APPENDIX 32
Memorandum from Green Alliance
SUMMARY
1. Green Alliance's mission is to promote
sustainable development by ensuring that the environment is at
the heart of decision-making. We work with senior people in government,
parliament, business and the environmental movement to encourage
new ideas, dialogue and constructive solutions.
2. Green Alliance welcomes the opportunity
to contribute to this inquiry on the role of Carbon Capture and
Storage (CCS), which comes at a crucial time in the development
of UK climate and energy policy.
3. We welcome the development of CCS but
are concerned that the introduction of additional policy mechanisms
to encourage this technology may divert attention and/or funding
streams away from promoting energy efficiency and renewable technologies.
There is still much to do to fully develop these areas, which
we see as a priority.
4. Green Alliance would like to highlight
in this submission a set of concerns regarding CCS that must be
addressed by government and industry. The outcome of these questions
will determine the extent to which CCS should contribute to climate
change policy: (a) How will the technology be supported? (b) How
secure will storage of CO2 be?
BACKGROUND
5. In the Energy White Paper (2003) the
Government stated that, in reducing carbon dioxide emissions,
their priority was "to strengthen the contribution of energy
efficiency and renewable energy sources." Green Alliance
supports this viewpoint and believes that policies that rely on
clean renewable energies (such as renewable heat, wave, solar,
biomass and wind energy), energy conservation and demand reduction
must be the focus of climate change mitigation.
6. When applied on a global scale the attractions
of CCS technology are understandable. It is particularly applicable
to growing economies, like China, with an extensive program of
new coal power-station construction.
7. Green Alliance is concerned that the
role CCS can play in climate change mitigation is not overstated.
CCS should be used under certain conditions in order to gain the
time to switch to a genuinely zero carbon energy supply system.
CONCERNS THAT
MUST BE
ADDRESSED
Support mechanism
8. Any mechanism to support CCS must not
divert support away from renewable technologies or the promotion
of energy efficiency.
These are proven, presently less risky and have
an increased security of supply—they do not rely on imported
fossil fuels.
9. Renewable technologies and the promotion
of energy efficiency still require additional support and strong
programmes to underpin their adoption and overcome market barriers.
The government must therefore not divert public funds away from
renewable energy and efficiency technologies to support CCS.
Government support of independent and transparent
research on this technology may be necessary but should not replace
or delay government support for existing renewable energy sources,
and should be part of a package with a clear priority for energy
efficiency and renewables.
10. Before extending the life of fossil
fuel power stations by equipping them with CCS technology, feasibility
of replacement with renewable energy generation should be analysed.
CCS plants would still have a range of environmental and social
impacts as a result of fossil fuel extraction, transport and production.
11. The Intergovernmental Panel on Climate
Change (IPCC) formally adopted a new "Special Report on Carbon
Capture and Storage" this month (which month?), which finds
that CCS will only truly take off when the right policy frameworks,
including implementing carbon dioxide (CO2) reduction
targets, are in place.
12. The core problem facing investors is
that there is no carbon market over the relevant investment period
for CCS. The EU ETS only extends until 2012 and permit levels
are only known until 2008. Investors are currently facing
political risk, which increases the cost of capital for low-carbon
investments. Green Alliance has therefore identified a number
of support mechanisms that could be used to support, and encourage
investment in, CCS.
Capital Grants
13. The government has recently made a limited
amount of money available for demonstration CCS projects—£25
million. This form of funding is unstable because of its stop/start
nature and does not give a long-term revenue stream to investors,
nor help provide a market for the technology.
A dedicated zero carbon electricity mechanism
14. The Renewables Obligation (RO) could
be extended to award ROCs for output from carbon-neutral electricity
generation or a separate obligation similar to the RO could be
created for these technologies. This would give the same level
of support to zero-carbon generation as is already offered to
renewables. Drawbacks to this option include; disrupting investor
confidence in the RO market; the possibility that carbon-neutral
projects could claim some of the subsidy currently distributed
to renewable technologies and diluting the current signal for
government support to renewables. Introducing another policy mechanism
would also add further complexity to an already complex market.
A revival of the Fossil Fuel Levy
15. The existing fossil fuel levy mechanism,
which is currently dormant, could be revived to provide a long-term
funding stream for zero carbon technologies.
