Communication from the Commission  to the Council and the European Parliament - Sustainable power generation from fossil fuels:  aiming for near-zero emissions from coal after 2020
Date: 2007-01-10
Institutions: European Commission
Subjects: coal, electrical energy, energy production, environmental protection, fossil fuel, pollution, power plant

COMMISSION OF THE EUROPEAN COMMUNITIES 

Brussels, 10.1.2007 
COM(2006) 843 final 

COMMUNICATION FROM THE COMMISSION  
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 

Sustainable power generation from fossil fuels:  
aiming for near-zero emissions from coal after 2020 

{SEC(2006) 1722} 
{SEC(2006) 1723} 
{SEC(2007) 12} 

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TABLE OF CONTENTS 

1. 

2. 

3. 

3.1. 

3.2. 

4. 

4.1. 

4.2. 

4.3. 

5. 

5.1. 

5.2. 

5.3. 

5.4. 

Role of fossil fuels in energy supply and the challenge of keeping coal in the 
energy mix................................................................................................................... 3 

Technological solutions for a sustainable use of coal and other fossil fuels.......... 5 

On the way to sustainable fossil fuels ....................................................................... 5 

Demonstration of integrated technological solutions for Sustainable Coal ................. 5 

Capture readiness as an integral part of fleet modernisation ....................................... 7 

Acting now to make sustainable fossil fuels a reality after 2020............................ 8 

Consistent regulatory framework for CCS at EU level................................................ 8 

CCS acceptance in international regimes..................................................................... 9 

Clear framework for phasing in Sustainable Fossil Fuels.......................................... 10 

Costs and benefits of sustainable fossil fuels technologies.................................... 11 

CCS costs and costs of electricity produced .............................................................. 11 

Electricity prices with Sustainable Coal .................................................................... 12 

Environmental risks and benefits of Sustainable Fossil Fuels ................................... 12 

Contribution of Sustainable Fossil Fuels to the goals of prosperity and sustainability
.................................................................................................................................... 13 

5.4.1.  Sustainable Coal in the service of global sustainable development........................... 14 

5.4.2.  EU as a competitive exporter of Sustainable Fossil Fuels technologies.................... 14 

6. 

Conclusions ............................................................................................................... 14

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COMMUNICATION FROM THE COMMISSION  
TO THE COUNCIL AND THE EUROPEAN PARLIAMENT 

Sustainable power generation from fossil fuels:  
aiming for near-zero emissions from coal after 2020 

(Text with EEA relevance) 

INTRODUCTION 

This  Communication  is  presented  in  the  follow-up  to  the  Commission  Green  Paper  on  “A 
European Strategy for Secure, Competitive and Sustainable Energy” adopted in March 2006. 
Its  aim  is  to  present  a  global  view  of  the  actions  needed  for  the  continued  contribution  of 
fossil  fuels  and  particularly  coal  to  the  security  and  diversification  of  energy  supply  for 
Europe  and  the  world  in  a  way  compatible  with  the  sustainable  development  strategy  and 
climate  change  policy  objectives.  This  Communication  takes  account  of  the  work  done  and 
opinions  received  during  2006  within  the  Second  European  Climate  Change  Programme 
(ECCPII), the High-level Group on Competitiveness, Energy and the Environment (HLG), the 
preparations  for  the  7th  Framework  Programme  (FP7)  for  Research,  and  the  Zero  Emission 
Fossil  Fuel  Power  Plant  Technology  Platform.  It  also  reflects  the  consultations  in  the 
European Fossil Fuels Forum and the reactions to the above-mentioned Green Paper. 

IMPACT ASSESSMENT STUDY 

This Communication  was  preceded  by an impact assessment  study, the results of which are 
summarised 
this 
Communication. The results of the impact assessment study are reflected as appropriate in the 
Commission positions set out in this Communication. 

Impact  Assessment  Executive  Summary1  accompanying 

the 

in 

1. 

ROLE OF FOSSIL FUELS IN ENERGY SUPPLY AND THE CHALLENGE OF KEEPING COAL 
IN THE ENERGY MIX 

Fossil fuels represent an important element of the energy mix in the European Union 
as  well  as  in  many  other  economies.  They  are  of  particular  importance  for  the 
generation  of  electricity:  over  50%  of  EU  electricity  currently  comes  from  fossil 
fuels (mainly coal and natural gas). Worldwide, growing total energy production is 
expected  to  rely  increasingly  on  fossil  fuels  at  least  till  20502,  particularly  in  a 
number of key geo-economic areas. 

The  use  of  fossil  fuels  (coal  or  natural  gas)  can  also  be  envisaged  for  the  co-
production  of  electricity  and  hydrogen  on  a  large  scale,  opening  a  realistic  and 
economically viable route to a hydrogen economy. 

1 
2 

Commission Staff Working Document SEC(2006) 1723 (referred to hereafter as IAES). 
IEA estimates in its WORLD DEMAND FORECAST 2006. 

