Memorandum submitted by the Carbon Capture
and Storage Association (CCSA)
INTRODUCTION
1. The Carbon Capture and Storage Association
welcomes this opportunity to respond to the Committee's inquiry
into green jobs and skills.
2. The CCSA was formally launched in March
2006, and brings together a wide range of specialist companies
across the spectrum of carbon capture and storage (CCS) technologies,
as well as a variety of support services to the energy sector.
The Association exists to represent the interests of its members
in promoting the business of CCS, raising awareness of the benefits
of CCS and to assist policy developments in the UK, EU and internationally
towards a long term regulatory framework for CCS, as a means of
abating carbon dioxide emissions.
CCS CONTRIBUTION
TO GREEN
JOBS AND
SKILLS
3. The UK is currently experiencing the
worst recession in recent history and economic concerns are therefore
weighing heavily in government policy. Yet the scale and urgency
of the climate change challenge must not be forgotten and if the
response is appropriately designed, there are benefits not just
to the future survival of our planet, but to the economy as well.
Lord Stern, in his report The Economics of Climate Change, estimated
that to take action now on climate change would cost the world
1% of global GDP, whereas without action, the global economy could
shrink by 20%[66]—clearly,
this is not an option.
4. The UK has already placed itself in a
leading role in setting stringent binding targets to cut greenhouse
gas emissions; 80% by 2050 with an interim target of 34%
by 2020.[67]
These targets set the framework under which a low-carbon economy
can flourish and if met, will afford the UK with a mature industry
for technologies to tackle climate change, with a domestic and
export market to match.
5. To create a low carbon economy in the
UK will require all sectors of society; energy, industry, housing
and transport—and all technologies must be part of the solution.
Relying on specific options will simply not be sufficient, and
to avoid the security implications, maintaining a broad portfolio
of options is much the safer bet.
6. The technology to capture, transport
and permanently store carbon dioxide emissions deep underground—Carbon
Capture and Storage (CCS) has the potential to play a vital role
in encouraging low-carbon investment and increasing employment
across many environmental industries. Whilst the initial and biggest
prospect for CCS is in power generation, with the potential to
reduce CO2 emissions by up to 90 per cent, the technology
will also play a large part in developing other environmental
industries. For example, certain parts of industry, such as cement
and steel, will have little or no other option for reducing carbon
dioxide emissions besides CCS. In addition CCS, through the pre-combustion
capture option, produces hydrogen as a product, which can be used
as a zero-carbon fuel for industry, commerce, vehicles, and housing
as well as electricity generation. The development of CCS can
therefore be seen as a precursor to developing a future hydrogen
economy for the UK.
7. The development and deployment of CCS
will also open up significant opportunities for the creation of
green jobs in the UK. Recent research for the Government has suggested
that the industry for carbon abatement technologies could deliver
50,000 jobs by 2030[68]—CCS
could play a large part. The Government's Advisory Committee on
Carbon Abatement Technologies (ACCAT) published a report in which
they used International Energy Agency (IEA) figures to estimate
that the CCS global market could be worth £100 billion
per year. Assuming the UK could take a 10% share in this market,
the UK market for CCS could be worth £10 billion per
year.[69]
Looking at the engineering and construction sectors, as well as
the supply chain—this could equate to a large number of
jobs, possibly reaching several hundred thousand.
8. The positioning of CCS projects will
also play an important role in developing infrastructure regional
infrastructure that will create considerable social and economic
benefits for the UK. Developing CCS projects through a cluster
approach in certain regions (such as Humberside, Thames, Teesside
and Firth of Forth) will ensure cost-effectiveness in rolling
out CCS plants—creating a transport and storage network
that can be linked into from existing plants and assist planning
considerations for location of future plants. Although power plants
are likely to be the precursor to such transport and storage networks,
the future benefits for other industrial emitters (such as steel
and cement) to tap into these networks, and thereby dispose of
their CO2 emissions, are of great importance. There is also
potential for such networks to create a considerable number of
green jobs in the relevant region—for example, Yorkshire
Forward have been at the forefront of research looking into a
CCS network for the Yorkshire and Humber region. Their conclusions
estimate that a total investment of £2 billion would
be needed to construct the transport network (if begun in 2008)—this
would open up a large number of jobs in the construction and manufacturing
sectors, helping to pull the region out of the current economic
downturn. By 2030 the added economic activity through EU
ETS credits alone, could be adding about £1.2 billion
per year.[70]
9. This country is in an advantageous position
to become a world leader in CCS and take a large share in the
global CCS market that could position the UK as a centre for CCS—much
like London has become the centre for the EU Emissions Trading
System (ETS). The UK has a significant well established energy
services sector, which has already shown a keen interest in the
development of CCS and could provide valuable knowledge and expertise
to other countries. In addition, the UK has considerable strengths
in design and manufacturing across power, process engineering
and offshore engineering industries, which would offer a competitive
advantage in developing a CCS industry.[71]
From many years of hydrocarbon extraction, the UK also has offshore
infrastructure that is well suited for use in offshore CO2 storage
operations.
