CO2 Pipelines

Coal

Beds

Saline Aquifier

Enhanced

Oil Recovery

Salt 

Bed

Power Plant

CONGRESS OF THE UNITED STATES

CONGRESSIONAL BUDGET OFFICE

CBO

Federal Efforts to 

Reduce the Cost of 

Capturing and

Storing Carbon

Dioxide

JUNE 2012

Photo credit: © Vadim Petrakov/Shutterstock.com
CBO

Notes

Numbers in the text and tables may not add up to totals because of rounding.

The diagram on the cover is reproduced from Michael Mann and Lee R. Kump, Dire 

Predictions: Understanding Global Warming, 1st ed., © 2009. Reprinted by permission of 

Pearson Education, Inc., Upper Saddle River, New Jersey.

Pub. No. 4146
Contents

CBO

Summary i

Carbon Capture and Storage Technology 1

Capturing Carbon Dioxide 2

Transporting Carbon Dioxide 2

Storing Carbon Dioxide 3

Status of CCS Technology Development 3

Federal Policy to Demonstrate Current CCS Technology and Promote Its Future 

Technological Development 5

The Department of Energy’s CCS Programs 5

Federal Tax Preferences 6

The Cost of Producing Electricity Using CCS Technology 7

Cost Differentials Associated with Current CCS Technology 7

Reducing Cost Differentials 8

How Much New Capacity Using CCS Technology Must Be Built to Reduce the 

Cost of Generating Electricity in a CCS-Equipped Plant? 9

How Much Construction of New Electricity-Generating Capacity Is Projected to 

Occur in the Near Future? 10

Box 1. Natural Gas-Fired Electricity Generation and the Development of 

Carbon Capture and Storage Technologies 12

Policy Options 12

Shift DOE’s Focus from Demonstration Projects to Research and Development 14

Adopt Policies That Encourage Private Investment in CCS-Equipped Plants 14

Reduce or Eliminate DOE’s Support for CCS 15

Appendix: Developing a Common Basis for Comparing Engineering Cost Estimates 17

Lists of Tables and Figures 23

About This Document 24
CBO

Summary

Electricity generation in the United States depends 

heavily on the use of coal: Coal-fired power plants produce 40 percent to 45 percent of the nation’s electricity. 

At the same time, those facilities account for roughly a 

third of all U.S. emissions of carbon dioxide (CO2), 

which together with other greenhouse gases has become 

increasingly concentrated in the atmosphere. Most climate scientists believe that the buildup of those gases 

could have costly consequences. 

One much-discussed option for reducing the nation’s 

greenhouse gas emissions while preserving its ability to 

produce electricity at coal-fired power plants is to capture 

the CO2 that is emitted when the coal is burned, compress it into a fluid, and then store it deep underground. 

That process is commonly called carbon capture and 

storage (CCS). Although the process is in use in some 

industries, no CCS-equipped coal-fired power plants 

have been built on a commercial scale because any electricity generated by such plants would be much more 

expensive than electricity produced by conventional coalburning plants. Utilities, rather than federal agencies, 

make most of the decisions about investments in the electricity industry, and today they have little incentive to 

equip their facilities with CCS technology to lessen their 

CO2 emissions. 

Since 2005, lawmakers have provided the Department 

of Energy (DOE) with about $6.9 billion to further 

develop CCS technology, demonstrate its commercial 

feasibility, and reduce the cost of electricity generated by 

CCS-equipped plants. But unless DOE’s funding is 

substantially increased or other policies are adopted to 

encourage utilities to invest in CCS, federal support is 

likely to play only a minor role in deployment of the 

technology. 

Engineers have estimated that, on average, electricity 

generated by the first CCS-equipped commercial-scale 

plants would initially be about 75 percent more costly 

than electricity generated by conventional coal-fired 

plants. (Most of that additional cost is attributable to 

the extra facilities and energy that would be needed to 

capture the CO2.) That initial cost differential would 

probably shrink, however, as the technology became 

more widely applied and equipment manufacturers and 

construction companies became more familiar with it—

a pattern of cost reduction called learning-by-doing. 

DOE aims to bring down the additional costs for generating electricity with CCS technology to no more than 

35 percent, or less than half the current cost premium. 

Such a cost differential, if combined with a tax on carbon 

or policies restricting CO2 emissions, could allow coalfired plants with CCS to be competitive with those 

without CCS. 

Such a reduction in costs might be accomplished over 

time through learning-by-doing, which would require 

that a certain amount of new generating capacity be 

built—in the form of new coal-fired CCS-equipped generating plants. Using the historical pace of reductions in 

costs for earlier emission-control technologies, the Congressional Budget Office (CBO) estimates that more than 

200 gigawatts (GW) of coal-fired generating capacity 

with CCS capabilities will have to be built to meet 

DOE’s cost reduction goal. That estimate of new 

capacity, which is equivalent to about two-thirds of the 

total current capacity of U.S. coal-powered electricity 

generation plants, is subject to considerable uncertainty. 

Nevertheless, in the absence of a significant technological 

breakthrough, it seems clear that a large amount of new 

CCS capacity—installed either at new plants or, through 

retrofitting, at existing plants—would be needed to 

reduce costs by enough to achieve DOE’s goal. 

But the demand for electricity in the United States is 

growing slowly, and even if DOE’s cost reduction target 
II FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

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was attained, coal-fired power plants equipped with 

CCS technology would not be competitive with coalfired plants that lacked it unless policies restricting 

CO2 emissions or imposing a price on them were 

adopted. Consequently, under current laws and policies, 

utilities are unlikely to build that much new generating 

capacity—that is, more than 200 GW—or invest in adding CCS technology to much of their existing capacity 

for many decades. If, however, new policies restricted or 

imposed a price on CO2 emissions, the domestic stock 

of electricity generation plants would turn over more 

rapidly, and CCS technology would become more 

competitive economically, increasing the potential for 

construction of CCS-equipped plants in the United 

States. Nevertheless, investors already have several 

options for generating electricity—nuclear power, 

wind, biomass, other renewables, and natural gas—that 

produce few, if any, CO2 emissions. The amount of 

investment in CCS would depend on how costs for the 

different alternatives compared with costs for electricity 

generation without CCS.

Reductions in costs for CCS-equipped power plants 

could also come from experience outside the United 

States. Demand for electricity is growing rapidly in other 

parts of the world—for example, China and India—and 

those countries are increasing their capacity to satisfy it. If 

plants that were equipped with early versions of the CCS 

technology were built abroad or if some coal-fired power 

plants now in operation in other countries were retrofitted with CCS, the cost of generating electricity at 

plants that were subsequently built or retrofitted in the 

United States would be expected to be lower than the cost 

of generating electricity at the plants that were built initially. At present, however, foreign investment in CCS, 

like investment in the technology in the United States, 

centers not on building full-scale CCS-equipped 

commercial plants but on conducting research and 

development, carrying out small-scale demonstrations of 

the technology’s feasibility, and building pilot plants. 

Until now, most efforts to develop CCS have focused on 

coal-fired power plants. However, the price of natural gas 

has dropped substantially in recent years, and the share 

of electricity generated by natural gas-fired plants has 

expanded and is likely to continue to grow. The cost of 

producing electricity with a natural gas-fired plant 

equipped with CCS could be lower, depending on future 

prices for coal and natural gas, than the cost of producing 

electricity with a coal-fired CCS plant. At present, 

though, regulatory action to curb CO2 emissions is more 

likely to shift electricity production from coal to natural 

gas (without CCS) and other low-emission fuels, such as 

biomass, rather than to CCS-capable plants.

CBO’s analysis suggests that unless the federal government adopts policies that encourage or require utilities to 

generate electricity with fewer greenhouse gas emissions, 

the projected high cost of using CCS technology means 

that DOE’s current program for developing CCS is 

unlikely to do much to support widespread use of the 

technology. A number of other policy approaches could 

be considered. For example, lawmakers could redirect 

resources that now fund technology demonstration projects toward research and development, for which the 

rationale for federal involvement is strongest and the 

record of success better. Alternatively, policymakers could 

impose costs on users of electricity whose generation 

releases greenhouse gases—for example, through a tax on 

carbon—thereby making CCS more competitive, or they 

could experiment with different types of electricity production subsidies that would provide more incentive for 

private-sector investments in CCS. As another option, 

lawmakers could reduce or eliminate future spending for 

CCS, leaving most of the potential for further development of CCS technology to countries with high rates of 

growth in the demand for electricity and in the need for 

new electricity-generating capacity. 
CBO

Federal Efforts to Reduce the Cost of 

Capturing and Storing Carbon Dioxide

Concerns about global warming have raised questions about the United States’ continued dependence on 

coal for producing electricity. About 1,400 coal-fired 

generating units located in roughly 600 power plants produce 40 percent to 45 percent of the electricity generated 

annually in this country and in so doing release about a 

third of the carbon dioxide attributable to human activities in the United States each year.1

 The consensus among 

scientific experts is that increasing concentrations of 

greenhouse gases in the atmosphere—including CO2, 

which is the most common—are likely to have extensive, 

highly uncertain but potentially costly effects on regional 

climates throughout the world.2

The federal government, through the Department of 

Energy, is seeking ways to reduce greenhouse gas emissions while preserving the nation’s ability to continue to 

rely on coal to produce electricity. A policy to reduce CO2

emissions would benefit the United States by lessening 

the risk of costly changes to the climate. However, such a 

policy would also impose costs on the U.S. economy 

because it would limit activities that produce those emissions. Depending on the type of policy that lawmakers 

chose, electric utilities and their customers, coal producers, or certain areas of the country could bear increased 

costs or a considerable loss of income and jobs.3

 As a 

result, policymakers have sought options that would 

reduce CO2 emissions but also limit the potential impact 

on the economy and allow the nation to continue to produce electricity from coal. Since 2005, lawmakers have 

provided DOE with about $6.9 billion to develop and 

demonstrate the commercial feasibility of technologies 

that would allow coal-burning power plants to generate 

electricity without emitting CO2 into the atmosphere. 

Instead, the CO2 would be removed from a plant’s 

exhaust stream, compressed into a liquid, and stored 

underground indefinitely. Collectively, those processes are 

usually called carbon capture and storage.

