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 Supporting Early Demonstration of Sustainable Power Generation from Fossil Fuels COM(2008) 13 final
Date: 2008-09-17
Institutions: European Economic and Social Committee
Subjects: ESC opinion, energy policy, energy production, energy technology, fossil fuel, greenhouse gas, reduction of gas emissions, research and development, sustainable development

31.3.2009

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Official Journal of the European Union

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Opinion of the European Economic and Social Committee on the ‘Communication from the
Commission to the European Parliament,
the European Economic and Social
Committee and the Committee of the Regions on Supporting Early Demonstration of Sustainable
Power Generation from Fossil Fuels’

the Council,

COM(2008) 13 final

(2009/C 77/13)

On 23 January 2008, the European Commission decided to consult the European Economic and Social
Committee, under Article 262 of the Treaty establishing the European Community, 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 Supporting Early Demonstration of Sustainable Power Generation
from Fossil Fuels.

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 16 July 2008. The rapporteur was
Mr Simons.

At its 447th plenary session, held on 17 and 18 September 2008 (meeting of 17 September), the European
Economic and Social Committee adopted the following opinion by 143 votes to three, with five abstentions.

1. Conclusions

lacks but are needed to support the early demonstration of
large-scale CCS may become available.

1.1
The EESC endorses the mechanisms in the proposal for
promoting the demonstration of CCS (Carbon Capture and
Storage)
in the Commission's
Communication, however the lack of financing capacity and
clearly
the medium
(2010-2020) and long term (2020 and beyond) is a concern.

in power stations, as set out

established

financing

options

for

1.2
Care should be taken to ensure that the lack of financing
capacity by the Commission can be partly compensated by
revenue generated via the European Emission Trading Scheme
(EU-ETS) e.g. through the auctioning of emission allowances by
the power generating sector after 2013. It is important to note
that so far, no specific financial scheme — including necessary
security — has been suggested at EU level.

the European Industrial

The Commission should draw up a plan defining the
1.6
organisation and role of
Initiative,
ensuring that it complements but does not overlap with other
initiatives such as the projects supported by the Seventh Frame-
work Programme,
the European Technology Platform for
Zero-Emission Fossil Fuel Power Plants and the European Flag-
ship programme.

1.7
The EESC agrees with the need for joint European CO2
transport and storage infrastructure. A European-wide transport
system is required to connect Member States that may not be
able to create national storage facilities themselves.

1.8
Because of the importance of transport as an essential
element in creating large-scale CCS infrastructure, the acronym
CCTS (Carbon Capture Transport and Storage,
including
transport) could be adopted.

i.e.

1.3
It is important that financial conditions are clear and
well-established by the end of 2009 at the latest. Only this will
ensure a financial basis
launching the preparation of
large-scale CCS demonstration sites to be operational in 2015.

for

2. Background (1)

Revenue generated by the EU-ETS should be collected at
the revised

the implementation of

1.4
national
EU-ETS directive from 2013 on.

level as part of

The Commission's idea to have 20 % of the total revenue
1.5
from national EU-ETS auctions dedicated to measures
to
support reductions in CO2 emissions is completely inadequate
and a missed financing opportunity. Member States should be
strongly urged to revolutionise their position on EU-ETS
revenue, and dedicate all EU-ETS revenue to low-carbon and
carbon-neutral technologies with a specific envelope for CCS. In
this way the billions of euros that the Commission currently

2.1
The development of the overall CCS value-added chain,
involving the capture, transport and storage of CO2, remains at
an early — and, in some cases, still at an exploratory — stage.
Measures to increase the degree of efficiency of conventional
power station technology, on the other hand, are gradually
making progress. Bearing in mind the urgent and high level of
need to replace power-station capacity in Europe over the next
few decades, the EESC therefore urges that a pragmatic approach
be adopted under which both technologies are developed and
employed side by side. Whilst the development of a higher level

(1) See the Opinion CESE 1203/2008 on the Proposal for a Directive on
the geological storage of carbon dioxide and amending Council Direc-
tives 85/337/EEC, 96/61/EC, Directives 2000/60/EC, 2001/80/EC,
2004/35/EC, 2006/12/EC and Regulation (EC) No 1013/2006
(COM(2008) 18 final — 2008/0015 (COD).

