Back on May 2nd I wrote about the looming coal vs. global warming fight in Congress. Today the NY Times put the issue up as its lead article (at least in the national edition). Edmund Andrews covers the issue well, bringing out various issues of price, competing priorities and constituent politics. (To recap my post: despite Senate ENR staffers trying to paint a rosy picture about a four-bill markup of some easy and no-brainer energy packages, coal state Senators still made a big stink about mandating coal synfuels.)

This is an issue setting itself up well (and early) to be one of the major boondoggles in crafting policy that effectively brings down GHG emissions. It essentially pits energy independence goals against GHG reduction goals when they should be addressed simultaneously in the same direction. Smart policy will reduce exposure to global warming risk and energy provenance issues together; bad policy will allow the two issues to battle each other.

The elephant in this room, only hinted at in Andrews’ article and only briefly mentioned in my post, is setting government targets for specific fuels. Coal state Members want to write into any energy/climate legislation either mandated volume purchase targets for liquefied coal fuels or heavy subsidies for the industry. But the coal-to-liquid conversion process releases a lot of carbon dioxide, and when confronted with this, coal supporters point out that carbon dioxide can be captured during the process and sequestered (known as carbon capture and storage, or CCS).

The key here is “can be” as in can be captured. It should be appended with “but won’t” unless any legislation mandating or heavily subsidizing liquefied coal also provides a mandate that any fuel derived from coal captures CO2, and also provides the subsidies to make that CCS possible. Will legislators go that far? Listening to Congress, especially the language coming out of Jeff Bingaman’s committee, I’ve heard a lot of discussion of subsidies to build synfuel plants and a lot of discussion about mandating fuel quotas or providing generous per-gallon tax credits, but nothing about also footing the bill for CCS. Keeping in mind that some lawmakers already want to give coal synfuels a $0.50/gal subsidy before even considering the carbon capture issues, requiring carbon CCS on the coal synfuel process means pricing coal synfuels well out of economic competitiveness.

The coal issue illustrates again the problems with government picking winners and losers instead of setting generalized targets to be met across a wide swath of economic players. Doing this with ethanol has already led to a international socioeconomic backlash, rightly or wrongly drawing in Mexican citizens decrying the rising price of the corn they depend upon for food. Anything close to a mandate for coal synfuels will mean a new avenue for climate change politicization. Have we learned yet from past lessons? Edmund Andrews hints that we probably haven’t:

But some energy experts, as well as some lawmakers, worry that the scale of the coal-to-liquid incentives could lead to a repeat of a disastrous effort 30 years ago to underwrite a synthetic fuels industry from scratch.

When oil prices plunged in the 1980s, the government-owned Synthetic Fuels Corporation became a giant government albatross that lost billions and remains a symbol of misguided industrial policy more than 25 years later.