EN Official Journal of the European Union C 341/82

Opinion of the European Economic and Social Committee on the ‘Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Future of Carbon Capture and Storage in Europe’

COM(2013) 180 final

2013/C 341/19

Rapporteur: Mr ADAMS

On 27 March 2013 the European Commission decided to consult the European Economic and Social Committee, under Article 304 of the Treaty on the Functioning of the European Union, on the

Communication from the commission to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions on the Future of Carbon Capture and Storage in Europe

COM(2013) 180 final.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for preparing the Committee's work on the subject, adopted its opinion on 2 September.

At its 492nd plenary session, held on 18 and 19 September 2013 (meeting of 18 September), the European Economic and Social Committee adopted the following opinion by 168 votes to 5 with 12 abstentions.

1. Conclusions and recommendations

Conclusions

1.1 EU energy and climate policy must recognise and be responsive to global markets and international agreements. It also must develop answers when the markets fails to respond to social priorities and deal with the lack of political coherence.

1.2 The debate on Carbon Capture and Storage (CCS) exemplifies the tensions represented in such a policy initiative.

1.3 The present global energy market is failing to take account of the massive and damaging externalities involved in the accelerating use of all fossil fuels – particularly the impact on public health and the atmospheric accumulation of greenhouse gases. Global political initiatives also have yet to have a significant effect on carbon reduction.

1.4 CCS offers a known technological process which potentially can provide an answer to the fundamental question of climate policy: before we release so much carbon dioxide into our atmosphere that it generates devastating climate change can we bury carbon at the same rate that we extract and use it?

1.5 The CCS policy initiative, seen as a vital element in mitigating market weaknesses, has nevertheless met severe obstacles. The near-failure of the EU Emissions Trading Scheme (resulting from weak design, recession and lack of global agreement on climate policy and carbon pricing) has undermined the programme.

1.6 Nevertheless, the case for developing CCS to the stage of a viable, large-scale option capable of being deployed remains compelling but a number of things are necessary for its acceptance which are identified in the following recommendations.

Recommendations

1.7 Maximum effort must be made to secure an international agreement on a climate stabilisation policy, including an agreed, effective and implemented programme for pricing carbon so that consumption of fossil fuel and consequent CO2 emissions are progressively constrained and funds are available to prevent or mitigate impacts.

1.8 Irrespective of such an agreement an active CCS demonstration projects programme should be continued to overcome the concerns raised by the public. The potential benefits – in technology, industrial collaboration, public awareness, statutory and regulatory definition, and in cost-reduction – make a very strong case for further development. The EESC considers this programme to be of vital strategic importance in order to pave the way for deployment

1.9 Such a programme would greatly benefit from being set in the context of a high profile, co-ordinated public dialogue at European level on the future of our total energy system and the need for it to make a transition to a low-carbon future. Public acceptance remains a vital issue for development of CCS infrastructure

1.10 In this context the issues of comparative effectiveness with other low carbon strategies, including CO2 re-usage, in-depth analysis of risk issues and the application of the precautionary principle can all be considered.

1.11 Any policy aimed at promoting CCS will require supportive financing from the public authorities and has to be accompanied by mechanisms offsetting the costs for European industries exposed to international competition.

2. Introduction and background

2.1 The EU's energy policy is complex. It seeks to recognise and balance sustainability, competitiveness and security whilst taking account of issues largely beyond its control such as technological change, global market factors and international developments on climate change action. The need to remain responsive to rapidly changing events and externalities further complicates the objective of setting a framework in which necessary long-term decisions can be made. CCS has to be seen in this context. It is, potentially, a technology of great importance. The Energy Roadmap 2050 makes it clear that CCS could have a very significant role to play and yet the medium to long-term strategic decisions surrounding it containing numerous economic, social political and technical uncertainties.

2.2 The Commission's communication on CCS contains evidence of these complexities, identifying the lack of a long term business case as the main reason for failure to progress in CCS development. However, behind this economic assertion lies a set of environmental technical and socio-political factors which determine the conditions on which such a business case can be made. In seeking to address the questions about CCS asked by the Commission this Opinion also tries to address the underlying issues.

