This morning, the Centre for European Reform launched the report which Simon Tilford and I have written about what the EU should do about CCS. We argue that large-scale demonstration will require public money, and that widespread and rapid deployment will require regulation, ideally at European level. The report is also on Climate Answers, at CCS: What the EU needs to do – Part 1 and CCS: What the EU needs to do – Part 2.
Ed Miliband, the UK Energy and Climate Change Secretary, spoke at the launch. He began by saying that CCS will require government involvement, both as investor and as regulator. He then said that the UK government is determined to promote CCS and that the Energy Bill currently going through Parliament would raise money for four CCS large-scale demonstrations. Asked by a journalist when there would be an announcement on which projects the government will support, he said “soon”, but would not be more specific.
I spoke next and said that UK energy policy is now much better than it was 18 months ago, when the Department for Energy and Climate Change was created. This is true – before then, energy was dealt with by the industry department and climate change by the environment department. However, I stressed that it is not perfect. The demonstration programme must cover the full portfolio of technologies: pre-combustion, post-combustion and oxyfuel, plus gas (which is excluded in the six projects chosen so far by the European Commission). Post-combustion is needed because it can be retrofitted – this was the reason given to explain why the UK’s first competition was confined to post-combustion. Yet one of the remaining two projects that will eventually be selected for the subsidy from the first competition, Eon’s Kingsnorth project in Kent, would involve building a new coal station. It makes absolutely no sense to build new capacity to demonstrate that something can be retrofitted. The other remaining project, Scottish Power’s Longannet station, would retrofit CCS to existing capacity, so is obviously a better option. (I should say, in the interest of transparency, that Scottish Power sponsored this report, but did not have editorial control, and we are certainly not recommending Longannet because of that.)
I then said that any company that receives public money for demonstration must agree to full knowledge sharing of the results. There is no justification for public money being used to gain knowledge that remains private. And the European Commission should give preference to projects which would form a CCS cluster, as this would reduce infrastructure costs. It should also give preference to projects that have already received a grant under the European Economic Recovery Plan (EERP). The EERP €180 million grant will not be enough to get any of the projects built. Giving preference to clusters and EERP projects conflicts with a strict interpretation of competition policy, but the money must not be spread too thinly and getting CCS built is more important.
Beyond demonstration, deployment will need regulation. The European Parliament has not yet agreed the process by which demonstration funding decisions will be taken – it has until the end of April to make objections. The parliament should accept the Commission’s proposals on demonstration funding and focus instead on introducing regulations for rapid and widespread deployment. The Commission is weak on this – proposing to do nothing until demonstration is finished. However, energy companies appreciate clear regulatory signals, as it lowers their cost of capital, so there is no good reason to delay.
Jesse Scott from E3G spoke next. E3G, and Jesse herself, have been instrumental in getting the EU to make progress on CCS. She stressed that, as well as gas and coal, CCS needs to be applied to key industrial sectors like steel and cement. Then came Jim Skea, Research Director of the UK Energy Research Centre and a member of the Climate Change Committee, which advises the UK government on carbon budgets. Jim also stressed the need for an early regulatory signal, as well as funding for large-scale demonstration. He emphasised that CCS has been shown to work at small scale and for all the parts of the process, but not at large scale or in an integrated way. That is why large-scale demonstration is needed, and why spending public money on it is justifiable.