Carbon capture funding row looms at Euro summit

Brussels showdown expected as nations argue over how to pay for technology to bury greenhouse gases
David Gow and Alok Jha
guardian.co.uk, Wednesday December 10 2008 17.46 GMT

Gordon Brown faces a bruising battle at Thursday's EU summit to persuade his fellow European leaders to back his proposal for subsidies to kickstart carbon capture and storage (CCS).
He wants more than 10bn euros for the technology, which would bury the emissions from burning fossil fuels, preventing them from contributing to global warming.
CCS is a key element of the climate package EU leaders are battling over, which aims to ensure the bloc meets its ambitious carbon-cut targets of 20% by 2020. The British prime minister is demanding that the EU sets aside 500m pollution permits from a special pot under the emissions trading scheme (ETS) to provide as much as 15bn euros to fund up to 12 CCS demonstration projects by 2015.
But it emerged on Wednesday that the French, who will chair the two-day summit, are proposing that only 150m permits – worth roughly 2bn euros – be allocated. A majority of the EU's 27 countries is willing to support only a maximum of 200m permits, senior diplomats said.
Chris Davies, Liberal Democrat MEP and chief European parliamentary negotiator on CCS, said MEPs would insist on obtaining their "final offer" of 350m permits. "The endgame on this critical issue takes place over the next 24 hours," Davies said. "The UK government has to be as belligerent as other governments on other issues in getting its way on this." The European parliament will meet on Saturday to assess the outcome – and could vote down the entire climate change package.
CCS takes CO2 from power stations and heavy industrial plants and stores it in underground rock formations. It is viewed as a key but controversial element of global efforts to combat global warming, as it would allow the continued heavy use of coal for power. The incoming Obama administration in the US, which backs it, is looking to the EU for a lead. On the eve of the summit, energy companies and green groups joined to urge the EU to commit the required funding, arguing that it is vital if Europe is to meet its emissions reduction targets and could create many tens of thousands of new jobs.
But Britain, as of Wednesday, can count on the support of only Poland, the Netherlands and, perhaps, the Czech Republic for its stand. Davies, however, suggested that Germany and Italy could be brought on board – if they win key concessions on other issues in the typical horse-trading at EU summits. "The government should treat this as a deal-breaker," he said. "There's no way 150m permits can pay for the full range of demonstration projects."
Some countries, such as Germany, are insisting that funding be taken from the existing EU budget, with each state paying its share according to GDP. Others, aware that none of the projects will be handed to them, are said to be digging in their heels over such subsidies. Poland, heavily dependent on coal, wants two of the projects for itself.
The International Energy Agency (IEA) predicts the world's use of power will increase by 50% by 2030, with 77% of that coming from fossil fuels. CCS technologies promise to trap up to 90% of the associated CO2 emissions. As such, it could be a vital tool for countries such as China, where the government's economic growth and poverty reduction targets depend on building huge numbers of coal-fired power stations.
"It is absolutely imperative that the heads of government commit to supporting the funding necessary to ensure that the demonstration projects can be operational by 2015," said Joan MacNaughton, formerly an adviser to the UK government on energy and now senior vice president of power and environmental policies at French engineering company Alstom.
Though each element of the CCS process is already proven and in use, until now no one has demonstrated a full-scale system – largely because developing it is likely to be very expensive. Many leading power companies have been reluctant to fund CCS individually, arguing that governments should shoulder some of the financial risks.
Whatever the EU decides, said Stuart Haszeldine, a geologist at the University of Edinburgh and an expert on CCS, projects will go ahead regardless in Norway, Australia, Canada and US, leaving the rest of Europe behind. "It would be very embarrassing for Europe not to do anything. It's not the end, but it means the ability to deliver the 2°C climate target, which Europe has always says is its top-level policy, the ability to deliver that becomes vanishingly small the longer this drags on."
In their letter, the environment and energy groups' coalition cited a study by the IEA, which pointed out that the the window of opportunity for CCS to make a material impact on climate change was closing. "Now is the time to act. Every day that full-scale demonstration of CCS is delayed, we lock in new CO2 emissions and make the challenge of meeting our CO2 targets harder."
Explainer: How carbon is captured and stored