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of efficiency may be largely market-driven, CCS technologies —
in respect of both power stations and infrastructure — require
additional support at the demonstration and marketing stages.

emerging technologies with the potential to bring the cuts of
CO2 emissions needed for meeting targets beyond 2020 (3).

CCS technology is being pursued along two development
2.2
paths:
integrated power station technology involving the
(a)
capture of CO2 before the combustion process and (b) post-
combustion technology, which involves washing out CO2 from
the flue gas after combustion (CO2 washing). Once it has under-
gone suitable development, method (b) would be suitable for
deployment in highly efficient new power stations which are
now in the process of construction, on condition that certain
power stations are designed accordingly (‘capture ready’). A
common feature of both these development paths is the fact the
CO2 so captured has to be brought from the power station to a
suitable storage site.

The issue of the safe,

2.3
long-term storage of CO2 is a
matter of decisive importance in respect of the social and poli-
in the final
this process. This aspect is,
tical acceptance of
analysis,
the major environmental question confronting this
technology as such (2).

2.4
At a meeting in Aomori, Japan, 9 June 2008, the Group
of Eight industrial powers (G8) has agreed to launch 20 large
carbon capture storage (CCS) demonstration projects by 2010,
with the view to support the technology development and cost
reduction for broad deployment of CCS from 2020 on.

2.5
The G8 meeting was attended by representatives from
Britain, Canada, Italy, Japan, France, Germany, Russia, the United
States, China, India and South Korea.

To support the G8's CCS commitment, the United States
2.6
Department of Energy (DOE) pledged to provide funding for the
addition of CCS technology to multiple commercial-scale Inte-
grated Gasification Combined Cycle (IGCC), or other advanced
clean-coal
its FutureGen
is also funding seven regional carbon
programme. The U.S.
sequestration partnerships to demonstrate the effectiveness of
large-scale, long-term terrestrial storage of carbon dioxide.

technology power plants, under

2.7
The G8's CCS announcement is in line with the Interna-
tional Energy Agency's (IEA) recommendation to use CCS tech-
nology as part of a package solution to halve greenhouse gas
emissions by 2050.

3.2 Wide-scale application of CCS in power plants can be
commercially feasible in 10-15 years, enabling CCS by 2020, or
soon after, to stand on its own feet in an Emission Trading
instrument for the
Scheme (ETS)-driven system as a crucial
elimination of CO2 emissions
in power
generation.

from fossil

fuels

3.3
This will not happen without an immediate start to the
necessary preparatory steps; early demonstration is particularly
needed for CCS technologies, already globally developed and
used in other applications,
to be adequately adapted for
large-scale application in power generation.

3.4
The European Council gave its endorsement in March
2007, and reiterated it in March 2008, to the Commission's
intention to stimulate the construction and operation by 2015
of up to 12 demonstration plants of sustainable fossil fuel tech-
nologies in commercial power generation.

3.5
Complementing the Commission proposal for a Directive
on Geological Storage of CO2 creating the legal framework for
CCS in the EU, the present Communication takes the work on
CCS forward, aiming to create a structure to coordinate and
effectively support
large-scale CCS demonstrations and the
conditions for bold industrial investments in a series of plants.

It is imperative that European efforts on CCS demonstra-
3.6
tion within an integrated policy framework, including focused
R&D efforts and public awareness and acceptance measures,
start as soon as possible. According to the European Commis-
sion, a delay of 7 years in demonstration leading to a similar
delay in global introduction of CCS could mean over 90 Gt of
avoidable CO2 emissions being released by 2050 worldwide (4),
equivalent to over 20 years of current overall EU emissions
of CO2.

3. Gist of the Commission's Communication

3.1
represent a crucial element

Technologies for the capture and storage of CO2 (CCS)
in a portfolio of existing and

3.7
Clear and decisive commitments from European industry
backed by Commission incentives and guarantees are essential if
contributions are to be paid from public funds. In particular,
those Member States intending to rely on coal in their future
energy mix should implement support measures for early
demonstration of CCS.

(2) See the Opinion CESE 1203/2008 on the geological storage of carbon

dioxide.

