Memorandum submitted by ClientEarth
BACKGROUND
1. ClientEarth is a non-profit environmental
law and policy organisation based in London, Brussels, Warsaw
and Paris. We have recently been involved in the provision of
legal policy advice to the Irish Minister for Environment on the
legality and design options for legislative provisions for CO2
emissions performance standards (EPS) for power generation. During
2009 and 2010, ClientEarth produced a series of legal submissions
and consultation responses to the previous government's plans
for "capture readiness" and the Framework for the Development
of Clean Coal.[58]
At European level, we were involved in securing a recently adopted
amendment[59]
to the proposed EU Industrial Emissions Directive recast clarifying
the ability of EU Member States to legally introduce CO2 EPS for
installations covered by the ETS by means other than via EU Integrated
Pollution Prevention and Control (IPPC) permits.
RESPONSES TO
QUESTIONS
What are the factors that ought to be considered
in setting the level for an Emissions Performance Standard (EPS)
and what would be an appropriate level for the UK? Should the
level be changed over time?
2. EPS for new power generation require
a different conceptual and statutory approach to standards introduced
for existing power. We strongly support the immediate introduction
of EPS for new power generation, with the level subject to statutory
review in order to keep abreast of industry developments, combined
with a requirement for the staged introduction of EPS for existing
power by a specified future date.
3. Regarding design features of an EPS for
new power stations, ClientEarth considers that the level should
initially be set so as to unequivocally prevent the construction
of new coal fired power stations and other inefficient fossil
fuel generation unless equipped with 100% CCS capacity from day
one. Provisions can be built into the regulations such that demonstration
projects equipped with partial CCS at industrial scale, including
those anticipated under the previous government's Framework for
the Development of Clean Coal, can proceed as planned.
4. The successful introduction of EPS in
four states in the US provides useful evidence for the design
of EPS. An EPS for the power sector now exists in the US states
of California, Oregon, Washington and Montana.[60]
The Californian EPS is required to be set no higher than the emissions
rate of a combined-cycle gas turbine.[61]
Based on its review of emissions rates, the California Public
Utilities Commission has adopted an EPS rate equivalent to 500g
CO2/KWh. In the UK, this level would allow inefficient forms of
gas generation to continue to be built, but would prevent new
coal unless fitted with functioning CCS to at least part of its
capacity. In the state of Washington the EPS is set at whichever
is the lower figure of: 1,100 pounds of GHG per MWh (this equating
to the Californian standard of 500g/KWh) or the average
available GHG emissions output,[62]
this being determined every 5 years by a government department
and informed by new combined-cycle natural gas thermal electric
generation turbines commercially available in the US. ClientEarth
considers that the level must be reviewed on a regular and predictable
cycle so as to keep abreast of industry innovation.
5. It is clear that 500g/KWH is now an insufficient
level for emissions performance standards for new power generation.
It will not shut the door on unabated coal power or inefficient
forms of other fossil fuel generation, or adequately drive development
and deployment of CCS. The science is clear that no additional
unabated coal emissions should be added to the atmosphere at this
critical point in the Earth's history.
6. ClientEarth acknowledges the need for
CCS demonstration projects and understands the Coalition Government's
policy towards new coal remains broadly in line with the previous
Government's Framework for the Development of Clean Coal. This
anticipated government support is for between two and four CCS
demonstration projects operating partial CCS of at least 300MWe
capacity. While ClientEarth does not support the construction
of any new unabated coal power unless fitted with 100% CCS from
the outset, if new coal with partial CCS remains the position
of the current government, the EPS provisions will naturally have
to be designed so as to accommodate partial CCS. However, it
does not necessarily follow that the level of the EPS for
new power need necessarily be set informed by CCS fitted on 300MWe
on the largest anticipated coal plant.
7. Depending on the latest emissions factors
arising from the technologies in question and the partial CCS
demonstration requirements, it may be preferable to set the default
level of the EPS more stringently such as to rule out all but
the most efficient forms of gas generation, but to deal with CCS
demonstrations as limited derogations permitted by statute, with
these being subject to a different level informed by the requirements
of the clean coal policy. This approach may be preferable for
several reasons, including by driving the most efficient forms
of gas generation with heat capture, and rather than setting the
level so as to accommodate demonstration projects permitted to
operate some capacity unabated. This may provide the government
with greater control over CCS developments and, depending on the
level, will ensure only the most efficient forms of gas generation
are permitted, and by providing the government with greater control
over the number and size of future CCS demonstrations.
