Select Committee on Science and Technology Written Evidence


APPENDIX 34

Supplementary evidence from the Government

ANSWERS TO FOLLOW-UP QUESTIONS FOLLOWING EVIDENCE SESSION ON 16 NOVEMBER

1.  Brian Morris said in oral evidence that the UK was "trying to promote the idea of `capture ready' plant" in the G8 [Q 12]. What are the features of `capture ready' plant and what measures has Government put in place to encourage new plant to be built `capture ready'? What other measures are under consideration?

  Capture ready refers to plant designed to enable CO2 capture equipment to be retrofitted with minimum disruption and in a manner that is optimal for future plant operations. Some key requirements are: availability of land for the capture plant; availability of space for the pipe-work and other systems needed to incorporate capture into the power plant; and the design of boiler and turbine systems to facilitate optimal integration. It has been suggested that location relative to CO2 storage sites might be an additional "capture ready" criterion. The G8 initiative on capture ready is seeking to arrive at an agreed definition.

  The CAT Strategy included £25 million of capital grants that, amongst other options, could be used to support a demonstration of capture ready technology. This has since been increased to £35 million as a result on the Chancellor's Pre-Budget Statement on 5 December.

  Measures to encourage new plant to be built capture ready must await an agreed definition for the concept, but once this is agreed, one option would be to use the licensing and consents process.

2.  Could you please provide full details of the UK-China bilateral agreement on R&D for clean coal technologies, and the EU-China agreement, mentioned in the response to Q 15? In particular, could you clarify the amount of UK funding being provided and the purpose for which it will be used?

  The EU-China agreement, called the Near-Zero Emissions Coal project (NZEC) aims to stimulate the deployment of CCS in China. This is broken down into three Phases, Phase One is a feasibility study for CCS in China and capacity building of Chinese knowledge in this area. This is supported by HMG by £3.5 million (DEFRA £3 million and DTI £0.5 million). ). The aims of Phase One are to assess the viability of CCS in China, including mapping of the potential for geological storage, and identifying CO2 sources and capture options, and to identify options for demonstration and deployment of CCS. A briefing paper is attached, (Annex 2).

  The UK-China bilateral agreement was signed last month which commits both sides to collaborate on R&D into clean technologies. These not only include CCS but also other future technologies such as wave/tidal and PV. The UK has initially allocated £750,000 for this activity. A copy of the signed Memorandum of Understanding is attached, (Annex 3) for information. It is planned to have a Workshop in China in April 2006 at which possible areas for collaboration will be discussed and project identified.

3.  Brian Morris said in oral evidence: "I think it is important to emphasise that the Chinese [. . .] are very aware of the consequences of climate change and [. . .] they realise the damage that burning coal without trying to control the emissions is going to do not just to the planet but to their own prospects in the future" [Q 15]. What evidence is there that countries like India and China are prepared to fund the costs of CCS technology transfer?

  Both countries are at a very early stage in considering CCS, and neither country is yet in a position to commit substantial funding to technology transfer. Hence the timing is now right for the UK's EU-China NZEC initiative to stimulate and assist development of CCS in China. Both China and India are starting small-scale domestic programmes to investigate CCS. We understand that China is planning to commence R&D into CCS in their 11th Five Year Plan (starting 2006), so as to develop their understanding of CCS.

4.  Brian Morris said in oral evidence: "we intend to develop a communications strategy which would try to raise the issue with people and try to tell them objectively what it is about, what the risks are and what the benefits are" [Q 17]. What is the timescale for the development of this strategy and who is involved in preparing it?

  A small preliminary study by the Tyndall Centre to gauge public attitudes has been completed and the DTI is now developing a communications strategy. There are a number of current international initiatives focusing on public perception, public outreach and communications strategy. The first step for DTI is to establish the content and range of these initiatives. Early in 2006 DTI will draw together an expert group to define a communications strategy that will promote consistent and effective messaging, based on research into public perceptions and attitudes, and drawing from the best communications materials available. It is planned to complete a provisional strategy by late Spring 2006.  David Reiner, Cambridge University, will lead the work for DTI. David is an expert in regulatory policy, national climate change policies, international environmental negotiations and policy design, and is closely affiliated to many of the key international players already active in this area.

