A future for CCS? Set emission performance standards

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Carbon capture and storage (CCS) has come to a dead end in Europe. Although the EU is carrying out a consultation to revive the CCS programme, it is already evident that the EU Emission Trading Scheme is too uncertain to provide a clear business case for CCS. If it wants to revive CCS, the EU should follow the US example and implement emission performance standards for power plants, argues energy consultant Vincent Swinkels.

Photo: Vattenfall’s  pilot CO2-Free Power Plant in Schwarze Pumpe, Germany

The energy companies that are supposed  to invest in CCS are keeping very quiet on the topic. Changing market conditions for electricity production, in which new coal powered power plants are losing money and with a carbon price that continues to be very low, make investments in CCS currently very unattractive.  CCS seems to have been removed quietly from the carbon strategies of power companies in Europe. Two presentations on the carbon strategies  of different power  companies I saw over the last weeks simply did not mention CCS at all.

Christoph Frei, Secretary-General of the World Energy Council, came to a similar conclusion in a recent interview with Energy Post: CCS “has simply flown off the map”, said Frei. “People don’t see it happening. Not even in North America.” Frei added that this is an ominous development as “we have no single plausible climate scenario that reaches the objective of 450 ppm without a very significant contribution from CCS. Without CCS we have no chance of reaching our climate objectives, unless we see very drastic changes in policy.”.

Within Europe discussions on CCS started when the European emission trading system (EU ETS) was introduced in 2005 and future carbon prices of €40-50 were projected.  The current ETS price is about €5 per ton and the recent history of the ETS has proven that allowance price developments are very sensitive to both economic developments and political choices.

The European Commission actively supported the development of this end-of-pipe solution by setting up subsidy schemes aimed at developing CCS demonstration projects in Europe. Now, 9 years later, funds have been used for a large number of studies and plans, preparing for large scale demonstration projects., but it seems that none of the intended projects will be realized, due to both legal issues and financial problems. The European Commission tried to re-open the debate on carbon capture and storage (CCS) through a public consultation during the first half of 2013. It is yet unclear what the conclusions of this consultation will be.

However, the  overarching problem for these demonstration projects is clear without the results  of the consultation. Within the context of the ETS it is simply not possible to make a business case for CCS.  The system does not provide the long term certainty that  a consistently higher ETS allowance price will be reached, on which investment decisions can be based. It seems that the ETS as primary policy instrument to create the market conditions for CCS to take off is not sufficient. Other (additional) instruments should be considered that make a business case for CCS possible.

Emission performance standard

In 2009,  such an alternative was discussed in Europe, as part of the revision of the IPPC Directive (Directive on Integrated Pollution Prevention and Control, aimed at controlling industrial emissions), namely the introduction of a CO2 emission performance  standard. This proposal would have limited the CO2 emissions of power plants to 450 grams of CO2  per kilowatt hour. It was rejected in the environment  commission of the European Parliament because  the EU had made a “clear policy choice to use the emissions cap-and-trade system” (IPPC rapporteur Liberal Democrat MEP Holger Krahmer quoted by Ends Europe on 4 January 2010). Now it seems that this clear policy choice is not really working out.

In the meantime, the EPA (Environmental Protection Agency) in the US is making serious progress with the implementation of an emission performance standard for new power plants. In 2012, the  EPA won a tough legal battle over the question whether greenhouse gases are a threat to the environment. Now, in September 2013, it has published a proposal to implement such performance standards for both gas and coal fired power plants as part of the US Clean Air Act. Implementation is expected starting from June 2014.

Industry has proven in the past to be able to cope with such limits. Usually first by developing end–of-pipe measures (such as CCS), but sooner or later, by coming up with more creative solutions, either increasing efficiency or developing alternative processes.

It is time for the EU to follow the US example. With a clear CO2 emission performance standard, there will be certainty for investors in new power plants on which to base their investment decisions. The market will decide whether such investments will include CCS or will involve alternatives, such as the use of alternative fuels or other innovative solutions.

Exhaustive information on CCS projects worldwide can be found on the website Carbon Capture & Sequestration Technologies from MIT. This also provides information on the state of European projects.
Another source of information is the Australia-based Global CCS Institute, an industry initiative.
A recent article in the Financial Times notes that “not a single large-scale coal-fired plant equipped with carbon capture technology is in commercial operation” today. No commercial-scale projects are under construction in Europe. Norway just recently announced the cancellation of a CCS project at its Mongstad refinery. In North America two plants are due to start operation next year, one in Canada and one in Mississippi. The FT article also notes that the EPA emission performance standard is likely to stimulate CCS in the US.

Vincent Swinkels is an independent consultant and associate with SQ Consult. He holds a MSc degree in Industrial Design (TU Delft) and an MBA in Strategic Environmental Management (University of Amsterdam). He has worked for Van Leer, a packaging producer, for SenterNovem (Dutch government agency, now AgentschapNL), KPMG Sustainability and DHV, an engineering consultancy. He keeps a weblog (www.vincent-energy.blogspot.com), in which he addresses links between sustainable change and economic development.

 

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