8. A variety of literature exists considering
possible scenarios for levels and timing of EPS. A couple of important
findings to highlight include that a good starting point for setting
the level of an EPS for new power is the carbon efficiency of
the most efficient ICCG gas plant with heat capture. On current
technologies, such a starting point would suggest at EPS of approximately
350g/KWH or lower.[63]
9. In regards to timing and staged entry,
it is noted that modelling of scenarios for EPS from ECOfys revealed
that a scenario in which a less stringent EPS is introduced earlier
and then progressively raised in stages, yields higher carbon
benefit compared to waiting to introduce a more stringent level
(of say 250g CO2/KWH) at a later date.[64]
However, as discussed, assuming adherence to the Framework for
the Development of Clean Coal, there are compelling reasons for
immediately introducing stringent EPS set to prevent all but the
most efficient gas plants with heat capture, coupled with special
provisions to enable new CCS demonstration projects operating
partial in the event that their net emissions rate will be greater
than, for example 300 or 350g/KWH.
10. It is noted that the Californian EPS
legislation contains a formula prescribing an alternative metric
to take account of combined heat and power generation.[65]
ClientEarth recommends that the UK government consider cogeneration
in such a way as to retain the competitiveness of combined heat
and power, while carefully ensuring that combined heat and power
generation does not become an excuse for not incorporating CCS
technology. Given the complexities and uncertainties concerning
biomass and associated land use emissions, an important consideration
with biomass co-firing is that the measurement of emissions performance
of such a plant attempts to account of lifecycle emissions of
biomass. While the EPS should be designed in a non-discriminatory
and technology neutral manner, an alternative metric for calculating
the CO2 emissions from these categories of generation is desirable.
11. ClientEarth notes with concern that
the Coalition Government's decision not to include EPS in the
upcoming Energy Bill 2010. Furthermore, the government has not
yet clarified whether its intention is only to introduce EPS legislation
for new power stations, or whether the legislation will also anticipate
and enable introduction of standards for existing power at a later
date. EPS for existing power naturally offers the greatest potential
carbon benefit, and is necessary to provide the government with
a flexible and responsive tool capable of compelling swift retrofitting
of CCS as soon as available, or requiring the staged closure of
the UK's most inefficient plants at a pace that does not jeapordise
energy security. Legislating for a requirement for future government's
to introduce EPS for existing power at a later date, compelling
swift widespread retrofit of CCS is likely to stimulate greater
private sector investment in this technology.
12. Accordingly, any EPS legislation introduced
into primary legislation should contain separate provisions establishing
EPS for new power, (which may be achieved via consent requirements
or establishment of a national system of CO2 permitting) coupled
with enabling provisions for the introduction of EPS or plant
level caps for existing power stations. By setting a final date
(such as 2020) by which such regulations must be introduced, a
powerful signal will be sent that will encourage private sector
investment in CCS, and avoid any perverse incentives for delaying
such investment. This is the approach taken in the latest version
of the proposed US climate legislation.[66]
13. EPS provisions should also be designed
so as to ensure that new CCS demonstration projects operating
CCS to partial capacity are required to fast track the retrofitting
to full capacity, ahead of staged introduction of EPS for existing
power, at a later date.
14. The 2009 consultation[67]
on Draft Supplementary Guidance for Consent Requirements under
s36 of the Electricity Act 1989 has yet to receive a government
response. The Coalition Government must confirm the details of
its policy regarding consent requirements for new coal as a matter
of urgency by adopting the s36 Guidance. The Framework for the
Development of Clean Coal only anticipated EPS as a contingency
measure to compel retrofit of CCS. As described in ClientEarth's
consultation responses to the Framework for the Development of
Clean Coal, this approach was inadequate and ClientEarth considers
that immediate and broader utilisation of EPS is necessary.
15. EPS are now a part of government policy
as concerns power generation. For reasons discussed in this document,
there are sound policy reasons for EPS to be designed as technology
neutral,not merely applying to coal generation. On our
analysis, the best option to facilitate good design and long term
certainty for EPS is to enact primary legislation enshrining and
shaping the design of EPS appearing in secondary legislation.
The enabling powers should enshrine a minimum level of environmental
ambition and be coupled with a duty for the government to promulgate
such Regulations by a specified date, firstly for EPS for new
power, and by a later date, staged introduction of EPS for existing
power to compel widespread retrofitting of CCS or controlled closure
and/or replacement of capacity.