This Congressional Budget Office study examines current federal policies that support the development, 

demonstration, and deployment of CCS technology 

and the policies’ potential to reduce the future costs of 

generating electricity with power plants that capture 

and store carbon. 

Carbon Capture and Storage 

Technology

Any industrial process that produces CO2 can be modified to capture and store it. For example, CCS technology 

can be applied to coal-fired power plants—the primary 

focus of this report—as well as to generating facilities 

fueled by natural gas; it can also be used in manufacturing such products as cement, ethanol, and fertilizer. In 

coal-fired power plants, CCS requires facilities and 

processes that accomplish the following tasks: 

1. Electricity production and emission data are from, respectively, 

Department of Energy, Energy Information Administration, 

“Coal’s Share of Total U.S. Electricity Generation Falls Below 

40% in November and December,” Today in Energy (March 9, 

2012), www.eia.gov/todayinenergy/detail.cfm?id=5331&src=

email, and Annual Energy Review 2010, DOE/EIA-0384(2010) 

(October 2011), Table 11.2, p. 317, www.eia.gov/totalenergy/

data/annual/pdf/aer.pdf.

2. For more information, see Congressional Budget Office, The 

Economics of Climate Change: A Primer (April 2003), and Potential 

Impacts of Climate Change in the United States (May 2009).

3. For additional discussion, see Congressional Budget Office, 

How Policies to Reduce Greenhouse Gas Emissions Could Affect 

Employment (May 2010).
2 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

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Figure 1.

Steps in the Capture and Storage of Carbon Dioxide After 

Electricity Generation at a Coal-Fired Power Plant

Source: Congressional Budget Office based on CCSReg Project, Carbon Capture and Sequestration: Framing the Issues for Regulation

(January 2009, updated March 2009), p. 10.

 Capture CO2 at the plant and compress it into a 

liquid; 

 Transport the compressed CO2, usually through a 

pipeline, to a storage site; and 

 Store CO2 deep underground in a porous rock 

formation (see Figure 1). 

The feasibility of using such facilities and processes in the 

generation of electricity has been explored on a small 

scale, but the technology has yet to be widely adopted. 

Capturing Carbon Dioxide

When CCS technology is used in coal-fired power plants, 

exhaust gases that contain CO2 are streamed through (or 

otherwise put into contact with) a specialized material 

that absorbs most of the CO2 while allowing the rest of 

the exhaust to pass. Subsequently, the CO2 that was 

absorbed is extracted, by heating or otherwise treating 

that material, and then compressed into a liquid. Because 

the approach applies CCS technology to exhaust gases, it 

is termed a postcombustion method. Two alternative 

approaches have been proposed and in some instances 

used in pilot plants or in fields unrelated to electricity 

generation—for example, in making glass. One alternative approach is to capture CO2 through a precombustion 

method such as gasification. That process separates the 

CO2 by transforming the coal into a gas (often referred to 

as syngas) before it is burned. The other alternative 

approach is oxy-fuel combustion, in which coal is burned 

in pure oxygen rather than air to produce exhaust gas that 

consists primarily of water and CO2 and that is ready for 

drying, compression, and storage. However, CBO’s analysis focuses on the postcombustion approach because that 

technology is the only one that is compatible with the 

most commonly used designs for electricity-generating 

plants. 

The process of treating the absorbent material and compressing the CO2 consumes a great deal of energy—so 

much so that the capture and compression of CO2 reduce 

the net amount of energy that the power plant yields for 

customers by between 15 percent and 30 percent. Thus, a 

plant equipped with CCS technology must be larger than 

a traditionally equipped plant and must burn more coal 

to serve the same number of customers. Engineering 

studies suggest that the capture portion of the process will 

account for approximately 90 percent of the additional 

costs required to construct and operate a plant that uses 

CCS instead of conventional technology. 

Transporting Carbon Dioxide

Once compressed, the captured CO2 must be transported 

to an underground storage site. If CCS was widely 

adopted, it would be necessary to substantially expand 

the existing pipeline network to transport the gas to storage sites that might be hundreds of miles away. Such a 

network could use pipeline technology that has already 

been developed to transport carbon dioxide to oil fields, 

where it is injected into wells to boost their production—

a process known as enhanced oil recovery. Currently, 

about 4,000 miles of pipeline is used for that purpose. 

Separate Compress Transport Store

Fossil Fuel

Capture

Combustion and

Generation (From other gases) (Into a fluid) (By pipeline) (In suitable geologic

formations)

Exhaust CO2 CO2 CO2
FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 3

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The market in CO2 for enhanced oil recovery and the 

network of pipelines to transport compressed gas are 

expanding, a trend reflected in forecasts by DOE’s Energy 

Information Administration (EIA) that enhanced oil 

recovery will increase significantly over the next 25 years.4

Storing Carbon Dioxide

After it has been transported, the CO2 captured at power 

plants would be injected through deep wells, similar to oil 

or natural gas wells, into porous geologic formations 

roughly a kilometer or more underground. (That depth is 

considered to be enough to maintain the pressure 

required to keep CO2 in its liquid state.) The types of 

underground formations typically discussed for storing 

CO2 include depleted oil and natural gas reservoirs, 

porous formations filled with brine, and unminable coal 

seams. The technology for underground storage of CO2

is well developed. Enhanced oil recovery efforts, together 

with some other storage projects, have already pumped 

more than 500 million tons of CO2 underground, most 

of which has remained in place.5

Geologists believe that geologic formations in the United 

States have the potential to store enough CO2 to permit 

widespread use of CCS technology in the country’s electric power industry. Current estimates by DOE and the 

International Energy Agency suggest a theoretical storage 

potential of over 3,000 billion metric tons, or roughly 

1,000 years’ worth of the CO2 emitted by U.S. coal-fired 

utilities.6

 The U.S. Geological Survey and DOE are trying to refine those estimates to determine how much of 

that potential could be developed.

Status of CCS Technology Development

The technology for separating and capturing CO2 is 

already in use in several industries, although the 

conditions in which it is employed are less demanding 

than those that apply in utility-scale coal-fired power 

plants.CCS is used, for example, by producers of natural 

gas, which, as it comes out of the ground, routinely contains more CO2 than conventional uses allow. To make 

natural gas fit for sale, refiners separate the CO2 from the 

gas and simply vent it into the atmosphere. More 

recently, facilities that produce natural gas have shown 

that large-scale capture of CO2 is technically and 

operationally feasible and that the captured gas can be 

compressed into a liquid, transported, and stored underground. The Sleipner natural gas plant in the North Sea 

off the coast of Norway and the Salah Gas plant in Algeria are the most prominent examples of that use of CCS 

technology. Both of those plants strip the CO2 from natural gas and pump it into suitable geologic formations. 

Similarly, the Great Plains Synfuels Plant uses a precombustion CCS technology that turns coal into a gas. The 

plant, located near Beulah, North Dakota, is the largest 

CCS-equipped plant in the world; its early version of the 

technology has a CO2 capture rate of 50 percent. (One of 

DOE’s CCS-related goals is to have CCS-equipped plants 

capture 90 percent of the CO2 emitted during the production of electricity.) The resulting liquid is piped to 

Canada, where it is used in enhanced oil recovery.

Technology for capturing CO2 has been used in other 

industries, although not on a large scale. Some producers 

of ammonia, hydrogen, and ethanol may separate CO2 

from other gases as part of their production process. Also, 

in the electricity generation industry, a few facilities separate and capture a fraction of their CO2 emissions for sale 

to nearby food-processing plants—to be used, for example, in carbonated products. Those facilities are relatively 

small, however, and the CCS technology they use is not 

of a sufficient scale to eliminate all or most of the CO2

emissions from the exhaust of a commercial power plant.

Because CO2 capture technologies are already in use to 

some extent, industrial engineers may have already taken 

advantage of the available opportunities to make the capture process more efficient and hence less costly. The 

additional advances necessary to markedly improve the 

technology’s performance or reduce its costs are likely to 

require substantial investment in research and development (R&D) as well as experience in building and 

operating new plants. The area of research that is widely 

4. Department of Energy, Energy Information Administration, 

Annual Energy Outlook 2012 (June 2012), p. 95, www.eia.gov/

forecasts/aeo/. 

5. For estimates of the quantities of CO2 used for such efforts, see 

Department of Energy, Office of Fossil Energy, Report of the 

Interagency Task Force on Carbon Capture and Storage (August 

2010), p. D-1, www.fe.doe.gov/programs/sequestration/ccs_task_

force.html. 

6. Ibid., p. 39. For more information, see Congressional Budget 

Office, The Potential for Carbon Sequestration in the United States

(September 2007).
4 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

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Table 1.

Large-Scale Projects to Install CCS Technology in Power Plants That Are 

Currently Planned or Under Construction in the United States

Source: Congressional Budget Office based on Carbon Capture and Sequestration Technologies at MIT, CCS Project Database, “Power 

Plant Carbon Dioxide Capture and Storage Projects: Large-Scale Power Plant CCS Projects Worldwide” (March 15, 2012), 

http://sequestration.mit.edu/tools/projects/index_capture.html. 

Note: CCS = carbon capture and storage (the set of processes and technologies that separate carbon dioxide, or CO2, from other gases 

generated when a fossil fuel is burned; compress the CO2 into a fluid; and then transport it to an underground location for storage); 

DOE = Department of Energy. 

thought by experts to have the greatest potential to 

reduce costs and so move the technology toward more 

widespread use is to improve the absorbent materials used 

to extract the CO2 and thereby reduce the energy required 

for the capture stage of the process.