5.  George Marsh said in oral evidence: "Last year we carried out a gap analysis to see which areas of CCS were already covered by existing regulations and where the gaps were that might need additional regulation" [Q 23]. Could you please provide us with this gap analysis and an indication of what steps the Government has taken, or is intending to take, to address these gaps?

  The regulatory gap analysis paper has been provided (Annex 1). The DTI is establishing a working group to ensure adequate regulation is in place for the storage of CO2 in geological structures, taking account of the fact that existing regulations and international agreements will apply to the to the rest of the CCS chain.

6.  George Marsh stated that there was sufficient land available on most UK power plants to enable retrofitting for CCS [Q 26]. Could you please provide us with the data on which this assertion was based? Are there any other obstacles to retrofitting of existing plant with CCS technology?

  The information was gathered during discussions with power generators concerning implementation of the CAT Strategy and possible incentives to encourage the commercial scale deployment of CCS.

  Currently the main obstacle is that there is no mechanism that provides a sufficient financial return for the carbon abated to make this a worthwhile investment.

  For existing coal stations it would be desirable to retrofit advanced boilers with the capture plant. Fitting new boilers would mean switching off the plant for about 12 months with associated loss of revenue. This could delay implementation, but since new boilers will be needed eventually if the plant is to continue operation, there is scope to optimise timing.

  For existing gas plant one retrofit option is to retrofit pre-combustion capture and burn hydrogen in the existing gas turbines. Some existing gas turbines may be unsuited for this in which case post combustion capture (flue gas scrubbing) would be the only option.

7.  Brian Morris said that, in terms of gas-fired plant fitted with CCS technology, there was a need "in future spending rounds [for] making a case for identifying what is needed" [Q 28]. What case is being made for funding of gas- and coal-fired plant equipped with CCS technology in the next spending round?

  The CAT Strategy set out a 10 year programme for the development of carbon abatement technologies including CCS. At present funding is committed up to 2008-09. The case for funding beyond 2008-09 will be made in the normal course of the next spending review.

8.  Brian Morris said in oral evidence: "We recognise that there is a need for some sort of incentive. We also recognise that carbon trading in itself is not enough and that there needs to be some sort of way to bridge the gap [. . .] There are a number of options for doing that" [Q 30]. What options are under consideration here and what are the key advantages and disadvantages associated with each?

  Budget 2005 set out the Government's intention to examine the potential of economic instruments to incentivise carbon capture and storage (CCS). The Climate Change Programme Review (CCPR) has analysed the costs and benefits of CCS and other carbon abatement technologies and is due to be published shortly. Pre-Budget Report 2005 looked to build on this work by committing the Government to consult further on the barriers to wide-scale commercial deployment of CCS in the UK, and the potential role of economic incentives in addressing those barriers. This work will feed into the Government's energy review, which was announced on 29 November, and will look at energy supply and demand and focus on policy measures to help us deliver our objectives beyond 2010.  The Review will consider all options including the role of current generating technologies (e.g. renewables, coal, gas and nuclear power) and new and emerging technologies (e.g. Carbon Capture and Storage).

9.  Helen Fleming stated: "Carbon emission is clearly an area where the full cost of the economy and society is not captured at the moment" [Q 44]. Aside from the EU Emissions Trading Scheme, what measures are under consideration by Government in order to better capture the full cost of carbon?

  As eluded to above, the Climate Change Programme Review (CCPR) is reviewing progress under the UK Climate Change Programme. The Review has considered a number of measures to better capture the costs of carbon and is expected to report early in 2006.  And the Government recently confirmed it will undertake a wide-ranging review of energy policy but set firmly within the framework of the four goals set out in the 2003 Energy White Paper, including to put ourselves on a path to cut the UK's carbon dioxide emissions by some 60% by about 2050 with real progress by 2020.  Hence the energy review will also consider these issues concurrent with the Stern Review, which is looking at the economics of climate change, in a wider global context. The Government's general approach in determining the most efficient policy measure(s) is to look at a range of possible approaches (tax alongside spending measures, regulation, voluntary agreements, trading schemes etc.) and consider the relative merits of each according to social, environmental and economic factors including the potential for reductions in carbon emissions, the cost-effectiveness of those reductions as well as air quality impacts, fuel poverty, distributional and competitiveness implications and security of supply issues.