Carbon contracts
16. As proposed by Dieter Helm[36]
government could issue a long-term carbon contract, to support
the delivery of emissions reductions. This would provide a forward
revenue stream with long-term price certainty. The contracts would
be technology blind with government taking the risk if the carbon
price falls below the price of the contract. If the carbon price
is higher than the contract price then the government would be
able to make money back.
http://www.dieterhelm.co.uk/publications/CarbonContractsOct05.pdf
A robust EU Emissions Trading Scheme (EU ETS)
17. One of the core purposes of the EU Emissions
Trading Scheme is to encourage investment in low-carbon technologies
and discourage more polluting methods. A robust national emissions
cap and longer-term certainty in the scheme would encourage not
only the development of CCS but also renewable technologies and
increased energy efficiency.
18. Auctioning allowances would create a
pot of money that could be used to support CCS and other low and
zero carbon technologies.
19. This mechanism would be easy to implement
and would be using the EU ETS for what is was designed to do.
If the scheme is not able to encourage low-carbon technologies,
like CCS, then what is its purpose?
20. Green Alliance believes that a robust
EU Emissions Trading Scheme and a tight national cap on emissions
should be used to support the development of Carbon Capture and
Storage. Key characteristics of the scheme must be a carbon price
that is high enough to drive development, and a long-term market
that is secure enough to attract investment in low-carbon technologies.
21. The government needs to ensure that
its national allocation for the second phase of the EU ETS is
aiming to meet its target of a reduction of a 20% reduction in
CO2 by 2010. This would mean an allocation of 224 MtCO2
compared to the 245 MtCO2 allocated in the first phase
of the scheme.
22. Furthermore the government must continue
to commit to its short-term and long-term emissions reduction
targets (a 20% reduction of CO2 by 2010 and at least
a 60% reduction by 2050).
STORAGE
Green Alliance is concerned about the lack of
knowledge on storage of CO2
23. Research is needed to improve the gaps
in knowledge on CCS; independently verified pilot projects should
test its effects on biodiversity, geological suitability and the
security and permanence of carbon stored in geological strata.
Likewise all pilot projects should have stakeholder processes
allowing for review, comment, and addressing concerns. Any research
undertaken should cover: environmental consequences including
those associated with fossil fuel extraction; capacity of safe,
long term underground storage of carbon; risks to public safety;
characteristics of the currently much less understood saline formations.
Green Alliance's support for CO2
storage will always be on a case-by-case basis.
24. Any CCS initiative must prove its robust
storage capabilities and be subject to strict environmental assessments.
The Government should set up a regulatory framework
for the development of CCS projects.
25. This should cover all the risks and
uncertainties related to CCS and include full public consultation.
An Emergency Management Plan for each site should be set up and
a full Environmental Impact Assessment carried out. Each site
should prove its net environmental gain to avoid an increase in
conventional pollution as a result of the introduction of CCS.
26. Green Alliance currently only supports
CO2 storage in disused oil or gas fields where the
science and geology is more certain.
Acceptability of storage sites will depend on
their gas leakage security
27. The proportion of gas leakage from any
site chosen for storage is critical. Ideally we would like zero
leakage. Just a small percentage of leakage is needed to return
all stored gas to the atmosphere. For example, a 0.1% leakage
would mean all CO2 will re-enter the atmosphere within
1,000 years, with a 1% leakage rate, within just 100 years. Locations
should not allow any leakage rate or "gassing out" that
would be higher than those from conventional natural gas fields.
This would mean a permanence time of longer than 100,000 years.
Green Alliance calls for an independent monitoring
body to be given responsibility for storage monitoring and verification.
28. The monitoring body should publish an
annual audit of the state of the UK's storage sites. There must
also be international agreed procedures for independent monitoring
and verification before CCS technologies should be allowed to
count against greenhouse gas reduction targets.
The question of liability needs to be addressed
29. Who should be liable for any leakage
from the storage site over its lifetime? Whilst it is essential
that the storage site is properly managed, we don't want to penalise
the development of low carbon technologies by expecting them to
be responsible for the long-term liability of the stored CO2,
when other high carbon technologies have no liability for the
emissions they emit into the atmosphere. The government must establish
a strict legal framework to regulate this.
November 2005
36 Helm, D and Hepburn, C. Carbon contracts and
energy policy: An outline proposal. 6 October 2005. Back
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