16. The upcoming Energy Bill 2010 presents
the natural option for achieving these objectives. Relying on
introducing EPS under existing legislation, such as could be attempted
under the Pollution Prevention and Control Act 1999, will limit
the design options available to government to some extent. It
will also fail to send an immediate signal to industry by enshrining
time commitments for the introduction of EPS for new power and
by anticipating future wider application to existing power. Procedurally,
secondary legislation is also somewhat easier for future governments
to overturn. Finally, we note that the EU legislature has recently
clarified[68]
that Member States are legally permitted to national CO2 EPS for
power generating installations liable under the EU Emissions Trading
Scheme. Enacting EPS in primary legislation may facilitate easily
replicable and transparent model for other Member States considering
introducing EPS.
What benefit would an EPS bring beyond the emissions
reductions already set to take place under the EU ETS?
17. As acknowledged by the Department of
Energy and Climate Change in 2009, government intervention is
required, in part because "reliance on market forces alone
will result in underinvestment in CCS research and development".[69]
It is clear that the current and projected price of carbon arising
from the EU Emissions Trading scheme is not sufficiently prohibitive
to prevent the construction of new unabated fossil fuel power
stations in the short term, or drive the transformation of energy
systems on the time scales required by climate science and necessary
to achieve legally binding targets. The advice of the UK Climate
Change Committee takes the same view.[70]
The inadequacy of emissions trading is further evidenced by the
existence of at least two currently proposed coal plants in the
United Kingdom, additional plans for new unabated coal in other
EU nations such as Poland, and recent economic analyses.[71]
There exists a clear need for government intervention.
18. The Coalition proposes to introduce
of a floor price on carbon. However, as the level of the floor
will be informed by behaviour of the current and projected price
of carbon arising from the EU ETS, this is unlikely to be sufficiently
aggressive to unequivocally shut the door on new unabated fossil
fuel power. The floor price will also do nothing to compel swift
retrofit or staged closure of existing fossil fuel power stations
once CCS is commercially proven. An EPS provides greater certainty
for industry, and equips the government with a strong and flexible
regulatory lever to manage the transition to a low carbon economy.
19. As succinctly put in the European Climate
Foundation's RoadMap 2050 study, "a massive and sustained
mobilization of investment into commercial low-carbon technologies
is needed, the vast majority of which will probably come from
the private sector. Investors need greater certainty about future
market conditions and the future competitive landscape.[72]"
An EPS for new power enshrined in statute, combined with provisions
anticipating the staged introduction of EPS for existing power
by a specified future date, will provide this certainty and, coupled
with adequate financial incentives, would make a huge contribution
towards kick-starting large scale investment in CCS from the coal
sector.
How effective is an EPS likely to be in driving
forward the development of CCS technology? Should the UK's CCS
demonstration programme cover gas-fired as well as coal-fired
power stations?
20. If set at the appropriate level and
coupled with necessary financing measures, an EPS has clear potential
to effectively compel both development and deployment of CCS technology.
This has been recognised by various administrations internationally,
including in all three latest versions of the proposed US climate
change legislation.
21. ClientEarth considers a technology-neutral
approach to an EPS is an important design feature. Linking future
revision of EPS levels by relevance to uncertain and undefined
CCS timelines creates the risk that introduction of EPS are delayed,
and creates a peverse incentive for lack of private sector investment
in CCS. A technology neutral approach to EPS is less discriminatory
and allows the government to avoid "picking winners".
A technology-neutral approach to an EPS will have the necessary
effect of immediacy in both preventing high carbon investment
and stimulating development and deployment of both CCS and renewables.
EPS that are not linked with CCS availability (including statutory
provisions requiring introduction of EPS for existing power) are
also likely to have the spin-off of further encouraging investment
in renewable energy technologies beyond the impetus created by
the renewable energy targetleaving the balance of the mix
between cleanest gas and renewables to the market,[73]
and helping make renewables more competitive by ruling out the
cheapest forms of generation at presentunabated coal and
inefficient fossil fuel generation.
22. Accordingly, EPS for both new and existing
power should apply to all power generators above a certain capacity
threshold, possibly with provision for a limited number of demonstration
projects in the manner described above.
23. ClientEarth supports the expansion of
the CCS demonstration programme to gas-fired power stations, noting
the advice of the CCC that equipping gas power with CCS is likely
to prove an important component of achieving a largely decarbonised
electricity sector by 2030, as is considered necessary to achieve
legally binding target of 80% overall reductions in UK GHG emissions
by 2050.