However, integrating CCS technology into the production of electricity—and specifically into electricity 

generation at coal-fired power plants—appears to be 

more demanding technically than, for example, the use 

of CCS in the production of natural gas. That added 

technical complexity, which contributes to the greater 

cost of electricity generation at CCS-equipped versus 

conventional power plants, has limited the technology’s 

use in existing coal-fired facilities. Until relatively 

recently, though, power companies worldwide were 

planning to undertake roughly 30 new large-scale coalpowered CCS projects—10 of them in the United 

States—to demonstrate the technology’s commercial 

viability. The planned facilities ranged in capacity from 

60 megawatts (MW) to more than 680 MW.7

 (The 

average coal-fired generating unit in the United States has 

a summer capacity of about 230 MW.)8

Plans for many of those “demonstration” projects have 

now changed, however, and in fact, a number of them 

(six in the European Union, Canada, and Norway, and 

four in the United States) have already been canceled or 

put on hold. Several projects in the United States were 

started when adoption of a cap-and-trade program or 

some other U.S. policy for reducing greenhouse gases 

seemed more likely to investors than it does today. As the 

prospect of a nationwide emission-reduction program has 

faded, so have plans for new CCS-equipped power plants, 

and now only six large-scale demonstration projects are 

still planned or under construction in the United States 

(see Table 1). Of those six projects, five have received 

federal funding. The private-sector organizers of the 

remaining project have discussed their hope of receiving 

federal funds, but as of this writing, the project has not 

received any federal support.

DOE Funding Planned

Private-Sector Size (Millions of Completion

Project Project Leader Location (Megawatts) dollars) Date

FutureGen 2.0 FutureGen Industrial Alliance Meredosia, Ill. 200 1,000 2015

Hydrogen Energy California SCS Energy Kern County, Calif. 390 308 2014

Kemper County Mississippi Power/Southern Company Kemper County, Miss. 582 270 2014

Tenaska Trailblazer

Energy Center Tenaska, Inc. Sweetwater, Tex. 600 0 2014

Texas Clean Energy Summit Power Group Ector County, Tex. 400 450 2014–2015

W.A. Parish Plant NRG Energy Thompsons, Tex. 60 154 2017

7. Massachusetts Institute of Technology, “Carbon Capture and 

Sequestration Project Database,” http://sequestration.mit.edu/

tools/projects/index.html, accessed June 18, 2012.

8. Department of Energy, Energy Information Administration, 

Electric Power Annual 2010 (November 2011), Table 1.2, 

www.eia.gov/electricity/annual/pdf/table1.2.pdf. That capacity 

figure includes many older plants, which tend to be smaller than 

those being built today.
FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 5

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Table 2.

Funding for the Department of Energy’s Coal Programs

(Billions of dollars of budget authority)

Source: Congressional Budget Office based on information from Department of Energy, Office of Fossil Energy, “Our Budget” (various years), 

www.fossil.energy.gov/aboutus/budget/index.html; and U.S. House of Representatives, Conference Report to Accompany H.R. 1, 

House Report 111-16 (February 12, 2009), p. 428.

Note: Budget authority is the authority provided by law to incur financial obligations that will result in immediate or future outlays of funds 

by the federal government.

Federal Policy to Demonstrate Current 

CCS Technology and Promote Its 

Future Technological Development

DOE encourages the advancement of CCS technologies 

through spending for projects to demonstrate the feasibility of using current CCS technology in commercial-scale 

power plants and by funding R&D activities to develop 

future generations of more advanced and more efficient 

equipment. In addition, the federal government encourages the use of CCS by providing tax credits for private 

utilities that choose to invest in and produce electricity 

from CCS-equipped plants. 

The Department of Energy’s CCS Programs

DOE’s programs devoted to CCS have two overall goals: 

to reduce the added costs for electricity produced by 

CCS-equipped coal-fired power plants to no more than 

35 percent and to improve the technology so that CCSequipped plants capture 90 percent of the CO2 emitted 

during the electricity generation process.9

 If the costs for 

CCS could be reduced to that extent, policies that 

imposed costs on emissions of carbon, such as a tax, 

might then make CCS-equipped plants competitive with 

conventional coal-fired facilities. Achieving those goals 

would allow for substantial reductions in CO2 emissions 

while still permitting the extensive use of coal in the generation of power. The desired amount of cost reduction, 

DOE argues, would require “aggressive but feasible” 

development of the technology and would, in the end, 

reduce the cost of meeting targets for CO2 emissions by 

billions of dollars.

The programs to develop and promote CCS technology 

—the CCS Demonstrations Program and the Carbon 

Capture and Storage and Power Systems Program—are 

overseen by DOE’s Office of Fossil Energy. That office 

received about $0.4 billion for its coal programs in 2012 

and similar amounts in most of the previous several years 

(see Table 2). It also received a large infusion of funds 

from the American Recovery and Reinvestment Act of 

2009, which provided $3.4 billion for DOE’s CCS 

efforts (bringing total funding in 2009 for that purpose 

to $4.1 billion). Much of the money appropriated for 

CCS remains unspent, however, in part because of the 

normal time lags in designing and building large projects 

but also because private investors have canceled several 

projects for which the federal government was planning 

to provide some funding. 

Full-Scale Demonstration Projects. DOE is participating 

in five of the six full-scale CCS demonstration projects 

currently being planned and built in the United States 

(see Table 1). As of April 2012, DOE had committed 

$2.2 billion to the construction of those plants; private 

parties are contributing roughly $10 billion, although 

that amount does not take into account tax advantages 

and other considerations from state and local governments. The plants that DOE is helping fund generally 

embody new technology not only to capture and store 

CO2 but also to advance the efficiency of coal-fired electricity production more broadly. Most of those projects 

include plans to use the captured CO2 for enhanced oil 

2005 2006 2007 2008 2009 2010 2011 2012

Coal Program Funding 0.3 0.4 0.4 0.5 4.1 0.4 0.4 0.4

9. Department of Energy, National Energy Technology Laboratory, 

“Innovations for Existing Plants: CO2 Emissions Control—

Program Goals and Targets,” www.netl.doe.gov/technologies/

coalpower/ewr/co2/goals.html, which is based on Research and 

Development Goals for CO2 Capture Technology, DOE/NETL2009/1366 (December 2011). 
6 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

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recovery as a way to increase the projects’ economic 

returns.

One DOE demonstration project that has evoked a great 

deal of public comment is the FutureGen project, to be 

located in Illinois. The FutureGen Industry Alliance, 

composed of several power companies, leads the project; 

its scope includes retrofitting an existing oil-fueled boiler 

with a coal-fueled boiler equipped with oxy-fuel combustion technology (for burning coal in pure oxygen) that 

could generate 200 MW of power. (The plans for the 

FutureGen project have been substantially modified since 

the program was first proposed in 2003, and the current 

project is now designated FutureGen 2.0.) In addition, 

the project calls for construction of a pipeline and storage 

facilities sufficient to accommodate an estimated 1.3 million tons per year of compressed carbon dioxide. 

According to the FutureGen Industry Alliance, the project will cost approximately $1.3 billion, most of which 

will be covered by a $1 billion grant provided by DOE.10

The alliance plans to spend approximately $730 million 

to retrofit the boiler and $550 million to build the pipeline and storage facilities. Construction is slated to begin 

in late 2012, and completion of the project is planned for 

2015.

In addition to its support for the five plants currently 

under way, DOE had committed an additional $730 million to three of the four large-scale CCS projects that 

have been postponed or canceled. Much of that funding 

was intended for the Mountaineer power plant in New 

Haven, West Virginia. The large utility American Electric 

Power recently finished a CCS pilot project there and had 

planned to expand its CCS capabilities to encompass 

20 percent of the plant’s electricity generation. DOE was 

to have provided a grant of $335 million to pay for half 

the cost of the expansion. But the company has postponed construction indefinitely, citing uncertainty about 

federal policies for reducing greenhouse gases and prohibitions by local utility commissions on increases in rates 

(which would have prevented the utility from recouping 

its costs for the plant’s construction). 

Research and Development Programs. DOE’s CCSrelated R&D activities have focused mainly on capturing 

and storing CO2. The department’s analysts believe that 

the current technology for capturing CO2 could never 

meet DOE’s goal of reducing the cost of CCS-generated 

electricity. Consequently, DOE has been seeking to 

develop next-generation CCS equipment and processes 

that would capture CO2 more quickly and more completely but use less energy than today’s technology does. 

For example, some DOE-sponsored research involves 

basic and applied studies to identify better materials for 

absorbing CO2 and reducing the amount of energy used 

by the process for capturing the gas. Those projects to 

develop new technologies are expected to begin to reach 

the pilot and demonstration stages over the next 10 to 

15 years. DOE is also sponsoring research on reducing 

the cost and increasing the reliability and efficiency of 

CCS-equipped coal-gasification plants. 

In the area of storing carbon dioxide, DOE is funding 

research to develop techniques to enhance firms’ ability to 

predict the movement of CO2 underground. Such techniques include the use of software that would enable 

analysts to better understand the capacity of underground 

formations for storing the compressed gas.

Federal Tax Preferences

Federal support for CCS extends beyond DOE’s coal 

programs to provisions of law that reduce the amount of 

taxes paid by utilities that invest in the technology and 

use it to generate electricity. The Energy Policy Act of 

2005 and the Energy Improvement and Extension Act 

of 2008 (Division B of Public Law 110-343) created 

several different tax credits for investment in plants that 

incorporate various types of “clean coal” technology. For 

operators of a plant to be eligible for those credits, the 

Secretary of the Treasury, in consultation with the Secretary of Energy, must certify that the plant will capture 

and store at least 65 percent to 75 percent of its total 

CO2 emissions, depending on the specific technology 

and credit. Altogether, lawmakers authorized almost 

$3 billion in investment tax credits, which, the Joint 

Committee on Taxation forecasts, will cost roughly 

$0.2 billion per year in forgone revenues through 2015.11

10. FutureGen Alliance, “FutureGen 2.0” (February 24, 2011), p. 1, 

http://futuregenalliance.org/pdf/FutureGenFacts.pdf.

11. Joint Committee on Taxation, Estimates of Federal Tax Expenditures for Fiscal Years 2011–2015, JCS-1-12 (January 17, 2012), 

p. 34.
FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 7

CBO

Given the lack of new or proposed projects and the 

cancellation of projects already under way, a substantial 

portion of the authorized credits will probably never be 

used.

