Ion Engineering says its new technology could cut the costs of capturing carbon dioxide from coal-fired power plants to as low as $20 a ton – a price that could get the attention of companies and governments looking to spend tens of billions of dollars on reducing greenhouse-gas emissions over the coming years.

But the Boulder, Colo.-based startup founded by University of Colorado researchers will first set its sights on a market that actually exists today – cleaning CO2 and other contaminant gases from natural gas, CEO Alfred Brown said Friday.

Ion's breakthrough is in using ionic liquids – molten salts – in place of water in the amine solutions now used in so-called "gas sweetening," Brown said.

Processing "sour" natural gas to remove CO2, hydrogen sulfide and other contaminating gases is a $12 billion-a-year business in the United States, and possibly as large as $50 billion worldwide, Brown said.

Using ionic liquids, which don't evaporate like water-based solutions and react with contaminating gases at a much higher rate, could lead to 30 percent to 40 percent reductions in those processing costs, he said.

"That alone addresses a huge market," Brown said, noting that cheaper sweetening processes could also open up "sour" gas fields now viewed as too expensive to develop. Ion – founded six months ago with funding from its founders and the University of Colorado – is seeking to raise about $5 million to develop that business, he said.

But the next step for Ion's technology – capturing carbon dioxide emitted from coal-fired power plants and other large-scale sources – will take a lot more money. "You could be talking $30 million to $40 million there," he said.

And for that, Ion is looking to partnerships with companies and institutions doing carbon capture pilot projects, as well as the federal stimulus money aimed at promoting them.

The stimulus package signed into law by President Barack Obama on Tuesday adds $3.5 billion to  the federal Fossil Energy Research and Development program,  which includes carbon capture andstoragefunding, bringing the program's total funding to more than $8 billion.

Worldwide, carbon capture and storage is looking at $20 billion in government grants and other incentives, Cambridge, Mass.-based Emerging Energy Research reported last week.

But while several carbon-capture pilot projects are underway around the world, the costs remain high (see Canada to Beat U.S. to Carbon Storage and Vattenfall to Trap Carbon Emissions).

The Department of Energy said in 2007 that current technology's costs are about $150 per ton of CO2 captured – enough to increase the cost of electricity by 2.5 cents to 4 cents per kilowatt hour.

Mark Trexler, director of EcoSecurities Consulting, said at the Clean-Tech Investor Summit in Indian Wells, Calif. last month that recent technology improvements have brought costs of carbon capture down to $50 to $100 a ton.

ION's $20-per-ton carbon capture cost would place it among the cheapest being promised, though Brown cautioned that the figure was based on "very preliminary" estimates.

"Obviously, we are trying to get into a small pilot situation as quickly as we can to validate these assumptions," he said. "Both gas and coal-fired power plants is what we're looking at. We're putting together partnerships right now."

But, of course, carbon that's captured needs to be stored somewhere – the other half of the carbon capture and storage, or sequestration, equation.

"The variable here is, sequestration hasn't been figured out yet," he said. While several projects around the world inject captured carbon into oil and gas wells or underground caverns, it's unclear whether that method will be effective for large-scale carbon storage (see DOE to Spend $126M to Put CO2 Underground).

Ion is exploring other uses for the CO2 it captures, including providing it to algae-to-biofuel companies that could use the gas to speed growth of the plants they want to turn into fuel at commercially viable costs, Brown said (see GreenFuels Farms 100 Square Meters of Algae).

The company's founders are Jason Bara and Dean Camper, two University of Colorado scientists with a long history in research into using ionic liquids for carbon capture. Their research has been published by the American Chemical Society and in other peer-reviewed journals.