Caching the Carbon: The Politics and Policy of Carbon Capture and Storage

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Caching the Carbon

Caching the Carbon The Politics and Policy of Carbon Capture and Storage

Edited by

James Meadowcroft Carleton University, Canada and

Oluf Langhelle University of Stavanger, Norway

Edward Elgar Cheltenham, UK • Northampton, MA, USA

© James Meadowcroft and Oluf Langhelle 2009 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA

A catalogue record for this book is available from the British Library Library of Congress Control Number: 2009933406

ISBN 978 1 84844 412 6 Printed and bound by MPG Books Group, UK

Contents List of figures List of tables List of contributors List of abbreviations and acronyms Acknowledgements 1 2

3 4 5 6

7 8 9 10 11

vi vii viii x xiii

The politics and policy of carbon capture and storage James Meadowcroft and Oluf Langhelle Technology leader, policy laggard: CCS development for climate mitigation in the US political context Jennie C. Stephens CCS in Australia: from political posturing to policy potential Darren Sinclair and Neil Gunningham CCS in Canada Mark Jaccard and Jacqueline Sharp Technology as political glue: CCS in Norway Andreas Tjernshaugen and Oluf Langhelle Electricity gap versus climate change: electricity politics and the potential role of CCS in Germany Barbara Praetorius and Christoph von Stechow CCS in the UK: squaring coal use with climate change? Ivan Scrase and Jim Watson CCS in the Netherlands: glass half empty or half full? Philip J. Vergragt CCS and the European Union: magic bullet or pure magic? Dag Harald Claes and Paal Frisvold CCS in comparative perspective Oluf Langhelle and James Meadowcroft The politics and policy of CCS: the uncertain road ahead James Meadowcroft and Oluf Langhelle

Index

1

22 50 75 98

125 158 186 211 236 267

297

v

Figures 4.1 4.2 4.3 4.4 4.5 6.1 6.2 6.3 7.1 7.2 7.3 7.4

Western sedimentary basin: CO2 sources and potential geological storage Possible carbon capture and storage in oil sands facilities Comparative economic growth, 1990–2006 Canadian targets, policies and emissions Sources of GHG reduction by 2050 CO2 emissions trajectory in Germany, 1990–2006 Electricity generation mix with CCS technologies at stepwise increase of CO2 price up to 50€/tCO2 Electricity generation structure, Lead Study 2008 UK coal production and imports, 1970–2007 Supply of primary energy in the UK, 1970–2007 Changes in UK electricity capacity, 1991–2006 UK energy R&D spending, 1974–2005

vi

78 79 81 82 88 131 136 137 160 160 161 165

Tables 6.1 6.2 6.3

6.4 8.1 10.1 10.2 10.3

10.4 10.5 10.6

Structure of German electricity capacities and generation, 2007 Measures and effects of the IECP Expected cost and performance measures of new electricity generation technologies with and without CO2 capture and storage, 2020 Shares of coal and lignite in electricity generation, 2006 CO2 emissions from planned coal power plants Time of political engagement with CCS Changes in GHG emissions, 1990–2006, average annual growth rates and Kyoto Protocol target Energy industries’ share of GHG emissions in the energy sector, 2006, and changes in GHG emissions/removals from the energy sector, 1990–2006, and from energy industries, 1990–2006, all without LULUCF Self-proclaimed long-term targets in 2008 Gross electricity production by source, 2006 Multiple political purposes of CCS

vii

128 132

134 144 197 246 250

252 254 255 258

Contributors Dag Harald Claes is a professor in the Department of Political Science, University of Oslo, Norway. Paal Frisvold is Chairman of Bellona Europa, a European NGO that represents The Bellona Foundation in the EU. Neil Gunningham is a professor in the School of Resources, Environment and Society, Australian National University, Canberra, Australia. Mark Jaccard is a professor in the School of Resource and Environmental Management, Simon Fraser University, Vancouver, Canada. Oluf Langhelle is a professor in the Faculty of Social Sciences at the University of Stavanger, Norway. He also works with the Centre for Sustainable Energy Solutions (CenSE Solutions) at the University of Stavanger. James Meadowcroft is a professor in the Department of Political Science and the School of Public Policy, Carleton University, Ottawa, Canada, and holds a Canada Research Chair in Governance for Sustainable Development. He works with the Centre for Sustainable Energy Solutions (CenSE Solutions) at the University of Stavanger. Barbara Praetorius is a research associate at DIW (the German Institute for Economic Research) in Berlin. Ivan Scrase is a research fellow with the Sussex Energy Group at SPRU (Science and Technology Policy Research), University of Sussex, Brighton, UK. Jacqueline Sharp is a research associate in the Energy and Material Research Group, Simon Fraser University, Burnaby, BC, Canada. Darren Sinclair is a senior researcher at the Australian National University, Canberra, Australia. viii

Contributors

ix

Jennie C. Stephens is a professor in the Department of International Development, Community, and Environment, Clark University, Worcester, MA, USA. Andreas Tjernshaugen is a research fellow at CICERO the Centre for International Climate and Environmental Research, Oslo, Norway. Philip J. Vergragt is a research professor at the George Perkins Marsh Institute, Clark University, Worcester, MA and a senior associate, Tellus Institute, Boston, USA. Christoph von Stechow is a student research fellow at DIW (the German Institute for Economic Research) in Berlin. Jim Watson is Director of the Sussex Energy Group at SPRU (Science and Technology Policy Research), University of Sussex, Brighton, UK.