The Cost of Producing Electricity 

Using CCS Technology

CBO has compared the estimated costs of producing 

electricity at conventional coal-fired power plants with 

those that would be incurred at facilities equipped with 

CCS technology. Initially, the cost of generating electricity at a new coal-fired CCS-equipped plant would be 

substantially higher than the cost of generating it at a 

plant that produced the same net output of electricity but 

used conventional technology to do it. However, that premium could decline over time as electric utilities gained 

experience in installing and using CCS, a pattern seen 

with other new technologies. Even so, reducing the cost 

by enough to achieve DOE’s goal of only a 35 percent 

premium could require a lengthy process of building a 

large amount of new electricity generation capacity.

Cost Differentials Associated with Current 

CCS Technology 

Analysts have assessed what happens to the cost of 

generating electricity when CCS equipment is added to 

a power plant. However, because no full-sized CCSequipped plants have been built, all of the estimates that 

analysts have produced derive from engineering designs 

for the construction of such a plant. On the basis of such 

designs, analysts predict that a plant equipped with CCS 

technology will cost more to build and to operate than 

will a conventionally equipped plant, for two main 

reasons:

 The equipment a CCS plant requires to capture and 

compress CO2 is large, complex, and expensive; and 

 Capturing and compressing CO2 consumes a substantial fraction of the plant’s total output. Consequently, 

to produce the same amount of electricity for customers, a plant with CCS capabilities has to be bigger than 

a plant without them. 

According to CBO’s analysis, average capital costs for a 

CCS-equipped plant would be 76 percent higher than 

those for a conventional plant: $3,070 per kilowatt of 

capacity compared with $1,740 per kilowatt. A CCSequipped plant would also be more expensive to operate 

than a non-CCS-equipped plant would be because it 

would have to burn more fuel during the process of capturing and compressing the CO2. Those higher capital 

and operating costs would in turn make the electricity 

generated by newly constructed CCS-equipped plants 

more expensive than that generated by conventional 

coal-fired plants.

CBO analyzed five engineering studies of the estimated 

costs for building and operating a new coal-fired power 

plant that would include technology for capturing, transporting, and storing carbon dioxide.12 (The appendix 

discusses those studies more fully. Calculating the estimated costs for the construction of new plants, rather 

than the costs for retrofitting existing ones, is more useful 

for comparing the various studies’ findings.) The studies 

provided cost estimates for two types of generating facilities whose costs would be fairly representative of the 

industry’s experience: subcritical pulverized coal plants 

(which employ the most common coal-based generating 

technology in use in the United States) and supercritical 

pulverized coal plants (which use a newer technology that 

generates electricity more efficiently). CBO’s calculations 

excluded gasification electricity-generating plants and 

oxy-fuel combustion plants because very few commercial 

power plants now use those technologies and estimates of 

construction costs for such plants will be less reliable than 

those for plants using postcombustion methods.13

Each of the five studies measured capital costs for building a CCS-equipped facility, expressed as the cost per 

kilowatt of generating capacity. Each one also calculated 

the average cost of producing electricity at such a plant 

over its lifetime, including the cost of transporting and 

12. For a similar analysis of engineering studies, see Peter Folger, 

Carbon Capture: A Technology Assessment, CRS Report for 

Congress R41325 (Congressional Research Service, July 2010), 

pp. 17–19.

13. See Michael Hamilton, Howard J. Herzog, and John E. Parsons, 

“Cost and U.S. Public Policy for New Coal Power Plants with 

Carbon Capture and Sequestration,” Energy Procedia, vol. 1, no. 1 

(February 2009), p. 4489. For a discussion of the difference 

between subcritical and supercritical pulverized coal, see Massachusetts Institute of Technology, The Future of Coal: Options for a 

Carbon-Constrained World (Cambridge, Mass.: MIT, 2007), 

pp. 17–22, http://web.mit.edu/coal/.
8 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

CBO

storing the captured CO2, expressed in dollars per 

megawatt-hour.14 CBO converted all costs to 2010 dollars and adjusted several of the assumptions underlying 

the studies to provide a common basis for comparing 

their findings. Those adjustments involved the cost of a 

coal-fired plant’s financing, the cost of coal, and the operating capacity of a plant, among others (see the appendix 

for details).

On average, the difference in the cost of electricity produced with and without CCS technology, as reported in 

the studies that CBO reviewed, was estimated to be 

$45 per megawatt-hour—that is, $104 with CCS versus 

$59 without it. That difference, like the cost premium for 

constructing a CCS-equipped plant versus a conventionally equipped one, is 76 percent. 

Reducing Cost Differentials

Experience in applying new technologies to coal-fired 

power plants indicates that the cost of generating electricity with such a technology may decline over time. For 

example, one recent study examined reductions in the 

costs of seven technologies relevant to power plants 

equipped with machinery for capturing carbon dioxide. 

As the technologies became more widely applied and 

equipment manufacturers and construction companies 

became more familiar with them, costs fell—a pattern of 

cost reduction called learning-by-doing. The study used 

the historical average reduction in costs for each component technology, weighted by the technology’s share of a 

plant’s total costs, to estimate likely future declines in 

costs for carbon capture technology. That analysis indicated that if 100 gigawatts of new CCS capacity was 

installed—either in the United States or abroad—the 

cost of producing electricity in a CCS-equipped coalfired plant would drop by between 10 percent and 

18 percent.15

The potential for gradual reductions in CCS-related 

costs is borne out by experience with other types of 

emission-control technologies in the electricity generation industry, but the process of reducing costs can be 

slow and sometimes requires additional funding for 

R&D activities or a substantial period spent using the 

new approach. Starting in the 1970s, as required by the 

Clean Air Amendments of 1970 and increasingly stringent regulations that were subsequently adopted, utilities 

reduced sulfur dioxide emissions from their smokestacks. 

The 1990 amendments to the Clean Air Act added 

requirements for reducing emissions of nitrogen oxide. 

Yet despite power plants’ long history of using technologies to capture sulfur dioxide emissions as well as funding 

from DOE for research, it took years to produce a technology that was efficient enough to meet the laws’ more 

stringent requirements. As a result, costs dropped slowly. 

After 20 years of investment in such facilities, however, 

capital costs for the equipment had fallen by half, and the 

removal of sulfur dioxide from plants’ emissions had 

become markedly more efficient.16 To reduce costs by 

that much, the industry had put in place sulfur dioxide 

emission controls on power plants worldwide that 

together produced almost 200 GW of electricity. 

Projections of the cost of CCS technology rest on engineering estimates and the learning-curve models, but two 

major sources of uncertainty characterize the findings 

from such analyses. First, the costs for building a CCSequipped plant could be substantially greater than the 

initial estimates that the engineering studies present. The 

builders of a precombustion CCS plant in Mississippi, for 

example, recently announced that they expected an 

increase of $366 million in the project’s previously estimated cost of $2.4 billion. Second, costs do not always 

decline as smoothly as learning curves suggest. In many 

cases, the first version of a new technology proves inadequate and requires redesigning, leading to costs for 

subsequent plants that are higher than those for the initial 14. A power plant’s electricity-generating capacity is measured in kilowatts; the electrical power produced by that capacity is measured 

in megawatt-hours. During a full hour of operation, 1 kilowatt of 

capacity produces 1 kilowatt-hour of electricity. A megawatt-hour 

is 1,000 kilowatt-hours. The average cost of electricity over a 

plant’s lifetime, sometimes called the levelized cost, takes into 

account such factors as the cost of building the plant, debt service, 

the return on equity investment, taxes, fuel costs, operating 

expenses, and the plant’s electricity-generating capacity. For a 

discussion of methods used to estimate levelized costs, see 

Congressional Budget Office, “The Methodology Behind the 

Levelized Cost Analysis” (supplemental information for Nuclear 

Power’s Role in Generating Electricity, May 2008).

15. Edward Rubin and others, “Use of Experience Curves to Estimate 

the Future Cost of Power Plants with CO2 Capture,” International 

Journal of Greenhouse Gas Control, vol. 1, no. 2 (2007), pp. 188–

197.

16. Peter Folger, Carbon Capture: A Technology Assessment, CRS 

Report for Congress R41325 (Congressional Research Service, 

July 2010), pp. 76–88. The decline in costs refers only to costs for 

the components related to reducing sulfur emissions, which in 

many cases fall much more rapidly than costs for the entire plant.
FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 9

CBO

Table 3.

CBO’s Illustrative Calculations of the Estimated Reduction in the 

Cost of Electricity from CCS-Equipped Plants

(2010 dollars per megawatt-hour)

Source: Congressional Budget Office.

Notes: In this analysis, a power plant’s electricity-generating capacity is measured in kilowatts; the electrical power generated by that 

capacity is measured in megawatt-hours. During a full hour of a plant’s operation, 1 kilowatt of capacity produces 1 kilowatt-hour 

of electricity; 1,000 kilowatt-hours equals 1 megawatt-hour. 

CCS = carbon capture and storage (the set of processes and technologies that separate carbon dioxide, or CO2, from other gases 

generated when a fossil fuel is burned; compress the CO2 into a fluid; and then transport it to an underground location for storage).

a. The levelized cost of electricity is the average cost over a plant’s lifetime for producing a megawatt-hour of electricity, taking into account 

such factors as the cost of building the plant, debt service, the return on equity investment, tax rates, fuel costs, operating expenses, and 

the plant’s electricity-generating capacity.

b. The cost of producing electricity at conventional coal-fired plants would also be expected to decline as more experience is gained in 

building such plants. However, the rate of that decline would probably be much slower than the decline in costs for CCS-equipped plants.

plant—although eventually, those higher costs decline as 

experience is gained. That pattern has characterized the 

introduction and adoption of some earlier technologies 

used to reduce emissions from coal-fired power plants; 

indeed, one study of electricity prices after the introduction of new emission-related equipment reported that 

initial costs increased in the majority of cases before such 

costs began to decline.17

How Much New Capacity Using CCS Technology Must 

Be Built to Reduce the Cost of Generating Electricity 

in a CCS-Equipped Plant?

According to CBO’s estimates, roughly 210 GW of 

generation capacity in the form of new CCS-equipped 

coal-fired power plants would be required to achieve 

DOE’s cost reduction goal for the technology (see 

Table 3). (That capacity is equal to about two-thirds of 

the total capacity—317 GW—of coal-fired generating 

plants operating in the United States.)18 CBO based its 

calculations on the initial difference in costs that it 

derived from its review of engineering design studies for 

new CCS-equipped plants and its analysis of learningcurve studies of earlier emission-control technologies. 