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However,  all  use  of  fossil  fuels  leads  to  CO2  emissions,  currently  the  most  critical 
cause of global warming. If fossil fuels are to continue playing their valuable role in 
the  energy  mix,  solutions  must  be  found  to  limit  the  impact  of  their  use  to  levels 
compatible with sustainable climate objectives.  

This is of particular importance for coal, which is traditionally the key fossil fuel in 
power production (used to generate some 30% of EU electricity) and also by far the 
most carbon-intensive3.  

Furthermore, most of the future growth in energy consumption in a number of large 
emerging economies is expected to be met from coal. Two-thirds of the increase in 
global coal use will come from China and India. Already today, one new coal-fired 
power plant is put into operation every week somewhere in the world. 

Coal is a key contributor to the EU's security of energy supply and will remain so. 
Coal  represents  the  fossil  fuel  with  by  far  the  largest  and  most  widely  distributed 
global  reserves,  estimated  to  last  for  some  130  years  for  lignite  and  200  years  for 
hard coal. Even with strategies to increase energy efficiency and the use of renewable 
sources, coal should remain an important option in the coming decades for covering 
essential electricity needs not satisfied by renewable energies4.  

However,  coal  can  continue  to  make  its  valuable  contribution  to  the  security  of 
energy supply and the economy of both the EU and the world as a whole only with 
technologies allowing for drastic reduction of the carbon footprint of its combustion. 
If such technologies are developed on a sufficient scale to allow the sustainable use 
of  coal  and  are  judged  economically  viable  for  commercial  deployment,  they  can 
also  provide  solutions  for  combustion  processes  using  other  fossil  fuels,  including 
gas-fired power generation.  

It  is  important  to  stress  the  global  character  and  the  urgency  of  the  challenges 
associated with coal use. Coal is expected to continue supplying about a quarter of 
global  primary  energy  needs.  As  global  primary  energy  consumption  increases  by 
60%  in  the  next  20  years,  so  will  the  use  of  coal.  With  current  technologies,  this 
would result in a 20% increase in global CO2 emissions by 2025. Two-thirds of this 
increase  would  arise  in  developing  countries.  The  EU  therefore  needs  to  develop 
technological  solutions  for  sustainable  use  of  coal  not  only  to  retain  coal  in  the 
European  energy  mix  but  also  to  ensure  that  global  growth  in  coal  use  will  be 
possible without irrevocable damage to the global climate. The urgency of this task 
stems  from  the  fact  that  even  with  sincere  and  concentrated  efforts,  the  necessary 
novel  technologies  may  not  be  ready  for  commercial  deployment  on  a  global  scale 
before 2020. It is therefore vital that the EU starts today to implement policies that 
will  underpin  and  sustain  its  global  leadership  in  fighting  climate  change  in  the 
decades to come. 

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Coal-based power generation in the EU-27 was responsible for around 950m tonnes of CO2 emissions 
in  2005,  representing  24%  of  all  EU  CO2  emissions.  Worldwide,  emissions  from  coal-fired  power 
generation amount to approx. 8bn tonnes of CO2 per year. See IAES for further details. 
This 
(http://ec.europa.eu/enterprise/environnement/hlg.doc_06/first_report_02_06_06.pdf).  See  also 
Strategic EU Energy Review adopted concurrently with this Communication - COM(2007) 1. 

the  recommendations  of 

the  First  Report  of 

the  HLG 
the 

inter  alia,  with 

line, 

in 

is 

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2. 

TECHNOLOGICAL SOLUTIONS FOR A SUSTAINABLE USE OF COAL AND OTHER FOSSIL 
FUELS 

Even  though  this  Communication  concentrates  mainly  on  the  possibilities  for  the 
sustainable  use  of  coal,  it  should  be  clearly  understood  that  many  of  the  proposed 
solutions  (notably  CO2  capture  and  storage)  should  be  applicable,  and  applied  as 
appropriate, to other fossil fuels, especially gas. 

‘Clean  Coal’  technologies  have  been  developed  and  are  now  widely  used  in  the 
power generation sector, substantially mitigating the problems of local pollution and 
acid rain by considerably reducing emissions of SO2, NOx, particulates and dust from 
coal-fired power plants.  

Clean  Coal  technologies  have  also  brought  about  a  steady  increase  in  the  energy 
efficiency of the conversion of coal into electricity, although there is still scope for 
substantial  improvements  in  the  energy  efficiency  of  large-size  coal-fired  power 
plants through the continued development of these technologies5.  

solutions 

(called  hereafter  "Sustainable  Coal" 

Such achievements are important stepping stones for further progress towards novel 
technologies) 
technological 
incorporating  the  concepts  of  CO2  capture  and  storage  (CCS)  in  coal-based  power 
generation.  Processes  for  CO2  capture  and  CO2  storage  already  exist  as  established 
industrial practices in some sectors; the technology is well developed and tested but 
needs  to  be  adequately  adapted  for  a  large-scale  use  in  power  generation  in  an 
integrated  manner.  Bringing  CCS  to  commercial  viability  in  coal-fired  power 
generation will pave the way for its application also in combustion processes using 
other  fossil  fuels,  notably  gas.  This  will  enable  a  transition  to  "Sustainable  Fossil 
Fuels" in power generation. 

