successfully from introduction to widespread use?

The scope of the capital investment required for the transition to a currently non-existent fuel technology is truly staggering. Capital cost for fuels infrastructure alone will approach or exceed $1 trillion. For comparison, this total is 13 times the total capital employed by ExxonMobil Corporation—the largest corporation in the petrochemical industry. It is equivalent to the total annual capital investment in the U.S. economy, or to the expected real growth in capital investment over the next 30-40 years. Other priorities of society, besides climate change, require capital investment as well.

Finally, let me discuss a number of dimensions in which new technology must succeed, if it is to come into widespread global use. To be successful in the marketplace, technology has to succeed in a number of critical dimensions. Failing in any one of these areas will doom the technology in its attempt to achieve widespread commercial use. For example, battery-powered vehicles work and reduce local emissions, but they have failed in the marketplace because they don't have the performance, range or cost that people want. Even with government mandates, they have not come into widespread use, only niche use. The list of criteria that are crucial to widening the use of a technology includes the following:

  • Performance
  • Cost
  • Safety
  • Regulatory compliance
  • Enabling infrastructure
  • Reduced negative environmental impacts
  • Consumer acceptance

For a technology to be considered, it must first be capable of delivering expected performance. A major barrier exists if newer technologies do not perform as well as existing technologies. Improved environmental characteristics are not enough to sell people on a new technology that cannot get the job done in the way that they are accustomed.

Those involved with commercial enterprise understand that competitive costs matter for the success of a new technology. Governments can subsidize small-scale costs and early market penetration, but governments are not able to bring about global use of new energy technologies. Taxes on a new technology can become a contentious issue for those that get past the initial stage. Entrepreneurs looking to develop a market for new technologies will often depend on subsidies, but as their market penetration grows, the government may remove the subsidies and subject the technology to a risk of collapse before it can make a profit on its own. Indeed, governments are more likely to tax energy products, if they come into widespread use.

Making a new technology safe for consumers, both in reality and in consumers' perceptions, is a key issue. Addressing the safety question will be especially relevant for those introducing hydrogen-powered technology to the economy, since these concerns are already well known.

Any new technology will face the challenge of complying with regulations associated with manufacture and production for market, as well as with the use of the technology and its disposal.

Enabling infrastructure for a new technology refers not only to capital infrastructure, such as roads, bridges, and pipelines, but also to personnel needed to support the use of the new technology. Education and training are necessary to prepare people for tasks involved in designing and managing the systems, performing repairs, and supplying spare parts.

Concerns about environmental impacts, land use, and access will arise when an energy technology is deployed on a global scale. For example, the use of biomass, especially as a source for liquid fuels, faces an enormous set of environmental issues.

The important point is that if a new energy technology fails in any of these critical dimensions, widespread commercialization will not occur. The research community should work to address each criterion for market acceptance when considering new technology options. While performance, cost, safety, and public acceptance are most important, researchers should aim to identify fundamental barriers to widespread use in any dimension. Research must be aware of the dimensions of performance that may become important and avoid focusing solely on emissions, separations, or power plants.

Identifying barriers, seeking solutions, and seeking public acceptance are key things that the academic and publicly supported research communities should address if these options are to work. Well-resourced constituencies exist who will actively work to create obstacles to public acceptance on economic or environmental grounds. I think this will be interesting to watch.

One significant obstacle to the introduction of a new technology is the fact that a new technology must compete against steady improvement in base technologies. For example, hydrogen-powered fuel cell vehicles must compete not with the internal combustion engine of today, but with the improved version that will be in place 20 or 30 years in the future.

If these potential new energy technologies for reducing CO2 emissions require taxpayer support, then they must compete for research and development resources with other promising approaches to addressing global climate change and, they must compete with other research priorities. R&D options might include end-use efficiency to curb CO2 technologies aimed at reducing greenhouse gases other than CO2, and technologies for adaptation. These areas will be competing for public- and private-sector funding.


I would like to finish with personal conclusions as someone with a private-sector perspective. The goal of R&D in carbon management should be to create economically justified options for future technologies that will make a difference to the global energy situation. Taxpayer-funded research and development should seek to identify fundamental barriers to technology, as well as finding solutions that improve performance, cost, safety, environmental acceptability, and consumer acceptability.

Taxpayer-funded resources today should not be wasted on optimizing currently uneconomic technologies. These technologies will not enter the market substantially for many years, if they do at all. Spending tax dollars on expensive pilot and demonstration studies to optimize technologies that are not viable economically is extremely expensive and unlikely to deliver a product of lasting value.