3. Summary of the Communication

3.1 CCS is presented as an essential element in achieving Europe's carbon reduction programme. It is seen as offering the only significant option to deal with CO2 resulting from the persistence of fossil fuel-derived energy in the coming decades. "The 2050 (climate) target can only be achieved if the emissions from fossil fuel combustion are eliminated from the system."

3.2 Since 2007 the EU has sought to support the development of CCS in various ways; a legislative framework for CO2 capture, transport and storage, support for a 10-12 project demonstration programmes, and continuing efforts to establish a carbon price through the Emissions Trading Scheme (ETS) to act as a development funding source and driver for implementation and longer term deployment.

3.3 However, no large scale demonstration projects yet exist in the EU and "even the most promising EU projects are facing major delays". This is because today "no rationale exists for economic operators to invest in demonstration CCS". The ETS has failed to deliver both the funds for investment in such plants and a stable CO2 price to support their future operation. Currently the CO2 price is around 10 % of the figure regarded by many as the absolute minimum needed to establish a possible business case for CCS. However, the Communication points out that even were a business case established it is by no means certain that in some countries, principally those where CCS would be most needed, the public would accept what they perceive as the risk involved in geological storage.

3.4 Nevertheless the Communication argues that it is vital to gain experience in progressing CCS to commercial scale roll-out which will reduce costs, demonstrate the safe geological storage of CO2, generate transferrable knowledge about the potential of CCS, and de-risk the technologies for investors. The promotion of such a programme also focuses attention on the detail of a suitable regulatory framework and stimulates public response. Knowledge thus gained will offer opportunities to be an active part of a future global CCS programme and reinforce the EU's potential role as a supplier of technology and skills.

3.5 Supplementary support mechanisms to fill the gap left by the gross underperformance of the ETS are proposed such as mandatorily purchasing CCS certificates, setting mandatory emission performance standards or creating support for demonstration projects through the equivalent of feed-in tariffs.

3.6 Finally a series of questions are presented which seeks respondents' views on the key issues facing the future of CCS.

4. General comments

4.1 The Commission's document is both a review and a consultation proposal and concludes with a series of questions on CCS-related issues in Europe. The objective of the Communication is limited – to address "the prime challenge of stimulating investment in CCS demonstration … to test whether the subsequent deployment and construction of CO2 infrastructure is feasible". Such a demonstration programme could then be the precursor to a CCS roll-out, though numerous other conditions would need to be met and obstacles overcome for this to happen.

4.2 In the view of the EESC the Commission has correctly identified the necessity for an urgent policy response. The options presented by the Commission are either to make CCS commercially viable or mandatory. The question should be asked, however, is it possible to see such a policy response being forthcoming in the present circumstances? The Committee therefore strongly argues for a much tighter focus in the CCS programme. This would involve recognition that, at this stage, more substantial public funding, possibly from a wider range of sources are necessary to bring any single CCS demonstrator project to fruition. Concentration is needed – on a sufficient number of demonstration projects but with 2-3 times the financial support and provision for supporting subsequent operation.

4.3 On balance it is the view of the EESC that such a commitment can continue to be justified as a risk investment in a technology which could have a significant role to play in the context of an international agreement on a carbon pricing or quota mechanism. We believe that such an agreement is a precondition for progressing CCS development (either in Europe or worldwide) to any significant extent. We also believe that a detailed response to the questions posed by the Communication can only follow a re-assessment of the objectives set by the European Council and a re-orientation of policy goals and instruments – but such a re-orientation has to involve a pragmatic approach to energy and climate policy.

4.4 This difficult topic can be best approached by asking under what conditions is CCS likely to be implemented at a large scale within Europe, where supportive legislative and regulatory frameworks in the shape of the CCS directive are largely in place. The answers are mostly contained within the Commission's document. — An enforceable global agreement on climate change action is necessary, equitably sharing the costs of both mitigation and adaptation measures. Without such an agreement no country or trading bloc, economically dependent on holding a competitive position in world markets could, in the medium to long term, afford to pursue an independent carbon-minimisation programme. Any proposal to unilaterally impose a realistic carbon "pricing" mechanism would be competitively and politically unacceptable especially in the present circumstances. A general, if phased and progressive global agreement would also be necessary to assure citizen support in democratic countries. — Minimisation of carbon production would need to be prioritised in such an agreement and a resulting "price" of carbon (however achieved) established which would support the business case for devoting resources to CCS. Nevertheless, CCS would still have to make a competitive case against alternative technologies seeking investment funds for the same purpose such as biological storage or carbon capture and usage programmes. The EESC considers that CCS is strongly placed as the leading carbon sequestration technology. — The public (and therefore political) acceptability of CCS as a low-risk carbon sequestration technology would need to be assured in those EU Member States where it was a realistic option. This particularly applies to the perceived risks involved in onshore storage – the only option for many MS – and where the precautionary principle needs due consideration.

