Tuesday 23 September 2008

Report boosts European policy on CO2

By Tony Barber in Brussels
Published: September 22 2008 16:59


European advocates of trapping and storing carbon dioxide as a means of curbing power-plant emissions received a boost on Monday when an experts’ report said the technology could become commercially viable in less than 25 years.
The study by the McKinsey consultancy estimated that for new coal-fired plants, carbon capture and storage (CCS) costs would average €30-€45 (£24-£38, $44-$66) by 2030 for every ton of CO2 prevented from entering the atmosphere.

The report was a pioneering effort to calculate the economics of CCS, a still fledgling technology that aims to capture CO2 emitted from power plants and industrial sites, compress it and transport it to permanent storage sites deep underground or underwater.
Early European demonstration projects using CCS technology are forecast to cost €60-€90 per ton of CO2 saved, making them too expensive for private companies to operate commercially, the report said.
However, with analysts at Deutsche Bank, UBS and other institutions forecasting a carbon trading right price of €30-€48 per ton by 2030, CCS would at that time become a viable proposition in Europe, the report said.
In March 2007 European Union leaders committed to building up to 12 demonstration power plants that would incorporate CCS. They took the view that CCS, though untested, was almost certain to be a vital component of the EU’s battle against carbon-driven climate change.
Eighteen months later, EU governments, the European Commission and the European parliament have still not agreed on how to pay for the demonstration plants, which are supposed to be up and running by 2015.
A vote is due in the European parliament next month that could kick-start the funding process. Chris Davies, the MEP responsible for steering CCS legislation, said that about €10bn in EU funds would be needed for the plants.
Andris Piebalgs, the EU’s energy commissioner, said: “We must make fast progress on the financing of the demonstration projects.”
Warren Campbell, the McKinsey expert who wrote the report, said it would be important to get the demonstration plants going as soon as possible if the target date of 2030 were to be met, because it takes about six years to acquire permission and build a new coal power plant in Europe.
“CCS can be economically viable by 2030, with a sufficiently aggressive roll-out,” said Tomas NauclĂ©r, another McKinsey expert.
The report cautioned that there were several potential obstacles to widespread use of CCS technology, such as a lack of certainty about how to transport and store CO2 under existing EU legislation. Moreover, some environmentalists have raised concerns about whether stored CO2 will remain isolated from the atmosphere in the long term.
Copyright The Financial Times Limited 2008