WHITEFISH, MT / September 2, 2014 / "Greenhouse gas" is a term most people are familiar with as pollutants that are damaging to the earth’s environment. Carbon dioxide (CO2) is the most frequently talked about as it accounted for about 82% of all U.S. greenhouse gas emissions from human activities in 2012. Say "criteria pollutants," though, and you’ll often get a blank stare about what that means. There is a distinct difference that everyone should be aware of.
Carbon Dioxide and Coal
Carbon dioxide is part of the normal carbon cycle of the earth, released and absorbed through a natural balance between the atmosphere, oceans, plants, microorganisms, animals and more. Human interference in these ratios by adding excessive atmospheric CO2 is argued by many to contribute to changing weather patterns and global temperatures.
The main source of CO2 generated by humans is the burning of fossil fuels for energy and transportation. The combustion of fossil fuels for electricity accounted for 38% of CO2 emissions in the U.S. in 2012. The problem with CO2 emissions is that they are a byproduct of combustion that cannot be eliminated after the fact. The reduction of CO2 emissions is only attainable by burning less fuel or by burning a fuel that produces less CO2 per unit of energy. This means things like driving smaller, more efficient cars, using less electricity in general or switching energy sources, such as from coal (regarded as a "dirty" energy source) to natural gas, which burns with about half of the CO2 emissions of coal per unit of energy produced. Burning crude oil falls in the middle of coal and gas for release of CO2 emissions.
CO2 and the coal business have been widely publicized this year with the new proposal of the Environmental Protection Agency (EPA) under direction of President Obama to tighten guidelines of the Clean Air Act to have the electricity sector reduce greenhouse gas emissions by 30% from 2005 levels. Opponents have called this a “war on coal” because in most cases it is not economically viable for coal-fired power plants to meet the mandate. Already pressured by the natural gas boom in the U.S. and increasing regulatory scrutiny regarding emissions, the coal industry has suffered in recent years, lending to the bankruptcy of Patriot Coal and shrinking valuations of coal miners Alpha Natural Resources (NYSE: ANR) and Peabody Energy (NYSE: BTU).
In 2009, coal was responsible for 45% of U.S. electricity generation, which slipped to about 40% now and is expected by the Energy Information Administration to fall to 30% by 2030 if/when the new standards go into effect.
In the big picture, the terms "greenhouse gases," "carbon emissions" and "carbon dioxide" have become somewhat synonymous, but (not to split hairs too much) they shouldn’t be. Criteria pollutants, such as those that form soot and contribute to smog, also have a type of carbon, carbon monoxide. The EPA defines six criteria pollutants that can damage health, the environment and property: carbon monoxide, lead, nitrogen dioxide, ozone (form from precursor volatile organic compounds), particulate matter and sulfur dioxide.
To control the release of these toxins, the EPA established National Ambient Air Quality Standards under the Clean Air Act. The pollutants can be derived in several manners, but they are often unwanted side reactions of combustion, namely nitrogen oxides (NOx) and carbon monoxide (CO). About three-quarters of CO emissions stem from transportation sources, mainly motor vehicle exhaust. NOx, which forms when fuels are burned at high temperatures, can not only be dangerous because it irritates that lungs and lowers resistance to lung infections, but also because it can form the smog component ozone (O3) as it reacts to sunlight. Sulfur dioxide is released primarily from burning sulfur-bearing fossil fuels, such as coal, oil and diesel fuel.
The Difference in Action
It can be a challenge to minimize greenhouse gases and criteria pollutants simultaneously. China is picking its battle right now as it is forced to take steps to deal with a growing smog problem. This means slashing criteria pollutants. The challenge for China, the world’s second biggest economy and largest producer of carbon dioxide by far, resides in the source fuel for electricity. China has an abundance of coal, but is falling short in its efforts to unearth natural gas, leaving the country relying more heavily on imports from Russia, Australia, Qatar and Yemen.
Backed into a corner as to how it will continue to meet growing energy demand, China intends to build 50 coal gasification plants in less populated areas of the country to generate electricity. Beijing hopes that this maneuver will help with its air pollution problem by 2017, although the country’s net CO2 emissions will increase. This is because in coal gasification, coal is chemically transformed into synthetic natural gas (SNG). SNG emits seven times more greenhouse gas than natural gas and nearly twice as much CO2 as a coal plant, according to a study by Duke University. However, burning the SNG vastly reduces criteria pollutant emissions, which will help the smog problem, but puts controlling CO2 emissions on the back burner.
CHP - Killing Two Pollutants with One Stone
Combined Heat and Power (CHP or "cogeneration") is technology that produces two forms of energy, typically electricity and thermal, from a single source – most often natural gas. CHP can come in many styles, but a common application involves a natural gas-driven engine to generate electricity accompanied with the technology to capture nearly every bit of heat generated in the process, which is then re-purposed for thermal demand. CHP systems are effective tools to maximize efficiency (they can run 80% - 90% efficient) and reduce pollutants as they burn less fuel than conventional electricity-producing processes (which are about 33% efficient), yielding a reduction of about half of the CO2 emissions per energy unit compared to fossil fuel power plants.
Because an engine is part of a CHP System, exhaust is part of the equation, which means so are criteria pollutants. The latest products of Tecogen (NASDAQ: TGEN), a maker of high efficiency CHP products including natural gas engine-driven cogeneration, air conditioning systems, and high-efficiency water heaters for industrial and commercial use, have stepped-up the game by addressing the criteria pollutants through a patented "Ultra" system to take CO and NOx to near-zero levels. Tecogen, who seems to have no rivals in the area of eliminating criteria pollutants, not only installs the technology on its products, but also offers it through a retrofit for other’s systems where regulating pollutants can be especially challenging, yet regulated by law.
On that point, regulations – and more strict enforcement of them – could increase in the future. Section 110 of the Clean Air Act covers the six criteria pollutants, Section 112 covers "hazardous air pollutants" (e.g. those that cause cancer) and Congress was forward-thinking with penning Section 111(d) to cover the gamut of pollutants not expressly detailed that could pop up later. CHP is a logical solution for many industries to make sure that they are compliant with air standards and, fortunately, reap the pleasant side effect of often lowering long-term costs on energy. Understanding the differences between different types of pollutants should help those in the investment community make more informed decisions about what companies in different sectors of the energy business stand to benefit most from a shifting regulatory climate.
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SOURCE: Emerging Growth LLC
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