10.  Brian Morris said in oral evidence: "One of the activities coming out of the CAT strategy is to develop a technology roadmap" [Q 53]. What will be the main purpose of this roadmap, who is involved in its development and when is it likely to be published?

  The road map will give a more precise definition of the priority activities to be undertaken in the DTI's CAT Programme. It will focus our resources by identifying areas suitable for a UK lead, areas best taken forward through UK participation in internationally co-ordinated activities and areas where UK activity should simply be to maintain a watching brief.

  Development of the route map is being guided by the Advisory Committee on Carbon Abatement Technologies (ACCAT). It is intended to publish the document in spring 2006.

11.  Brian Morris stated: "there is no reason why it [CCS] cannot qualify for carbon credits in the next phase of the Emissions Trading Scheme" [Q 54]. When do you expect CCS to be able to qualify for the EU ETS? What are the obstacles that need to be overcome to enable this to happen?

  The DTI has commissioned work and initiated an EU Ad Hoc Group of Experts to develop recommendations for how CCS would best work within the EU ETS. Subsequently recommendations have been made to EC DG ENV. A further piece of work on EOR and ETS is being commissioned. We understand that DG ENV wishes to include consideration of the issue of CCS and the ETS in the European Climate Change Programme, and to use the CCS working group's meeting next year to develop policy recommendations (reporting later in 2006). The present monitoring and reporting guidelines for the EU ETS allow CCS provided interim monitoring and reporting guidelines are agreed with the European Commission (see response to Question 21 below).

12.  Jim Penman said in oral evidence that "very considerable progress" was being made towards amending the London Convention [Q 59]. What is the timescale for clarifying the London Convention to allow CCS? Will projects be able to proceed in the meantime?

  The 27th Consultative Meeting of the London Convention established a process to consider whether the Convention, and/or the Protocol that will eventually replace it, need to be clarified and/or amended in order to facilitate or regulate CCS in sub-seabed geological structures. A meeting is planned for April 2006, which will report to the 28th Consultative Meeting in October 2006, at which Parties will decide clarifications or amendments as necessary. Since the Protocol will replace the Convention, most Parties are likely to focus on the Protocol. The whole process could take two or three years to complete. Meanwhile projects can proceed within the remit of the Convention. Projects involving enhanced oil recovery, or in which the CO2 placed in geological storage is produced with the oil or gas being extracted (as with the Norwegian Sleipner project), are compatible with the Convention and/or the Protocol. Projects of this type could therefore proceed now, consistent with the requirements of relevant domestic legislation. Some other types of project could also be consistent, but since the Convention and/or Protocol as they stand were not drafted with the needs of carbon capture and storage in mind, trying to apply their current provisions to CCS is correspondingly complex, and views differ widely on the legality in these other cases.

13.  Jim Penman said in oral evidence: "I think we are looking in the long term to low carbon technologies and this [CCS] helps us work, starting with the existing energy system as it is to achieve that. If we did not do that we would run the risk of incurring higher costs than we would otherwise have done" [Q 12]. What does DEFRA estimate the cost of doing nothing to be, i.e. the global damage cost of climate change per ton of CO2 emitted?