Abbreviations and acronyms ABRCC ACF AIGN ALP AP6/APP APPEA ASAP BAU BCA BERR BMBF BMU BMWi CATs CCC CCGT CCS CDM cents/tCO2 CER CGE CHP CO2CRC COORETEC CRE CSIRO CSLF CSRP

Australian Business Roundtable on Climate Change Australian Conservation Foundation Australian Industry Greenhouse Network Australian Labor Party Asia Pacific Partnership on Clean Development and Climate Australian Petroleum Production & Exploration Association Alberta Saline Aquifer Project (Canada) business as usual Business Council of Australia Department for Business, Enterprise and Regulatory Reform (UK) Ministry for Education and Research (Germany) Ministry for Environment, Nature Conservation and Nuclear Energy (Germany) Ministry for the Economy (Germany) carbon abatement technologies Committee on Climate Change (UK) combined-cycle gas turbine carbon capture and storage Clean Development Mechanism cents per ton of CO2 certified emission reduction computable general equilibrium combined heat and power Cooperative Research Centre for Greenhouse Gas Technology (Australia) CO2 Reduction Technologies for Fossil-Fired Power Plants (Germany) Coal Research Establishment (UK) Commonwealth Scientific and Industrial Research Organisation (Australia) Carbon Sequestration Leadership Forum Carbon Sequestration Regional Partnerships x

Abbreviations and acronyms

Defra

xi

Department for Environment, Food and Rural Affairs (UK) DoE Department of Energy (USA) DPIE Department of Primary Industries and Energy (Australia) DTI Department of Trade and Industry (UK) EEA European Economic Area EFTA European Free Trade Area EIA Energy Information Administration, US Department of Energy ENGO environmental non-governmental organization EOR enhanced oil recovery ETF Environmental Transformation Fund (UK) ETI Energy Technologies Institute (UK) ETS Emissions Trading System (EU) EUA emission unit allowances EZ Ministry of Economic Affairs (Netherlands) FCO Foreign and Commonwealth Office (UK) FDP Free Democratic Party (Germany) FTA Free Trade Agreement GDP gross domestic product GHG greenhouse gas GtCO2 giga tonnes CO2 GVSt Gesamtverband der deutschen Steinkohle (the association of hard coal) (Germany) GW gigawatt IEA International Energy Agency IECP Integrated Energy and Climate Programme (Germany) IEEP Institute for European Environmental Policy IEM Internal Energy Market (EU) IGCC integrated gasification combined cycle IOGCC Interstate Oil and Gas Compact Commission (USA) IPCC Intergovernmental Panel on Climate Change IRENA International Renewable Energy Agency JI Joint Implementation JUSSCANNZ Japan, US, Switzerland, Canada, Australia, Norway and New Zealand LNG liquefied natural gas LO Norwegian Confederation of Trade Unions MCMPR Ministerial Council on Mineral and Petroleum Resources (Australia) MEP Member of the European Parliament

xii

MtCO2 Mtoe MW NCEP NER NERA NETL NGCC NGO NOK OECD Öko-Institut PCAST PJ R&D RCI RD&D SAGD SET-Plan SFT SPD SRA T-PAGE TSB TWh UBA UIC UNFCCC VROM WI WRI WWF ZEP ZERO

Caching the carbon

million tonnes of carbon dioxide million tonnes of oil equivalent megawatt National Commission on Energy Policy (USA) New Entrance Reserve National Economic Research Associates National Energy Technology Laboratory (USA) natural gas combined cycle non governmental organization Norwegian krone Organization for Economic Cooperation and Development Institute for Applied Ecology President’s Committee of Advisors on Science and Technology (US) petajoules research and development Rotterdam Climate Initiative research, development and demonstration steam assisted gravity drainage Strategic Energy Technology Plan (EU) Norwegian Pollution Control Authority Social Democratic Party (Germany) Strategic Research Agenda Transatlantic Platform for Action on the Global Environment Technology Strategy Board terawatt hours Umweltbundesamt (Federal Environmental Office) (Germany) underground injection control United Nations Framework Convention on Climate Change Ministry of Housing, Spatial Planning, and the Environment (Netherlands) Wuppertal Institute for Climate, Environment and Energy World Resources Institute Worldwide Fund for Nature zero emission fossil fuel power plants Zero Emissions Resource Organization

Acknowledgements The editors would like to acknowledge the support of the Canada Research Chairs and Shell Technology Norway which provided funding for different elements of the research on which this volume is based.

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1.

The politics and policy of carbon capture and storage James Meadowcroft and Oluf Langhelle

Over the past decade carbon capture and storage (CCS) has increasingly come to the fore as a possible option to manage carbon dioxide (CO2) emissions that are contributing to human-induced climate change. This volume is concerned with the policy and politics of CSS in the advanced industrialized countries. It is focused on the way CCS has been brought into the political realm, with different interpretations of the significance of this emerging technology, and with the policy challenges faced by governments and international institutions with respect to its development, deployment and regulation. The book will consider the place that CCS is assigned in greenhouse gas (GHG) mitigation strategies and future energy trajectories, and the controversies that CCS has generated in the policy and political domains. In conceptual terms CCS is straightforward. The idea is to avoid the harm caused by the release of CO2 from the combustion of fossil fuels (and certain other industrial processes) by trapping the emissions at source, and ensuring that they are locked away into the distant future. In practice, of course, things are more complicated. CCS requires the large-scale integration of technologies for the capture, transport and long-term storage of carbon dioxide. It entails significant costs, both in terms of capital investment and ongoing energy and resource inputs. Yet the precise level of these costs remains uncertain. Moreover, CCS is not without risks for the environment and human health. And a host of liability and regulatory issues must be addressed before large-scale deployment goes forward. As debate about the urgency of action to address climate change continues, questions concerning the appropriate place of CCS within the portfolio of GHG abatement strategies are coming to the fore. Public attitudes towards this emerging suite of technologies remain relatively unformed. Governments are varied in their enthusiasm and level of support for CCS. And while many experts in the climate change area see CCS as an essential element in the arsenal of mitigation tools, a number of vocal opponents are now criticizing CCS as no solution at all. 1

2

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Such controversies related to the role of CCS in addressing climate change, and to the policies put in place to support and regulate CCS, are the focus of this volume, which includes chapters on the reception of CCS in a number of major industrialized states.