3. 

ON THE WAY TO SUSTAINABLE FOSSIL FUELS 

3.1. 

Demonstration of integrated technological solutions for Sustainable Coal 

Past  and  ongoing  research  and  development  (R&D)  programmes  addressing  Clean 
Coal and CCS technologies have produced positive results. It is now time to focus on 
the  development  and  industrial  demonstration  of  integrated  technological  solutions, 
combining  in  an  optimal  way  Clean  Coal  and  CCS  for  near-zero  emission  power 
generation from coal.  

It  emerges  from  the  analyses  undertaken  by  the  Commission6  that  technological 
solutions  involving  only  efficiency  improvements  through  Clean  Coal  technologies 
or  only  CCS  technologies  are  not  able  to  meet  in  the  long  term  the  combined 
objectives of achieving near-zero CO2 emissions at acceptable costs while preserving 
the  diversity  of  the  energy  mix  needed  for  security  of  energy  supply.  At  the  same 
time, and especially in the particular case of coal-fired power generation, it is clear 

5 

6 

While the oldest units still operating in the EU may have efficiencies of 30%, the most recently built 
coal-fired plants reach efficiencies of up to 43% (for lignite power plant) and 46% (for hard coal power 
plant). The technical limits are assumed to be above 60%. 
See IAES for further details. 

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that CCS technologies cannot be envisaged without highly efficient coal conversion, 
allowing to limit the impact of the energy penalty associated with the use of CCS. 

With  sustained  effort  and  with  market  conditions  reflecting  clear  and  ambitious 
carbon constraints, Europe stands a fair chance of achieving the commercial viability 
of  Sustainable  Coal  technologies  in  the  next  10  to  15  years.  This  will,  however, 
require  bold  industrial  investments  in  a  series  of  demonstration  plants,  both  within 
and outside the EU, and related policy initiatives for a relatively extensive period of 
time, starting practically now and lasting possibly until 2020 or even beyond. Even 
with  demonstration  projects  under  way,  further  R&D  activities  will  continue  to  be 
needed  in  parallel  throughout  the  demonstration  phase.  It  should  be  seen  as  an 
iterative process where demonstration and further R&D go hand-in-hand. 

A  very  positive  signal  in  this  area  came  in  2006  from  industry  through  the  Zero 
Emission  Fossil  Fuel  Power  Plant  Technology  Platform  (ZEP  TP).  Major  energy 
companies  involved  in  coal-fired  generation  announced  their  plans  to  build  10-12 
large-scale demonstration plants testing various ways of integrating CCS in coal- and 
gas-fired  power  generation.  Once  commissioned,  these  plants  will  need  to  be 
operated for at least five years before the tested solutions are considered to be fully 
demonstrated  and  ready  for  standard  investment  in  zero-emission  power  plants,  in 
2020 and after. 

Commission  action:  The  Commission  will  substantially  increase  the  funding  for 
R&D  in  the  energy  area,  making  the  demonstration  of  Sustainable  Fossil  Fuels 
technologies one of the priorities for 2007-2013. The Commission calls on Member 
States to show an equal commitment to R&D and demonstration in this area. The 
Commission will also seek to ensure that action at both EU and Member State level 
complement  the  efforts  by  industry  in  the  framework  of  the  ZEP  TP.  A  European 
Strategic Energy Technology Plan will provide a suitable instrument for the overall 
coordination  of  such  R&D  and  demonstration  efforts  and  for  the  maximisation  of 
synergies at both EU and national level.  

The  presence  and  bold  initiative  of  the  ZEP  TP  notwithstanding,  successful  and 
timely  demonstration  of  the  commercial  viability  of  Sustainable  Fossil  Fuels  may 
require  the  creation  of  a  structure  to  coordinate  and  adequately  support  such 
industry-scale  technology  demonstrations.  Its  added  value  should  lie  primarily  in 
avoiding duplication of effort and aligning priorities through enhanced coordination 
and knowledge sharing, both among activities undertaken in Europe (at EU level and 
within  Member  States)  as  well  as  between  European  activities  and  those  in  third 
countries. 

Such an instrument should actively support not only the demonstration projects but 
also  the  advancement  of  international  cooperation,  the  definition  of  exchange 
programmes,  and  links  with  other  related  EU  initiatives  (such  as  other  platforms). 
Furthermore,  it  could  also  design  and  execute  an  affordable  public  awareness 
strategy. 

Several  types  of  arrangements  may  be  considered,  from  enhancing  the  existing 
Technology Platform to establishing special Commission-driven instruments (such as 
a Joint Technology Initiative or Joint Undertaking) or specific financing instruments 
with  the  participation  of  the  banking  sector  (possibly  through  the  European 

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Investment  Bank,  EIB,  and/or  the  European  Bank  for  Reconstruction  and 
Development, EBRD). 

