Speak Up Energy

The Commission says it is “open” to a discussion on how the EU Emissions Trading Scheme and EU state aid guidelines could be leveraged to fund the development of up to 15 carbon capture and storage (CCS) demonstration plants by 2020.

But experts continue to diverge on the best way to raise the necessary cash. The remarks were made yesterday (3 June) by Piotr Tulej, head of unit for energy and environment in the Commission’s environment service (DG Environment).

Tulej spoke at a workshop on CCS financing hosted by UK Liberal MEP Chris Davies, Parliament’s rapporteur on the Commission’s proposed directive to establish a legal framework for the storage of CO2 in underground geological formations.

Davies favours using the EU Emissions Trading Scheme (EU ETS) as one option for freeing up money for the development of CCS demonstration plants. Under such an approach, installations using CCS would receive double or even multiple ETS credits for each tonne of CO2 captured and stored. These credits could then be sold on the EU’s carbon market.

But experts who spoke at the 3 June workshop were divided on whether or not this is the best way to proceed, with some raising concerns that such a mechanism would “wreck” the ETS.

Positions:

John Scowcroft, head of unit for environment and sustainable development policy at Eurelectric, argued that any CCS financing formula “should not impact” upon the internal electricity market or the ETS. Scowcroft suggested a scheme whereby a target carbon price at which CCS becomes profitable is set through a competitive bidding process. If the real carbon price is below the winning bid, governments should foot the remaining costs, he said.

In addition, “ETS should not be used to subsidise any one technology,” according to Scowcroft, whose view on the matter was supported by Steve Drummond of the emissions trading brokerage firm Cantor CO2. If the EU ETS is used to finance CCS, “then you get a long queue of other technologies looking for subsidies,” Drummond said.

Drummond also argued that using the ETS is simply a “complicated way of having member states subsidise CCS,” since the proceeds from EU ETS auctions would normally go into the coffers of member states, who remain opposed to Brussels dictating how such monies should be spent.

Adam Whitmore of BP argued in favour of a double credit system, but noted that shifting carbon and energy prices make it “difficult to finance projects against that degree of volatility”. The EU could, however, allocate multiple credits on a variable basis in accordance with fluctuations in the carbon price, he suggested.

But any such scheme should reward installations on the basis of tonnes of CO2 not emitted, rather than on the basis of tonnes of CO2 stored, since the latter would act as an incentive against the construction of efficient power plants, he said.

Finally, Whitmore was sceptical about the notion that initial support for CCS would put be enough to lead to the development of an independent CCS market. “I don’t think 10-12 demonstration projects will end the need for CCS support mechanisms,” he said, citing the precedent of ongoing state support for nuclear and wind power installations.

Elvind Hoff of the environmental foundation Bellona outlined a ‘Plan B Galileo funding model’ whereby the EU would divert funds from the 2007-2013 budget towards CCS. Hoff used Galileo as an example, since the EU took the unprecedented step of shifting funds within an already agreed EU budget. Because of the current spike in food prices, the EU will save between five and 12 billion euros on farm subsidies in 2008, according to Hoff, who suggested this money could be diverted to fund CCS.

But Hoff’s suggestion was criticised by an audience participant from Parliament’s Budget Committee, who pointed out that it took one year to reach a unanimous agreement between Council and Parliament to divert funds from a normally ‘locked’ budget to Galileo, and that numerous technical difficulties plagued the process.

From EurActiv

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