1

A BRIEF INTRODUCTION TO CARBON CAPTURE AND STORAGE

CCS involves three basic steps: capture of CO2, transport to a suitable disposal site, and long-term storage. With respect to capture, attention is primarily directed at major point source emitters, particularly fossil fuel-fired power stations, but also other large industrial facilities including those associated with the production of oil, gas, chemicals, steel and cement. About 60 per cent of global fossil fuel emissions come from such stationary sources, which each release more than 0.1 megatons of CO2 per year (IPCC 2005, p. 22). Approaches to capture include post-combustion, pre-combustion and oxyfuel technologies. In the first case, CO2 is separated from flue gases after the combustion of the primary fuel. In the second case, the primary fuel is transformed to produce hydrogen, and CO2 is removed before combustion. In the third case, fuel is burned in an oxygen environment, resulting in a CO2-rich waste gas stream. Whichever approach is employed, the CO2 is then dehydrated (the presence of water makes the gas highly corrosive) and compressed for transport. All these processes have substantial energy requirements. According to the IPCC, in power generation ‘capture and compression need roughly 10–40 per cent more energy than the equivalent plant without capture’ (ibid., p. 22). They cite estimates of increased fuel consumption per kilowatt hour of electricity produced at a plant capturing 90 per cent of CO2 emissions of 11–22 per cent for natural gas combined cycle plants, 14–25 per cent for coal-based integrated gasification combined cycle (IGCC) systems, and 24–40 per cent for new supercritical pulverized coal plants. These additional energy requirements mean that the CO2 emissions avoided by a CCS-equipped plant (as compared to a similar conventional plant with the same power output), are less than the total CO2 sent for storage. Of course, over time technological improvements in capture technologies may substantially decrease this energy penalty. Today capture technologies are in slightly different states of development. Post-combustion capture using liquid solvents and pre-combustion capture have both been employed in commercial systems (for the production of CO2 and hydrogen). Oxyfuel combustion remains in the demonstration phase. None of these technologies has been applied at full scale in a commercial size fossil

The politics and policy of carbon capture and storage

3

fuel power plant and integrated into a complete capture/transport/storage system. Transport of captured CO2 can take place by pipeline or in an ocean tanker, much like liquefied natural gas. Transport imposes additional costs (construction and operating costs for pipelines or tankers), so it is advantageous to identify major sources in close proximity to storage sites. Technologies for the transport of CO2 are mature. Storage options for captured CO2 include: geologic sequestration (in abandoned oil and gas wells, saline aquifers, or deep coal beds); ocean storage (either in the water column, or in liquid form on the deep ocean floor); or mineral carbonation (producing magnesium carbonate and calcium carbonate solids). Presently interest is focused principally on geologic storage. Ocean storage would involve injecting the CO2 into the deep ocean (below 1,000 metres) where it would dissolve in seawater, or perhaps onto the very deep ocean floor where it would pool as a liquid. Much of the CO2 that has been emitted since the Industrial Revolution has been taken up by the oceans through natural exchange with the atmosphere (500 GtCO2 out of 1,300 GtCO2), and CO2 injected at depth could be expected to remain in the oceans for hundreds of years (ibid., p. 37). Nevertheless, concerns about the environmental implications of ocean acidification and the temporary nature of storage, legal issues related to ocean disposal, and indications of public unease with this approach, have seen interest in this option wane. Mineral carbonation would safely isolate stored CO2 for geological timescales, but the energy requirements and environmental disruption implied by movements of rock on the necessary scale (for mining and disposal) pose serious challenges, and it is currently being pursued in specific contexts – for example, where accessible geological storage sites are not available. With respect to geological storage, there is already considerable experience injecting CO2 underground for enhanced oil recovery (EOR), and oil and gas fields constitute an attractive early application for CCS as continued fossil fuel extraction provides a significant revenue stream for storage operators. This is also potentially the case for injection into deep coal deposits, which permits the extraction of ‘coal-bed methane’, although there is more uncertainty about this technique. The largest storage potential, however, is provided by deep saline aquifers. Once injected, a number of processes contribute to retaining the CO2 in the underground formation, including ‘physical trapping’ (by impermeable cap rock that overlies the injection level, and by capillary forces in the pore space) and ‘geochemical trapping’ (as the CO2 dissolves in the underground water, and eventually reacts chemically with the rock to form solid carbonate minerals). Careful site selection, injection procedures, underground modelling, and monitoring, would ensure that the combination of

4

Caching the carbon

these mechanisms would minimize any leakage into ground water or the atmosphere. Potential environmental impacts of CCS can be conceptualized on three levels: (i) local issues related to the accidental release of CO2; (ii) global climate risks from large-scale releases of CO2; and (iii) other impacts linked to the deployment of the technology. These problems can in turn be related to the three stages of the CCS chain: capture, transport and storage. Local risks would impact workplaces and communities at sites of CCS activity. At low concentrations CO2 can cause biological effects and at higher concentrations there is risk of asphyxia, so accidents at capture, transport or storage facilities could pose dangers to workers or local communities. Leakage could also cause local ecological disruption. Global climate risks would be posed by any large-scale (sudden, or slow long-term) release of CO2 from storage sites. The Intergovernmental Panel on Climate Change (IPCC) is confident that leakage rates would be very small for well-selected and -operated storage venues, arguing that it is very likely that more than 99 per cent of stored CO2 would remain isolated from the atmosphere for 100 years and likely that more than 99 per cent would be retained over 1,000 years. Other environmental impacts result primarily from the additional energy requirements of CCS, and from the construction and maintenance of large-scale infrastructure (capture facilities, pipelines and injection sites). The reduction in overall efficiency of a CCS-equipped power plant means that a larger installation is required to produce the same power output, and a greater throughput of materials (fuel, water and so on) is also necessary. Increased fuel for a coal-fired plant would imply more mining and bulk transport, generate additional solid waste, and require more materials for the control of air pollutants. Improvements in capture technology have the potential to reduce these effects. When considering such risks it is important to remember that the reason for undertaking CCS is to contribute to the abatement of GHG emissions and the management of global climate change. And models suggest that the availability of CCS could substantially reduce the cost of meeting significant emission reductions over the course of this century.

2

THE EVOLUTION OF INTERNATIONAL INTEREST IN CCS

Although interest in CCS has broadly followed increased international concern with anthropogenic climate change, it is only comparatively recently that CCS has gained wide acceptance within the international climate change policy community as a practical mitigation option.