Commission action: The Commission will examine (inter alia by way of an in-depth 
impact assessment study to be undertaken in 2007) possible measures for achieving 
the  demonstration  of  Sustainable  Fossil  Fuels,  and  particularly  Sustainable  Coal, 
technologies. On this basis, the Commission will determine the most suitable way to 
support  the  design,  construction  and  operation  by  2015  of  up  to  12  large-scale 
demonstrations  of  Sustainable  Fossil  Fuels  technologies  in  commercial  power 
generation. 

3.2. 

Capture readiness as an integral part of fleet modernisation 

Modernisation of the fleet of coal-fired power plants operating in the EU represents 
another early step towards Sustainable Fossil Fuels in Europe. More than a third of 
existing  coal-fired  capacity  in  the  EU  is  expected  to  reach  the  end  of  its  technical 
lifetime in the coming 10 to 15 years7.  

Using  the  best  available  and  most  energy-efficient  conversion  technologies  in 
replacement (as well as new-build) investment can bring about an initial reduction of 
around  20%  in  CO2  emissions  from  coal-based  power  generation  by  2020.  Recent 
developments  in  the  European  power  industry  show  that  reducing  CO2  emissions 
through improved coal conversion efficiency is considered a more economic solution 
than  switching  to  gas,  at  prevailing  gas-coal  price  ratios  and  levels  of  CO2 
restrictions.  In  the  absence  of  a  long-term  and  commercially  viable  perspective  for 
coal,  however,  electricity  operators  may  be  reluctant  to  include  coal-based 
technologies  in  their  considerations  when  replacing  ageing  coal-fired  plants;  their 
decisions could then impact on the security of EU energy supply. 

The  expectations  of  higher  costs  associated  with  CCS-equipped  power  plants  after 
2020 give rise to a tangible risk. This is the risk of a "non-CCS technology lock-in" 
as  the  result  of  ill-considered  investment  decisions  with  respect  to  the  coal-fired 
capacity due for replacement in the coming 10-15 years. It is imperative to avoid a 
situation where much of the new build before 2020 is undertaken in a way that would 
either  preclude  or  insufficiently  guarantee  the  addition  of  CCS  components  on  a 
sufficiently wide scale after 2020. 

Commission action: The Commission will assess on the basis of recent and planned 
investments whether new fossil fuels power plants built and to be built in the EU use 
best available technologies regarding efficiency and whether, if not equipped with 
CCS, new coal- and gas-fired installations are prepared for later addition of CCS 
technologies ('capture ready'). 

If this turns out not to be the case, the Commission will consider proposing legally 
binding instruments as soon as possible, after a proper impact assessment. 

7 

Up to 70 GW of EU coal-fired capacity will need to be replaced (out of a total of 187 GW) by 2020. 

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4. 

ACTING NOW TO MAKE SUSTAINABLE FOSSIL FUELS A REALITY AFTER 2020 

Smooth  and  definitive  transition  to  Sustainable  Coal  and  more  generally  to 
Sustainable  Fossil  Fuels  technologies  hinges  not  only  on  further  development  and 
commercial  demonstration  of  CCS.  It  is  also  predicated  on  the  existence  of  an 
economic and regulatory environment that will reward low-carbon technologies and 
provide  sufficient  motivation  for  investment  decisions  preferring  technological 
solutions with CCS to non-CCS ones. Future gas-coal price ratios and CO2 allowance 
prices will be determining factors for investment decisions in new power generation 
in  coal,  gas  and  renewables.  Based  on  these  market  fundamentals,  utilities  will 
optimise  their  generation  portfolio  towards  a  combination  of  minimum  risk  and 
maximum return on investment. 

In the context of the future emissions trading scheme, this transition will thus largely 
depend  on  the  prevailing  regime  and  prices  for  CO2  emissions  allowances,  which 
will in turn depend on the overall environmental regulatory framework in the EU and 
indeed world-wide. 

4.1. 

Consistent regulatory framework for CCS at EU level 

While sufficient storage capacities are available in Europe to store CO2 from power 
production for several centuries8, a regulatory and policy framework for CCS in the 
EU is needed in order to: 

– 

– 

– 

ensure  the  environmentally  sound,  safe  and  reliable  operation  of  CCS 
activities; 

remove unwarranted barriers to CCS activities in current legislation; 

provide appropriate incentives proportionate to the CO2 reduction benefits. 

The  regulatory  framework  for  CO2  storage  must  be  based  on  an  integrated  risk 
assessment  for  CO2  leakage,  including  site  selection  requirements  designed  to 
minimise the risk of leakage, monitoring and reporting regimes to verify storage, and 
adequate  remediation  for  any  leakage  that  does  occur.  R&D  and  demonstration 
support  will  be  required  to  advance  the  requisite  technology.  The  Commission  has 
already  launched  a  study  to  assess  in  detail  the  potential  risks  from  CCS  and  to 
identify  the  safeguards  needed  to  ensure  that  CCS  can  be  operated  safely.  This 
process  will  be  open  and  transparent  and  the  Commission  will  also  design  and 
execute an awareness strategy to involve the wider public. 

