EU, China to Finance Demo of Carbon Capture, Storage Technology

June 26, 2009 // Published as a news service by IHS

This comes in the context of a commitment made by the European Union (EU) and China to develop and demonstrate, both in China and Europe by 2020, advanced, near-zero emissions coal technology through CCS.

CCS is an important technology in the fight against climate change and has the potential to cut greenhouse gas emissions from power generation in fast-developing and coal-dependent emerging economies, such as China.

EC Environment Commissioner Stavros Dimas said, "We have taken action to put in place the regulatory framework and the incentives to facilitate CCS demonstration in Europe and now we are making good on our promise to China. Action by developed and developing countries alike is essential to ensure global warming is kept below the danger level of 2°C. This important cooperation between the EU and China on CCS can act as a model for cooperation under the post-2012 global climate change regime the world must agree in Copenhagen in December."

EC Commissioner for External Relations Benita Ferrero-Waldner added, "The joint efforts of the EU and China are key to the success of the post-2012 climate change negotiations in Copenhagen and we have an opportunity to show true leadership. The fact that the EU is supporting the construction of a power plant equipped with this innovative technology in China is proof of our common goal to look way beyond Copenhagen and to prepare the ground for cleaner energy production based on coal worldwide."

The Need for Action by All Countries
As set out in the EC's Copenhagen communication (see IP/09/141), both developed and developing countries need to mitigate their greenhouse gas emissions in order to limit average global warming to less than 2°C compared to pre-industrial levels.

Under the United Nations Framework Convention on Climate Change, the EU and the other developed countries have agreed to help developing countries tackle climate change through financial and technical cooperation.

EU Cooperation with China on CCS
Specifically, the EU agreed in 2005 to cooperate with China on a range of climate change issues, including CCS, in the context of the EU-China Climate Change Partnership.

The EC's June 25 communication describes its plans for establishing an investment scheme to co-finance the design and construction of a power plant to demonstrate CCS technology in China. The EC has programmed funding of up to €50 million for the construction and operation phase of the project, out of a total of €60 million that has been earmarked for cooperation with emerging economies on cleaner coal technologies and CCS.

Depending on the choice of technology used, and assuming China introduces some form of carbon pricing instrument, the additional cost of constructing and operating a new power plant equipped with CCS in China, over a 25-year lifetime, is estimated at €300 to €550 million.

The EC will work closely with China, EU member states, other European Economic Area (EEA) countries and industry to secure the additional financing required. The EC proposes to combine these funding sources in a public-private partnership, possibly in the form of a "special purpose vehicle."

This investment scheme could serve as a model for other technology cooperation activities between developed countries and emerging/developing countries in the context of a post-2012 climate change agreement.

The Importance of CCS
Coal, the fossil fuel with the highest emissions of carbon dioxide, is China's predominant energy source, contributing 70% to the energy mix. It is expected that coal will maintain an important role in the future.

Therefore, ways to reduce the impact on the climate of coal burning need to be found. CCS technologies could make a significant contribution by mitigating the greenhouse gas emissions produced. CCS would be a bridge technology, while alternatives to fossil fuels are further developed and deployed.

EC analysis indicates that under an emissions scenario compatible with meeting the 2°C target, around 18% of global fossil fuel power generation would have to be fitted with CCS technology in 2030.

Action on CCS in the EU
EU leaders have committed to establishing a network of up to 12 CCS demonstration plants in the EU by 2015.

Directive 2009/31/EC - the new EU directive on the geological storage of carbon dioxide, agreed upon as part of the EU climate and energy package (see IP/09/628) - sets out an enabling legal framework for CCS to enable the safe operation of CCS in Europe.

The EU also agreed to incentivise CCS demonstration through the EU's Emissions Trading System (ETS), by providing funding from the auctioning of EU ETS allowances that can be used to co-finance CCS demonstration plants (carbon dioxide safely stored does not count as emitted), as well as through revised state aid rules.

The European Economic Recovery Plan has allocated €1,050 million to CCS demonstration projects inside the EU. In addition, several EU companies have announced demonstration plants to be completed in the EU over the next five to ten years.

Next Steps
The EC invites EU member states, interested EEA states and China to pledge financial and political support for this novel initiative. It also invites the European Parliament to provide its political support.

For further information, see the EC's web page on the EU's contribution to shaping the future global climate change regime and the EC's web page on climate change and China.

Source: European Commission (EC).