10. Across the low-carbon technologies,
a massive skills and expertise gap is emerging, particularly in
the manufacturing sector, and with the growth expected for these
technologies (particularly the renewables sector which will need
to meet ambitious EU targets), the number of available skilled
workers will be declining fast. In the current economic downturn,
with little availability in relevant jobs for these skilled workers,
there is a danger that many of these workers will find jobs in
other sectors or other countries—and UK expertise will be
lost.
11. For CCS to fulfil its role in enabling
a significant increase in low-carbon investment and employment
in the environmental industries will require an ambitious long-term
policy from Government. The IEA estimates that to reduce global
greenhouse gas emissions by 50% by 2050 will require (in
addition to other low-carbon technologies) 80 CCS plants
per year from 2020 onwards across Europe.[72]
Working back, this will require a significant programme of first
phase commercial scale CCS projects to be deployed around 2015,
enabling the technical improvements and cost reductions to be
made in order for CCS to be rolled out from 2020.
12. Developers will need certainty in a
long-term regulatory framework as well as supporting financial
incentives to enable projects to be built. To this end, the UK
has already taken important steps forward—the detailed regulation
for CCS is in the final stages of negotiation and the UK played
an instrumental role in developing an EU Directive on CCS, which
was agreed in December 2008. The UK Budget, announced on 22 April
this year, also laid out the Government's new policy on coal,
whereby any new coal plant in the UK must include CCS on a proportion.[73]
13. In terms of the financial incentives
needed, the EU has recently come forward with two mechanisms:
— €1.05 billion for CCS under
the EU Economic Recovery package—to be allocated to a number
of EU countries—UK could receive €180 million
for one CCS project.[74]
— 300 million EU ETS allowances from
the New Entrants Reserve of Phase III (2013-) allocated to CCS
under the EU ETS Directive agreed in December 2008.[75]
14. As part of the Budget 2009, the UK also
announced its intention to fund up to four CCS demonstration projects
via a levy mechanism on consumers. Whereas the EU funding is likely
to contribute to one or perhaps two of the four projects proposed
by the UK Government at this stage (provided conditions of timing
and other selection parameters are met), the remaining funds for
the UK CCS demonstration programme will largely come from public
funding through the proposed levy.
15. Whilst these mechanisms are all welcome
steps towards providing the financial environment in which developers
can invest, the detail of how these incentives will be dispersed,
remains to be seen. To enable the widespread deployment of CCS
will require an ambitious investment programme, and UK Government
must implement appropriate incentives for this to take place.
There has been no indication that the recent announcement to support
two to four projects will form the first part of an ongoing strategy
to introduce CCS into the UK generation mix. Rather it seems that
these four projects are being treated as a narrowly defined technology
demonstration programme, with an expectation that CCS will then
become business as usual. However, as with other low-carbon technologies,
funding will be required in the first phase of projects to bring
CCS to the stage of commercial roll-out. Not only will developers
of this first phase carry significant early-mover risk, but they
will also bear the cost burden of building the initial infrastructure
that will be vital to support future CCS projects. It is hugely
important that the UK urgently initiates this first phase of a
large CCS deployment programme to send the signal to industry
that CCS must form part of the strategy for delivering a low-carbon
economy for the UK.
16. The UK is in an extremely advantageous
position to lead on CCS; physically, there are benefits from the
large resource of storage capacity under the North Sea, in addition
to the technological expertise and know-how that comes from years
of oil and gas extraction. With the recent announcements in CCS
policy, the UK is amongst the first to develop concrete proposals
to regulate CCS. The only remaining piece now is urgently to begin
building plants, to build up UK capacity and show the world that
an economic recovery can lead to a low-carbon economy with CCS
playing an integral part in this objective.
The view expressed in this paper cannot be
taken to represent the views of all members of the CCSA. However,
they do reflect a general consensus within the Association.
12 May 2009
66 Stern Review: The Economics of Climate Change,
HM Treasury, October 2006 Back
67
Building a low-carbon economy: implementing the Climate Change
Act 2008, HM Treasury, April 2009 Back
68
Low carbon and environmental goods and services: an industry
analysis, Innovas (commissioned by BERR), March 2009 Back
69
Accelerating the deployment of carbon abatement technologies-with
special focus on Carbon Capture and Storage, Advisory Committee
on Carbon Abatement Technologies, February 2009 Back
70
A Carbon Capture and Storage Network for Yorkshire and Humber,
Yorkshire Forward, June 2008 Back
71
Delivering the low-carbon economy-Business opportunities for
UK manufacturers, EEF, January 2008 Back
72
Accelerating the deployment of carbon abatement technologies-with
special focus on Carbon Capture and Storage, Advisory Committee
on Carbon Abatement Technologies, February 2009 Back
73
Building a low carbon economy: a framework for the development
of clean coal, DECC, April 2009 Back
74
http://www.consilium.europa.eu/uedocs/cms_data/docs/pressdata/en/ec/106847.pdf Back
75
Proposal for a Directive of the European Parliament and of
the Council amending Directive 2003/87/EC so as to improve and
extend the greenhouse gas emission allowance trading system of
the Community, Council of the European Union, January 2009 Back
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