Could the introduction of an EPS pose any risks
to the UK's long-term agendas on energy security and climate change?
24. No. An EPS can be designed as a flexible
regulatory tool. A standard that prohibits the construction of
new unabated fossil fuel power will assist to bring renewable
energy closer to within striking distance of market competitiveness
and thus has potential to increase the diversity of the UK's energy
mix. Regulation is the missing piece of the puzzle in ensuring
achievement of the UK's long term commitment to decarbonisation
of the energy sector by 2030, and 2050. Other measures being introduced
by the Coalition Government in the upcoming Energy Bill, such
as the Capacity Guarantee Mechanism will enable prescient evaluation
of the adequacy of existing plans to meet future energy needs.
25. The UK's ageing coal power infrastructure,
approaching end of lifespan over the next 10 years provides an
excellent opportunity to radically transform the emissions profile
of our energy sector. Regarding EPS for existing power, if regarded
as absolutely necessary from a security of supply perspective,
these enabling provisions could allow for limited derogations
from the EPS for existing peaking generators, during the decarbonisation
transition period.
26. A technology-neutral EPS, as opposed
to an EPS only applying to coal power, is also preferable from
an energy security perspective, by encouraging various subsectors
within the energy industry to rise to the challenge of a decarbonised
energy sector, driven by the aniticipation of a gradually decreasing
EPS level.
What is the likely impact of an EPS on domestic
energy prices?
27. A long term view should be taken to
evaluating the impact of an EPS on domestic energy prices. In
2007, Californian legislators anticipated the difficulties of
extra costs arising from emissions trading or other GHG regulation
being passed on to ratepayers, and this was part of the motivation
for the early introduction of an EPS:
"An EPS is needed to reduce California's
financial risk exposure to the compliance costs associated with
future GHG emissions (state and federal) and associated future
reliability problems in electricity supplies. Put another way,
it is needed to ensure that there is no `backsliding' as California
transitions to a statewide GHG emissions cap: If LSEs enter into
long-term commitments with high-GHG emitting base load plants
during this transition, California ratepayers will be exposed
to the high cost of retrofits (or potentially the need to purchase
expensive offsets) under future emission control regulations".[74]
(emphasis added)
28. A scenario of immediate introduction
of EPS for new power stations will save consumers money in the
long run when pitted against mid-term scenarios of continued lock-in
to high carbon infrastructure and inevitable large scale retrofits,
forced closures and/or aggressive price on carbon in the 2020s
and 2030s. More broadly, the Stern Review on the economics of
climate change announced the well accepted findings that delaying
aggressive action on emissions reductions will result in greater
costs to the economy in the long run. Coupled with energy efficiency
gains that will arise from shutting the door on the most carbon
intensive and inefficient forms generation, the economic case
for immediate phased regulation of the power sector in the form
of EPS is sound.
Are any other European countries considering an
EPS? If so, should the standards be harmonized?
29. ClientEarth can confirm that at least
one EU Member State is set to release draft legislation including
provisions for EPS for the power sector during 2010. For reasons
of confidentiality, the State will not be identified in this document.
If passed, these provisions will anticipate EPS both for new power
stations, using consent frameworks as the intervention point,
and for existing power, by establishing offences and a system
of CO2 EPS permitting. We urge the UK Coalition Government to
consider the powerful ripple effect from its leadership position
on the issue of EPS. We can confirm the perception in the Member
State government planning EPS legislation that the promulgation
of EPS in UK law during 2010 would assist their prospects of EPS
legislation through their parliament.
30. The practical case for eventual harmonisation
of EPS revolves partly around concerns of carbon leakage within
and beyond Europe if one Member State introduced an EPS where
a neighbouring Member State did not. The other Member State currently
considering introducing EPS legislation during 2010 is not connected
to the UK's energy grid. The debate over the introduction of a
harmonised EU level EPS is ongoing and ClientEarth consider it
is unlikely to gather sufficient momentum before a number of early
movers, such as the UK, introduce domestic emissions performance
standards.
Could unilateral action by the UK to introduce
an EPS contribute towards global climate negotiations in Cancun
in November 2010?
31. Yes. Direct regulation of the power
sector is a powerful and necessary step that will reverberate
internationally. To our knowledge, while various state level CO2
emissions performance standard's exist in the United States and
are currently being considered in some other EU Member States,
the UK has potential to enact the world's first national CO2 EPS
for the power sector if momentum is maintained during 2010.
Can greater use of Emissions Performances Standards
internationally help promote agreement on global efforts to address
climate change?
