Alternative sources of fossil fuels such as oil sands and coal-to-liquids have significant economic promise, but the environmental consequences also must be considered, according to a new study by the RAND Corp.
The study by RAND, a non-profit research organization,
provides a review of coal-to-liquids and Canadian oil sands technologies,
considers possible impacts on fuel costs from future limitations on carbon
dioxide emissions, and compares costs of the alternative fossil fuels to
conventional petroleum fuels in 2025.
"With concerns about high and unstable world oil
prices, there is strong interest in developing alternative fuel sources,"
says Michael Toman, lead author of the report. "Oil sands and
coal-to-liquids represent economically important options for expanding global
fuel supplies that can ease upward pressures on oil prices."
However, Toman explains, current methods for oil sands
production require large quantities of water and can harm local water quality,
though technical advances are lessening these pressures. Development of oil
sands also can cause large-scale disturbances of land and habitat.
Both resources also represent potentially significant
sources of carbon dioxide emissions; carbon dioxide is the key greenhouse gas
driving global climate change. Total carbon dioxide emissions from production
and use of oil sands are about 20 percent higher than conventional petroleum,
while total emissions from production and use of liquid fuels from coal are
about twice the emissions of conventional fuels.
Emissions of carbon dioxide from producing oil sands and
liquid fuels from coal can be reduced to levels comparable to conventional
petroleum by investing in equipment to capture and pump the carbon dioxide into
long-term underground storage. The technical and economic feasibility of
large-scale carbon capture and storage is currently under study, but has not
yet been demonstrated.
"Because the potential environmental impacts are
considerable, decision makers need to assess the economic and other benefits of
alternative fossil fuels relative to these environmental concerns," Toman
Production of Canadian oil sands is commercially established
and currently is greater than 1 million barrels per day. Substantial oil-sand
reserves exist, with Canadian reserves second only to Saudi Arabia in volume.
The study concludes that oil sands likely will remain very competitive with conventional
petroleum, even after accounting for the costs of emitting or capturing and
storing carbon dioxide emissions.
Modern coal-to-liquids technology currently is being
developed, drawing upon a sizable experience base in key industrial processes,
including several decades of production in South Africa using older technology.
Large-scale commercial production of coal-to-liquids would require large
quantities of coal, but U.S. and global coal resources are quite adequate for
meeting potential demand, according to the report.
The future cost of liquid fuels from coal also appears to be
reasonably competitive with conventional petroleum, provided:
(1) oil prices do not fall back to pre-2006 levels for
(2) there are further improvements in coal-to-liquids
technology as production volumes grow; and
(3) carbon dioxide limitations do not impose too large a
cost burden on liquid fuels from coal relative to conventional fuels.
Costs of carbon dioxide limitations would be moderated if
carbon dioxide storage proves to be technically feasible and relatively
low-cost on a large scale.
"The most important constraints for oil sands are the
local environmental impacts and demand for water," Toman says. "Since
major investments in coal-to-liquids become more likely if environmentally
sound carbon capture and storage can be commercialized at relatively low cost,
the future expansion of this fuel source will be strongly influenced by future
private sector and government initiatives to support such
"However, even with carbon capture and storage
deployed, neither alternative fuel offers a path toward large long-term
reductions in total carbon dioxide emissions to limit climate change,"
Toman says. "There will still be a need to develop lower-carbon fuel
options, such as fuel synthesized from a mixture of coal and sustainably grown
The study was funded by the National Commission on Energy