25 June 2008
(Source: Point Carbon, London, 24 June 2008) The European commission is on the verge of dropping its opposition to giving power companies extra allowances from the region’s cap and trade scheme to kick start the development of carbon capture and storage technology, claims an MEP.
Two rapporteurs in the environment committee have recently proposed amending the European ETS directive to give additional allowances to coal-fired power companies that store carbon dioxide.
The first of the plans by MEP Chris Davies called for power companies to receive up to 700 million extra allowances in phase three of the ETS scheme, which runs from 2013 through 2020.
Called the ‘double credit’ scheme, power companies which successfully store a tonne of carbon dioxide underground would not only avoid having to buy an EU allowance, but they would also receive an extra allowance which could be traded in the market.
The idea was quickly rejected by the commission when it was first mooted back in May.
“(The commission) has not proposed such an idea ourselves because we do not think it is a good idea,” said Peter Zapfel at the time, emissions trading co-ordinator at the directorate general environment of the commission.
But Davies says the commission is now considering backing his idea by re-working and expanding the second double credit scheme which was proposed by MEP Avril Doyle.
“I have just met the commission to discuss possible changes to Avril Doyle’s amendment 22 – allowances from within new entrants (will be )reserved for CCS demonstration projects,” Davies told Point Carbon.
“The commission say they will examine these with genuine interest as they are running out of alternative funding options. We have till July 2 to table amendments to the emissions trading scheme directive that might keep the door open to funding from sources associated with the ETS,” he said.
Earlier in June, Doyle, the rapporteur in charge of steering ETS legislation through the parliament, proposed keeping back 60 million allowances from the new entrants reserve until December 2015.
These allowances would then be given on to the first 12 power companies that have successfully stored carbon dioxide underground by 2016.
For every tonne of CO2 stored underground, the power company receives one allowance.
Davies says the EU institution is considering calling for a more ambitious proposal than Doyle has envisaged, by raising the number of free allowances available to the first 12 power companies using CCS, and also remove the time frame of having to store CO2 underground by 2016.
“This is potentially a double credit scheme although it wont be fixed as such,” he said.
Europe’s policy and lawmakers are struggling to find a way to create an incentive for power companies to invest in CCS, as the EU bloc struggles to meet binding regional and international emissions-reduction targets in the face of growing energy demand.
Currently, 2008 EU allowances are trading just above €26 ($40.5), but they would need to be a minimum of €40 before investing in CCS was economically viable, according to a report by Deutsche Bank last week.
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