5

The idea of capturing CO2 from fossil fuel combustion and storing it in the ocean or underground had already been floated in the late 1970s (Marchetti 1977), but it was only in the mid-1980s, as worries about climate change spread more widely in the scientific community and reached the attention of international policy makers, that work on CCS really began. From the early 1990s the International Energy Agency (IEA) played an increasingly important role in stimulating research around CCS through its Greenhouse Gas Research and Development Programme. The first major international conferences on CCS were held in 1992 and 1993, and throughout the 1990s active international networks from industry, academia and government pushed forward understanding of CCS. Fossil fuel producers and governments were major sponsors of these investigations, which focused on technologies for capture and transport, assessments of storage potential, and the modelling of costs. In 1996 the first large-scale storage project got under way at Sleipner in Norway, where CO2 separated from natural gas was re-injected into geologic strata under the North Sea. By the end of the 1990s, legal and regulatory problems as well as societal acceptability were being given greater attention in these networks. Still, it is remarkable that in this early phase of activity CCS remained the preserve of a narrow group of technical experts in the energy field, who were relatively isolated from the mainstream climate change community (Hellin 2008). Even in the mid-1990s the IEA was cautious about climate change, and technical work on CCS was presented as being of relevance if climate change turned out to be a serious problem. For its part, the IPCC was hesitant to recognize CCS as an appropriate mitigation pathway. It was not listed among the recommended mitigation options in the IPCC Second Assessment Report published in 1995. Indeed, the CCS option was characterized as ‘limited for technical and environmental reasons, because not all forms of disposal ensure prevention of carbon re-entering the atmosphere’. More substantive treatment was provided in the Third Assessment Report in 2001, which stated that ‘physical removal and storage of CO2 is potentially a more viable option than at the time of SAR’. Nevertheless, the authors of the 2005 IPCC Special Report later wrote: Although it [CCS] can be implemented mainly by applying known technology developed for other purposes, its potential role in tackling climate change was not recognized as early as some other mitigation options. Indeed the topic received little attention in IPCC’s Second and Third Assessment Reports. (p. 54)

Yet by the first years of the new century the relative neglect of CCS as a mitigation option began to change. In the autumn of 2001 the Seventh Conference of the Parties of the United Nations Framework Convention

6

Caching the carbon

on Climate Change (UNFCCC) requested that the IPCC investigate CCS more fully. In April 2002, the IPCC took up the challenge, and set about organizing a conference to review the state of play regarding CCS which was held in Regina, Canada, later that year. The Regina meeting drew heavily on the expertise that had been built up through the IEA Greenhouse Gas Research and Development Programme, and many of the participants went on to become contributors to the IPCC Special Report, which finally appeared in September 2005 (Hellin 2008). During 2000–05 a number of other important CCS initiatives got underway. These include the Weyburn EOR Project, where CO2 from a coal to methane plant in North Dakota is piped 300 kilometres to Weyburn, Saskatchewan, and injected to permit continued oil extraction. From the outset, the results of injection have been monitored by the IEA GHG Weyburn-Midale Project. Ultimately more than 20 MtCO2 are expected to be injected over a 20–25-year period. In 2003, the Carbon Sequestration Leadership Forum (CSLF) was established by a number of developed and developing country governments to promote the rapid development of CCS. Founding members included the US, the UK, Japan, Norway, Sweden and the EU. Early contributions included meetings of technical groups, identification of key projects, outreach to stakeholder groups and production of a CSLF Technology Roadmap (CSLF 2004). It is difficult to overstate the significance of the IPCC Special Report, which presented a comprehensive review of the technical and economic potential of CCS, and was communicated to a broad audience concerned with climate change and energy policy. The Special Report drew on a wide range of expertise, and integrated the technical consideration of CCS as a mitigation option into the wider discourse on climate change, in which the IPCC assessment reports and emissions scenarios occupy a central place. The report’s content is far richer and more nuanced than is reflected in the ‘Summary for Policy Makers and Technical Summary’. Needless to say, the IPCC imprimatur lent substantial legitimacy to its findings. For 15 years the IPCC assessment reports have provided the scientific anchor for climate change policy debates, and so the relatively favourable evaluation of the emissions reduction potential of CCS contained in the Special Report could hardly be ignored. Since the autumn of 2005 CCS has had an increased international profile, with the EU and a series of national governments moving forward to intensify research, support the construction of demonstration facilities, and establish clearer policy and regulatory frameworks. The EU, for example, adopted a draft directive on CCS in January 2008 as part of its package of proposals preparing for post-Kyoto international climate change negotiations (CEC 2008). The elaboration of ideas for policy and


7

regulatory frameworks has moved forward rapidly with a series of major studies and discussions and the launch in May 2008 of the IEA-sponsored CCS Regulators Network to accelerate international collaboration. Looking back over the past 20 years, it may seem curious that CCS took so long to attract attention. After all, setting aside dilution, the traditional way to deal with harmful air emissions has been to treat flue gases to remove pollutants, and then to dispose of residual wastes (consider, for example, sulphur dioxide and particulate emissions from coal-fired power plants). But for CO2 this option was initially ‘skipped over’, with emphasis being placed on solutions such as fuel switching, energy efficiency and non-carbon energy sources. Certainly there were concerns that CO2 was not like other air pollutants, that it would be difficult and costly to capture, and that storage might not be permanent. But there also seems to have been an assumption among those active on the climate file that since fossil fuels were the cause of the problem, the solution must lie elsewhere. Moreover, those whose economic fortunes were most closely tied to fossil fuels (companies, regions, countries), were initially more inclined to express doubt about the need for action to address human-induced climate change than to press for the early deployment of a (potentially very expensive) CCS solution. Of course, research and contingency planning were another thing altogether. So for some years technical work on CCS remained relatively isolated from the mainstream climate policy community. But the evolution of the scientific and political consensus about climate change ultimately disrupted this arrangement. As warnings about climate change grew more urgent, and the pace of political action remained slow, some in the climate change policy community began to look for alternatives (Stephens 2006) – and CCS offered an additional abatement trajectory that might prove more appealing to economies and industries still tied to fossil fuels. Meanwhile, as the inevitability of stringent carbon controls became more apparent, so the active promotion of CCS became more appealing to fossil fuel interests. And the preparation and launching of the IPCC Special Report became part of the process for drawing CCS into the climate mainstream.

3

CCS AS A CLIMATE CHANGE MITIGATION OPTION

CCS is typically presented as one of a series of GHG abatement options that include fuel switching (especially from coal to gas), energy efficiency savings (gains in conversion, transmission and end-use efficiencies), expanding established large-scale low carbon energy production