Commission  action:  In  2007,  the  Commission  will  assess  the  potential  risks  from 
CCS  and  lay  down  requirements  for  the  licensing  of  CCS  activities  and  for 
adequately  managing  the  risks  and  impacts  identified.  Once  a  sound  management 
framework  is  developed,  it  can  be  combined  with  changes  to  the  existing 
environmental regulatory framework at EU level so as to remove any unwarranted 
barriers  to  CCS  technologies.  The  Commission  will  also  assess  whether  to  amend 
existing instruments (such as the Environmental Impact Assessment Directive or the 
Integrated Pollution Prevention and Control Directive) or propose a free-standing 

8 

See IAES for details. 

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regulatory framework. It will assess which aspects of the regulatory framework are 
preferably addressed at EU level or, alternatively, at national level.  

The  Commission  will,  in  early  2007,  hold  a  public  internet-based  consultation  on 
different options for CCS to ensure the proper involvement of the European public 
in the evaluation of the environmental integrity and safety of the capture, transport 
and geological storage of CO2. 

In the review of the EU Emissions Trading Scheme (EU ETS), the Commission will 
address the recognition of CCS activities in the EU ETS. A proposal for the revision 
of the ETS is planned in the Commission Work Programme for 2007; it will relate 
to  the  period  from  2013  and  will  aim  at  the  projection  of  necessarily  regulatory 
stability. It will seek a level playing field in line with the actual CO2 benefits, both 
between  various  CCS  options  and  across  the  EU  for  investment  in  CCS 
technologies.  The  Commission  will  also  consider  intermediate  options  to  take 
account of CCS activities undertaken during the period 2008-2012. 

4.2. 

CCS acceptance in international regimes 

Europe's  global  leadership  in  combating  climate  change  gives  the  EU  a  chance  to 
engage  other  countries  in  international  climate  change  negotiations  for  the  period 
after  2012.  This  should  facilitate  the  creation  of  a  stable  long-term  international 
agreement on future emission-reduction objectives and thus support the deployment 
of low-emission energy solutions in other parts of the world as well. The geological 
storage  of  CO2  needs  to  be  recognised  as  part  of  the  broad  portfolio  of  options 
necessary  for  the  implementation  of  such  an  agreement.  There  should  also  be 
recognition  of  CCS  under  flexible  mechanisms  such  as  the  clean  development 
mechanism (CDM), while respecting appropriate environmental safeguards. 

Commission action: The EU will continue its efforts to achieve a global agreement 
to  limit  and  subsequently  reduce  global  emissions  of  CO2  and  other  greenhouse 
gases,  in  line  with  the  objective  of  limiting  the  increase  in  the  earth's  average 
temperature to a maximum of 2ºC above pre-industrial levels. The Commission will 
support  the  recognition  of  CCS  activities  respecting  appropriate  environmental 
safeguards  as  part  of  the  broad  portfolio  of  energy  options  necessary  for  the 
implementation of such agreement. 

There  may  be  unwarranted  barriers  at  international  level  to  CCS  in  certain 
international  agreements  drafted  without  CCS  in  mind.  While  addressing  the 
management  of  the  CCS-related  risks,  amendments  to  these  agreements  should  be 
negotiated  and  adopted,  as  has  been  recently  done  for  the  1996  Protocol  to  the 
Convention  on  the  Prevention  of  Marine  Pollution  by  Dumping  Wastes  and  Other 
Matter  (the  "London  Protocol"),  so  as  to  permit  environmentally  sound  geological 
storage of CO2 under the seabed.  

Commission  action:  While  assisting  the  development  of  a  framework  for  CCS-
related risk management, the Commission will support appropriate amendments to 
the international conventions (e.g. The Convention for the Protection of the Marine 
Environment of the North-East Atlantic – the "OSPAR Convention").  

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4.3. 

Clear framework for phasing in Sustainable Fossil Fuels 

Further  improvements  in  Clean  Coal  technologies  and  power  plant  efficiency, 
successful large-scale  demonstrations and a suitable  regulatory framework for CCS 
should  make  Sustainable  Coal  the  business  model  of  choice  for  coal-fired  power 
generation  in  the  period  after  2020.  Once  the  commercial  viability  of  Sustainable 
Coal  is  demonstrated,  appropriate  framework  should  be  in  place  so  that  new  coal-
fired  power  plants  built  after  2020  operate  with  CCS;  capture-ready  plants  built  in 
the previous period should be rapidly retrofitted. The future EU ETS should provide 
the  primary  incentives  through  stable  and  strong  prices  for  CO2  allowances.  It 
remains  to  be  considered  how  strictly  (i.e.  whether  and  to  what  extent)  the  same 
approach should be applied to power generation from other fossil fuels, particularly 
gas. While it is important to maintain a level playing field, the imperative of reducing 
CO2 emissions is clearly much more evident with respect to coal.  

Incentives may be justified to discourage traditional coal-based power generation and 
foster wide penetration and use of Sustainable Coal technologies. Relevant measures, 
although  intended  for  the  period  after  2020,  will  need  to  be  adopted  sufficiently  in 
advance  to  provide  clear  signals  and  useful  input  for  investors'  decisions.  Such 
measures would need to be compatible with pro-active measures already in place for 
renewable energies, and their adoption would be preceded by an impact assessment 
evaluation. 

