Memorandum by ClientEarth
Memorandum of ClientEarth on the proposals of
the European Commission for a Directive amending Directive 2003/87/EC
to improve and extend the greenhouse gas emission trading system
of the Community (COM (2008)16) and a Directive on the geological
storage of carbon dioxide (COM (2008) 18).
1. INTRODUCTION
AND SUMMARY
1.1 ClientEarth is a non-profit environmental
law, science and policy organisation incorporated as a limited
liability company and registered in a charity in England and Wales.
The charitable objects of the organisation include promoting and
encouraging the enhancement, restoration, conservation and protection
of the environment, including the protection of human health,
for the public benefit.
1.2 We understand that, in connection with
its scrutiny of the European Commission's climate and energy package
published by the European Commission on 23 January 2008, the Committee
will be focusing its inquiry on the proposed revisions to the
EU ETS. The call for evidence notes that "closer examination
of those proposals will to some extent touch upon other elements
of the package of climate change and energy measures", including
the draft Decision on Greenhouse Gas Emissions (which affects
sectors not included in the ETS); the draft Directive on geological
storage of carbon (referred to as the carbon capture and storage
(CCS) Directive); and the draft Directive on the promotion of
energy from renewable sources (the subject of a separate inquiry
by the House of Lords EU Sub-Committee B).
1.3 In this memorandum, we wish to draw
to the Committee's attention a specific set of issues relating
to the EU ETS and the CCS Directive, and in particular, the provision
in the draft CCS Directive for "capture ready" fossil
fuel power stations to be consented by Member States. We recently
submitted comments to the House of Commons Environmental Audit
Committee inquiry into CCS, specifically setting out our views
with regard to CCS.
1.4 In summary, we consider that:
— The level of the EU ETS cap (and
the effort sharing targets) should be strengthened to reflect
the scientific assessments of climate change, including the Fourth
Assessment Report of the Intergovernmental Panel on Climate Change
(IPCC) demonstrates that developed (Annex 1) countries need to
reduce emissions by 25 to 40% by 2020 and by 80% to 95% by 2050.
— Carbon pricing under the EU ETS alone
will not be sufficient to support development of low carbon technologies,
and in the initial phases of a carbon trading scheme, additional
measures must be put in place to avoid investment in long-lived
high carbon infrastructure (based on the Stern review on the economics
of climate change).
— The CCS Directive would allow fossil
fuel power stations including coal power stations to be consented
by Member States on a "capture ready" basis, and article
32 is of greatest concern.
— This approach is unacceptable in
terms of the climate risk from coal fired power stations, as well
as creating regulatory uncertainty as to when, if ever, capture
ready plants would be retrofitted with CCS technology, and fails
to help drive demonstration and delivery of CCS technology.
— The effective regulatory alternative
to "capture ready" is to set an emissions performance
standard for emissions of carbon dioxide from power plants, such
as that adopted by the State of California, so that any new coal
fired power plant would have to present a reasonable, economically
and technically feasible plan that CCS will operate from the outset
to meet the standard.
2. GENERAL COMMENT
ON ENVIRONMENTAL
EFFECTIVENESS AND
THE LEVEL
OF THE
CAP
2.1 The proposed revision and extension
of the EU ETS undoubtedly represents a significant improvement
from the initial phases of the scheme, and the proposals for an
EU-wide cap and auctioning in some sectors, in particular power
generation, are welcome.
2.2 The EU ETS scheme is a cap and trade
scheme for emissions of greenhouse gases. The purpose of the scheme
is to meet the environmental objective of reducing emissions of
greenhouse gases from the largest stationary emitters in the European
Union. The provision for a cap recognises that it is the overall
quantity of carbon dioxide (and other greenhouse gases) in the
atmosphere that matters while the provision for trading recognises
that emissions reductions should be made in the most cost effective
way. The efficacy of the scheme in environmental terms is therefore
dependent upon the level at which the cap is set. How the permits
are distributed to emitters (by free allocation or auction) will
also influence decisions of emitters (to reduce emissions or purchase
permits).
2.3 In our view, the proposed cap for phase
3 lacks the level of ambition that would match the most recent
scientific assessments of climate change, including the IPCC's
Fourth Assessment Report. The overall EU target for greenhouse
gas emissions reductions in ETS and non-ETS sectors is 20% by
2020, rising to 30% if there is an "international agreement
committing other developing countries to comparable reductions
and economically more advanced developing countries to contributing
adequately according to their responsibilities and respective
capabilities".[23]
In the ETS, the proposal is to set the cap at a 21% reduction
in EU emissions levels from 2005 by 2020 with provision for an
increase to 30% upon conclusion of a satisfactory international
agreement.
