In conjunction with its request for submissions on the 2030 policy framework, the EU Commission posed a series of questions on carbon capture and storage (CCS) to be answered separately. This follows on from the failure of the NER300 policy framework to deliver an EU CCS demonstration programme.
One question within this new consultation is of particular interest in that it opens up the possibility of a dedicated instrument designed specifically for the deployment of CCS. The Commission asked;
Should the Commission propose other means of support or consider other policy measures to pave the road towards early deployment, by:
a. a support through auctioning recycle or other funding approaches
b. an Emission Performance Standard
c. a CCS certificate system
d. another type of policy measure
One of the leading CCS focused industry / society groups (European Technology Platform for Zero Emission Fossil Fuel Power Plants, or ZEP) responded to this and argued for consideration of a CCS Certificate system should its preferred Feed-in-Tarrif approach not be acceptable. Such a system would require a certain (and annually increasing) amount of CO2 storage for each tonne of CO2 emitted, but the storage could take place in another location with proof of such storage coming in the form of a tradable certificate. But ZEP noted that;
Any system of certificates should be designed in such a way as to avoid any negative interaction with the existing ETS. Measures to ensure this could include making CCSCs fungible with a certain number of EUAs, or retiring EUAs, as CCSCs are supplied into the market.
While a robust carbon market is the preferred approach for driving investment in technologies such as CCS, frustration with price development is leading policy makers and some CCS proponents to consider targeted policies. The ZEP caveat is important in that overlapping policies have been a real problem for the EU ETS. With other polices taking away the need for the carbon price to trigger investment, higher overall costs of mitigation result, but at the same time weakening the visible CO2 price. The same would be true of a CCS policy instrument. However, an EU wide CCS Certificate mechanism which operates for all the same facilities as the ETS could be designed as follows, delivering a first round of CCS projects but working within the ETS to at least mitigate the overlap issue to some extent:
- For the period 2021-2025, each 100 tonnes of CO2 emitted would require the surrender of 99 EUAs (EU ETS Allowances or equivalent instruments) and 1 CCSC (carbon capture and storage certificate).
- The CCSCs are tradable instruments and would be granted for each tonne of CO2 stored in the EU from 2015 onwards. This would give the EU some lead time to build up a modest bank of CCSCs.
- From 2026 onwards, the CCSC requirement would increase by 1 in 100 each year, i.e. by 2030 the minimum compliance requirement for each 100 tonnes of CO2 emitted would be 6 CCSCs and 94 EUAs (or equivalent).
- A facility that generates CCSCs would be deemed as emitting one tonne of CO2 for each CCSC sold into the market.
- CCSCs could be banked for future use.
- The initial 2021-2025 period would require about 20 million CCSCs in each year across the EU, therefore underpinning a number of projects.
- As a “relief valve” mechanism for the period 2021-2025 only, an EUA could be converted to a CCSA for a fee, for example at the current ETS non-compliance penalty level (€100), with the money being placed in a CCS technology fund for disbursement to CCS projects.
- Total EU allowance auction / allocation for the period 2020-2030 would be adjusted downwards on the basis of the creation of a certain number of CCSCs.
- The approach could also inspire the EU to lead the development of an international CCSC at the UNFCCC which could also be used for compliance in the EU.
A CCS Certificate approach has a very modest price impact on the consumer (of electricity). Under an ETS, the marginal cost of compliance is reflected in the cost of everyone’s electricity and this must rise to levels above €50 per tonne before any CCS project activity is firmly triggered. This equates to quite an increase in electricity prices. But the CCSA not only ensures delivery but quickly socializes the cost of CCS, in that each electricity purchaser pays a fraction of the cost of the first CCS facilities. If a CCSC was trading at €80 per tonne of CO2 stored, then in the period 2021-2025 the consumer would see a cost per tonne of CO2 of only 80 € cents, or for coal fired power generation at 900 gms CO2/kWh, a price increase of less than a tenth of a €-cent per kilowatt hour.