I think this is the fundamental question concerning the role of research and development for society. Taxpayer-sponsored initiatives create opportunities for inertia, boondoggles, pork-barrel funding, and white elephants that could become a problem. This will be a challenge because it creates opportunities for big budgets and employment gains in some areas through politically motivated demonstrations of action that are unlikely to lead anywhere.

At the end of the day, the private sector should bear the risk and capture the rewards of developing commercial technology that will ultimately compete in the market. Historically, governments tend to be ineffective at supplying markets efficiently. The private sector is far more successful. Even more importantly, it is the private sector and not the government that should suffer the loss if mistakes are made.

Reducing CO2 emissions is a vast and challenging task that, even with concerted action, can occur only over decades. To effect real change, solutions have to apply globally, and they must be carried out as science and technology continue to evolve.

It is a pleasure for me to acknowledge the contributions to this paper of my ExxonMobil colleagues Haroon Kheshgi, James Katzer, and Roger Cohen.


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David Keith, Carnegie Mellon University: I would like you to comment on what I see as a real problem—the decline of large-scale research and development in a corporate setting. We have seen a real evaporation of the old corporate research laboratory across many industries, from electronic technologies to energy. Lucent has been effective at mining some of the core, very-long-term research that Bell Labs used to do, and as you know, investment in long-term research and development for the electric power industry has been very much attenuated. Research and development in industrial settings seems to be a vital niche between very long-term fundamental science—that the federal government can fund—and the short-term product development. Can you tell us how you or Exxon see ways to fill that gap?

Brian Flannery: It's a very good question. I don't have an easy answer. One thing I can say, and I come out of that ExxonMobil research and development community, is that at ExxonMobil, we have still held on to ours. It's smaller, but we still have research. The challenge to us is to make sure we find some way of delivering, because if we don't, we'll be gone too.

I think we can deliver. I believe that technology, the pace of technological change, and the opportunity to knit it together to create commercial value are probably as big as they have ever been, or bigger, but the question is how.

I also note that the decline of large-scale corporate research and development is changing the competitive landscape in ways that are going to make this debate we're entering into about the role of the federal government, even more difficult. Many of our competitors have abandoned their own research and development and, therefore, are looking for government partnerships and taxpayer-funded resources to accomplish what might be viewed as private outcomes. That's going to pose a challenge to everyone.

It's going to be a challenge to us, because we are hoping to deliver, through our own research and development, a competitive advantage. Yet if we are competing with people who are working in partnerships with government, it's going to be an interesting question of how all this plays out. Your question is very important. I don't know the answer, but it's one that is of interest to the entire research community.

Geraldine Cox, EUROTECH: There appears to be an interesting disconnect between public perception and public action. Europe is the most concerned about global climate effects, yet it has allocated less money for research than any other region. In the United States we say that we're concerned about global impacts, yet we are still buying larger cars that consume more gas and generate more CO2—the biggest sellers are the sports utility vehicles, vans, and trucks. So as a society, we say one thing, and we act against our stated beliefs.

In a way, you were talking about the same thing. If we look at truly active greenhouse gases, this conference should focus on a wider field than CO2 management. Carbon dioxide is one of the weakest climate-active gases relative to methane and some of the other gases. Yet it is more politically acceptable to focus on CO2 than on some of the other gases, because the latter are harder to control. Are we really solving the problem by misdirecting our focus?

I believe we should approach the control of climate-active gases in the most scientifically expedient manner—not the most politically expedient manner. We must focus on the problems that can have the largest impact on the solution.

Also, the politically expedient big-industry focus should go hand-in-hand with a concerted effort to tackle the entire problem—population growth, efficient transportation, life-style changes, and appropriate industrial control on a worldwide basis.

Brian Flannery: You have wrapped up a whole bunch of things. Yes, the concern about climate change has so far been expressed in political commitments to achieve outcomes without talking about how to implement them. Credit has been claimed for making the commitment, but now the question is, What are we going to do? Even emissions trading doesn't actually do anything. It's just a means for identifying options and financing them more cheaply. At the end of the day, you've got to do real things in energy supply and conservation, such as fuel switching and new technologies, if you are going to affect outcomes. That's the challenge.

I understand that there is the belief on the part of many that if government sets clear policy goals, industry can deliver. I'm not sure that's true. Some of the mandates in the United States in transportation haven't worked, and the government relaxed the mandate after a lot of resources were wasted.

