SPEECH/08/598
Andris
Piebalgs
Energy Commissioner
Zero Emission
Platform
Speech at the Zero Emission Platform General Assembly
Brussels, 10
November 2008
I am pleased and honour to be here at the General Assembly of the Zero Emission Platform with you today and to share with you my views regarding the exciting developments in energy policy in the European Union.
Let me stress, that the activities and support of bodies like the ZEP are needed to effectively introduce any policy. That is why events like this General Assembly are of great importance for us. Participants present here today and the industries and organisations they represent are important players on the European power generation and CCS scene.
Events of this year
This year has been particularly relevant for Europe and for Energy. A series of events have affected the way we see energy. An important event has certainly been the conflict in Georgia as a result of which, the Council of Heads of State and Governments, on the 1st September, called for enhancing diversification of energy sources and energy routes. The event has indeed been relevant as least in the eyes of certain Member States which have taken note when defining their energy mix. This is the case of the country I know the best, Latvia. Latvia, recently, decided to favour coal rather than gas or other sources. There is nowadays a swift in the thinking we approach energy mix. All sources are indeed important and necessary.
The Commission's response to this demand of strengthening security of supply and thus diversifying our energy sources and routes, is the Second Strategic European Energy Review (SEER II) that the Commission will be adopting this week. This policy document will give once again an overview and update of the overall vision of an energy future for Europe. This time, energy security will feature as the focal theme. There will be a full debate on the SEER II from mid-November in the Council and the Parliament and industry is of course invited to contribute too.
Energy security is one of the three objectives set for European energy policy. It must therefore be pursued alongside and as much as possible in synergy with the other two objectives, climate protection and competitiveness of the European economy.
In Europe's energy policy, strengthening energy security is a matter of encouraging the necessary investments in infrastructures, enabling diverse supplies, domestic as well as external; negotiating robust relations with energy producer and transit countries and cooperation with consumer countries; diminishing European vulnerability to energy supply shocks, and encouraging investments in energy efficiency in Europe and beyond and making best use of our indigenous resources and skills. This is a forward-looking and global approach, not defensive and domestic. That being said, it focuses on developing and using Europe's strengths to the full.
Coal fired power plant will be regarded positively in this paper. Until now, it is true that coal fired power plants have been regarded quite negatively. And despite the fact that our consumption of domestic EU coal is slowing down, one thing is absolutely true. Europe, the World, China will continue consuming coal and producing electricity from coal.
Further to energy security, it is clear that there are other important developments. Global warning is certainly affecting us. Human population will increase up to unknown levels by 2050 (9.5 billions inhabitants). If nothing is done, this would trigger an important growth increase with the subsequent increase in the World Greenhouse gas emissions. If we don't act, the problems, such as migration from poorest areas, might be closer to us than we think.
This is why I think by 2050 we certainly need to cut Greenhouse gas emissions by 80% (This is based on the report of the International Panel on Climate change). We have taken some initial steps. Indeed, Member States of the EU committed to reducing the overall green house gas emissions by at least 20% below 1990 levels by 2020. Member States have also agreed to introducing a series of changes at the emission trading scheme (ETS) and making it as the main driver for fighting against climate change. There is as well the compromise to raise the 20% target GHG reduction by 2020, increased to 30% if we succeed to reach an international compromise in Copenhagen. Other measures will be key. It is worth mentioning the commitment to achieve 20% of energy by 2020 originating from Renewable sources or other measures such as our energy efficiency packages to address the reduction of CO2 emissions from non ETS sectors (building and transport, for example)
Need of Carbon Capture and Storage
However, if we want to reduce our GHG emissions by 80% in 2050, we certainly need Carbon Capture and Storage. As I said before, coal will continue to be used. The following question is relevant: should coal be banned? My answer is no. And I have expressed this opinion on a number of times. What should then be the alternative? I do not see other alternative that Carbon Capture and Storage. We now know that CCS is the technology that can deliver the dual benefit of removing significant part of the green-house gas emissions without removing fossil fuels from the energy mix.
This is why in the January package the Commission came forward with several CCS related proposals, among them a communication on supporting early demonstration of CCS and a draft directive on the geological storage of CO2. These two last years has been a quite successful year in this regard. First, the European Council has endorsed the proposal to enable low-CO2 power generation from fossil fuels by 2020. The Council have also welcomed the idea of stimulating the construction and operation by 2015 of up to 12 demonstration plants applying the technologies for CO2 capture and storage. In January this year, the Commission adopted a very ambitious set of proposals relating to climate protection and renewable energy. This package included a draft directive for the post 2013 period of carbon trading under the EU-ETS, revised EU state aid rules, a communication and a draft directive on CCS. And as you know, these proposals are currently in the legislative process and are expected to be finalized this year.