Such incentives could be provided through various mechanisms, for example:  

– 

– 

– 

Establishing a more favourable context for long-term investment decisions by 
ensuring  the  relative  perpetuity  of  the  emissions  trading  scheme  and  by 
facilitating commercial financing and risk-sharing instruments (e.g. through the 
EIB). 

Developing EU CO2 storage sites (onshore, offshore) and pipelines for multi-
user  access  or  projects  for  CO2  infrastructure  development  at  Member  State 
level. 

Adopting  legally  binding  measures  to  regulate  maximum  allowed  CO2 
emissions per kWh after 2020 and/or introduce a timed phase-out (for instance 
by 2050) of all high CO2 emitting (i.e. non-CCS) electricity generation. 

Commission action: In the light of the above, the Commission considers that a clear 
and predictable long-term framework is necessary to facilitate a smooth and rapid 
transition  to  a  CCS-equipped  power  generation  from  coal.  This  is  necessary  to 
enable power businesses to undertake the required investments and research in the 
secure knowledge that their competitors will be following a similar course. On the 
basis of the information currently available, the Commission believes that by 2020 
all  new  coal-fired  power  plants  should  be  built  with  CCS.  Existing  plants  should 
then progressively follow the same approach. 

In order to make a decision, in terms of both the timing of any CCS obligation and 
the  most  appropriate  form  and  nature  of  the  requirement,  the  Commission  will 
undertake in 2007 an analysis including a wide-ranging public consultation on the 
issue.  On  the  basis  of  such  an  analysis,  the  Commission  will  evaluate  what  is  the 

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optimal  retrofitting  schedule  for  fossil  fuels  power  plants  for  the  period  after  the 
commercial viability of Sustainable Coal technologies is demonstrated. 

5. 

COSTS AND BENEFITS OF SUSTAINABLE FOSSIL FUELS TECHNOLOGIES 

Economically  viable  Sustainable  Fossil  Fuels  technologies  can  help  achieve  deep 
carbon reductions at acceptable cost. Sustainable Coal is of particular importance as 
it can bring about dramatic carbon reductions while  ensuring cost-efficient security 
of energy supply, especially if prices for oil and gas remain high. While the transition 
from traditional coal to Sustainable Coal will certainly not be costless, it may prove a 
priceless contribution to climate change mitigation. 

For regular new installations, the requirement of capture-readiness in the period up to 
2020  may  not  necessarily  entail  additional  costs:  it  will  first  and  foremost  call  for 
new  investment  to  be  made  with  the  right  technology  choices  and  for  the  needs  of 
future  CCS  operations  to  be  taken  into  account  in  selecting  the  location,  spatial 
planning and configuration of any new power plant. 

Industrial-scale  demonstration  of  Sustainable  Fossil  Fuels  will,  on  the  other  hand, 
require substantial financial resources to be mobilized in Europe over a short period 
of  time.  A  fleet  of  up  to  12  CCS-equipped  coal-  or  gas-fired  power  plants,  each  at 
300 MWe, may, at current technology costs, require at least €5bn and possibly more9. 
CCS retrofitting after 2020 will also entail significant additional investments, which 
are currently difficult to predict exactly and will depend on the level of technology 
development  in  the  2020  horizon  as  well  as  on  R&D  and  demonstration  advances 
and  industry  commitment  in  the  interim  period.  The  total  capital  requirement  for 
CCS-retrofitting  of  coal-fired  power  plants  is  estimated  to  be  in  the  range  of 
€600,000  –  700,000  for  1MW  of  installed  capacity  (for  capture-ready  installations 
built in the period between now and 2020 with currently available technologies). The 
costs  of  retrofitting  (after  2020)  older  power  stations,  i.e.  installations  already  in 
place today, will probably be higher. 

5.1. 

CCS costs and costs of electricity produced 

Cost estimates for CO2 capture from power generation and subsequent storage at the 
10, 
current  level  of  technology  development  range  up  to  €70  per  tonne  of  CO2
rendering  the  large-scale  use  of  these  technologies  prohibitively  costly  for  the  time 
being. 

However,  major  technology  improvements  are  anticipated  for  the  coming  years. 
Gains  in  the  efficiency  of  future  plants  and  reductions  in  CO2  capture  costs  are 
expected  in  the  near  future,  while  the  side-benefits  of  CCS  (such  as  use  of  CO2 
streams  for  Enhanced  Oil  Recovery)  will  further  reduce  the  net  costs  of  particular 
CCS operations in power generation. 

Available models and studies with a medium- to long-term perspective thus estimate 
the costs of CCS by 2020 at about €20-30/tCO2. This translates in the models to costs 

9 
10 

See IAES for details. 
See IAES for details. 

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of  coal-fired  power  generation  with  CCS  by  2020  or  soon  afterwards  at  just  10% 
above or even on the par with the current levels11.  