So should we opt for CCS Certificates? Although they will deliver CCS, the approach isn’t as economically efficient as the carbon market left to its own devices. But as already noted, carbon markets aren’t being left to their own devices as other policies continually encroach on their turf (e.g. renewable energy targets), which means that CCS may be significantly delayed.
One further thought. Arguably, the increasing requirement to provide CCSAs could continue past 2030 until the ETS is fully replaced later in the century. This would at least align any use of fossil fuels with the long term requirement to store all the resulting CO2.
David, to be honest, I cannot answer the questions posed in this post.
But, I would like to ask for guidance: How would any of these options effectively reduce emissions from burning products refined from petroleum, e.g., gasoline, kerosene, diesel, bunker C, and other fuels?
I don’t understand why an oil company like Shell has such a strong position on CCS because I just don’t see how we can possibly capture emissions from cars, trucks, aircraft, ships and such, let alone get them sequestered. I cannot imagine how CCS will get us out of our predicament … at all, let alone quickly enough to avert disaster.
Do you understand the urgency to begin reducing greenhouse gas emissions implied in the blue and red curves in http://bit.ly/LetsGetGoing … ignore the green curve because that is a missed opportunity. Are we on the same wave length?
Having started out somewhere in the middle of this debate, i.e. we need a bit of everything, I have increasingly come to the view that we need to put carbon back in the ground because it is looking very unlikely that we (society) will stop taking it out. By the time we might eventually stop taking it out, there will be so much additional CO2 in the atmosphere that the only course left to us might be air capture and sequestration. Unfortunately renewable energy and efficiency drives are not currently forcing carbon to stay in the ground, almost the opposite (have a read of the book I reviewed recently, “The Burning Question”). So that pretty much leaves CCS as the reliable mitigation mechanism.
With regards transport, one route forward is to see them shift to electricity / hydrogen / bio. The other of course is to store the equivalent CO2 emissions somewhere else, either through direct air capture or CCS with biomass, which offers a true carbon emissions offset (i.e. negative).
Like Doug, I can’t answer the technical questions asked in this post. And I appreciate your reply to his important question. I still have trouble with it, though. I don’t see how css can be considered mitigative. Its money on R and D misspent. Why isn’t Shell, and other petro corps, working on renewables….which would be truly mitigative. It also would seem to he the economically wise thing to do, in the long run.
While I agree we should be finding ways to capture CO2 because we can’t ignore any of our options, it seems that Carbon Capture and Storage can only be done on a small scale relative to our total emissions. It cannot be done on a scale sufficient to allow us to continue using fossil fuels as a significant source of energy. We must reduce global greenhouse gas emissions by 80% just to stabilize greenhouse gas concentrations in the atmosphere at any level. How much of our current emissions total could CCS possibly recapture under the most optimistic of scenarios — a percent or two? Anyone know what percentage? That’s an important point. And we need technology we can apply reliably and immediately. Right now we are approaching levels that will send us beyond 2 degrees of warming, and we are not taking sufficient action to make this amazing reduction in emissions. Viable pathways to very low CO2 emissions rely on dramatic energy efficiency and conservation, including cultural changes away from wasteful consumption, and rely on solar, wind and water energy technologies for energy. There is no believable plan which includes continued reliance on fossil fuels.
Thanks for the clarification … and humble apologies for having discovered this blog only recently (late February) and having read back only as far as December 12, as well as the “Shell Energy Scenarios to 2050” back to 2008, and not picking up on sequestration of excess CO2 already in the atmosphere.
I agree with your concerns about the delays we continue to experience in getting concrete reductions. We are running out of time. Thus the frustration I have expressed.
Agree that we need a bit of everything. In my mind, industry can no longer wait for policy, which may never be implemented in sufficient efficacy; rather industry is situated to initiate changes that are needed to substantially reduce emissions, not just sequester, by an all-out shift in capital investment strategy. At this juncture, I see no other viable course of action that might hit the target, let alone the bulls eye.
As you continue to strive for CCS implementation, which is laudable, will Shell also engage in a discussion about “taking the bull by the horns” (pun unintended) and begin to take steps to reduce hydrocarbon production and infrastructure?