4.5 The likelihood of the first two conditions being met, based on evidence of international climate negotiations to date, is low. There is considerable doubt about whether an effective global climate pact can be reached at the UN Paris conference in 2015. There is also no evidence that policy-makers have been able to convincingly explain to the consumer the future costs of the related market failure. This results in current prices of goods and services not fully reflecting the expected costs of climate change impacts which will be borne by generations to come. Citizens, whether as consumers or voters, are reluctant to accept the implications, particularly at a time of austerity and low or negative economic growth.

4.6 The thrust of this Opinion so far has been realistically pessimistic. We believe this appropriately reflects the present concerns of civil society. The outcome of unrealistically optimistic thinking in policy making is currently only too evident and casts a shadow of despair for some and disillusion for many. But there are some grounds for believing that the present situation and outlook on energy and climate policy (and related CCS issues) can be gradually transformed.

4.7 It is increasingly apparent that EU policy legitimacy will (and should) become more dependent on public understanding and involvement in the decision-making process. Without public understanding of the underlying rationale of climate and energy policy and public acceptance of CCS technology, carbon sequestration is unlikely to progress beyond a demonstration phase or the present commercial usages such as enhanced oil recovery and food and drink applications.

4.8 It also has to be recognised that every decision that a country takes on energy sources and related issues is ultimately based on that society's value judgments over technical and economic considerations. Thus a societal and ethical dimension is always present in such decisions. This creates a difficulty in developing a common EU policy especially when, as with energy, final competence on sources and composition of supply remain with the Member State.

4.9 One effect of lack of citizen awareness is the failure of the public to realise the potential of climate change mitigation technologies such as CCS. Jobs, a lead in global innovation, new types of investment and finance methods and the development of new technologies are examples of such benefits. A roll-out of CCS could also offer greater job security in traditional industries such as mining.

4.10 The EESC therefore advocates and will be active in developing a European Energy Dialogue, an inclusive, transparent, trustworthy and coordinated multi-level conversation within and across all Member States. It should translate into everyday terms the essential points about the energy "transition" – and related issues such as CCS, energy poverty, etc. It should bring discussion about a low carbon transition into the classroom, the cafe and the kitchen. Such a Dialogue should be framed to feed into policy-making and encourage discussion of how far sometimes conflicting goals – secure, sustainable, safe, competitive and affordable energy – can be reconciled. The process will enable more qualitative and robust input from citizens and organisations to future formal energy consultation exercises. But the Dialogue will also focus on out-reach as an "honest broker" and facilitator, in this sense it can encourage and augment energy discussions in Member States and play a key communication role in forming more of a common view on energy across Europe. In this context CCS, as a contributing technology to atmospheric carbon reduction, can be comparatively assessed and options and trade-offs discussed.

5. Specific comments

5.1 The Commission makes the fundamental point that elimination of CO2 from fossil fuel combustion is vital in achieving agreed 2050 EU climate targets. A similar approach needs to be adopted at a global scale and the extent of the problem understood by all policy-makers and reconciled with economic aspirations. The world's known fossil fuel reserves equate to approximately 3 000 billion tonnes of carbon dioxide if combusted, but just 31 % of that could be burned for an 80 % chance of keeping below a 2C global temperature rise. For a 50 % chance of 2C or less, just 38 % could be burned (Unburnable Carbon http://www.carbontracker.org/wp-content/uploads/downloads/2012/08/Unburnable-Carbon-Full1.pdf). But the mitigating role that CCS could play needs to be put in proportion. Even an optimistic scenario which sees 3 800 commercial CCS projects worldwide would allow only an extra 4 % of fossil fuel reserves to be burned (IEA World Outlook 2012). The reality is that energy assets already valued at trillions of euros will have to be left in the ground, unburned, if currently proposed global climate aspirations are to be met without CCS. This will have profound economic consequences. It is essential to recognise that it is necessary to find a way to resolve this fundamental dilemma if climate and energy policy (and CCS) are to have any chance of being effective.