8

Caching the carbon

(nuclear, hydro), developing new renewables (wind, solar, wave, geothermal, biomass and biofuels, and so on), land-use changes (for example, slowing deforestation and encouraging re-forestation), and reducing emissions of other GHGs (methane, nitrous oxide and so on). Each of these approaches, and the many detailed options they encompass, provides an opportunity for emissions abatement. But it also presents a distinctive set of co-benefits, costs and risks. Such measures can be combined in different ways into a portfolio to achieve a specified emissions abatement trajectory. Other things being equal, if one option bears a lighter burden, others will be required to do proportionately more. Because of the scale of emission reductions that will be necessary globally over coming decades most, if not all, of these approaches will be required to make some contribution to the overall abatement effort. Since different abatement options impose different benefits, costs and risks on particular societal groups, such options are not distributively neutral. The extent to which CCS contributes to GHG emission reductions (globally and in specific countries), will be determined by the interplay of many factors including the character of climate change objectives, the further development of CCS technology, the relative costs and benefits of alternative abatement approaches, and explicit political and policy choices. The long-term future of fossil fuels is closely bound up with the development and deployment of CCS. Although there is concern today about the security of oil supplies (related to volatile prices, political instability in exporting regions, and ‘Peak oil’), remaining fossil energy reserves – especially of coal – are substantial. Nevertheless, emission cuts on the scale now being discussed for the medium term (perhaps 80 per cent or more in developed states by mid-century, with global emissions eventually declining to a few percent of current emissions) (IPCC 2007), would imply that at a certain point virtually all large-scale uses of fossil fuels would have to be accompanied by CCS. The availability of suitable storage sites presents one limit on the eventual scale of CCS. Current estimates of geological storage potential vary widely. Although oil and gas reservoirs have been closely studied for decades, much less is known about other formations. The IPCC Special Report suggested that storage is likely to prove adequate for economically feasible projects that might be developed over this century (totalling 200–2,000 GTCO2), and cited figures for the full range of available storage of 679–900 GtCO2 in oil and gas fields, 3–200 GtCO2 in deep coal seams, and 1,000–10,000 GtCO2 in deep saline aquifers. Time-related issues are also of critical relevance when assessing the emissions abatement potential of CCS. Three points are of particular interest: (a) the speed of initial commercialization and take-up; (b) the


9

evolving scale of CCS deployment over coming decades; and (c) the retention rate of geological storage. The first issue relates to the time required for CCS to become commercially available and achieve initial deployment as a practical emissions abatement alternative. On the technological side, the construction of a number of full-scale integrated demonstration facilities is a critical step in this direction – providing firmer knowledge about costs, the challenges of integrating systems, and operational reliability. But policy and regulatory frameworks also require elaboration to provide a context within which it makes business sense to apply CCS. Above all, a strong regulatory push and/or a significant price for carbon emissions will be required to develop commercial applications. Most analysts suggest that CCS will not be ready for commercial deployment until 2020. Yet even this date is uncertain. It is assumed that there will be significant cost reductions and reliability gains as experience with the full-scale installations accumulates. But this learning cycle, as well as the reductions in uncertainties surrounding CCS, can only get underway once demonstration facilities begin operation. The second issue concerns the relative burden of emission reductions that can be carried by CCS over time, nationally and internationally. And this relates to evolving levels of fossil fuel usage. The IPCC Special Report anticipates that CCS could achieve widespread commercial application during the second quarter of this century with much more extensive development beyond 2050. The assumption is that CCS would be deployed first in developed states and then spread into the developing world. Some analysts suggest that CCS could already be accounting for more than half of the necessary emission reductions in developed states by 2050 (Stangeland 2006). The third issue relates to leakage and climate risk. Leakage volumes are a function of the quantity of CO2 stored and the rates at which it escapes from the storage formation. If absolute leakage was extremely low, escaping CO2 would be absorbed into the natural carbon cycle, and could be ignored practically by future generations. If leakage were somewhat higher it might at some point require active remediation. If leakage were very high, or remediation were not carried out, a large proportion of stored CO2 would eventually return to the atmosphere. Even so, it is argued that CCS still might prove beneficial by slowing the atmospheric accumulation of CO2, and displacing the release of stored emissions to a point in time where other anthropogenic emissions had declined (IPCC 2005). Be that as it may, most discussion of geologic storage today assumes that leakage must be kept at very low levels, and storage should be considered as essentially permanent.

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Caching the carbon

CCS can be integrated into industrial systems in various ways, but four strategic pathways appear particularly significant for climate mitigation: 1.

2.

3.

4.

Reduction of CO2 emissions from large point source industrial facilities, especially power plants and fossil fuel production facilities. This is the core application considered above and forms the main focus of current international interest. It is also the turn-key application that can pave the way for further deployment. Reduction of CO2 emissions from mobile and smaller fixed sources, by shifting them from the direct use of fossil fuels to an energy carrier (electricity or hydrogen) produced by CCS-equipped fossil fuel facilities. This would allow CCS to bear some of the burden of abatement in the transport sector, which today remains almost entirely dependent on oil, and is currently one of the fastest-growing emissions source. Capture and storage of CO2 from biomass-based energy production, generating net negative carbon emissions. The production of energy from biomass is considered carbon neutral because CO2 released when fuel is consumed is taken up as the next crop grows. If these emissions are captured and stored, the overall result is to remove CO2 from the atmosphere. Large-scale application of CCS to biomass plants (producing electricity, hydrogen or liquid biofuels), or to plants using a mix of biomass and fossil fuels, offers a route to slow the accumulation of GHGs, or ultimately lower atmospheric concentrations. Such an approach might be particularly important should atmospheric accumulation of CO2 overshoot a desired stabilization target (ibid.). Direct air capture of CO2. The direct capture of CO2 from the atmosphere would allow a decoupling of CCS activity from the emissions source (Keith et al. 2006). Capture could be sited adjacent to favourable storage formations, removing the challenge of source/storage site matching and the requirements for the associated transport infrastructure. Although such an approach is not currently practicable (CO2 concentrations in air are low – 100 times less than in power plant flue gases), were it to become technically and economically feasible, there would be important implications: the capture of emissions from mobile and distributed sources, as well of those from large fixed sources far from suitable storage locations, would be facilitated; emissions could be captured from sources in other countries; emissions could be captured without the cooperation of the emitter or knowledge of the particular source; remediation of slow leaks from CO2 storage sites would be facilitated; and the scale of capture operations and ongoing annual emissions could be decoupled.