Specifically, CBO used the following assumptions in its 

calculations:

 The average cost of electricity from a new coal-fired 

power plant without CCS capabilities is $59 per 

megawatt-hour, and the average cost of electricity 

Initial CCS Plant 104

Coal-Fired Plant Without CCS 59

CCS Cost Differential (Percent) 76

CCS Plant After 210 Gigawatts of Worldwide Investment 74

Coal-Fired Plant Without CCSb 55

CCS Cost Differential (Percent) 35

Memorandum:

Cost Reduction for CCS Plant per 100 Gigawatts of 

New Investment (Percent) 14

Levelized Cost of Electricitya

Costs When the First CCS Plant Goes into Operation

Costs After Investment in 210 Gigawatts of CCS Capacity Worldwide

17. Edward Rubin and others, “Use of Experience Curves to Estimate 

the Future Cost of Power Plants with CO2 Capture,” International 

Journal of Greenhouse Gas Control, vol. 1, no. 2 (2007), pp. 188–

190.

18. Based on data from Department of Energy, Energy Information 

Administration, Electric Power Annual 2010 (November 2011),

Table 1.2, www.eia.gov/electricity/annual/pdf/table1.2.pdf.
10 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

CBO

generated by early CCS-equipped plants is $104 per 

megawatt-hour, or 76 percent more (see the appendix 

for details).

 The cost of building and operating a CCS-equipped 

plant will fall by 14 percent for every 100 GW of 

additional capacity that is built. That assumption is 

the midpoint of the range of learning curves discussed 

earlier (10 percent to 18 percent). 

 The cost of producing electricity in a new conventional coal-fired power plant will fall by 6 percent 

during the time required to add 210 GW of CCSequipped capacity. According to EIA’s forecasts, coalfired generation capacity worldwide will increase by 

66 percent between 2007 and 2035, an expansion that 

could provide opportunities for improvements in 

constructing and operating conventional as well as 

CCS-equipped plants.19 If the development of CCS 

proceeds slowly, the reductions in the cost of the competing conventional capacity could be greater than 

CBO has assumed.

Because the amount of new CCS-equipped capacity 

needed to achieve DOE’s cost reduction goal would vary 

under assumptions different from those above, CBO performed several analyses to explore those effects. Specific 

estimates of the amount of necessary additional capacity 

varied widely, but they were all substantial. For example, 

if the initial cost of a CCS-equipped plant turned out to 

be a third higher than the average of the estimates on 

which CBO based its analysis—so that such a plant cost 

twice as much as a new conventional coal-fired plant—

310 GW of additional capacity (rather than 210 GW) 

would have to be built to meet DOE’s goal. By contrast, 

if DOE’s R&D program proved fruitful and reduced the 

cost of building a CCS-equipped plant to only 66 percent 

more than the cost of building a new conventional plant, 

then 170 GW of additional capacity would be sufficient 

to meet the goal. Overall, those estimates ranged from an 

amount at the low end roughly equal to half the United 

States’ current coal-fired generating capacity to an 

amount at the high end roughly equal to all of the 

country’s capacity. 

Changing the pace of learning would also affect CBO’s 

illustrative calculations. Those calculations used the 

midpoint (14 percent) of the learning-curve range of 

reductions in costs per 100 GW of new capacity (10 percent to 18 percent). If, instead, learning occurred more 

slowly and the cost of producing electricity at CCSequipped plants fell by 10 percent for each 100 GW of 

new capacity, it would take 330 GW of additional capacity to reduce costs to the requisite level. Alternatively, if 

learning occurred more quickly and electricity production costs declined by 18 percent per 100 GW of new 

capacity, then 155 GW would be needed.

The cost of generating electricity at plants equipped with 

CCS technology would also be expected to decline over 

time if existing plants were retrofitted to capture CO2

emissions. That is, the learning necessary to reduce costs 

would be similar regardless of whether the technology 

was installed in a new facility or an existing one. However, the cost of using CCS would generally be less at a 

new plant because the equipment and processes could be 

standardized, whereas at an existing plant, the technology 

would have to be adapted to the facilities that were 

already in place, which is usually a more expensive 

approach. Nevertheless, the higher costs of the CCS 

equipment at existing facilities might be more than offset 

by avoiding the array of construction costs that a new 

facility would entail. The decision about retrofitting 

existing plants rather than building new ones is complex 

and would be affected by many factors other than the 

cost of the CCS equipment.

How Much Construction of New ElectricityGenerating Capacity Is Projected to Occur in the 

Near Future?

Given the economics of producing electricity with CCS 

technology, there seems to be little likelihood of substantial investment in that technology in the near future, 

either in the United States or elsewhere, particularly if no 

laws or agreements are in place to limit CO2 emissions.

Current projections indicate that the United States is 

unlikely to need an additional 210 GW of coal-fired 

generating capacity in the near future. (One reason is that 

in recent years, natural gas has accounted for a greater 

share of electricity generation than it did in the past; 

see Box 1.) EIA has projected that the average annual 

growth in capacity in the entire electric power sector will 

be 0.4 percent per year through 2035, for a total addition 

19. See Table H4 in Department of Energy, Energy Information 

Administration, International Energy Outlook 2010, DOE/EIA0484 (July 27, 2010), www.eia.gov/forecasts/archive/ieo10/

index.html.
FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 11

CBO

of 187 GW of new capacity.20 So even if all new generation capacity built by electric power companies in the 

United States through that year was devoted to CCS, it 

would probably be insufficient to meet DOE’s cost 

reduction targets. 

But currently, little incentive exists for investments in 

CCS capacity. That might change if the United States 

implemented policies to reduce CO2 emissions; then, the 

domestic stock of electricity generation plants would turn 

over more rapidly, and the potential for new investment 

in CCS capacity in the United States—both in new 

plants and in existing plants that might be retrofitted—

would be strengthened. If DOE met its goal of reducing 

the cost premium for CCS-generated electricity to no 

more than 35 percent while capturing 90 percent of the 

associated CO2 emissions, utilities and others that might 

build CCS-equipped plants would still operate at a cost 

disadvantage of $19 per megawatt-hour ($74 versus $55; 

see Table 3 on page 9). However, if policymakers also 

imposed a price (say, as a tax or as part of a cap-and-trade 

system) of $20 per metric ton of CO2 emissions, then, 

in CBO’s estimation, that cost disadvantage would be 

eliminated.21

Investors and consumers that faced a price on CO2

emissions could choose from among several approaches 

for reducing them: for example, coal-fired generation 

with CCS, conservation, or the use of other sources of 

energy, such as natural gas (with or without CCS), 

nuclear power, wind, biomass, or other renewables. Overall, investors would probably choose a mix of all of those 

types of investments, which would be determined in large 

part by the relative prices of the different options for 

reducing emissions. In one study that examined how the 

electricity industry could reduce its CO2 emissions if 

policymakers imposed a price on them, the role played 

by CCS in the future varied widely—ranging from 

accounting for roughly half of all electricity generation to 

accounting for none—depending on the relative size 

of the cost premiums for CCS- and nuclear-generated 

power compared with power generated in conventional 

coal-fired plants.22

Another possibility is that the United States could benefit 

from knowledge about CCS gained through experience 

in other countries. In contrast to EIA’s forecasts for the 

growth of capacity in the United States, its outlook for 

the rest of the world suggests that the needed investment 

of 210 GW in CCS-equipped capacity could be accommodated easily. By EIA’s estimates, worldwide coal-fired 

generating capacity will grow by more than 940 GW during the 2007–2035 period, rising from 1,425 GW to 

2,366 GW.23 About 80 percent of that increase would 

occur in other countries, where, unlike projected demand 

in the United States, the demand for electricity is growing 

rapidly; China and India in particular are poised to experience increases. Thus, investments in CCS-equipped 

generation plants abroad could provide enough industrywide learning to reduce costs for similar plants built in 

the United States. (In the same way, investments in plants 

in the United States would probably provide some experiential benefits to foreign generators.) 

The potential for reciprocal technology transfer between 

the United States and other countries is limited in the 

short term, however, because of differences in the stages 

of various countries’ development of the technology. 

China, for example, is currently focused on research and 

development, together with small-scale demonstration 

projects; funding for large-scale demonstration projects is 

limited.24 Large-scale CCS projects are being built mainly 

in North America and Europe, where capacity is growing 

much more slowly.

Over the longer term, shifting growth in the world’s 

coal-based electricity-generating capacity toward investment in CCS would require international agreements on 

substantial reductions in CO2 emissions.

20. Department of Energy, Energy Information Administration, 

Annual Energy Outlook 2012, DOE/EIA-0383(2012) (June 

2012), Table A9, www.eia.gov/forecasts/aeo/.

21. That differential falls within the commonly estimated range of 

damage caused by CO2 emissions. One interagency federal analysis estimated that the average social costs of the damage from 

climate change associated with CO2 emissions range from $5 to 

$37 per metric ton in 2010 dollars. See Interagency Working 

Group on Social Cost of Carbon, Technical Support Document: 

Social Cost of Carbon for Regulatory Impact Analysis Under Executive Order 12866 (February 2010), pp. 1 and 33, www.epa.gov/

otaq/climate/regulations/scc-tsd.pdf. 

22. Sergey Paltsev and others, The Cost of Climate Policy in the United 

States, MIT Joint Program on the Science and Policy of Global 

Change, Report 173 (April 2009), http://globalchange.mit.edu/

files/document/MITJPSPGC_Rpt173.pdf.

23. Department of Energy, Energy Information Administration, 

International Energy Outlook 2011, DOE/EIA-0484(2011) 

(September 2011), Table F4, p. 254, www.eia.gov/forecasts/ieo/

pdf/0484(2011).pdf.

