Europe clinches deal to fund carbon capture technology

By Joshua Chaffin in Brussels
Published: February 4 2010 02:00
Europe's ambition to become a leading player in carbon capture and storage advanced yesterday after member states agreed a plan that will direct billions of euros to test the unproven technology.
CCS - which involves capturing carbon from power plants and other industrial installations and then burying it underground so that it cannot collect in the atmosphere - is seen by some as a vital part of efforts to reduce global warming.
But it has also aroused considerable opposition because it has not yet been shown to work on a large scale at commercially viable rates. Critics complain that investment in CCS could divert much-needed funds from renewable energy sources - such as wind and solar - and energy-efficiency initiatives.
The European agreement, reached on Tuesday, broke a months-long deadlock between the European Commission and some member states that had imperilled an EU plan to build up to a dozen CCS-equipped demonstration plants by 2015.
Chris Davies, the British MEP who was a co-author of the original initiative, hailed it yesterday as "a positive step forward" and estimated that it could yield as much as €10bn ($14bn, £8.7bn) in public funding for CCS in Europe.
"We have now got in place the largest programme in the world for the funding of CCS technology," said Mr Davies.
The pilot plants are the cornerstone of an EU effort to bring down the cost of the technology and prove its safety so it can become commercially available by 2020. European leaders adopted a European parliament proposal in December 2008 to use revenues from the sale of 300m carbon permits under the EU's emissions trading scheme to help finance the pilot plants . They also agreed to dedicate some unspecified share to support "innovative renewable energy technologies".
Those plans have since languished amid a power struggle between member states and the Commission about who should have authority over the allocation of those funds. CCS proponents warned that the delay was causing Europe to lose ground to the US and China in a potentially lucrative green industry of the future.
Under the EU agreement, the Commission and the European Investment Bank will have a final say as to which projects receive funding to ensure the full range of capture and storage technologies is tested across Europe. The EIB will also oversee the sale of the permits, which will ultimately determine how much money is available.
At current carbon prices, which have been depressed since December's Copenhagen climate summit, the permits would be worth about €3.8bn. Although it is not compulsory, member states are expected to contribute to the test projects, potentially resulting in billions of additional euros.
Mr Davies expressed confidence that CCS projects would soak up the majority of the funding because their size and financial requirements were much greater than those of the renewable technologies.
Copyright The Financial Times Limited 2010.