On the question of other greenhouse gases and different approaches, yes, that's a very valid point. Many of them actually are very amenable to reductions. After you get beyond CO2, methane, and nitrous oxide, there are ways to deal with those other gases. They are powerful greenhouse gases, but they are only in small use so far.

However, although they are such attractive targets, if you look at a regulatory regime, perfluorocarbons and the like would be gone from commercial practice or contained by the end of the first commitment period, and they would not provide an ongoing means of improvement. Although this could be a very attractive near-term step, the point is you won't gain those cost efficiency improvements in the second commitment period, because the other gases will be gone. Methane offers very attractive opportunities; alternate uses for it exist. I think the scientific community is coming to the conclusion that the weights used for methane in the Kyoto Protocol may have been too low, but that was a political decision. The weight used for methane is the 100-year global warming potential. If it were the 20-year global warming potential, methane would be much higher valued in the near term, but the political process wanted to address energy use, so it used this weight intentionally. There are arguments you could make for using the 100-year global warming potential in terms of the long-scale issue, but I think if you talked about policy or technology or near-term ability to affect regulatory enforcement, you would give much more attention to methane than the Kyoto Protocol gives it.

At the end of the day, I think I would agree with what Jae and others have said after you have gotten through the other gases, if climate change proves to be serious, you will have to address CO2 produced by using energy. The question is when, and what's the most attractive approach in the near term.

Chandrakant Panchal, Argonne National Laboratory: I think the last two questions really touch the basis of what we are talking about here. I just remember the last couple of things into which the U.S. government has put money. The Carter administration funded solar programs. We tried to develop solar technology in a very short time. There were lots of demonstration projects, but we did not get the best results from these technologies. If we don't act proactively in providing a roadmap, we will again spend a lot of money and try to do something in a short period of time, then repeat what happened before. Instead, we should be proactive. Let's do one, two, three, and then make the change accordingly, rather than keep talking about these things. Do you have some thoughts on that—how the industry can take the lead rather than waiting for direction or policy from the government?

Brian Flannery: Well, I have a couple of comments. First, I would recall the case of synthetic fuels from coal. That was an approach where taxpayers and heritage Exxon lost a great deal of money. I hope we've learned from those experiences. We don't want to see that happen again. It isn't just a question of money; it's people and colleagues and investments in whole communities that are disrupted by bad decisions when public policy leads the way and remains long after the need is gone. I think the fundamental difficulty is how fast you do something.

For the purposes of this discussion, I didn't mention the other greenhouse gases, because this workshop is about carbon management. Otherwise, we might have talked about methane a little bit more. For this meeting, I wanted to raise some broad, general questions about how research needs to be focused on widespread, possibly global, technologies for 20, 30, or 50 years from now. In my view, it's up to the research community—and yes we have several points of view, but I think everybody does—and we need to sort through them and come up with priorities.

We have to identify the fundamental barriers to alternate energy production that limit the performance or keep the cost too high or create environmental barriers. We must find ways to focus on those, rather than on demonstration projects. It's not the time to rush these technologies into commercial use too soon in an uneconomic way. It's time to step back and say let's parse this system. Let's look at what it would look like. Let's identify the barriers, and let's go to work and research in those areas that limit use. That's what I think, but it's not just the performance side—it's cost, environmental acceptability, and safety.

Tom Brownscombe, Shell Chemical: I want to make one comment about the synthetic fuels. We had a similar experience, except we have commercialized the synthetic fuels process and are building another synfuel plant. But I wanted to ask you a question—does global warming prove itself to be a serious issue in your view, and why should we take precautionary action?

Brian Flannery: I believe your remarks refer to Shell's gas-to-liquids technology, a 1990s development. I was referring to technology to make liquid fuels from oil shales, an effort in the 1970s and 1980s. When folks speak of precautionary actions to address climate change, such actions should include a wide range of steps, research being one of them. Looking at and affecting technologies, and discovering what their barriers are is real action. It requires real resources. It requires real prioritization and thought. It's not “no action.”

I think all companies are taking action to become more efficient. For example, ExxonMobil has more co-generation capacity than any other oil company in the world. We produce over 2,000 megawatts. We didn't need credit for an early action to do that. It makes great economic sense, so we do it. As soon as the regulatory and enabling conditions are in place, we put it in place.

With strong management systems and disciplined investment efficiency, steps are easy to implement. We are also undertaking research with General Motors and with Toyota on advanced vehicles, including hybrid and fuel cell powered automobiles. However, fuel cell powered vehicles cannot be rushed into widespread commercial use. They are not economic today. But performing the research to create economic options is real and tangible action.