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Dirty Fuels And The Bailout

As Dayo noted a few days ago, the final version of the financial bailout bill was sprinkled with goodies for renewable energy, including tax credits for solar investments and a one-year renewal of the all-important production tax credit for wind projects. Unfortunately, clean energy wasn't the only kind of energy to get a tax break. The bill also contains some sizeable tax giveaways to promote what may well be the dirtiest energy sources around: oil shale, tar sands, and liquefied coal.

Taking low-grade fossil fuels—like oil shale, tar sands, or coal—and processing them into liquid fuels for use in transportation is an old idea that's now enjoying a resurgence in popularity, thanks to politicians looking for an alternative to imported oil. But, according to a recent RAND report, these "unconventional" fossil fuels inflict a high cost on the environment. Fuels derived from tar sands are about 20 percent more carbon-intensive than fuels derived from oil, mostly because of the energy required to cook useable fuel out of the tar sands. Liquid fuels derived from coal are about twice as carbon-intensive as regular fuels, because the chemical process used to convert coal into a liquid releases large amounts of carbon dioxide. And that's not counting the local—and not-so-local—environmental damage caused by digging up the raw materials out of the ground, often through strip mining.

Liquefied coal was once—like "clean coal"—an environmentally questionable idea that enjoyed the support of both Barack Obama and John McCain. But, after being criticized by green groups during the primary season, Obama has since changed his mind, saying that he'd only support liquefied coal if it emitted 20 percent less carbon over its life cycle than conventional fuels. That's could conceivably happen, but only in a liquefaction plant that processed biomass as well as coal and permanently sequestered all of the carbon that was produced during the liquefaction process. And, while carbon sequestration might make coal-derived fuels greener, it would also drive up their price—likely to the point where they couldn't compete with gasoline and other petroleum-based fuels. That's why their bailout-bill tax break is looking like a lousy investment.

--Rob Inglis, High Country News