(3) While improvements in combustion efficiencies will be indispensable,
they alone will not deliver the necessary reduction of CO2 emissions.

(4) IAES.

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3.8

Two main types of obstacle are mentioned:

— Legislative and safety obstacles: these issues can be overcome
on time and without substantial extra cost. Once a regula-
tory framework ensures risk mitigation, legal barriers can be
addressed.

— Economic obstacles: CCS cost is estimated to be around
35 EUR/ton CO2 in 2020 and it is felt that they could easily
be covered by the value of emission allowances.

The Commission's document suggests that there is an opportu-
nity to take leadership in international regulation.

The proposed European Industrial Initiative should bring
3.9
together the efforts of first movers in a network of demonstra-
tion projects. This should assist in exchanging experience and
information,
increase public awareness and provide input for
policies enabling a complete CCS value chain. In addition, the
proposed European Industrial Initiative is also expected to assist
in attracting national and international funds.

The Commission states that

it can only provide a
3.10
minimum of support and therefore focuses on catalysing finan-
cing by first movers themselves and public funding from
national governments and international NGOs.

3.11

Three actions are defined:

— Mobilising first movers in industry by means of the Flagship

Programme and providing real commercial benefit.

— Willingness of the Commission to allow on a case-by-case
basis the use of state aid and other preferential measures by
Member States.

— Mobilising financing at EU level: a specific initiative by the
Commission together with the EIB to develop financing/risk
sharing instruments.

In addition it is pointed out that the longer industry takes to
start embracing CCS, the more policy-makers will be obliged to
look at compulsory measures.

The need for a joint European CO2

3.12
storage infrastructure is addressed. A revision of
guidelines including CCS is envisaged.

transport and
the TEN-E

4. Context of the European Commission's referral

promoting renewable energy sources and developing and using
the relevant innovative technologies. The Committee has drawn
up specific opinions on each measure (5).

4.2
One area of key importance in this context is the devel-
opment of methods to sustainably reduce greenhouse gas emis-
sions arising from the use of fossil fuels, which is the subject
discussed in this opinion.

This opinion ties in with a Committee opinion (6) on the
4.3
same technology discussing the Commission's Proposal for a
Directive on the geological storage of carbon dioxide.

5. General comments

5.1
In its Communication, the Commission repeatedly makes
the point that if its plans are to succeed, it is crucial to demon-
strate at an early stage that f (a) the European Emission Trading
Scheme (EU-ETS) will play a key role and (b) there is scope for
‘real commercial benefits’. Obviously, the EU-ETS promises to
generate real commercial benefit for first movers. However, it
will come too late if the Commission fails to provide a clear and
final basic set of rules for the post-2012 EU-ETS scheme before
the end of 2009.

By the end of 2009, industry will need to have a solid basis for
taking investment decisions in order to start the engineering
and construction phase in time for the first CCS sites to become
in 2015. This aspect has not been sufficiently
operational
stressed, especially in view of
lack of clarity
surrounding the EU-ETS and vague demands from the Commis-
sion on industry and national governments that keep the finan-
cing issue in the air.

the current

5.2
The EU-ETS does indeed constitute an important carbon
market, which may prove to be very effective, but this will only
be the case if the scheme is strongly geared towards establishing
of a price for emission allowances which more than covers the
extra costs incurred by carbon mitigation measures.
the
Commission fails to set out clear provisions in respect of the
rules and scope for auctioning and appropriate recovery of such
collected revenues and if
it fails to play a supervisory role,
potential investors will be inclined to adopt a ‘wait and see’ posi-
tion because of too large uncertainties.

If

4.1
Following the Council decisions of March 2007 on
climate change and threats to the security of energy supplies,
the Commission proposed a package of measures in the form of
separate documents in order to meet the objectives set by the
Council decisions. These measures focus on energy efficiency,

(5) NAT/399, NAT/400, NAT/401 and TEN/334, TEN/338, TEN/341.
(6) See the Opinion CESE 1203/2008 on the Proposal for a Directive on
the geological storage of carbon dioxide and amending Council Direc-
tives 85/337/EC, 96/61/EC, Directives 2000/60/EC, 2001/80/EC,
2004/35/EC, 20006/12/EC and Regulation (EC) No 1013/2006
(COM(2008) 18 final — 2008/0015 COD).

