Carbon Capture and Geological Storage (CCS) in emerging developing countries: financing the EU-China Near Zero Emissions Coal Plant project

The European Commission today set out plans to finance the demonstration of carbon capture and geological storage (CCS) in cooperation with China. This comes in the context of a commitment made by the EU and China to develop and demonstrate in China and the EU advanced, near-zero emissions coal technology through carbon capture and storage by 2020. CCS is an important technology in the fight against climate change and has the potential to cut emissions from power generation in fast-developing and coal-dependent emerging economies, such as China.
Environment Commissioner Stavros Dimas said: “We have taken action to put in place the regulatory framework and the incentives to facilitate CCS demonstration in Europe and now we are making good on our promise to China. Action by developed and developing countries alike is essential to ensure global warming is kept below the danger level of 2ºC. This important cooperation between the EU and China on CCS can act as a model for cooperation under the post-2012 global climate change regime the world must agree in Copenhagen in December."
Commissioner for External Relations Benita Ferrero-Waldner added: "The joint efforts of the EU and China are key to the success of the post-2012 climate change negotiations in Copenhagen and we have an opportunity to show true leadership. The fact that the EU is supporting the construction of a power plant equipped with this innovative technology in China is proof of our common goal to look way beyond Copenhagen and to prepare the ground for cleaner energy production based on coal worldwide."
The need for action by all countries
As set out in the Commission's 'Copenhagen Communication', 1 ( IP/09/141 ), both developed and developing countries need to mitigate their greenhouse gas emissions in order to limit average global warming to less than 2°C compared to pre-industrial levels.
Under the UN Framework Convention on Climate Change, the EU and the other developed countries have agreed to help developing countries tackle climate change through financial and technical cooperation.
EU cooperation with China on CCS
Specifically, the EU agreed in 2005 to cooperate with China on a range of climate change issues, including CCS, in the context of the EU-China Climate Change Partnership. 2
The Communication adopted today sets out the Commission's plans for establishing an investment scheme to co-finance the design and construction of a power plant to demonstrate carbon capture and storage (CCS) technology in China. The Commission has programmed funding of up to €50 million for the construction and operation phase of the project, out of a total of €60 million that has been earmarked for cooperation with emerging economies on cleaner coal technologies and carbon capture and storage.
Depending on the choice of technology used, and assuming China introduces some form of carbon pricing instrument, the additional cost of constructing and operating over 25 years a new power plant equipped with CCS in China is estimated at €300-€550 million. The Commission will work closely with China, Member States, other European Economic Area (EEA) countries and industry to secure the additional financing required. The Commission proposes to combine these funding sources in a public-private partnership, possibly in the form of a a Special Purpose Vehicle.
This investment scheme could serve as a model for other technology cooperation activities between developed countries and emerging/developing countries in the context of a post-2012 climate change agreement.
The importance of CCS
Coal, the fossil fuel with the highest emissions of the greenhouse gas carbon dioxide, is China's predominant energy source, contributing 70% to the energy mix. It is expected to maintain its important role into the future. Ways therefore need to be found to reduce the impact of coal burning on the climate. CCS technologies could make a significant contribution by mitigating the greenhouse gas emissions produced. CCS would be a bridge technology while alternatives to fossil fuels are further developed and deployed.
European Commission analysis indicates that under an emissions scenario compatible with meeting the 2ºC target, around 18% of global fossil fuel power generation would have to be fitted with CCS technology in 2030.
Action on CCS in the EU
EU leaders have committed to the establishment of a network of up to 12 CCS demonstration plants in the EU by 2015.
The new EU directive on the geological storage of carbon dioxide, 3 agreed as part of the EU climate and energy package ( IP/09/628 ), sets out an enabling legal framework for CCS to enable the safe operation of CCS in Europe. The EU has also agreed to incentivise CCS demonstration through the EU Emissions Trading System (CO 2 safely stored will not count as emitted), by providing funding from the auctioning of EU ETS allowances which can be used to co-finance CCS demonstration plants), and through revised State Aid rules.
The European Economic Recovery Plan has allocated €1050 million to CCS demonstration projects inside the EU. Several EU companies have announced demonstration plants to be completed in the EU over the next 5-10 years.
Next steps
The Commission invites EU Member States, interested EEA States and China to pledge financial and political support for this novel initiative. It also invites the European Parliament to provide its political support.