Select Committee on Science and Technology Written Evidence


Memorandum from the Confederation of UK Coal producers

  The Confederation of UK Coal Producers (CoalPro) represents member companies who produce over 90% of UK coal output. CoalPro is not opposed to the development of any form of energy. CoalPro is pro-coal.

  CoalPro welcomes the opportunity of providing evidence to the Committee's inquiry into CCS. The development of CCS has the potential to achieve deep cuts in carbon emissions whilst continuing to derive the benefits of fossil fuel use.

  CoalPro is not competent to comment in detail on CCS technology or economics but would like to take the opportunity of commenting in more general terms, particularly on the barriers impeding the development of the technology.

  CCS is not a new technology. It has and is being used for enhanced oil recovery (EOR) in many locations. In some instances (eg Sleipner), it is also being used to capture and store carbon to avoid excessive emissions. Monitoring at various locations also suggests that CO2 has not thus far escaped form the geological formations into which it has been injected. CoalPro accepts, however, the need for more assurance on this point.

  It may be, therefore, that most of the effort needs to be devoted not to the technologies themselves but to the related "soft" issues and to the barriers impeding deployment.

  First, whilst monitoring technologies are in use, they may need to be further developed along with other approaches to provide long-term accurate measurement and hence greater assurance. Some commentators have said that CCS should not be deployed until long-term storage can be guaranteed. However, this begs the question. Even if there is the potential for some leakage many decades hence, CCS offers huge potential for short-term reductions in emissions. If long-term problems emerge they can be dealt with at the time but this will depend on having accurate monitoring in place to give early warning.

  Second, there may be legal barriers under the OSPAR convention to the disposal of CO2 under the sea other than for EOR. Given the widespread interest in CCS by many governments, this issue should be capable of being resolved, but it will need a proactive approach to do so. The UK Government could stake a strong lead here.

  Third, the European Union Emissions Trading Scheme (EUETS) would not appear to allow carbon which has been captured and stored as saving emissions. It is silent on the issue. This is not to criticise the Scheme as the potential of CCS may not have been fully recognised when originally designed. This may require a technical amendment to the Scheme and, again, should be capable of being resolved, but there is a need to get on with it, with the UK Government in a position to take the lead.

  The above are technical issues, but there are economic barriers to be overcome. In this context it should be noted that, whilst all carbon abatement technologies are expensive, CCS may be less costly than other approaches per tonne of emissions reduced/avoided.

  First, as carbon has a price under the EUETS, there may be an issue of liability if there is leakage. Proper monitoring and the cessation of injection should be capable of dealing with this in the short-term. In the long-term, however, it may not be possible to identify the successor in liability terms. It may be necessary, therefore, for governments to stand in as a long-term guarantor.

  Second, CCS, even when combined with EOR, would appear to be uneconomic in the UK. The partners in the Petehead/Miller proposal have stated that they need financial assistance for it to be viable. Amendment of the EUETS (see above) may represent a solution. Carbon allowances which are not then required can be sold, thus providing a revenue stream. Application of this approach to a limited number of installations may be enough to get some demonstration projects off the ground. The Government could make a limited number of carbon allowances available for CCS projects and could award these on the basis of a competitive bidding approach to ensure best value. This may not be enough on its own but will reduce the need for top-up funding from Government.

  Third, allied with this is the need for long-term regulatory certainty. It is already apparent that the short-term time horizon of Phase I of the EUETS to 2007, the uncertainty over the allocations of Phase II, and the comparatively short-term time horizon for Phase II to 2012 are impeding investment decisions in replacement electricity generating capacity and will similarly impede allied investment in CCS. This needs to be resolved by making early decisions on the allocations for Phase II and by providing guarantees of the availability of longer-term allowances (Phase II plus) for carbon abatement technologies. CoalPro understands that this approach has been adopted by the German government with guarantees of allowances for up to 18 years.

  There is another aspect to the lack of regulatory certainty that the Committee might wish to take into account. By far the greatest reduction in carbon emissions can be achieved by applying CCS to coal-fired generating plants. However, the lack of regulatory certainty means that the low initial capital costs of gas-fired power stations will minimise risks in an uncertain world. There is a real danger, therefore, that all new fossil fuel generating capacity will be gas by default with all the security of supply and price risks that that entails.

  In making available longer-term carbon allowances, for carbon abatement technologies in general and CCS in particular, the Government should therefore reserve some part of these for coal-fired generating plant to ensure a diverse mix into the future.

September 2005

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