2.4 The definitive Fourth Assessment Report
of IPCC demonstrates that developed (Annex 1) countries need to
reduce emissions by 25 to 40% by 2020 and by 80% to 95% by 2050
in order to be on track for stabilisation at 450 ppm CO2-equivalent.[24]
This is the kind of stabilisation level needed to have any prospect
of limiting global average temperature increase to no more than
2°C, the long standing objective and commitment of the European
Union, as well as European leaders including British Prime Ministers.
The EU should commit to a principled, science-led cap and targets
that reflect the types of contributions that Member States will
need to make to reducing global emissions.
2.5 Although climate change, by its nature,
requires reductions in greenhouse gas emissions on a global level,
we also consider that the EU can play major role in demonstrating
that a low carbon economy is possible. In addition, while the
carbon market is developing and until a credible carbon price
is established, the EU must take steps to ensure that investment
decisions in long-lived, high carbon infrastructure, which will
lock the EU's economies into a high carbon trajectory, are avoided.[25]
Stern concludes that issues of credibility are particularly important
for investments in long-lived capital stock such as power stations,
industrial plant, and buildings:[26]
If businesses believe that carbon prices will
rise in the long run to match the damage costs of emissions over
time, this should lead them to invest in low-carbon rather than
high-carbon assets. But in the transitional period, where the
credibility of carbon pricing is being established worldwide,
there is a risk that future carbon prices are not properly factored
into business decision-making, and investments may be made in
long-lived, high-carbon assets. This could lock economies into
a high-carbon trajectory, making future mitigation efforts more
expensive.
2.6. Investment in high carbon options now
will make it more expensive and more politically difficult in
the future to reduce domestic (EU) emissions.
2.7 This assessment leads to two conclusions.
The first, as discussed above, is that the cap must be stringent
and based on a long term stabilisation goal to be environmentally
effective. Second, however, Stern's analysis also points to the
conclusion that carbon pricing alone will not be sufficient, because
of the credibility issues in the early years of the carbon market
as discussed above, and also because additional measures will
be required to support low carbon technologies. On technology
policy, Stern states "Carbon pricing alone will not be sufficient
to reduce emissions on the scale and pace needed" and "Effective
action on the scale required to tackle climate change requires
a widespread shift to new or improved technology in key sectors
such as power generation, transport and energy use".[27]
We address this point in the context of the proposed European
legal framework for CCS.
3. THE EU FRAMEWORK
FOR CCS
3.1 The proposed CCS Directive aims to establish
a licensing system for the geological storage of carbon as part
of the CCS process. Although referred to as the "CCS Directive",
the Directive in fact deals principally with geological storage
of CO2 and establishing a licensing regime to allow such storage.
However, the proposed Directive also hides one of the most contentious
issues of the whole EU climate and energy package: how Europe
will deal with new coal power plants, the dirtiest fossil fuel
and the single largest emitter of carbon (the most efficient advanced
supercritical capture ready 1.6 GW coal plant is estimated to
emit eight million tonnes of CO2 into the atmosphere every year).
Across Europe, in the order of 50 new coal power stations are
planned for the next five years.[28]
3.2 The EU is considering allowing new coal
power plants (as well as gas combined cycle power plants) to be
built on a "capture ready" basis. Article 32 of the
proposed directive is of greatest concern. In order to be "capture
ready", a new coal power plant will only have to have empty
space next to it for the CCS equipment to be fitted in the future;
be near a suitable storage site (such as an old oil field); and
have a technical retrofit assessment report.
3.3 Article 32 proposes amending the Large
Combustion Plants Directive 2001/80/EC in the following terms:
Member States shall ensure that all combustion
plants with a capacity of 300 megawatts or more for which the
original construction license or, in the absence of such a procedure,
the original operating licence is granted after the entry into
force of Directive XX/XX/EC of the European Parliament and of
the Council.(*), have suitable space on the installation site
for the equipment necessary to capture and compress CO2 and that
the availability of suitable storage sites and suitable transport
facilities, and the technical feasibility of retrofitting for
CO2 capture have been assessed.
3.4 A report prepared by the International
Energy Agency titled CO2 Capture Ready Plants[29]
makes it clear that "capture ready" does not mean very
much. It states that:
"[A] high degree of uncertainty is inevitable
when making a plant capture ready. It is not clear when the underlying
global politics of climate change mitigation may justify extensive
use of CO2 capture and storage and hence retrofitting. Neither,
given the current rapid developments in capture technology concepts,
is it possible to specify in advance which capture technology
will be available to retrofit to a particular plant. The precautionary
principle suggests, however, that doing nothing until these uncertainties
are resolved is not the best option. Indeed, it is quite likely
that clarity will only emerge when political and market conditions
dictate that new fossil plants are built with capture and so the
need for capture ready plants no longer exists!"
