Supplementary memorandum submitted by
the Carbon Capture and Storage Association
During the evidence session that I and my colleagues
were involved in on 4 November the Chairman asked for supplementary
comments on infrastructure for CCS and floor price for emissions:
1. INFRASTRUCTURE
FOR CCS
As might be expected, the CCSA has given considerable
thought to this subject. We have canvassed the opinion of our
members and have distilled them into a position paper which I
am attaching to this email. This is an extremely important issue
concerning the future prosperity of the UK and the conclusions
at the end of the paper have unanimous support.
2. FLOOR PRICE
ON EU ALLOWANCES
The first thing to say is that the EU ETS is,
of course, a Europe wide scheme. It is difficult to see how the
UK could politically or practically act unilaterally.
The EU ETS is designed to ensure that the industries
covered collectively meet a cap as set by governments, in this
case the EU with agreement by Member States. The ETS price reflects
market views on the costs of making this cap. The ETS is not designed
to deliver major capital investment beyond that needed to meet
the cap. There is little appetite to constrain the workings of
the emissions market and investment needed to meet other policy
goals, eg acceleration on investment in CCS should be done outside
the EU ETS. Most observers would say that the market should be
allowed to work freely but that the price should be underpinned
by setting a tight cap on emissions.
We are not expert in emissions trading but we
would find it difficult to see how a floor price could be implemented.
It would be impossible to tell traders not to trade below a certain
level. Perhaps the way to do it is to constrain the price at auction.
The way this is handled at present means that all Member States
would have to agree to a common reserve price at auction.
The proposal put forward by the Government for
a levy to raise finance that would disbursed as a contract for
differences effectively puts a floor on the emissions value exclusively
for CCS projects.
If the Committee would like to hear a more detailed
argument on the options for a floor price on emissions we would
recommend taking evidence from the Carbon Markets and Investors
Association or the International Emissions trading Association.
We are also aware that the UK Emissions Trading Group is considering
the issue but also sees challenges in delivering a floor price.
November 2009
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