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11

THE POLITICS AND POLICY OF CARBON CAPTURE AND STORAGE

Like other technologies linked to energy and climate change, CCS is enmeshed in a dense web of political and policy arguments that have irreducible normative connotations. In the first instance these relate to understandings of the appropriate governmental response to climate change, including: the definition of what constitutes ‘dangerous’ climate change, judgements about the importance of climate change mitigation in relation to other societal goals, perspectives on how the costs and benefits of mitigation and adaptation should be distributed (across generations, internationally, and among societal groups), and views on the range of suitable mitigation approaches. These arguments also involve the specificities of CCS – how this particular technology fits into broader climate and energy strategies; the anticipated benefits, costs and risks of its deployment; and the policy and regulatory frames that should guide its possible introduction. With respect to the place of CCS in climate and energy strategies, arguments revolve around the proportion of the mitigation load that CCS will be expected to bear, the place and mix of fossil fuels within the evolving energy supply, the timing of CCS deployment, and linkages between domestic and international uptake of the technology. Discussions of the advantages and drawbacks of CCS deal with anticipated climate benefits (emissions abatement) and economic benefits (continued use of fossil fuels, lower abatement costs, jobs and regional prosperity, export markets for new technology), as well as environmental costs and risks (climate change mitigation effectiveness and other environmental dimensions), and economic costs and risks (to economic prosperity, international competitiveness and so on). Discussion on the policy side flows from these political and economic arguments, and includes the definition of the policy framework (the basic stance towards CCS, how it is to be integrated with other goals and policies, and the extent to which it will receive public support), and the regulatory framework (the way CCS operations are controlled and monitored by public authorities). A key issue of these policy debates relates to public financial support for CCS (funding of R&D, demonstration facilities and infrastructure support). Binding controls on the emission of GHGs (cap-and-trade systems, carbon taxes and so on) provide an underpinning for CCS promotion – giving firms an economic incentive to reduce carbon emissions. But experience suggests that additional help is required to overcome barriers to the development and market penetration of carbon-reducing energy technologies. Hence the widely adopted policy supports for new

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renewables (such as wind and solar), even in jurisdictions that have already introduced some form of CO2 pricing. On the other hand, critics suggest that public funding for CCS amounts to a violation of the ‘polluter pays principle’, and a subsidy to the fossil fuel industry. Moreover, many governments have expressed a commitment to keeping policy focused on specifying outcomes – CO2 emission reductions – and letting markets determine which technology can best accomplish this goal. There are also a series of complex regulatory issues that must be resolved if CCS is to go ahead on a large scale, including the legal regime within which capture, transport and underground storage will be regulated (CO2 as industrial chemical, waste product or toxic waste); property rights; liability (responsibility for accidents and inadvertent leakage); licensing (permitting of capture, transport and storage operations); and monitoring (especially monitoring of injection and long-term storage). In some cases it is relatively simple to adapt existing regulations to cover CCS, but new frameworks and approaches are also required. Many of these regulatory issues have an international dimension: agreements regarding GHG abatement are international in scope as are international accounting and trading; potential storage reservoirs straddle international frontiers; and in the future it may be desirable to transport CO2 for storage across international boundaries. The development of international standards relating to the safe and secure operation of CCS, responsibility for any leakage, and appropriate accounting and monitoring systems, will be an important part of any move to wide-scale deployment. Experience with other novel technologies suggests that publics can turn against particular technologies if they lack confidence in regulatory authorities or believe that private interests are trumping the collective good. ‘Overselling’ of the supposed benefits of a technology (and minimization of residual risks), and early accidents that show up failures in oversight systems, may also undermine public support. Thus development of an appropriate regulatory system is strategically important for the longterm deployment of CCS. A key challenge here is to secure an appropriate balance of public and private interests and distribution of risks and opportunities. For example, liabilities will have to be assumed by private and public actors. Shifting liability too strongly onto private actors risks delaying or preventing the development of CCS; on the other hand overly relaxed private sector liability provisions would increase the risk of accidents and place an excessive burden on public institutions. Governments in industrialized countries are now generally supportive of the principle of CCS, accepting that it has the potential to play an important role in international emissions abatement efforts, whether or


13

not they currently intend it to play a significant role in their own national mitigation efforts. Some countries – for example, the United States, Canada and Australia – have placed particular emphasis on prospects for CCS in their emission reductions plans. Yet this does not necessarily mean that they are closer to practical deployment of this abatement option. Some of the states that have vigorously upheld the potential of CCS have delayed establishing domestic frameworks to motivate near-term abatement (deferring the introduction of emissions pricing through a GHG tax, or cap-and-trade system, for example). Indeed this suggests a deep paradox that runs throughout the CCS story: its most enthusiastic advocates often use the promise of future CCS-secured emission reductions to resist calls for immediate abatement today. Although the public remain relatively uninformed about the CCS alternative, political debate around the topic is now picking up. And in this context civil society organizations (NGOs) are playing an important role. One of the earliest and most consistent supporters of CCS has been the Bellona Foundation, a Norwegian anti-pollution campaign organization founded in the 1980s, which cut its teeth on opposition to civilian and military nuclear industries, particularly in northern Russia. Bellona argues that cuts in GHG emissions of 50–80 per cent will be required by mid-century. Given rising energy demand, especially in developing countries, energy efficiency and renewables alone will not be able to secure the necessary reductions. The serious problems associated with nuclear power – the dangers of proliferation, the risks of reactor accidents, and the issue of radioactive waste disposal – mean that a massive expansion of nuclear energy cannot represent a sustainable solution to the climate change challenge. Thus for Bellona, CCS represents a critical emissions abatement technology. In a recent report they suggested that a vigorous deployment of CCS could result in worldwide capture of 4.5 GtCO2 annually by 2030, and 16 GtCO2 by 2050, for cumulative stored totals of 30 GtCO2 and 244 GtCO2 by 2030 and 2050, respectively. An effort on this scale would allow CCS to secure a 56 per cent reduction of EU CO2 emissions by 2050, and a 17 per cent reduction of non-OECD country emissions, based on a 2005 baseline. As one Bellona representative recently put it, CCS is ‘an essential bridging technology that needs to be deployed fast if Europe and the rest of the world are serious about tackling climate change’ (Bellona 2008). CCS will allow societies to get CO2 emissions down in coming decades, even before renewable energy technologies are sufficiently mature to provide all our energy needs. Just as Bellona has become a determined advocate of CCS, so Greenpeace International emerged as one of its most consistent critics. In a report published in mid-2008, Greenpeace suggests five basic reasons

