US major utility American Electric Power (AEP) has advised of its intention to put on hold plans to construct a carbon capture and storage (CCS) facility due to political uncertainty over future climate-change legislation in the country, and unfavourable current market conditions. About 60% of the companys 80 power plants are coal-fired and have come under pressure from cheap substitute products such as natural gas and generally sluggish power demand in the aftermath of the 2008-09 recession, according to a company statement. AEPs CCS plant was designed to capture about 1.5 million metric tonnes of carbon dioxide from coal combustion and store the emissions underground. Since AEP has not been able to attract interested partners in the project, the CCS plant is indefinitely deferred.

Significance:Despite ongoing disagreement between US Democrats and Republicans about climate-change-mitigation measures, in 2009 the government agreed to support AEPs CCS plans with USD334 million in funding to partially cover the costs of the project. AEP, however, advised it would terminate the agreement with the government, despite USD16 million in phase-one front-end engineering and design, and development of an environmental impact statement having already been carried out. It remains unclear whether AEP will be required to refund the amount or whether the government support package can be frozen together with the project. The fate of AEPs CCS project only highlights the business challenges the lack of US climate-change guidance results in on the federal level. Fourteen years after the Kyoto Protocol was initially adopted, the US still lags behind many Organisation for Economic Co-operation and Development (OECD) countries in terms of a federal climate-change-mitigation plan. While industries did welcome the United States no-nonsense stance on the matter for a long time, investors have come to realise that a carbon price and emissions-reduction measures are instruments that will prevail in the long-run, and they are seeking to price these future costs into their projected cash-flow calculations. Continuing to ignore this reality will therefore not be an option for the US if it does not want to lose its competitive edge.

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