On Tuesday 2 February 2010, European Union member states agreed to European Commission proposals on how to distribute billions of Euros collected under the Emissions Trading Scheme (ETS) to CCS and renewable energy projects. The EU aims to have 10 to 12 large-scale (above 250Mw) CCS plants operational by 2015. This target was agreed in 2007 and the source of funding identified in 2008, but arguments about whether the Commission or national governments should select the schemes have held up progress in actually making awards of most of the money.
At present, around half of the EU’s electricity is produced by burning fossil fuels, two-thirds of which comprises coal. EU countries are currently planning to build 50 large coal-fired power stations. Therefore, there is no way that the EU can meet its 20% carbon reduction target by 2020 without widespread deployment of CCS.
The greatest political breakthrough is that member states have agreed to let the Commission select schemes. The Commission did well in selecting schemes for the €1bn for CCS under the European Economic Recovery Plan. This will go to six projects:
- Post-combustion in Poland, the Netherlands and Italy.
- Pre-combustion in Germany and the UK.
- Oxyfuel in Spain.
(For an explanation of different technologies, see Carbon capture and storage.)
Each will get €180 million, except the Italian project which will get €1,000 million. National governments are required to provide match funding, but even €360 million of public money will not be enough to get the projects built. CCS is substantially more expensive than ‘conventional’ (which means filthy) coal.
This week’s agreement means that the revenue from 300 million ETS permits will go to CCS and “new and innovative” renewable projects. This would be about €4.5bn at the current market price of €15 per tonne. The Commission aims to make awards to eight CCS projects by the end of 2011. The text of the agreement states that the projects selected under the Recovery Plan will not get any preferential treatment in the process of selecting ETS awards. Hopefully, this is just to avoid running into legal difficulties with EU competition policy. In practice, the six Recovery Plan projects have been rigorously and fairly assessed, and it would make little sense if public money is spread out so thinly that projects are not actually constructed.
The agreement between the Commission and the member states now goes to the European Parliament for a three-month scrutiny. MEPs should not change the agreement about money. Instead, they should focus on regulation. Beyond the demonstration projects, the EU needs to ensure widespread and rapid CCS deployment. This may require further subsidy and will certainly require regulation. Rules on emissions from power stations and other industrial plants are being revamped into an Industrial Emissions Directive. The Commission opposes including CO2 in this, on the argument that CO2 is already dealt with under the ETS. So it is, but not adequately. At a time of economic upheaval, and with an urgent need to reduce emissions, there is no time for theological discussion about whether market mechanisms or regulations are better. Both are needed.