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A joint European CO2 transport and storage infrastruc-
5.3
ture
indeed something which would clearly facilitate
is
large-scale implementation of CCS throughout Europe. Some
Member States may not be able to create national storage facil-
ities themselves (7). Where possible, use should be made of
existing infrastructure that has fallen into disuse or new facilities
integrated with other infrastructure. Because of the importance
of
the EESC would even suggest adopting the
acronym CCTS (Carbon Capture Transport and Storage) expli-
citly including transport, even though the acronym CCS is
already internationally known and acknowledged.

transport,

5.4
The Commission imposes a considerable burden upon
national authorities in respect of CCS financing as there is no
scope for a significant contribution from the Commission's
current budget. Bearing in mind that the subject at hand is an
important issue to the EU and in view of the need for EU-level
supervision to ensure the success of the demonstration projects,
the Commission should take a much larger share in financing
CCS projects than it now envisages, backed up, where necessary,
by Member State contributions provided by the Member
States (8).

low-carbon

5.4.1
The auctioning of emission rights under the EU-ETS
has provided an opportunity to tackle the issue of insufficient
Commission financing. At present only 20 % is dedicated to
supporting
technologies.
Member States should be strongly urged to revolutionise their
position on EU-ETS revenue, and dedicate all EU-ETS revenue to
low-carbon and carbon-neutral
technologies with a specific
envelope for CCS (9). In this way the billions of euros that the
Commission currently lacks but are needed to support the early
demonstration of large-scale CCS, may become available.

carbon-neutral

and

5.4.2 Moreover, as the Committee already has suggested, the
budget for energy within the Seventh Framework programme
(FP7) could be significantly increased by 15 % resulting in an
increase of 2 % to 3 % of GDP invested in R&D. In this way a
real contribution to promoting CCS demonstration could be
made via FP7.

5.4.3
There are a number of other measures supported under
the Seventh Framework Programme which can also contribute
large-scale demonstration projects. The
to the preparation of
various measures should be clearly linked with the proposed
mechanisms for promoting demonstration.

(7) See The Primes study mentioned in footnote 2 with relevant maps

attached.

(8) There are nevertheless other suggestions how to overcome the finan-
cing deadlock — see the EurActive.com article of Wednesday
27 February 2008 ‘Financing woes plague EU Climate technologies’.
(9) In the European Parliament proposals are being discussed to dedicate
between 60 and 500 million EUR revenues from the ETS to large-scale
commercial demonstration projects (amending the draft directive that
amends directive 2003/87/EC so as to improve and extend the green-
house gas emission allowance trading system of the Community
COM(2008) 16 final).

5.5
No mention is made of how the European Industrial Initia-
tive ties in with the range of other measures and initiatives in
which the Commission is involved (10). To ensure an integrated
approach, it is essential to indicate which measures are to be
taken.

5.6
It is anticipated that the development and implementa-
tion of CCS technologies will have a substantial positive impact
on employment in Europe. Some major CCS equipment and
transport infrastructure providers are based in Europe. They
develop and would also sell and install e.g. equipment and pipe-
lines when CCS is implemented worldwide. Europe has a strong
worldwide position on CCS that would be strengthened further
if the EU succeeded in early large-scale demonstration of CCS
technology within Europe (11).

fossil

The EESC proposes using the word ‘clean’

instead of
5.7
‘sustainable’
fuels. Sustainable is more appropriate for
e.g. solar and bio energy and less appropriate for CCS technolo-
gies that bridge the gap, using fossil fuels in a clean way, until
we have succeeded in a full transition towards a sustainable
energy supply.