24. See Global CCS Institute, The Global Status of CCS: 2011

(Canberra, Australia, 2011), pp. 15–25.
12 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

CBO

Continued

Policy Options

In CBO’s view, current policies are unlikely to achieve the 

goal of reducing the additional costs for producing electricity with CCS technology to 35 percent more than 

the cost of producing electricity without CCS. DOE’s 

present funding for CCS would allow the United States 

to build only a small number of demonstration plants, 

which are unlikely to be sufficient to reduce costs through 

the learning process described earlier. If DOE adhered to 

its current plan, it would continue to support the R&D 

and demonstration programs for which the American 

Recovery and Reinvestment Act provided funding of 

$3.4 billion, and it would continue to seek annual appropriations of $300 million to $400 million for related 

efforts. 

However, unless lawmakers substantially increased support for CCS, probably well beyond even those amounts, 

federal funding would be likely to contribute only a little 

to reducing the costs of CCS-equipped coal plants after

Box 1.

Natural Gas-Fired Electricity Generation and the Development of 

Carbon Capture and Storage Technologies

Most public and private efforts to develop technologies for capturing, compressing, transporting, and 

storing carbon dioxide (CO2) emitted during electricity generation have focused on coal-fired plants rather 

than on natural gas-fired plants. Until recently, natural gas has been more expensive than coal as a power 

source and thus has been used less; in addition, coalfired power plants produce more electricity than their 

natural gas-fired counterparts, and coal combustion 

produces far more emissions of CO2 per unit of electricity than does the burning of natural gas. But with 

lower prices for natural gas and its increasing use for 

electricity generation, carbon capture and storage 

(CCS) technology could also be developed for use in 

natural gas-fired power plants. Nevertheless, because 

demonstration and pilot projects to construct facilities equipped with CCS technology take years to plan 

and fund, and because the potential benefits of CCS 

are greater for coal-fired plants, the use of CCS at 

coal-fired facilities will probably remain at the forefront of the technology’s development for at least the 

next few years. 

Increased Use of Natural Gas in 

Electricity Generation

The role that natural gas plays in the production of 

electricity in the United States has been shaped by 

several factors. Capital costs for electricity-producing 

turbines powered by natural gas are lower than those 

for coal-fired or nuclear-powered generators; thus, by 

using natural gas, utilities can increase their capacity 

to generate electricity while incurring lower capital 

costs than would be necessary if those other power 

sources were used. However, because natural gas 

generators have, until the past few years, been more 

expensive to operate than coal-fired or nuclearpowered facilities, they have mainly been used at 

times of peak demand. Now, for several reasons, 

many analysts expect utilities to use natural gas more 

regularly to satisfy normal rather than just peak 

demand; those reasons include the fuel’s relatively low 

price; the cost of addressing environmental effects 

other than the buildup of greenhouse gases, such as 

emissions of mercury; and uncertainty about the cost 

of complying with possible future regulation of 

greenhouse gas emissions.1

 A striking indication of 

that trend is that since 2000, the amount of electricity generated in coal-fired power plants has fallen by 

7 percent and the amount of electricity generated in 

natural gas-fired plants has grown by 64 percent.2

1. Susan Tierney, Why Coal Plants Retire: Power Market Fundamentals as of 2012 (Analysis Group, February 16, 2012), 

pp. 3–4.

2. Department of Energy, Energy Information Administration, 

Electric Power Annual 2010 (November 2011), Table ES1, 

www.eia.gov/electricity/annual/. 
FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 13

CBO

the initial demonstration projects for the technology had 

ended. Most investment in electric utilities comes from 

the private sector. As CBO’s illustrative calculations suggest, the amount of current federal spending is small 

relative to the magnitude of the investment necessary to 

make CCS-equipped plants economically competitive, 

and DOE’s current activities are unlikely to provide the 

amount of learning that would drive down the technology’s costs. Rather, reductions would have to be spurred 

by the activities of investors and the efforts of utilities and 

their customers.

To encourage investment and deployment, additional 

incentives would be needed, many analysts say; without 

them, the returns on investment in CCS plants beyond 

the demonstration stage would be too small to attract 

investors. Yet the history of other emission-control 

technologies suggests that the ability of widespread 

deployment alone to reduce costs is limited. Even with 

broad deployment, such earlier technologies as the 

removal of sulfur dioxide from utilities’ emissions have 

required decades of experience and extensive research and 

Box 1. Continued

Natural Gas-Fired Electricity Generation and the Development of 

Carbon Capture and Storage Technologies

That shift toward using natural gas in nonpeak times 

will undercut the possible need for coal-fired CCS 

plants to meet environmental goals. Natural gas facilities emit roughly half the CO2 that a similarly sized 

coal-fired plant emits.3

 If natural gas prices remained 

low or the regulation of greenhouse gases became 

more stringent, natural gas-fired plants could prove 

an increasingly viable alternative to coal-fired plants. 

In fact, the Environmental Protection Agency (EPA) 

is considering regulations to limit emissions of CO2

to a level below those produced by a typical coal-fired 

plant that is not equipped with CCS technology.

Carbon Capture and Storage Technology for 

Natural Gas-Fired Power Plants

CCS technology could be adopted at plants that use 

natural gas rather than coal for electricity generation. 

In fact, the cost of using CCS at natural gas-fired 

plants would probably be less than the cost of using it 

at coal-fired plants. In particular, although much of 

the capture and compression equipment integral to 

the CCS approach is the same for both types of 

plants (and the transportation and storage facilities 

are identical), natural gas-fired plants would require 

less equipment because they produce fewer CO2

emissions. Similarly, developers of CCS-capable

3. Utilities that generate electricity by burning natural gas also 

use that process as an inexpensive way to reduce emissions of 

mercury and other nongreenhouse gases.

coal-fired facilities face additional challenges to 

ensure that the new emission-reduction technology is 

compatible with the plant’s coal-handling and 

exhaust equipment, some of which limits the emissions of other pollutants. 

However, firms today have no incentive to install 

CCS technology in natural gas-fired plants. It is not 

economically viable now, and no policies are in place 

to encourage utilities to purchase the additional 

equipment and incur the higher costs for producing 

electricity that CCS technology currently entails. If 

EPA adopted regulations for reducing greenhouse 

gases or lawmakers enacted policies to restrict emissions from power plants (such as imposing a price 

on CO2 emissions or subsidizing the production of 

electricity at CCS-equipped electricity generation 

plants), then natural gas-fired facilities might have an 

incentive to use CCS to meet such requirements. At 

present, though, regulatory action to curb CO2 emissions is more likely to shift electricity production 

from coal to natural gas (without CCS) and other 

low-emission fuels, such as biomass, rather than to 

CCS-capable plants.4

4. Nathan Richardson, Art Fraas, and Dallas Burtraw, 

Greenhouse Gas Regulation Under the Clean Air Act: Structure, 

Effects, and Implications of a Knowable Pathway, RFF DP 

10-23 (Resources for the Future, April 2010), pp. 43–45, 

www.rff.org/rff/Documents/RFF-DP-10-23.pdf.
14 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

CBO

development—as well as a substantial amount of investment—before costs were reduced.25

The decisions facing policymakers with regard to support 

for CCS center on whether current federal technology 

programs, which are mainly devoted to reducing the costs 

of the capture portion of the process, should continue as 

they are currently structured. Some alternatives include 

shifting the focus from demonstration projects to 

research and development, adopting policies that encourage private investment in CCS, or reducing or eliminating support for CCS.

Shift DOE’s Focus from Demonstration Projects to 

Research and Development 

One option for increasing the effectiveness of federal 

spending on CCS technology would be to limit that support to research and development and withdraw it from 

more-costly demonstration projects. Concentrating federal resources on R&D would focus DOE’s efforts on 

activities for which the rationale for spending by the 

federal government is the strongest—that is, in bringing 

scientists and engineers together to perform research that 

is removed from specific commercial applications. R&D 

is also an area in which the federal record of success is 

long, compared with many failed federal attempts to 

commercialize earlier fossil energy technologies.26

One variation of that option would be for the federal 

government to collaborate with governments of other 

countries in developing CCS technology. DOE, 

sometimes in cooperation with the U.S. Agency for International Development, supports many activities through 

the United Nations, the International Energy Agency, 

and other multilateral groups to promote the transfer of 

CCS technology internationally. DOE is also promoting 

adoption of U.S.-developed environmental technology 

in China as well as the use of U.S.-developed clean coal 

technologies in other countries. In other areas—for 

example, research in particle physics and fusion energy—

DOE collaborates with foreign partners to pay for large 

projects, which in many cases are not built on U.S. soil. 

Such collaboration might be a model that could be 

applied to CCS-equipped power plants. However, without international agreements on reducing CO2 emissions, 

such new projects are likely to be developed only slowly, 

if at all.

Adopt Policies That Encourage Private Investment 

in CCS-Equipped Plants

The private sector would have a greater incentive to 

invest in CCS technology if the federal government 

adopted policies that in some way offset the higher cost of 

generating electricity in coal-fired plants equipped with 

the technology. Currently, the price of electricity reflects 

the cost of producing it but not the cost of the damage 

that could be expected from climate change caused by 

emissions of greenhouse gases. The United States could 

adopt other policies that would incorporate the cost of 

that damage in the price of electricity. For example, 

imposing a tax on CO2 emissions or adopting a cap-andtrade program that would limit emissions would cause 

the price of electricity from conventional coal-fired plants 

to increase. If it did, that rise would encourage investment in technologies like CCS that reduced emissions. 

However, even with such a policy in place, investors 

might choose other approaches for reducing CO2 emissions because of the high cost of CCS.

Similarly, some analysts have suggested that instead of 

subsidizing the development and construction of CCSequipped plants, the federal government could subsidize 

the electricity that the plants produce—for example, by 

offering to pay any utility using CCS technology a fixed 

amount for each ton of CO2 that it captured and stored. 

Such a policy would avoid having DOE choose individual projects to support and could focus federal efforts on, 

for example, determining whether such plants were 

indeed producing electricity in a process that reduced 

emissions of CO2. Currently, electric utilities can receive 

a tax credit for using CCS technology to generate 

electricity. However, the credit does not seem to have 

encouraged private investors to equip plants with CCS—

either because the credit has been too small or because the 

credit does not provide an incentive for firms that do not 

pay taxes. 