  The Social Cost of Carbon (SCC) is the economic concept used to measure the marginal global damage cost, per tonne of carbon emitted. In 2002 the Government Economic Service (GES) published advice with a central SCC value of £70 per tonne of carbon emitted, within a range of £35 to £140.  Per tonne of carbon dioxide, the corresponding values are, in round terms, £20 per tonne of CO2 within a range of £10 to £40.  The GES also recommended that these values should be subject to an annual increase in real terms by £1 per tonne of carbon emitted. Finally the GES recommended a periodic review of these values as new evidence comes available. In 2003 Defra initiated a review of SCC values and a research report is now available.[37] This confirms £35 per tonne of carbon emitted as a reasonable lower limit, with a range going to much higher values, reflecting values in the economic literature of up to about £1,000 per tonne C. This range is driven by scientific uncertainty on the speed of climate change and on the associated socio-economic impact, but also reflects different (and controversial) judgements on how to aggregate costs and benefits across different regions of the world and different generations. The range is very wide for practical policy purposes and given the balance of evidence, the Government's view of SCC remains unchanged for the present. The Government will review this when the a second research report from the Defra review is published later this year, and this information will also be available to the Stern review of the economics of climate change.

  These present valuations are based on the estimated functional dependences between climate and socio-economic parameters such as food production or disease incidence. They reflect a variety of market and non-market impacts of climate change, although the latter are generally associated with a higher degree of uncertainty. Only a small number of studies have tried to capture the risks of irreversible shifts in the climate system such as polar ice sheet destabilisation, Gulf Stream suppression or methane hydrate destabilisation. None of the existing estimates capture socially contingent effects (such as risk of conflict arising from the impacts of climate change on water supply). These effects may nevertheless have very significant (and not necessarily marginal) damage costs which need to be taken into account in policy development. This can at present only be done by assessment of risks associated with different levels of stabilisation of atmospheric greenhouse gas concentrations.

14.  Jim Penman referred to an example of a project in which low level leakage has been detected [Q 34]. Which project is this and what information is available regarding this leakage?

  The project referred to is the enhanced oil recovery project at Rangely in Colorado where CO2 has been injected since 1986 and there is evidence for a flux of CO2 from depth which may or may not be associated with the injected CO2.[38] According to the IPCC Special Report fluxes of CO2 from the 78 square kilometre field area are estimated to be between 170 and 3800 t per year.[39] Because most of the CO2 is determined to originate from near-surface microbial activity, the surface release from the storage reservoir is estimated to be less than 170 t per year. This would amount to an annual leakage rate of the order of 0.00076% of the total stored Co2 (equivalent to a retention rate of more than 99% over 1,000 years. The two other projects, Sleipner (Norway) and Weyburn (Canada) which have been extensively monitored do not show any such evidence.

  15.  Brian Morris said in oral evidence: "We are aware of the infrastructure issue and using the existing infrastructure" [Q 59]. What steps is Government taking to encourage adaptation or reuse of the existing pipeline infrastructure (both on- and offshore)? Has the Government analysed the impact of re-use of the existing infrastructure on the entry costs for CCS projects?

  DTI has sponsored a study by the East of England Energy Group on the potential to reuse existing pipeline infrastructure for CO2 transportation. Also we have recently commissioned work from the British Geological Survey to map potential sources and sinks for CCS both on and offshore in the UK. We are presently considering additional work, building on these studies, to estimate cost versus supply (volume) curves for CCS that will include both near and medium term options.

16.  A wide range of costs are cited in conjunction with CCS technology. To what extent is this an obstacle in deciding what investments Government will make and what incentives it is prepared to put in place? What cost range is the Treasury currently using for the purposes of policy development (and how have these costs been defined)?

  The Government recognises that there are a range of cost estimates associated with CCS and carbon abatement technologies more broadly and that this generates uncertainty for policy-makers. That is why we have initiated a number of work strands to try and further build the evidence base surrounding these technologies, including:

    —  The Climate Change Programme Review—which is looking at the costs and benefits of CCS and other carbon abatement technologies and is due to be published shortly.

    —  Consultation with industry—Pre-Budget Report 2005 announced the Government's intention to consult further on the barriers to wide-scale commercial deployment of CCS in the UK, and the potential role of economic incentives in addressing those barriers.

    —  Collaboration with Norway—Pre-Budget Report 2005 also announced the Government's intention to work collaboratively with Norway on the issues surrounding the costs of CCS.

  This work will provide further clarity around the costs of CCS as the Government embarks on a review of its energy policy which will consider all options (including CCS).

