Recommendations on the 2030 climate and energy framework from the European CCS Demonstration Project Network

Recommendations on the 2030 climate and energy framework from the European CCS Demonstration Project Network

Recommendations on the 2030 climate and energy framework from the European CCS Demonstration Project Network

During the European Council meeting in March 2014 the Heads of State discussed the 2030

Climate and Energy Framework. The discussions on energy security dominated the agenda and a decision on climate targets is now delayed until October 2014. The European Council invited the Council and the Commission to analyse the implications for individual Member States of the proposed EU-wide targets for emission reductions and renewable energy and announced it will take stock of progress made on this issue at its meeting in June. However, the Council conclusions did not include CCS, despite the fact that the critical role of CCS in meeting EU and global climate targets cost-effectively has been made clear by the latest IPCC report.

The European Carbon Capture and Storage Demonstration Project Network recommends that the European Council takes account of the elements listed below in its further discussions at its meeting on 26th -27th June.

CCS in the 2030 climate and energy framework Communication

Proposed 40% GHG reduction target:
The Network welcomes the 40% GHG reduction target proposed by the European Commission and urges the European Council to progress discussions with a view to taking a final decision on the new policy framework no later than October 2014.

The Network welcomes:

•         the principles listed in point 17 of the Council’s conclusions, specifically to base the new framework on “further improving coherence between greenhouse gas emissions reduction (…) and deliver the objectives for 2030 in a cost-effective manner, with a reformed Emissions Trading System playing a central role in this regard”. Within this context, the Network recommends that the role of CCS as key technology as cost efficient decarbonisation option should be emphasised and strongly supports the reform of the ETS as a long term driver for investment.

•         the recommendation in point 18 by the European Council to continue work on long term planning security for industrial investment in order to ensure the competitiveness of Europe's energy-intensive industries. The Project Network calls for support measures and for a low carbon innovation fund to be established that will provide the necessary confidence for companies to invest in low carbon technologies while achieving the GHG reduction targets.

The role of CCS needs to be explicitly highlighted in further discussions on the 2030 framework. The Communication recognises that: “CCS  may be the only option available to reduce direct emission[s] from industrial processes at the large scale needed in the longer term […]” and that “In the power sector, CCS  could be a key technology for fossil fuel-based generation that can provide both baseload and balancing capacity in an electricity system with increasing shares of variable renewable energy.” However, these analyses fail to recognise the key role of CCS for a cost-efficient decarbonisation. According to available studies without implementing CCS the cost of meeting Europe’s climate change targets by 2050 would significantly increase – by over 40% in the power sector alone and would be literally ‘priceless’ for most industrial sectors that have commitments to reduce emissions by 83-87% from 1990 levels by 2050 with no other decarbonisation option than CCS. The IPCC’s latest contribution to the Fifth Assessment report presents unequivocal conclusions on the need for technological developments, such as the CCS technology, being critical to stay within the 2 degrees scenario. The recent Commission’s Communication on European Energy Security Strategy highlights the need for CCS given the significant share of coal and lignite in electricity generation in several Member States and about 27% at EU level. While deployment of nuclear and renewables at scale provides increased security of supply as it reduces dependence on fossil fuel imports, these low carbon solutions can only be deployed in a responsive grid at scale with a flexible power generation solution such as fossil fuel based power generation with CCS.  The Network calls on the European Council to embed the CCS as an essential technology in further discussions around the Commission’s proposal on the 2030 climate and energy framework and in the discussions on energy security.

National decarbonisation plans:
The Commission outlines a new governance system based on national plans for competitive and sustainable energy to be drawn up by Member States. In addition, it proposes a set of indicators to assess progress over time and to provide an accurate base for a potential policy response. The Communication indicates that “These plans should set out a clear approach to achieve domestic objectives regarding greenhouse gas emissions in the non-ETS sector, renewable energy, energy savings, energy security, research and innovation and other important choices such as nuclear energy, shale gas, carbon capture and storage”. European Parliament and Council discussions on the 2030 framework include proposals for binding targets for energy efficiency and renewables. The Network does not have a position on the efficacy of specific binding targets, but it is essential that all low carbon technologies receive the same treatment. Otherwise the market is distorted and will not find the most effective low carbon solution for each application. The Network invites the European Council to support the inclusion of CCS in national decarbonisation pathways and to engage with the Commission on further defining whether and how CCS could be deployed by the Member States concerned. Additional time-limited national-level mechanisms that will create extra incentive for CCS should be specifically encouraged.

CCS financing:
The Network supports the Commission’s plan to step up the efforts on accelerating cost reductions and market uptake of low carbon technologies. Any further considerations on the use of revenues generated through the ETS to finance low-carbon demonstration projects through an Innovation Fund (“an expanded NER300 system”) should be designed in a way to incentivise the CCS projects taking into account that CCS projects lack the support of national support schemes and binding targets in contrast to some other low carbon technologies such as renewable energies.  The factors that led to failure of NER300 to deliver CCS projects in the first round, such as the rigidity of the award system will need to be reviewed under the new system. Despite cost effective project proposals, the majority of Member States were unable to provide guarantees on the timetable required for the award. The European Council should invite the Commission to design a new funding system with flexible and equitable allocation rules resulting in a better value for money for co-financing Member States.

CO2 storage and transport infrastructure: 
Targeted funding on European and national level is required to stimulate the development of transport infrastructure and storage projects. The upfront costs, risks and complexity of developing properly sized infrastructure that anticipates future demand must be supported. Early mover projects are often expected to take on the cost, time and effort required to develop suitably scaled transport and storage infrastructure which will be vital in the larger and longer term deployment of CCS. Therefore, the Network welcomes the Commission’s conclusion that the commercial deployment of CCS by the mid-2020s “must include the development of an adequate CO2 storage and transport infrastructure that could benefit from EU funding such as the Connecting Europe Facility and any potential successor”. Taking into account the vast potential in the West Mediterranean area and in the North Sea basin for the development of CO2 transport infrastructure between Member States and with neighbouring third countries this area should remain listed as a priority in the Connecting Europe Facility work programme and should be supported by the funding for storage characterisation made available under the Horizon 2020 programme in 2015 and upcoming years. The European Council should call on the Commission to issue a specific call for CO2 transport projects during 2015, including the development of CO2 transport infrastructure hubs, to be financed as Projects of Common Interest. The Network invites concerned Member States to use the funding available for storage projects under  Horizon 2020 programme and to work towards inclusion of common offshore CO2 transport projects in the next PCIs list.

Structural ETS reform:
The Network strongly supports the ETS as the long term driver for investment. It is clear that a structural reform is necessary. The Network therefore welcomes the proposed structural reforms of the ETS. However these structural measures are scheduled to be implemented only as of 2021 and any impact on ETS price will take even longer. In addition, in the absence of other direct support measures for CCS, the companies considering CCS investment will also require long term confidence in the operation of electricity market which is also currently lacking. Thus, the structural reform of the ETS is only a measure for the long-term. Until the ETS delivers a strong carbon price, CCS investment will require transitional support measures for both capital and operational expenditure.

Bio-CCS:
The recent reports by the IPCC and IEA show that CO2 removal from the atmosphere is likely to be essential to meet the 2oC target climate target. Without this “negative emission” technology, credible trajectories for future greenhouse gas emission reductions are inadequate to hold the temperature rise below 2oC.  Currently bio-CCS is the only cost-effective large scale negative emission technology available. The Network recommends that the Commission ensures the inclusion of negative emission credits from bio-CCS in the EU ETS mechanism, and also actively promotes the use by Member States of bio-CCS (including in co-firing applications) to meet the overall CO2 emission reduction target.