But subsidizing the electricity that CCS-equipped plants 

produce would be another form of federal investment in a 

technology that might never prove to be cost-effective. 

Moreover, lawmakers have already committed large 

amounts of money and many years to the construction of 

the next generation of CCS-equipped plants, and DOE 

25. For more information, see Peter Folger, Carbon Capture: A 

Technology Assessment, CRS Report for Congress R41325 

(Congressional Research Service, July 2010), pp. 76–88.

26. For more information, see Congressional Budget Office, Federal 

Climate Change Programs: Funding History and Policy Issues (March 

2010).
FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 15

CBO

has signed agreements to help fund the construction of 

several of them. 

Reduce or Eliminate DOE’s Support for CCS 

Given the limits on DOE’s ability to lower the costs of 

CCS through its currently planned activities, lawmakers 

could substantially reduce or discontinue funding for 

both developing and demonstrating the technology. If 

little coal-fired generation capacity was being built in the 

United States, lawmakers might decide that the development of technologies such as CCS would have little effect 

on either reducing CO2 emissions or preserving the 

nation’s ability to use coal-fired power plants in the 

future. Moreover, even if DOE’s cost reduction target was 

attained, coal-fired plants with CCS would not be competitive with plants that lacked the technology unless 

policies were adopted that imposed costs on carbon 

emissions. 

Scaling back or eliminating the CCS programs would 

reduce the need for future annual appropriations for 

those activities. Moreover, eliminating larger-scale 

technology demonstration projects would reduce DOE’s 

involvement in fields in which the agency has a mixed 

track record and in which U.S. industry is generally not 

poised to follow up with subsequent investment. 

An option that would reduce or discontinue support for 

CCS would not necessarily apply to the funding already 

provided for demonstration projects, however. Much of 

that money has been obligated (that is, legally committed 

for some purpose that will result in outlays) but not yet 

spent, and because of the CCS-equipped demonstration 

plants that have been canceled or put on hold, a great 

deal of it may never be spent. The eventual disposition of 

those obligated but unspent funds is currently unknown. 

Because DOE has signed agreements with several private 

investors to help pay for the five large-scale demonstration plants that are still being built or that are planned to 

be built, spending for CCS could not be eliminated 

immediately. In addition, because of existing agreements, 

DOE might bear some shutdown costs if its support of 

those plants was terminated or reduced.

CBO

Appendix:

Developing a Common Basis for Comparing 

Engineering Cost Estimates

The set of facilities and processes known as carbon 

capture and storage (CCS) technology would allow 

electric utilities that install the technology to capture 

emissions of carbon dioxide and store them as a liquid 

underground. The Congressional Budget Office (CBO) 

compared the costs for building and operating new coalfired power plants with and without CCS technology. 

That comparison is based on estimates from five engineering studies, published from 2005 to 2010, of the 

cost of equipping new electricity-generating plants with 

CCS technology. Those studies consist of engineering 

designs and their associated costs for what are considered 

reasonable plans for constructing and operating such a 

plant. (No full-scale CCS-capable facility has as yet been 

built.) CBO used two principal measures of costs in its 

calculations: 

 Total plant construction costs—the costs for building 

a new power plant per kilowatt of net electrical output 

that the plant can produce;1

 and 

 The levelized cost of electricity—the average cost of 

producing a megawatt-hour of power over the lifetime 

of a plant, taking into account such factors as the costs 

of building, financing, and operating the facility. 

On the basis of the studies’ findings, CBO concluded 

that the added cost of constructing and operating a CCSequipped coal-fired plant rather than a conventional 

coal-fired power plant would average about 76 percent 

for both total plant costs and for the levelized cost of 

electricity (see Table A-1).

For its analysis, CBO converted all costs to 2010 dollars 

and adjusted several of the assumptions underlying the 

studies to provide a common basis for comparing their 

findings. CBO’s adjustments included the following:

 The engineering studies used a nominal fixed-charge 

factor to take into account the cost of financing for the 

plant’s construction, calculated on an annual basis. 

The nominal fixed-charge factor includes the cost of 

funds used for construction plus payments toward the 

principal of any loans, calculated over the lifetime of 

the plant (which is assumed to be 30 years). The cost 

of funds represents a weighted cost of the debt and 

equity financing used in building the plant. (The cost 

of debt is the interest paid on any bonds that are 

issued, and the cost of the equity financing is the 

return to investors in a power plant; both costs are 

adjusted to take taxes into account.) The fixed-charge 

factors that the studies used ranged from 10.5 percent 

to 15.1 percent, a variation that reflects the general 

rise in interest rates leading up to 2008 and the subsequent drop in rates after 2009. To compare the studies 

on an equal basis, CBO used a nominal fixed-charge 

factor of 10.5 percent to reflect the lower interest rates 

in recent years. 

1. A power plant’s electricity-generating capacity is generally measured in megawatts (1 megawatt equals 1,000 kilowatts), and 

the electrical power generated by that capacity is measured in 

megawatt-hours. During a full hour of operation, 1 megawatt of 

capacity produces 1 megawatt-hour of electricity, which, according to statistics compiled by the Department of Energy’s Energy 

Information Administration, can power roughly 800 average 

households.

Total plant costs do not include preproduction costs, inventory 

capital costs, financing costs, or costs to pay off debt while the 

plant is being built. CBO used total plant costs rather than a more 

inclusive measure because many of the studies used the total costs 

metric. 
18 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

CBO

Table A-1. 

Estimates from Engineering Studies of Total Plant and Levelized Electricity 

Costs for New Coal-Fired Power Plants With and Without CCS Technology

Continued

 Assumptions in the engineering studies about the price 

of coal over the 30-year lifetime of a plant ranged from 

$1.50 to $2.47 per million British thermal units (Btu) 

of heat produced. The price of coal assumed in CBO’s 

analysis was $2.23 per million Btu. CBO derived that 

estimate by averaging forecasts for 2010 to 2035 of the 

price of coal used for electricity generation (developed 

by the Department of Energy’s Energy Information 

Administration) and then converting that number to 

2010 dollars. 

 Operating capacity factors in the engineering studies 

ranged from 80 percent to 85 percent. (The capacity 

factor measures how much of a plant’s total capacity 

for generating electricity is used over the course of a 

year.) A larger capacity factor will reduce the levelized 

cost of electricity because fixed costs can be spread 

over the production of more energy. Because four of 

the five studies used 85 percent as the capacity factor, 

CBO adjusted the capacity factor of the other study to 

equal 85 percent.

 To account for the increase in power plant construction 

costs from 2005 to 2010, CBO adjusted the studies’ 

results to reflect costs in 2010. From 2005 to 2008, 

the nominal costs for building a new power plant 

rose by about 40 percent; between 2008 and 2010, 

however, costs fell by about 7 percent, making the 

estimates of costs for the beginning of the period quite 

different from those for the end.

Without CCS 1,770 1,693 10.5 2.3 55.4 55.6

With CCS 3,205 3,202 10.5 2.3 96.2 99.9

Premium for

CCS (Percent) 81 89 0 n.a. 74 80

Without CCS 1,763 e 11.7 1.5 53.2 e

With CCS 2,930 e 11.7 1.5 92.8 e

Premium for

CCS (Percent) 66 e 0 n.a. 74 e

Without CCS 1,919 e 12.1 2.5 76.0 e

With CCS 3,464 e 12.1 2.5 131.0 e

Premium for

CCS (Percent) 81 e 0 n.a. 72 e

Without CCS 1,330 1,280 15.1 1.5 47.8 48.4

With CCS 2,140 2,230 15.1 1.5 76.9 f 81.6 f

Premium for

CCS (Percent) 61 74 0 n.a. 61 69

Without CCS 1,647 1,622 13.4 1.6 74.7 75.3

With CCS 2,913 2,942 14.0 1.6 135.2 139.0

Premium for

CCS (Percent) 77 81 4 n.a. 81 85

Pulverized

Supercritical 

 Coal Plantsc

Pulverized

 Coal Plantsc

Supercritical Subcritical 

Total Plant Construction Costsa

 (Dollars)

Fixed-Charge

Levelized Cost of Electricityb (Dollars)

Factord

(Percent)

National Energy Technology Laboratory (2007 dollars)

Carnegie Mellon University (2009 dollars)

Pulverized

Subcritical 

(Dollars per MMBtu)

Cost of Coal

 Coal Plantsc

Global Carbon Capture and Storage Institute (2010 dollars)

Pulverized

 Coal Plantsc

Massachusetts Institute of Technology (2005 dollars)

Electric Power Research Institute (2006 dollars)
APPENDIX FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 19

CBO

Table A-1. Continued

Estimates from Engineering Studies of Total Plant and Levelized Electricity 

Costs for New Coal-Fired Power Plants With and Without CCS Technology

Source: Congressional Budget Office based on Massachusetts Institute of Technology, The Future of Coal (2007), web.mit.edu/coal/

The_Future_of_Coal.pdf; Electric Power Research Institute, Updated Cost and Performance Estimates for Clean Coal 

Technologies Including CO2

 Capture—2006, EPRI Report 1013355 (March 2007), http://mydocs.epri.com/docs/public/

000000000001013355.pdf; National Energy Technology Laboratory, Cost and Performance Baseline for Fossil Energy Plants, 

vol. 1, Bituminous Coal and Natural Gas to Electricity, DOE/NETL-2010/1397 (November 2010), www.netl.doe.gov/technologies/

coalpower/ewr/co2/SystemsAnalysis.html; Carnegie Melon University, Integrated Environmental Control Model, version 6.24 

(May 2010), www.cmu.edu/epp/iecm/iecm_dl.html; and Global CCS Institute, Economic Assessment of Carbon Capture and 

Storage Technology: 2011 Update (2011), www.globalccsinstitute.com/publications/economic-assessment-carbon-capture-andstorage-technologies-2011-update.

Notes: In this analysis, a power plant’s electricity-generating capacity is measured in kilowatts; the electrical power generated by that 

capacity is measured in megawatt-hours. During a full hour of a plant’s operation, 1 kilowatt of capacity produces 1 kilowatt-hour of 

electricity; 1,000 kilowatt-hours equals 1 megawatt-hour. 