5.8 With regard to the feasibility of safe storage of CO2 there
is already considerable experience in this field, as indicated
briefly below:

i) Gas fields: proven containment for natural gas; potential for

enhanced gas production (EGR) to be proven;

ii) Oil fields: proven containment for oil; enhancing oil produc-
tion (EOR) routine in South West USA since mid 1970s;

iii) Aquifers: large potential with large uncertainty; site-specific
appraisal needed, good experience for many years with
Sleipner field Utsira saline aquifer;

iv) Coal

seams:

interesting niche for enhancing coal bed
is

methane production with CO2 injection. This, however,
still in the research phase.

v) An important aspect to large-scale demonstration will be to
show and to provide proof to the public that storing CO2 in
amongst others gas fields is just as safe as producing oil and
gas from the same types of
fields. The EESC asks the
commission to take appropriate measures for informing the
public.

(10) Reference may be made, in this context, to, for example, the European

Flagship Programme or the Zero Emission Power Platform.

(11) See IEA report.

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6. Specific comments

6.1
The EESC is able to endorse the mechanisms in the
proposal for promoting the demonstration of CCS in power
stations, as set out in the Commission's Communication, but
wishes to make a number of observations:

The Commission should have a strategy ensuring that
6.1.1
Initiative does not overlap with the
the European Industrial
European Flagship Programme and the European Technology
Platform for Zero Emission Fossil Fuel Power Plants (ZEP). These
activities
coordinated and mutually
reinforcing.

should be properly

In its Communication,

6.1.2
the Commission speaks of
‘extending the scope of the European Industrial Initiative beyond
a project network’. The aim of this statement is not clear. It is
also pointed out that the requisite financing still has to be
found. What added value is provided by such extension and
how does it tie in with the abovementioned measures in the
field of CCS?

6.2
The EESC does not endorse the proposal for catalysing
the finance for CCS demonstrations because it does not go far
enough.

6.2.1
The proposal advocates a ‘case-by-case’ approach under
which the Commission would be presented with national initia-
tives and would assess which forms of state aid and other
national measures would be permitted. If the implementation of
the European flagship demonstration projects is to succeed, the
Commission should play a central co-ordination and supervi-
sory role. This would mean that the Commission would take
responsibility for general financing. In addition to the commis-
sion's contribution financing could then be topped up by
earmarked contributions from the Member States concerned
which would then have such funding recognised as authorised
state aid. At the same time the industry would have to commit
itself in respect of financing and implementation.

If the Commission were to guarantee, subject to certain
6.2.2
conditions, EU co-financing proportional
to an earmarked
national contribution, this could provide a stimulus to national
authorities. Pre-determined co-financing could remove some of

Brussels, 17 September 2008.

the uncertainty surrounding the financing of projects and could
speed up their development.

financing

Catalysing

projects
6.2.3
through new financial facilities is, in itself, an attractive idea. In
the final analysis, however, such blueprints will only prove effec-
tive if the risk is acceptable and if it is clear how the additional
long-term costs can be recovered in each case.

demonstration

for

6.3
The EESC can readily endorse the view that the inclusion
of CCS in the EU-ETS provides an important stimulus to the
development and implementation of large-scale demonstration
projects in a European context.
the
Commission also points out that first movers must be able to
see a ‘real commercial benefit’.

In its Communication,

6.4
It is, however, stated that the EU-ETS should be able to
compensate for — or even more than compensate for — the
additional costs incurred in each case. As things stand at
present, though, this scenario cannot be guaranteed for the
following reasons:

— the situation as

regards a post-2012 EU-ETS remains

unclear;

— assuming that CCS is incorporated in the EU-ETS, there is
ongoing uncertainty with regard to the pricing of emission
allowances. The major issues at stake in this context are, for
example: the character, scope and timing of auctioning at
the Member State level within the EU wide cap or the influ-
ence of the Clean Development Mechanism (CDM);

— the actual costs involved in CCS after 2012 (early demon-
stration) and after 2020 (commercial implementation) will
depend to a considerable extent on progress made with
R&D and economic developments (e.g.
fuel prices and
design and construction costs).

6.5
The Emissions Trading Scheme (EU-ETS) provides impor-
tant scope for enabling first movers to derive real commercial
benefit vis-à-vis other parties. Further elaboration is however
required with a view to making the EU-ETS into a reliable and
long-lasting market which gives first movers a competitive
advantage over subsequent market entrants. Furthermore, efforts
should be made to bring about stronger and possibly different
market drivers.

The President

of the European Economic and Social Committee

Dimitris DIMITRIADIS