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Caching the carbon

why CCS represents a ‘dangerous gamble’: first, ‘CCS cannot deliver in time to avoid dangerous climate change’; second, ‘CCS wastes energy’; third, ‘storing carbon underground is risky’; fourth, ‘CCS is expensive and undermines funding for sustainable solutions’; and fifth, ‘CCS carries significant liability risks’ (Greenpeace 2008). The clincher is that the world already has viable solutions to the climate change crisis – renewable energy and energy efficiency. Greenpeace argues that climate change is a pressing issue and emission reductions must be made today if we are to avoid serious disruption to the global climate system. But large-scale deployment of CCS is unlikely before 2030 – too late to deliver the emission cuts we need. And yet CCS threatens to soak up huge quantities of public money in R&D subsidies, starving the more promising renewables sector of critical finance. Moreover, while energy efficiency is another key solution to the climate problem, a wide-scale introduction of CCS would undermine half a century of efficiency gains because of the additional energy requirements for CO2 capture, transport and injection. Greenpeace emphasizes the uncertainties surrounding CCS technology, noting that the first large-scale demonstration facility has yet to be built, that the costs of transport beyond 100 kilometres may turn out to be prohibitive, and that the availability of secure storage formations may have been seriously overestimated. Discussion of risk and liability engages with two interrelated issues. First, Greenpeace points to risks and liabilities imposed by CCS on society as a whole. These include risks to the environment and climate system from CO2 leakage, risks of failing to abate emissions in a timely manner because of the ‘false hope’ of CCS, risks from the excessive costs of CCS deployment (where plant costs may double and electricity prices rise by ‘21–91 per cent’), and from the additional environmental pressures (coal mining and transport, water use). But Greenpeace also emphasizes risks to the private sector. The point here is to suggest that businesses will be averse to CCS, will delay deployment for as long as possible, and will try to shift liabilities onto governments and taxpayers. Particular scepticism is directed at ‘capture ready’ power plants, with Greenpeace suggesting that this is little more than a ploy to make fossil fuel plants more acceptable, with no guarantee that CCS will ever be fitted to the ‘capture ready’ plants.

5

RESEARCHING THE POLITICAL AND POLICY DIMENSIONS OF CCS

As the preceding discussion has made clear, obstacles to large-scale deployment of CCS are not only technological or economic. This was


15

appreciated by early advocates and a considerable effort has been made in the recent past to map legal and liability issues, regulatory problems, and potential public reactions to CCS (de Coninck et al. 2006). The result has been a rapidly growing literature (much of it issued by international organizations, government agencies, consultants and business groups, but more recently also by independent thinktanks and academic research teams) dealing with these dimensions. Key interconnected and overlapping areas on which advances have been secured in recent years include: ●

●

●

Legal issues The assessment of existing legal instruments (nationally and internationally) that relate to CCS (Purdy 2006); property rights (such as ownership of CO2 as it passes down the CCS chain, ownership of the pore space in which stored CO2 resides, and ownership of intellectual property in CCS technologies); and liability, including the transfer of responsibility for storage from private to public hands at the end of the operational phase (IEA 2005, 2008). Also important here is how CCS relates to the current climate agreements and perspectives for integrating it into the Clean Development Mechanism (CDM) and future climate accords (Bode and Jung 2004, 2006; IEA 2004; de Coninck and Bakker 2005; NETL 2006; Vormedal 2008). Economic issues Cost assessments of alternative technological approaches under different assumptions about energy prices, economic growth, carbon pricing, discount rates and so on. These include capital and running costs, costs per ton of carbon avoided, and impacts at the plant level as well as effects on consumer electricity prices. Work has been done on the impacts of CCS availability (or otherwise) on GHG abatement costs. The economics of CCS relates directly to technological alternatives – because cost effectiveness is a critical systems design criteria. But it relates also to policy, because the carbon price is not fundamentally a scarcity price, but a price created by regulatory intervention to internalize externalities associated with GHG releases. Regulatory frameworks Work has gone on to examine how existing regulatory frameworks and institutions can be amended and expanded to encompass CCS (Clifton Associates 2004; Reiner and Herzog 2004; Solomon et al. 2007). Frameworks for CCS permitting are being developed in many countries (CO2 Capture Project 2003). And proposals for liability transfer and long-term monitoring are also under discussion. Balancing responsibilities among industry and public bodies and between national and international agencies is also on the table. And efforts have been deployed to develop risk

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●

management frameworks appropriate for CCS operations (Vajjhala et al. 2007; Murphy and Jaccard 2008). Public acceptability and communication There has been significant early work relating to public attitudes about CCS and public knowledge of CCS, including survey and focus group exercises in many countries. Communications and outreach strategies around CCS have also been examined (Sharp et al. 2005; Shackley et al. 2006; Accept 2007). Early evidence suggests that public knowledge remains low, with a basic understanding of human-induced climate change and of the urgency of emission reductions being important to supportive attitudes.

Nevertheless, social science research has only begun to engage with the many questions raised by CCS. Much of the existing literature displays a strong instrumental orientation – a preoccupation with assessing (and overcoming) obstacles to CCS deployment, asking for example – ‘how can we make sure the public accepts this mitigation option?’. And, as long as these normative commitments are made explicit in the research frame, this may be quite appropriate. But social science research needs also to be able to acquire critical distance, at least for some of the time, and in relation to certain issues. It needs to be able to ask ‘why?’, and ‘for whom?’ and ‘what are the alternatives?’, as well as ‘how?’. Moreover as CCS moves from the stage of research, experimentation and discussion towards full-scale demonstration and initial deployment, its societal reach will become more significant, and new issues and areas for analysis will open up. This study contributes to growing literatures around CCS, by focusing on the political understandings and policy responses that have developed to date in various jurisdictional contexts. It will identify contrasts and similarities and try to account for the varied perspectives. In so doing it will cast light on a number of themes central to arguments about CCS – such as defining its relative weight within the array of abatement options; developing a nuanced assessment of risks and opportunities; balancing private and public interest; and assessing its potential role in transforming energy systems. The book is not based around a single overarching theoretical framework. Instead authors have drawn upon different literatures as and when these proved useful for the expository and analytical tasks at hand. Writings on climate change, energy policy, science and technology, and comparative environmental policy have been invoked at different points in the discussion. In identifying political perspectives on CCS we have drawn inspiration from recent work on environmental discourses, especially the notion of ‘story lines’ (Hajer 1995; Dryzek 1997). Here ‘story lines’ are


