E3G

Media Brief: New EU Climate Change Package Fails to Tame King Coal

By Nick Mabey

5 Critical Areas in the Climate Package

1.Reducing incentives for building new coal power plants: the package may give stronger disincentives for building new coal plants by requiring new plants to buy 100% of the permits needed to cover their emissions at auction from 2013. Unless a strong international agreement is reached companies will also be limited in the amount of cheap credits they can buy outside the European Union to cover their emissions. It is critical that 100% auctioning in the power sector and limits on purchasing emissions outside the EU are agreed to make new plants pay the full cost of their emissions.

2. Additional Funding for European CCS Demo Plants and other Clean Technologies: The climate package will not provide any new European funding for delivering the 12 CCS demo plants agreed by the European Council in 2007. The European Commission is asking Member States to apportion up to 20% of their Emission Trading auction revenues to pay for CCS and other new technologies, and will review the potential for additional EU funding at the end of 2008. Without additional EU funding it is highly unlikely that the 12 CCS demonstration plants will be built. New funding could be delivered through a combination of Member States pledging ETS auction revenues, using some ETS permit allocations to directly fund CCS demonstration plants, and undertaking an ambitious review of EU funding sources in 2008. This need must be clearly signposted in the package.

3. Making Carbon Capture and Storage (CCS) Mandatory: the 2007 Coal Communication from the European Commission argued for mandatory use of CCS on all new fossil power stations built after 2020, and retrofitting of all plants built after 2010. The March 2007 European Council endorsed deployment of CCS by 2020 if technically possible. The current package pulls back from this approach and only threatens to consider mandatory regulation in companies fail to invest fast enough in CCS, and it contains no provisions on retrofitting plants. Without a strong signal that CCS will be required in the future it is unlikely that companies will invest in CCS at scale, as prices in the ETS will be too uncertain and low to make the first wave of plants profitable. Regulation for mandatory deployment should be kept as the default option until the results of the demonstration plants can be reviewed in 2015.

4. Making new fossil plants carbon capture ready: the package moves away from requiring any new fossil fuel power plants built after 2010 to be retrofitted with CCS, with a much weaker regulatory obligation to just consider the technical feasibility of CCS for new plants. All new plants should be required to undertake a full economic, financial and technical review of CCS retrofitting as part of their permitting process; private investors in utilities should require similar analysis as due diligence for power plant financing.

5. Building International Cooperation: tackling new coal build in Europe is important, but will not deliver climate security unless CCS technologies are also deployed in other major economies which are also dependent on coal - notably China, India and the USA. Europe must deepen its cooperation on CCS and coal with all major consuming countries, including by providing substantial funding for collaboration on research and commercial scale demonstration, and developing mechanisms for technology sharing with developing economies.