Europe backs carbon capture with €10bn

By Joshua Chaffin in Brussels and Ed Crooks in London
Published: October 7 2008 22:13

European legislators have committed about €10bn ($13.6bn, £7.7bn) to help build as many as a dozen power stations equipped to capture and store carbon dioxide, throwing its weight behind a technology that supporters say has immense potential to curb greenhouse gases.
The European parliament’s environmental committee brushed aside concerns about financial turmoil to back the unproven technology, in a narrow vote in favour of a package that would make Europe a global leader in cutting emissions.

Tuesday’s vote was dubbed “Super Tuesday” by legislators and environmentalists eager for Europe to pass an ambitious climate regime ahead of an international meeting next year to renegotiate the Kyoto Treaty.
It will form the basis of discussions with the EU’s 27 member states, with France hoping for a final agreement before the end of their presidency in December.
The environmental committee endorsed the target for the EU to reduce its carbon dioxide emissions by 20 per cent by 2020, or 30 per cent if a broader international agreement is struck. It also supported an expansion of Europe’s carbon emissions trading scheme that would force power generators to pay for 100 per cent of their emissions allowances, beginning in 2013. They currently receive most for free.
Plans to develop as many as 12 power plants, equipped with carbon capture and storage to test the technology, were agreed by EU governments last year. However, little progress was made because they had not been allocated any funding.
The proposal approved onTuesday would set aside revenue from carbon credits that Europe will sell at auction, beginning in 2013, as part of its expanded emissions trading scheme. Those allowances could be worth roughly €10bn, according to Chris Davies, the liberal MEP who is championing the technology. Mr Davies’ proposal would also allow for at least one of the pilot plants to be built in China, which is heavily reliant on coal-fired power plants.
The vote took place against a backdrop of darkening economic news that appeared to give new weight to efforts by industrial lobbyists and some member governments to delay or dilute the measures.
Hans-Ulrich Engel, head of oil and gas and the European region for BASF, the German chemicals and energy group, on Tuesday urged Brussels to protect energy-intensive industries from the increased energy costs imposed by the emissions trading scheme: a proposal already made by the German government.
He warned that unless Brussels moved quickly to ease the impact of the ETS, investment in industry would be displaced out of the EU.
Avril Doyle, the MEP who drafted one of the bills, acknowledged the economic environment, but said that legislators could not put aside long-term goals because of a short-term crisis. The committee did offer some concessions, allowing so-called energy-intensive industries a phase-in period for the new trading scheme.
Beginning in 2013, they would have to purchase only 15 per cent of their emissions allowances; down from the 20 per cent figure set out by the European Commission earlier this year. That will increase to 100 per cent by 2020.
It also pulled back from a measure that would have placed a ceiling on carbon emissions for new power plants at 350g per kilowatt hour, a measure that would have banned construction of new coal-fired plants. Instead, the committee set the limit at a more manageable 500g, the same as that set by California.
Copyright The Financial Times Limited 2008