All of the studies except the one conducted by the Electric Power Research Institute (EPRI) incorporated the assumption that over a 

year, a plant would operate 85 percent of the time. In contrast, the EPRI study incorporated an assumed annual rate of operation of 

80 percent.

MMBtu = 1 million British thermal units (1 BBtu is the amount of energy required to raise the temperature of 1 pound of water by 

1 degree Fahrenheit under certain controlled conditions); CCS = carbon capture and storage (the set of processes and technologies 

that separate carbon dioxide, or CO2, from other gases generated when a fossil fuel is burned; compress the CO2 into a liquid; and then 

transport it to an underground location for storage); n.a. = not applicable.

a. The costs for building a new power plant for each kilowatt of net electrical output that the plant can produce.

b. The levelized cost of electricity is the average cost over a power plant’s lifetime for producing 1 megawatt-hour of electricity, taking into 

account such factors as the cost of building, financing, and operating the plant.

c. “Subcritical” and “supercritical” refer to the efficiency of electricity production from pulverized coal—that is, the percentage of the fuel’s 

potential energy that is actually converted to electricity. The efficiency of electricity production using subcritical pulverized coal is about 

37 percent; the efficiency of electricity production using supercritical pulverized coal, which uses higher steam temperatures and 

pressures during generation, is about 40 percent.

d. Broadly speaking, the cost of the funds required to build the plant, including the rate of interest on any debt and the rate of return on 

equity investment, adjusted to take federal, state, and property taxes into account.

e. EPRI and the Global Carbon Capture and Storage Institute did not estimate costs for a subcritical pulverized coal plant.

f. Does not include the cost of storing and transporting the captured CO2. 

 Similarly, to account for the increase in nominal 

operating expenses—that is, those not related to CCS 

operations—in the various years of the studies, CBO 

adjusted the studies’ estimates of nonfuel operating 

expenses to reflect 2010 costs. The operating costs of a 

power plant increased by 20 percent from 2005 to 

2008 before declining by about 9 percent in 2009.

 All of the studies except the one by the Massachusetts 

Institute of Technology (MIT) included a cost for storing and transporting the captured carbon dioxide. To 

account for such a cost and thus compare the MIT 

study with the others on an equal-cost basis, CBO 

added $10 for each short ton (2,000 pounds) of captured carbon dioxide to the MIT study’s estimate of 

the levelized cost of electricity.2

The adjusted estimates of total plant costs for non-CCSequipped plants ranged from about $1,600 to $1,900 per 

kilowatt of net electrical output (see Table A-2); the 

adjusted estimates for CCS-equipped plants ranged from 

about $2,800 to $3,500 per kilowatt. After the adjustments, the estimated cost premium for building a CCS 

plant ranged from 61 percent to 89 percent in the 

studies. The adjusted estimates of the levelized cost of 

electricity for non-CCS plants ranged from $53 to 

$66 per megawatt-hour, and the adjusted estimates for 

CCS-equipped plants ranged from $95 to $112 per 

megawatt-hour. The latter figures represent a premium of 

70 percent to 89 percent in the levelized cost of electricity 

from a CCS plant.

2. The $10 cost per short ton for storage and transportation is taken 

from Jay Apt and others, Incentives for Near-Term Carbon Dioxide 

Geological Sequestration (Carnegie Mellon University, Carnegie 

Mellon Electricity Industry Center, October 2007), p. 4.
20 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

CBO

Table A-2. 

CBO’s Adjusted Estimates of Total Plant and Levelized Electricity Costs for 

New Coal-Fired Power Plants With and Without CCS Technology

(2010 dollars)

Continued

Without CCS 1,788 1,710 55.9 56.0

With CCS 3,237 3,234 97.3 100.8

Premium for

CCS (Percent) 81 89 74 80

Without CCS 1,888 d 65.5 d

With CCS 3,138 d 111.5 d

Premium for

CCS (Percent) 66 d 70 d

Without CCS 1,919 d 57.4 d

With CCS 3,464 d 101.8 d

Premium for

CCS (Percent) 81 d 77 d

Without CCS 1,734 1,669 53.1 54.6

With CCS 2,790 2,907 95.4 103.3

Premium for

CCS (Percent) 61 74 79 89

Without CCS 1,637 1,612 63.2 64.0

With CCS 2,895 2,924 107.7 111.3

Premium for

CCS (Percent) 77 81 71 74

National Energy Technology Laboratory

Carnegie Mellon University

Global Carbon Capture and Storage Institute

Supercritical Subcritical 

Pulverized

Total Plant Construction Costsa

Supercritical Subcritical 

Levelized Cost of Electricityb

Massachusetts Institute of Technology

Electric Power Research Institute

Pulverized Pulverized

 Coal Plantsc Coal Plantsc Coal Plantsc

Pulverized

 Coal Plantsc
APPENDIX FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 21

CBO

Table A-2. Continued

CBO’s Adjusted Estimates of Total Plant and Levelized Electricity Costs for 

New Coal-Fired Power Plants With and Without CCS Technology

Source: Congressional Budget Office based on Massachusetts Institute of Technology, The Future of Coal (2007), web.mit.edu/coal/

The_Future_of_Coal.pdf; Electric Power Research Institute, Updated Cost and Performance Estimates for Clean Coal 

Technologies Including CO2

 Capture—2006, EPRI Report 1013355 (March 2007), http://mydocs.epri.com/docs/public/

000000000001013355.pdf; National Energy Technology Laboratory, Cost and Performance Baseline for Fossil Energy Plants, 

vol. 1, Bituminous Coal and Natural Gas to Electricity, DOE/NETL-2010/1397 (November 2010), www.netl.doe.gov/technologies/

coalpower/ewr/co2/SystemsAnalysis.html; Carnegie Melon University, Integrated Environmental Control Model, version 6.24 

(May 2010), www.cmu.edu/epp/iecm/iecm_dl.html; and Global CCS Institute, Economic Assessment of Carbon Capture and 

Storage Technology: 2011 Update (2011), www.globalccsinstitute.com/publications/economic-assessment-carbon-capture-andstorage-technologies-2011-update.

Notes: CBO adjusted the results of the studies to provide a basis for comparing them, using common assumptions about the price of coal, a 

fixed-charge factor, and capacity utilization—that is, how much of the time during a year a plant would be operating. (Broadly 

speaking, the fixed-charged factor is the cost of the funds required to build the plant, including the rate of interest on any debt and the 

rate of return on equity investment, adjusted to take federal, state, and property taxes into account.) In addition, CBO converted all 

costs into 2010 dollars. 

In this analysis, a power plant’s electricity-generating capacity is measured in kilowatts; the electrical power generated by that 

capacity is measured in megawatt-hours. During a full hour of a plant’s operation, 1 kilowatt of capacity produces 1 kilowatt-hour of 

electricity; 1,000 kilowatt-hours equals 1 megawatt-hour. 

CCS = carbon capture and storage (the set of processes and technologies that separate carbon dioxide, or CO2, from other gases 

generated when a fossil fuel is burned; compress the CO2 into a liquid; and then transport it to an underground location for storage).

a. The costs for building a new power plant for each kilowatt of net electrical output that the plant can produce.

b. The levelized cost of electricity is the average cost over a power plant’s lifetime for producing 1 megawatt-hour of electricity, taking into 

account such factors as the cost of building, financing, and operating the plant.

c. “Subcritical” and “supercritical” refer to the efficiency of electricity production from the pulverized coal—that is, the percentage of the 

fuel’s potential energy that is actually converted to electricity. The efficiency of electricity production using subcritical pulverized coal is 

about 37 percent; the efficiency of supercritical pulverized coal, which uses higher steam temperatures and pressures during generation, 

is greater, at about 40 percent.

d. The Electric Power Research Institute and the Global Carbon Capture and Storage Institute did not estimate costs for a subcritical 

pulverized coal plant. 

23 FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE

CBO

Lists of Tables and Figures

Tables

1. Large-Scale Projects to Install CCS Technology in Power Plants That Are 

Currently Planned or Under Construction in the United States 4

2. Funding for the Department of Energy’s Coal Programs 5

3. CBO’s Illustrative Calculations of the Estimated Reduction in the Cost of 

Electricity from CCS-Equipped Plants 9

A-1. Estimates from Engineering Studies of Total Plant and Levelized Electricity 

Costs for New Coal-Fired Power Plants With and Without CCS Technology 18

A-2. CBO’s Adjusted Estimates of Total Plant and Levelized Electricity Costs for 

New Coal-Fired Power Plants With and Without CCS Technology 20

Figure

1. Steps in the Capture and Storage of Carbon Dioxide After Electricity 

Generation at a Coal-Fired Power Plant 2
FEDERAL EFFORTS TO REDUCE THE COST OF CAPTURING AND STORING CARBON DIOXIDE 24

CBO

About This Document

This Congressional Budget Office (CBO) study was prepared at the request of the Chairman of the 

Senate Committee on Energy and Natural Resources. In keeping with CBO’s mandate to provide 

objective, impartial analysis, the study makes no recommendations.

Philip Webre of CBO’s Microeconomic Studies Division and Samuel Wice (formerly of CBO) 

prepared the study under the supervision of Joseph Kile and David Moore (formerly of CBO). 

Megan Carroll, Terry Dinan, and Robert Shackleton offered helpful comments, and Ashley Silberhorn 

provided research assistance.

Also reviewing the report were Jay Apt, Carnegie Mellon University; Alan Crane, National Research 

Council; Peter Folger, Congressional Research Service; Howard Herzog, Massachusetts Institute of 

Technology; Robert Hilton, Alstom (a producer of equipment for the electric power sector); David 

Mowery, University of California at Berkeley; Karen Palmer, Resources for the Future; and Chiara 

Trabucchi, Industrial Economics Inc. The assistance of external reviewers implies no responsibility for 

the final product, which rests solely with CBO.

Leah Mazade edited the report. Jeanine Rees prepared the study for publication, and 

Maureen Costantino designed the cover. The report is available on CBO’s Web site (www.cbo.gov).

Douglas W. Elmendorf 

Director

June 2012