Word of the Day: Sequestration

Quick, hide that carbon dioxide!

Carbon capture and sequestration is a mouthful to say, but it's General Electric's (NYSE: GE) and BP's (NYSE: BP) brand new endeavor.

The idea is really simple: extract hydrogen from fossil fuels like coal, oil, or natural gas, and shove the carbon dioxide byproducts into a deep, dark hole in the ground. The result is cleaner fuel -- the only byproduct of burning hydrogen is water -- and more efficient use of our natural resources.

In fact, the efficiency cuts in from both ends of the equation. First, we get to squeeze more use out of the fossil fuels we have around, and even out of some byproducts that go to waste entirely today. Then, the carbon dioxide can be pumped back into nearly dry oil and gas wells, helping to push out any useful materials still left in there that are unreachable by conventional means.

Carbon dioxide produced by today's coal or oil power plants can also be sequestered. The hideaway method is estimated to reduce CO2 emissions by as much as 90%, and applying that technique to power generation can reduce global emissions substantially. Of all greenhouse gases today, 40% are produced by electricity generation.

Of course, the distilled hydrogen can also be used in fuel cells. Those next-generation batteries convert hydrogen into electricity without burning it, and companies like Ballard Power Systems (Nasdaq: BLDP), Hydrogenics (Nasdaq: HYGS), and of course FuelCell Energy (Nasdaq: FCEL) are hoping to turn fuel cells into the power source of choice for everything from cars to cell phones.

The idea of carbon capture and sequestration (all together now!) has been around for years, and there are other supporters and even government contracts already in place. But pumping the gas down deep enough takes a lot of pressure and is very expensive, so the challenge is to make the technique economically feasible. BP and GE certainly have the scale and resources to make it happen, and I wish them the best of luck.

Further Foolish reading:

• An alternative energy play made it into David Gardner's All-Star lineup.
• Then there's the Canadian oil sands strategy.
• Not every Fool likes Ballard's chances.

Looking for the next great energy innovator? Our Motley Fool Rule Breakers newsletter can lead the way. And now you can take the swashbuckling newsletter dedicated to up-and-coming companies in emerging fields for a 30-day free spin .

Fool contributor Anders Bylund doesn't hold any position in any of the companies mentioned today, but he loves to hear about promising alternative energy projects. Foolish disclosure is right out in the open; you can check out his holdings here .