Capture and storage of CO2 could earn firms ETS credits

Companies that capture and store carbon dioxide (CO2) emissions will gain credits under the European emissions trading scheme (ETS), according to plans to be proposed by the European Commission in January.

A draft communication set to be presented by the Commission on 23 January says that "the current emissions trading scheme can recognise CO2 captured and safely stored as not emitted". The communication on carbon capture and storage (CCS) and an accompanying directive will be one of five proposals to be presented by the Commission on that day as part of the EU’s bid to slash its carbon emissions by at least 50% by 2050.

At the beginning of 2007 the Commission announced that Europe should launch 12 large-scale demonstration CCS projects for coal and gas-fired power plants by 2015, with all new coal-fired power plants to include CCS by 2020.

The draft communication says that €1 billion will have to be spent until 2020 on research and development to allow capture and storage technologies to reach the point where they can be deployed commercially. Billions more would need to be spent on building the sites.

Currently, the high cost of building such sites would make energy produced through them less competitive than energy produced in a conventional way. The paper says that this money should come from a mix of public and private funding and it implies that member states that expect to make significant use of coal will need to play "a major role" in guaranteeing funding.

In order to help the fledgling sites thrive, the Commission says that it is ready "to view favourably" the use of state aid to cover the extra costs of CCS. Under the EC treaty, state aid rules can be relaxed in some circumstances to take environmental goals into account. New guidelines on the environment and state aid are also to be published in January.

The draft paper says that member states can decide how to support their own CCS projects and can consider options including feed-in tariffs, direct grants and CO2 price guarantees.

But Claude Turmes, a Green Luxembourgeois MEP, said that the industry should be expected to pay more towards the costs of CCS, arguing that industry had made windfall profits under the first phase of the ETS.

"This is [public] money which would have to be diverted from energy efficiency and renewables, which are both cheaper," Turmes said, adding that the EU should build at least half its demonstration sites outside Europe to help developing economies cut emissions.

Industries generally welcomed the approach outlined in the Commission’s paper. A spokesman for German energy giant E.ON said that the company approved of including CCS in the ETS.

"A working, EU-wide harmonised ETS would be incentive enough for everyone to produce electricity without CO2," he said.

Arno Behrens, a research fellow at the Centre for European Policy Studies, said that many open questions remained about cost and the viability of the technology. He said that the directive must address the question of who is responsible if carbon seeps out of its underground or under-sea storage chamber in 30 years’ time.

Companies that capture and store carbon dioxide (CO2) emissions will gain credits under the European emissions trading scheme (ETS), according to plans to be proposed by the European Commission in January.