32. Yes. See response to previous question.
Particularly as sectoral approaches to international agreements
gain increasing attention, more countries legislating for EPS
for the power sector, (the largest source of anthropogenic CO2
emissions globally), will foster confidence in achievement of
national pledges for emissions reductions. This can only aid the
prospects of securing future binding global agreements to mitigate
climate change.
CONCLUSION
33. It is vital that momentum is maintained
for the prompt introduction of EPS legislation in the UK. The
benefits will extend well beyond UK borders, and ClientEarth can
confirm that continued leadership on this issue from the UK will
strengthen the prospects of successful introduction of CO2 emissions
performance standards in other EU Member States as is anticipated
over the next six to 12 months. ClientEarth would be pleased to
maintain dialogue with the Department of Energy and Climate Change
and to share our expertise regarding statutory design of CO2 EPS
in greater detail over the coming months.
September 2010
58 See ClientEarth, response to Towards Carbon Capture
and Storage A Consultation Document published by Department for
Business Enterprise & Regulatory Reform (BERR CCR Consultation)
(11 September 2008); ClientEarth, response to the DECC consultation
on the draft Supplementary Guidance for Section 36 Electricity
Act 1989 Consent Applicants for Coal Power Stations, 29 January
2010 Back
59
New Recital 10 to the Industrial Emissions Directive recast, as
approved by Council after trialogue talks in June 2010, reads:
"In accordance with Article 193 of the Treaty on the Functioning
of the European Union, nothing in this Directive prevents Member
States from maintaining or introducing more stringent protective
measures, for example greenhouse gas emission requirements, provided
that such measures are compatible with the Treaties and the Commission
has been notified". EU Parliament Position Second Reading,
T7-0267/2010. Back
60
Regulatory Assistance Project, Emissions Performance Standards
in selected states, Research Brief, August 2010 available at http://www.raponline.org/docs/RAP_ResearchBrief_Simpson_EPS_Updated_2010_08_12%282%29.pdf Back
61
California, Senate Bill 1368, Chapter 598, subsection 8341(d). Back
62
Washington, Senate Bill 6001, section 7 Back
63
ECOfys Scenarios for the introduction of CO2 emissions performance
standards for the EU power sector, (2009) page 15 Back
64
Ibid at 4. Back
65
California, Senate Bill 1368, Chapter 598. See also California
Public Utilities Commission, GreenHouse Gas Emissions Performance
Standard, Decision 07-01-039 January 25, 2007 Available at:
http://docs.cpuc.ca.gov/published/FINAL_DECISION/64072.htm Back
66
American Power Bill 2010, part IV Back
67
Department of Energy and Climate Change, draft Supplementary Guidance
for Section 36 Electricity Act 1989 Consent Applicants for Coal
Power Stations, November 2010 Back
68
New Recital 10 to the Industrial Emissions Directive recast, as
approved by Council after trialogue talks in June 2010, reads:
"In accordance with Article 193 of the Treaty on the Functioning
of the European Union, nothing in this Directive prevents Member
States from maintaining or introducing more stringent protective
measures, for example greenhouse gas emission requirements, provided
that such measures are compatible with the Treaties and the Commission
has been notified". Parliament Position Second Reading, T7-0267/2010 Back
69
The Framework for the Development of Clean Coal Impact Assessment
published on 9 November 2009 states: "The rationale for government
intervention is the existence of a market failure related to technological
innovation. In the absence of government support for CCS technologies,
the private benefit to investors is lower than the social benefits.
There are also associated risks for first movers as it is an unproven
technology. Reliance on market forces alone will result in under
investment in CCS research and development from a social point
of view." Page 1. Back
70
UK Committee on Climate Change, Meeting Carbon Budgets-the need
for a step change, Progress Report to Parliament October 2009 Back
71
See generally, Sandbag, Cap or Trap? How the EU ETS risks locking
in carbon emissions , September 2010 Back
72
European Climate Foundation, Roadmap 2050 (2010) at page 17 Back
73
"Some have described an EPS as analogous to an energy efficiency
appliance standard set for appliances such as refrigerators, where
there are minimum performance standards and beyond that it is
up to the market to compete, so long as they meet or exceed the
minimum standard:" Regulatory Assistance Project, Research
Brief, November 2009 Emissions Performance Standards in Selected
States page 1 (www.raponline.org) Back
74
California Decision 07-01-039 25 January 2007 Available at http://docs.cpuc.ca.gov/published/FINAL_DECISION/64072.htm Back
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