3.5 This statement confirms that it is only
political and market conditions—including regulation—that
will drive private sector investment in CCS. Recent analysis of
the "capture ready" concept provides further confirmation
of the uncertainties inherent in the concept and the difficulties
that such uncertainty creates for subsequently being able to achieve
the retrofit of CCS technology at capture ready power stations.[30]
3.6 The core of the EU's approach on CCS
relies on the EU ETS to deliver CCS by establishing a cap and
a carbon price.[31]
In our view, the EU ETS, even in the third phase, will not be
sufficient to drive delivery of CCS within an appropriate time
frame. The risk to the climate system of delay in demonstrating
and implementing CCS (or implementing alternative energy options
should CCS not prove technically or commercially feasible) is
too serious to ignore. According to Dr James Hansen of NASA and
Columbia University, one of the world's leading climate experts:
"The only practical way to prevent CO2
levels from going far into the dangerous range, with disastrous
effects for humanity and other inhabitants of the planet, is to
phase out the use of coal except at power plants where the CO2
is captured and sequestered."
3.7 Rapid demonstration and then deployment
of CCS technology is needed urgently around the world. The technology
will be critical in managing the CO2 emissions from the coal power
stations that will continue to power the world's major economies
for the next 50 years. This will only occur through leadership
in demonstration and regulation requiring CCS to be deployed.
3.8 The regulatory alternative to "capture
ready" is to set an emissions performance standard for emissions
of carbon dioxide from power plants. The State of California introduced
this approach in January 2007 and now requires any baseload power
to meet an emissions standard of 500 kg of CO2 per MWh. Any new
coal fired power plant would have to present a reasonable, economically
and technically feasible plan that CCS will operate from the outset
to meet the California EPS. The projected net emissions over the
life of the proposed power station must also be pre-approved by
the regulator.
3.9. This regulatory approach should be
distinguished from "mandating CCS". The emissions standard
applies to all forms of power generation. Electricity generated
from low carbon sources such as renewable generation clearly meets
the standard. Coal only meets the standard if CCS is operational
from the outset—but the technology is not prescribed and
it is up to the market to decide which generation and which type
of technology to invest in.
3.10 This form of environmental standard
can help drive innovation.[32]
In the case of CCS, a standard alone, while effective to stop
investment in new unabated "capture ready" coal power,
will not be effective to deliver CCS, and the EU and Member States
must consider funding and support for innovation and demonstration
to complement an emissions standard.
3.11 The great advantage of an EPS is that
it will force energy companies (and Member States) to identify
the real cost of CCS technology. As a result it will create a
real price for clean electricity from coal and a real price for
CO2 emissions. If the EU had an EPS energy companies would have
to show that they fully understood all the costs and risks associated
with CCS technology before they were allowed to build a new coal
power plant. An EPS would let the EU have clean energy now while
letting the market chose which clean solution to build.
3.12 Uncertainty surrounding the price of
CCS technology will not only affect investment decisions relating
to new coal power plants. Most energy companies have a portfolio
of different energy assets, including wind, nuclear, gas and coal.
If the cost of coal with CCS technology is fully understood energy
companies will be able to make realistic comparisons between coal
and cleaner sources of energy. An EPS may make electricity generated
from unclean coal more expensive but in turn this will encourage
everyone to focus on using electricity more efficiently.
3.13 The draft CCS Directive should be amended
to introduce an emissions performance standard at EU level so
that Member States cannot grant consents for new combustion plants
that do not conform to the standard.
19 June 2008
23 European Commission, COM(2008) 30 Final. Communication
from the Commission to the European Parliament, the Council, the
European Economic and Social Committee and the Committee of the
Regions. Back
24
IPCC (2007). Mitigation of Climate Change, Chapter 13,
Policies, Instruments and Co-operative Arrangements, Box 13.7. Back
25
Stern (2006). The Stern Review on the Economics of Climate
Change, Chapter 15, Carbon Pricing and Emissions Markets in
Practice, page 370. Back
26
Stern, Chapter 15 at page 370. Back
27
Stern, Chapter 16: Accelerating Technological Innovation at
page 393. Back
28
New York Times, 23 April 2008, Europe Turns Back to
Coal, Raising Climate Fears http://www.nytimes.com/2008/04/23/world/europe/23coal.html?_r=1&pagewanted=1&sq=Europe%20Turns%20to%20Coal%20Again,%20Raising%20Alarms%20on%20Climate%
20-%20New%20York%20Times&st=nyt&scp=1&oref=slogin. Back
29
CO2 Capture Ready Plants Technical Study Report Number
2007/4 http://www.iea.org/textbase/papers/2007/CO2_capture_ ready_plants.pdf Back
30
Dr Nils Markusson and Professor Stuart Haszeldine (2008). How
ready is "capture ready"?-Preparing the UK power sector
for carbon capture and storage, A report written by the Scottish
Centre for Carbon Storage for WWF-UK. Back
31
In addition, some support for demonstration of CCS in the EU is
planned, of which the UK Government's post-combustion CCS demonstration
competition is one example. Back
32
California Climate Change Centre, University of California Berkeley,
The Role of Technological Innovation in Meeting California's
Greenhouse Gas Emission Targets 2006. Back
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