The European Parliament has also gone through this debate. It is clear that at the end of the debate, the technology has received a quite large support and acceptance. CCS has public support perhaps not public enthusiasm but certainly public support.
We are now in a key time. The technology has to be developed. ZEP has been a key stakeholder providing real added value and pushing the agenda forward. The proposals on the table seem to be serious.
We are now discussing about having up to 12 large scale industrial demonstration CCS plants with a power of at least 300 MW. The industry has advanced their intentions to put 11 billion € on this particular initiative and if I understand correctly, there are now over 40 pilot projects for CCS. In this regards, you will recall that I was very happy to receive from ZEP representatives in the beginning of the year the positive message with the headline figure of 11 billions € but also asked for follow-up information on which individual projects will account for this spending.
Further and on the basis of the agreements that you intend to reach today, we now have on the table a detailed proposal for an EU Demonstration Programme on CCS. It shows that when it comes to taking that next, vital step towards deployment, Industry is serious.
ZEP has also provided a technology matrix that could certainly serve us in our work for identifying those CCS demo projects presenting a community interest.
At the Commission we followed with great interest the work carried out by Mc Kinsey on behalf of ZEP to propose an outline of a future European CCS demonstration program. The analysis of technologies to be represented within such a program is a very valuable input and will certainly serve the Commission to further define its policy.
All this is more than progress.... it is a clear momentum. On behalf of the Commission, I congratulate all the members of this Platform for their drive and initiative in moving this technology forwards – NGOs, scientists, geologists, as well as Industry.
But as Dr Sweeney has pointed out, timing is very tight and synergy between the Commission, the EU and Industry is essential if our 2020 goals are to be met. So there are issues that must be resolved. The key one is where to find the matching figures or how to face the extra costs that will allow the start of the demonstration and one day the commercial deployment of this technology? Dr Sweeney has made it very clear where the economic gap lies and how it could be closed. I think the discussions that have taken place during the course of this study have been extremely useful in clarifying exactly the costs and risks.
A solution might be on the table to accelerate the process. I am, of course, referring to Doyle-Davies Amendment. According to the proposed amendment, 500 million ETS Emissions allowances would be allocated to the building of 12 CCS demo projects from the ETS New Entrants Reserve. I look forward to seeing how it progresses through the Trilogue.
But as Dr Sweeney has pointed out, we need the projects first and then the money. After the vote in Parliament, I hope that the projects will begin to be built up. Industry, no doubt will need to take risks. But I am optimistic. We'll have CCS. Industry will need to come with concrete projects and the EC will provide for avenues of funding and support. While funding is critical, I also know how long it takes to get these large, integrated projects up and running. So the Commission looks forward to working with ZEP to identify how we can speed up the process.
In this regards, let me advance you that the Commission will be sending a positive signal regarding the so-called Doyle-Davies amendment. The amendment can offer means of helping all new low carbon technologies demonstration, including early CCS projects, to cover part of the additional demonstration costs regular power plants will not face. However, any use of the EU ETS new entrants' reserve for low carbon technologies, including CCS, must also be acceptable to Member States so as to contribute positively to a first reading agreement by December. Any option supported by the Commission should therefore be aimed at building broader support for financing for large scale demonstrations of low carbon technologies in such a way that would be ultimately facilitate overall agreement on the climate/energy package.
It is clear that any low carbon technologies financing instruments, including for CCS, will need to make sure that the overall stability and coherence of the ETS mechanism is not compromised.
Any support scheme has to meet a clear set of criteria:
- Any use of allowances to support demonstration projects must come from within the overall cap;
- we must avoid possible windfall profits
- It must be a temporary instrument and designed only for early demonstration projects;
- Any earmarking of allowances for early demonstration projects must be technology neutral. However, individual support mechanisms for early demonstration can be technology specific.
- Allowances specifically earmarked for support to early demonstration projects must not be the only support mechanism; specific support must have leveraging effect of opening the door to other forms/sources of financing;
- The mechanisms for allocation of allowances must guarantee the establishment of an optimised portfolio of demo projects (i.e. avoid unnecessary overlaps and repetitions, preferably approved within the framework of SET Plan steering group (i.e. Member States with facilitation of the Commission)).
- Any mechanism should distort the ETS as little as possible.
- Any mechanism should be compatible with community state aid rules.
We may also need to re-examine issues such as the amount of allowances at the disposal of industrial demonstration, the way these allowances will be allocated or the availability of other supplementary funding options.
Concluding remarks
I hope I have provided you with an overview of the CCS perspective of the European Commission outlining the progress and plans of European energy policy plans and developments.
Let me reiterate the important role the Zero Emission Platform can and should play in contributing to the European energy future. ZEP's activities and ideas are most valuable to help us devise effective policies and measures to tackle the energy challenges we face.
I therefore thank you once again for the opportunity to address the ZEP General Assembly.
Ladies and Gentlemen, thank you for your attention.