Thursday, March 7, 2013

European Commission Split on How to Advance CCS

Last summer, the European Commission declared its intention to select two or three European CCS projects for major awards by the end of 2012 under the EU's NER300 funding program (see Update on NER300, 8/10/12).  But these first round funding plans fell apart in December, after the Commission was unable to persuade any Member State to provide the required 50 percent cost share for candidate projects.  Faced with this setback, the Commission shifted the entire 275 million ($357.8 million) dedicated to CCS under the program to the second and final NER300 funding round, with final award decisions expected by the end of 2013.

Now, with national governments apparently unwilling to support projects, and funding levels much lower than originally anticipated (since they are based on sales of ETS emission allowances, which plummeted in value following adoption of the NER300 funding framework), Brussels is considering other ways to propel CCS forward in Europe.  According to a draft "communication" currently circulating within the Commission, given the moribund state of the European carbon market, "there is no rational case for economic operators to invest in CCS," and "it is unrealistic to assume that industry will commit the appropriate investments to CCS projects."  Rather than relying on ETS-based NER300 funding, the draft proposes alternative strategies to promote CCS uptake, including emissions performance standards for power plants and tradable CCS certificates akin to renewable energy certificates (RECs).  The performance standards proposed by the UK as part of its Electricity Market Reform (EMR) initiative (see Electricity Market Reform in the UK, 12/9/12) are singled out as a potential model for the rest of the EU.  However, the Directorate-General for Climate Action reportedly opposes releasing the communication and triggering a public consultation, preferring instead to drive CCS deployment through the ETS carbon market.

CCS performance standards is a good idea whose time has come.  The ETS has manifestly failed to deliver CCS to Europe, either through cap-and-trade carbon prices or as a source of capital funding.  Despite proposals to bolster allowance prices by "backloading" auctions to temporarily restrict supply, the ETS is clearly too weak to overcome the cost constraints inherent to carbon capture.  Short of a robust carbon tax, emissions performance standards offer the best way to ensure widespread adoption of CCS technology and deployment of integrated systems (for more, see Calls Intensify for More Global Action on CCS, 5/16/12).  The climate directorate should drop its objections and support the new proposals from the Commission.

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