It  is  also  worth  comparing  the  estimated  initial  increase  in  the  costs  of  power 
generated  with  Sustainable  Coal  technologies  with  the  production  costs  of  some 
renewable sources available today. Both turn out to be at least in the same order of 
magnitude12,  for  what  are  all  viable  and  environmentally  beneficial  alternatives. 
When  commercially  available,  Sustainable  Coal  technologies  may  thus  offer  an 
additional  economically  sensible  opportunity  for  countries  wishing  to  reduce  their 
CO2 footprint from electricity generation.  

5.2. 

Electricity prices with Sustainable Coal 

It is important to recognize that even if CCS does result in moderate increases in the 
costs of electricity production, these are unlikely to translate, at least not fully, into 
increased electricity prices for consumers. Sustainable Coal is expected to continue 
to provide a base-load electricity supply. As such, it would be unlikely to become the 
marginal electricity generation source on the economics of which electricity supply 
prices are generally based: this role would continue to be played by still more costly 
peak-load sources. 

5.3. 

Environmental risks and benefits of Sustainable Fossil Fuels 

The potential negative environmental impacts from sustained use of fossil fuels and 
the deployment of CCS stem mainly from potential leakage from CO2 storage. The 
leakage  impacts  can  be  both  local  (on  local  biosphere)  and  global  (on  climate). 
However, the International Panel on Climate Change's report on the issue concludes 
that, based on existing experience, the fraction of CO2 retained in well-selected and 
managed storage sites is very likely to exceed 99% over 100 years13. Site selection 
and  management  are  thus  the  key  factors  for  minimising  risk.  The  Commission 
impact assessment for enabling legal framework will identify all potential risks and 
will put forth appropriate safeguards. 

Continued  use  of  fossil  fuels  in  power  generation,  reinforced  by  the  arrival  of 
Sustainable Fossil Fuel technologies, may translate into increased global production 
of  fossil  fuels,  coal  mining  in  particular.  This  could  pose  challenges  to  local 
environments. Best practices in the production and use of fossil fuels, including coal 
mining,  have  been  sufficiently  developed  to  guarantee  that  the  inherent  risks  can 
continue  to  be  adequately  managed,  inter  alia,  through  further  improvement  and 
dissemination of such best practices.  

11 

12 

13 

Some research projects currently under way aim to produce electricity  from coal-fired power stations 
with CCS by 2020 at costs higher by 10% compared to current technologies without CCS. Simulations 
run by the Commission in cooperation with the National Technical University of Athens and based on 
the PRIMES model show that the costs of electricity in 2030 may be as low as €ct 6.1/kWh. See IAES 
for details. 
Costs of €ct 7.5-8.5/kWh for electricity from coal with present CCS technologies are comparable to the 
costs  of  wind-generated  electricity  reported  by  the  European  Wind  Energy  Association  for  sites  with 
low  wind  speeds  (€ct  6-8/kWh).  Technology  improvements  by  the  time  of  full  commercialisation  of 
sustainable  coal  (2020-2030)  should  bring  costs  down  significantly  to  around  €ct  6/kWh,  i.e.  levels 
comparable to the average costs of wind power (roughly €ct 5-6/kWh). 
See IAES for details. See also the IPCC Special Report on Carbon Capture and Storage, UN 2006. 

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On the positive side, Sustainable Fossil Fuels technologies, and particularly CCS, are 
expected to deliver significant positive results. First and foremost, of course, they can 
effectively  eliminate  up  to  90%  of  the  carbon  emissions  from  fossil  fuels  power 
plants. This could translate into an overall reduction in EU-27 CO2 emissions of 25-
30% by 2030 compared to 2000. 

Furthermore,  the  combined  emissions  of  major  pollutants  traditionally  associated 
with coal combustion and seen as major contributors to acidification, eutrophication 
and ground-level ozone are likely to be significantly reduced by the deployment of 
Sustainable  Fossil  Fuel  technologies.  Although  the  effects  are  technology-specific, 
Commission  analyses  show  that  some  of  the  envisaged  technologies  could  reduce 
NOx  and  SO2  emissions  significantly  (by  around  80%  and  95%  respectively  in 
comparison  with  traditional  pulverized  coal  power  plants).  In  all,  this  would  bring 
significant social benefits in the form of an improved environment and better public 
health (and thus reduced healthcare costs)14. 

5.4. 

Contribution  of  Sustainable  Fossil  Fuels  to  the  goals  of  prosperity  and 
sustainability 

The  concept  of  Sustainable  Fossil  Fuels  offers  numerous  potential  benefits  to  the 
EU's efforts undertaken in the context of the Lisbon and Johannesburg agendas. The 
role  Sustainable  Fossil  Fuels  can  play  in  the  sustainable  development  strategy  is, 
however, predicated on a strong international action taken by Europe as a leader in 
the  development  of  the  requisite  technologies.  By  2030,  global  annual  electricity 
generation  from  coal  alone  is  expected  to  increase  by  7.8  TWh15.  More  than  two-
thirds  (70%)  of  this  increase  will  take  place  in  India  and  China,  additional  10%  in 
other  non-OECD  countries.  The  international  dimension  of  EU's  Sustainable  Fossil 
Fuels strategy will therefore be crucial for the sustainability of continued global use 
of  fossil  fuels  as  well  as  for  accessing  opportunities  this  may  generate  for  EU 
businesses.  