5.2 It should be noted that carbon dioxide can be used as well as stored. In addition to enhanced oil recovery, food use and other minor applications it is possible that both chemical and biological engineering may play a part in the use of CO2 in building materials, feedstock, other chemical processes and other products with the benefit of further R&D. However the scale of extraction of fossil fuels suggests that, in the foreseeable future, only a modest contribution to the CO2 problem will come from this source.

6. Specific responses to the questions presented in the Communication

1) Should Member States that currently have a high share of coal and gas in their energy mix as well as in industrial processes, and that have not yet done so, be required to: a. develop a clear roadmap on how to restructure their electricity generation sector towards non-carbon emitting fuels (nuclear or renewables) by 2050, b. develop a national strategy to prepare for the deployment of CCS technology. The merit of requiring MS to forward-plan for low carbon energy and CCS deployment is that it both raises the awareness of those involved in the process and offers the potential of a valuable, if daunting, cost and impact assessment which would accompany future legislative proposals. This would seem to be a useful exercise but should also include the balancing of comparative national options on other biological, chemical and physical sequestration processes and low emission technologies (1).

2) How should the ETS be re-structured, so that it could also provide meaningful incentives for CCS deployment? Should this be complemented by using instruments based on auctioning revenues, similar to NER300? The lesson of the vulnerability of the ETS to global economic forces must be taken into account. It is clear that a globally agreed climate policy (or the failure to achieve one) will determine the future of the ETS and the outcome of the 2015 talks will be crucial and the radical remedial measures which the ETS demands cannot be undertaken without greater global policy clarity. Concerning financial incentives in general it is clear that support for operating costs of demonstrator CCS plants are required in addition to development and capital cost funding.

3) Should the Commission propose other means of support or consider other policy measures to pave the road towards early deployment, by: a. support through auctioning recycling or other funding approaches b. an Emission Performance Standard c. a CCS certificate system d. another type of policy measure The Commission should certainly explore other funding methods for a CCS demonstrator project though it is considered that action on early widespread deployment of CCS is premature, for the reasons given. This, however, does not affect the case for public funding of a small number of demonstration projects. Work on an Emissions Performance Standard and a CCS certificate system could explore and test methods for regulatory processes that are almost certainly going to be needed in the future.

4) Should energy utilities henceforth be required to install CCS-ready equipment for all new investments (coal and potentially also gas) in order to facilitate the necessary CCS retrofit? This is a logical step if roll-out of CCS technology could be given an above average probability. At present this seems unlikely. It should also be noted that large industrial CO2 producers using primary fossil fuel energy sources– especially cement producers – would also need to be treated in a similar way.

5) Should fossil fuel providers contribute to CCS demonstration and deployment through specific measures that ensure additional financing? The risks implicit in possible failure to apply CCS technology seem to place it in the category of being fully supported from public funds, pro bono publico. Fossil fuel providers should certainly be involved in subsequent deployment funding and a case could be made for their contributing to development costs. However, a range of issues need to be recognised, such as implications involving WTO rules and the need for all fossil fuel sources to be contributors, even those where at present no relevant CCS process exist, particularly in transport.

6) What are the main obstacles to ensuring sufficient demonstration of CCS in the EU? The main obstacles are: — the failure to establish a realistic carbon "pricing" mechanism that is sustainable at global level; — "competition" from other carbon sequestration or low carbon technologies; — the need for the public to accept what is perceived as a potentially risky technology; — the possible failure to establish a fund of sufficient size to support the programme in both capital and running costs.

7) How can public acceptance for CCS be increased? Active dialogue with the public on the nature of CCS, its potential benefits and a realistic and independent assessment of risks should be undertaken as part of a total systems approach to energy awareness. In certain countries and regions the fact that there could be beneficial job outcomes from the deployment of CCS should also be recognised.

Brussels, 18 September 2013. The President of the European Economic and Social Committee Henri MALOSSE

(1) OJ, C 299, 4.10.2012.