17.  By how much will the costs of CCS have to be reduced if it is to become commercially viable?

  The answer depends on the circumstances. CCS will never be cheaper than fossil fuel technologies without CCS since many of the technical advances that will benefit CCS will also benefit normal fossil plant. However, our assessment is that CCS is comparable to other large abatement options such as renewable energy and nuclear power (see DTI CAT Strategy—"A strategy for developing carbon abatement technologies for fossil fuels", page 24, already supplied to the committee). Moreover, programmes such as the BP led Carbon Dioxide Capture Project have estimated that the potential to reduce capture costs, which are about 60-70% of total CCS costs, is up to 60%.

  CCS can also compete where there is an incentive that values the carbon abatement it delivers.

18.  What role will Government play in facilitating and supporting the BP-led project at Peterhead?

  As discussed under Question 5, work has been initiated to examine and address gaps in the regulatory framework for CCS projects including EOR projects such as that proposed for Peterhead-Miller.

19.  When is the Climate Change Programme Review due to report? What kind of incentives for CCS have been under consideration in the Review?

  The Climate Change Programme Review is expected to report in January. Some support is already available for R&D projects via the Carbon Abatement Technology Strategy.

20.  What steps is the Government taking to build the skills and human resource base in CCS technologies? What research has been undertaken to establish the skills needs of, and the availability of appropriately skilled personnel in, the UK with respect to CCS?

  People with the right skills will be motivated to work on CCS when there is a clear market demand and career path associated with these technologies. DTI's CAT Programme is addressing this at the innovation and technology development level by supporting R&D and demonstration activities. Additionally the UK can draw on a strong capability in power and process engineering to support full-scale design and construction activities.

21.  How will Government determine an acceptable threshold for leakage of CO2 from storage sites from (i) an environmental viewpoint and (ii) to enable CCS to qualify for emissions trading schemes?

  The Government would expect CCS schemes to conform to the guidelines for emissions inventory estimation being developed by the Intergovernmental Panel on Climate Change (IPCC). These Guidelines will, we anticipate, be agreed in 2006 and are likely to require that all projects to be accompanied by an assessment based on geological evidence of potential leakage, or a demonstration that leakage is not expected to occur, plus a monitoring plan to check the validity of the assessment by subsequent periodic measurements. One possibility in response to (i) would be to require evidence of the expectation of zero leakage, rather than set a threshold. If a threshold were set it would need to take account of scientific evidence of the impact of low CO2 fluxes on marine and terrestrial ecosystems. In response to (ii) the present monitoring and reporting guidelines for the EU Emissions Trading Scheme (EUETS) allow CCS provided interim monitoring and reporting guidelines are agreed with the European Commission. A possible approach on (ii) would therefore be to base guidelines on the emissions inventory work of the IPCC, once agreed within the existing framework of the EUETS. The Government, in consultation with the European Commission, has commissioned consultants to examine this approach.

22.  Is Government willing to be the guarantor for long-term storage of CO2 in geological sites?

  The proper domestic framework for regulation is under consideration and no decision on this question has been made.

December 2005



37   Social Cost of Carbon: A Closer Look at Uncertainty: Stockholm Environmental Institute, Oxford, November 2005, http//www.defra.gov.uk/environment/climatechange/carboncost/sei-scc.htm Back

38   Klusman, R.W., 2003a. Rate measurements and detection of gas microseepage to the atmosphere from an enhanced oil recovery/sequestration project, Rangely, Colorado, USA. Applied Geochemistry, 18, 1825-1838; Klusman, R.W. (2003b). Computer modelling of methanotrphic oxidation of hydrocarbons in the unsaturated zone from an enhanced oil recovery/sequestration project, Rangely, Colorado, USA. Applied Geochemistry, 18, 1839-1852; Klusman, R.W. (2003c) A geochemical perspective and assessment of leakage potential for a mature carbon dioxide enhanced oil recovery project as a prototype for carbon dioxide sequestration: Rangely field, Colorado. Bulletin of the American Association of Petroleum Geologists, 87, 1485-1507. Back

39   IPCC Special Report on CO2 Capture and Storage (In Press) Back


 
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