Commission  action:  The  Commission  has  already  laid  groundwork  for  close 
collaboration  with  China  in  the  2005  EU-China  Partnership  on  Climate  Change 
and the subsequent 2006 Memorandum of Understanding (MoU), focusing on joint 
CCS  demonstration.  The  collaboration  follows  a  three-stage  logic,  starting  with 
exploratory  work,  continuing  by  the  definition  and  design  of  a  concrete 
demonstration  project  to  be  constructed  and  operated  in  the  final  stage.  The  first 
stage  of  the  project  should  be  completed  by  2008,  the  operation  of  the 
demonstration project was initially previewed for 2020.  

While making efforts to accelerate the ongoing European collaboration with China 
in  the  demonstration  of  CCS  (bringing  the  operation  date  from  2020  significantly 
forward),  the  Commission  will  look  for  opportunities  to  extend  cooperation  on 
demonstration  projects  to  other  key  emerging  economies  (such  as  India,  South 
Africa)  and  will  seek  to  stimulate  the  creation  of  enabling  policy  and  regulatory 
framework  in  those  countries.  The  Commission  will  examine  options  for  co-

14 

15 

The  overall  benefits  generated  by  some  sustainable  coal  technologies  (such  as  CCS-equipped  IGCC 
power plants) could be as high as one-quarter to three-quarters of the costs of CCS. They could even 
outweigh the CCS costs for locations such as Central Europe. See IAES for details. 
Reference Scenario as presented in the IEA 2006 World Energy Outlook. 

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financing such projects and for close coordination of demonstration projects in the 
EU and in third countries.  

At the same time, the Commission will seek to identify and exploit the synergies with 
efforts  under  way  in  other  coal-using  economies  (including  the  US,  Japan, 
Australia). 

5.4.1. 

Sustainable Coal in the service of global sustainable development 

An  early  involvement  of  third  countries  in  the  development  and  deployment  of 
Sustainable  Coal  technologies  and  particularly  the  CCS  component  is  essential  for 
sustainable  global  economic  development  and  for  tackling  climate  change  in  a 
scenario with increasing global use of coal resources. Closer collaboration on zero-
emission  power  generation  with  key  third  countries,  with  the  focus  on  large  fossil 
fuel exporters and large emerging economies, will therefore be imperative. 

Concrete  actions  to  reinforce  collaboration  with  interested  third  countries  should 
include projects in: 

– 

– 

– 

– 

increasing the energy efficiency of the coal chain 

identification  and  testing  of  potential  sites  for  geological  CO2  storage 
(including possibilities in hydrocarbon fields) 

cooperation in the development of Sustainable Coal technologies and in 
the preparation and construction of demonstration plants 

establishing a suitable regulatory framework for CO2 emission limits and 
the deployment of CCS using experience from the European model. 

Furthermore, Energy Technology Centres could be established in key third countries, 
building  on  the  closer  energy  cooperation  already  in  place  with  e.g.  the  Gulf 
Cooperation  Council  (GCC),  OPEC,  China  and  India.  Such  centres  could  facilitate 
the launch and execution of projects in the areas mentioned above. They could also 
promote  later  on  the  penetration  of  Sustainable  Fossil  Fuels  technologies  in  third 
countries. 

5.4.2.  EU as a competitive exporter of Sustainable Fossil Fuels technologies 

European industry today plays a leading role on the world markets in developing and 
supplying  advanced  technological  equipment  to  the  coal-mining  and  coal-fired 
electricity generation sectors. By developing, demonstrating and further investing in 
Sustainable Fossil Fuel technologies, European industry will maintain a competitive 
advantage on world markets and contribute to growth and employment in Europe. 

Sustainable coal mining and coal-fired power generation in developing and emerging 
economies  creates  opportunities  for  supplying  new  equipment  to  these  countries. 
However,  international  competition  in  these  markets  will  be  fierce.  It  is  therefore 
very  important  for  European  industry  to  seize  early  opportunities  for  developing 
Sustainable  Fossil  Fuels  both  in  the  EU  and  beyond,  thus  securing  the  EU’s 
continued leadership in advanced environmentally beneficial technologies.  

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6. 

CONCLUSIONS 

The  Commission  recognises  the  importance  of  fossil  fuels  and  particularly  the 
contribution  of  coal  to  the  security  of  energy  supply.  At  the  same  time,  the 
Commission  stresses  that  the  future  use  of  coal  in  particular  must  be  made 
compatible with sustainability objectives and climate change policy.  

The success of Sustainable Coal and particularly the commercialization of CCS on a 
large scale will also offer opportunities for the exploitation of the new technologies 
in applications for other fossil fuels, first and foremost in gas-fired power production. 

The Commission is ready to play its part in the promotion of Sustainable Fossil Fuels 
by  establishing  a  favourable  context  and  supporting  the  implementation  of  the 
technological  solutions  needed.  The  Commission  plans  to  undertake  concrete 
initiatives in order to make Sustainable Fuels a reality both in Europe and globally in 
the shortest possible time. 

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