17

narrative accounts that unite political actors, suggesting shared understandings of the world. As Hajer has explained, story lines are ‘essential political devices that allow the overcoming of fragmentation’ (p. 62), and which are intimately connected with powers of individual and collective agency. In social science it is common to establish distinctions between explanatory and interpretative modes of analysis; between empirical and normative orientations; or between ‘problem solving’ and ‘critically-oriented’ social investigations. An attempt is made here to bridge these polarities, and to present an account that has explanatory and interpretative dimensions, is empirically grounded yet informed by an explicit normative commitment, and that furthers sound policy in the CCS domain while maintaining a critical perspective. This study has an explicit normative frame captured by the idea of ‘sustainable energy policy’. This can be conceptualized in various ways, but the approach adopted here is to anchor sustainable energy to the broader notion of sustainable development. According to the often-cited definition, sustainable development is ‘development that meets the needs of the present without compromising the ability of future generations to meet their needs’ (WCED 1987). It is development that takes account of the critical pressures that humans are imposing on global ecosystems while recognizing the urgent development needs of the world’s poor. Sustainable energy policy is energy policy that contributes to sustainable development. It is concerned with the ways in which societies meet their energy needs without imposing undue burdens on local and global environments. It considers the economic, social and environmental dimensions of energy supply, distribution and consumption. Energy policy has traditionally been concerned with economic and security dimensions – with energy as a foundation for economic growth, prosperity and military power. Particularly since the late 1960s environmental issues have assumed greater significance, as the scale of human impacts on the natural world has grown with human numbers, rising consumption and novel energy technologies. Sustainable energy policy takes this one step further, placing environmental issues at the heart of energy policy, and insisting on the need to radically restructure the energy economy in order to decouple economic activity from environmental pressures, and bring resource use and waste generation back within the supportive capacity of natural ecosystems. Such an approach recognizes the seriousness of climate change and the need for an urgent policy response. And it sees the transition to a carbon neutral energy system over the course of this century as one of a series of transformations to key societal subsystems (including transportation and

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agriculture) that will be required to dramatically reduce pressures on the global ecosphere. From such a perspective, CCS has serious potential as an emission reduction pathway. But its contribution must be judged in relation to the wider challenge of developing a carbon neutral energy system, as well to the requirement of sustainable development. Costs and risks must be considered as well as promised benefits. And experiences with other emergent technologies, and lessons from other regulatory domains, may help decision makers structure societal engagement with CCS in ways that maximize the benefits and reduce the costs and risks. In other words, if CCS is to be done, let us try to get it as right as possible.

6

STRUCTURE OF THE CURRENT STUDY

The focus of this volume is the policy and politics of CCS. It includes case studies of the reception of CCS in seven OECD countries – Australia, Canada, Germany, the Netherlands, Norway, the United Kingdom and the United States. Developments in the European Union as a whole form the subject of an eighth case study. Although the climate abatement effort in large developing countries such as China, India, Brazil and South Africa will ultimately be critical, this study is concentrated on CCS in the developed world. According to the terms of the UNFCCC these countries have the responsibility to act first in mitigating climate change, and it is here that research and experience with CCS is currently most advanced. In terms of the selection of individual countries, priority was given to those for which CCS was already emerging as a potentially critical mitigation pathway. Australia, Canada, Norway and the United States are major fossil fuel producers and exporters. Australia and the United States are heavily reliant on coal for electricity generation (79 and 49 per cent, respectively), and this is true also of certain regions of Canada. To this group were added three additional countries – Germany, the Netherlands and the United Kingdom. Each of these has substantial remaining reserves of fossil fuels and is reasonably dependent on such fuels in the electricity sector (50, 35 and 55 per cent, respectively). They have also engaged substantively in the climate change policy arena, and shown considerable technological and policy interest in CCS. Thus the study does not include countries without significant domestic fossil fuel production, such as Sweden, France, or Portugal. The EU forms the subject of an eighth case study because of its importance for policy developments in the three EU member states included in the volume (Germany, the Netherlands and the United Kingdom), the


19

essential role this emergent political unit is now playing in international negotiations around climate change, and the potential to gain broader insights about CCS developments in Europe as a whole. Each of these eight case studies discusses a series of basic issues concerning engagement with CCS within the specific jurisdiction, which provides a foundation for the subsequent comparative analysis. These include: structural characteristics of the national economy and energy system; the evolution of the policy stance on climate change; key actors involved in CCS; the current government policy framework around CCS; the link between national developments and international processes; factors which account for the particular national reception of CCS; important fault-lines among policy actors relating to the development of CCS; and emerging issues. While these studies engage with common themes, contributors were encouraged to develop their own analysis about debates around CCS in each jurisdiction. Authors have written in more detail about issues that assumed particular importance in the specific context, and have engaged at greater length with themes about which they possessed greater knowledge. The result is chapters that not only provide parallel case studies, but also present a series of complementary discussions on various dimensions of the policy and politics of CCS. Moreover, as they go through the volume, readers will discover that individual authors have somewhat differing assessments of CCS, with some enthusiastic about its potential as a climate mitigation option, while others remain more sceptical. This plurality of perspectives was a great advantage to the research team that produced this volume, and it can provide readers with further insight into the complex and nuanced world of the politics and policy of CCS. After the eight individual studies come two additional chapters. The first presents a synthesis of the specific studies and a comparative analysis of developments in the different jurisdictions. The intention is to highlight similarities and contrasts across the cases, and to present some general conclusions about the evolution of politics and policy around CCS within this selection of developed states. The final chapter is more reflective and forward looking, engaging with a series of themes that emerge from the earlier portions of the volume, and exploring their implications in some detail.

REFERENCES Accept (2007), ‘Multidisciplinary analysis and gap filling strategies’, Deliverable 4.1 and 4.4. Bellona (2008), ‘“Innovative” solutions needed for CO2 storage’, EurActiv, 27

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June 2008, available at http://www.euractiv.com/en/climate-change/bellonainnovative-solutions-needed- CO2-storage/article-173736. Bode, S. and M. Jung (2004), ‘On the Integration of Carbon Capture and Storage into the International Climate Regime’, HWWA Discussion Paper 303, Hamburg Institute of International Economics, Hamburg. Bode, S. and M. Jung (2006), ‘Carbon dioxide capture and storage – liability for non performance under the UNFCCC’, International Environmental Agreements, 6: 173–86. CEC (2008), ‘Proposal for a Directive of the European Parliament and of the Council on the Geological Storage of Carbon Dioxide’, Commission of the European Communities, Brussels. Clifton Associates (2004), The Long-Term Storage of CO2: A Regulatory Requirements Project, Regina: Clifton Associates. CO2 Capture Project (2003), ‘Inventory and review of government and institutional policies and incentives contributing to CO2 capture and geological storage’, Environmental Resources Management. CSLF (2004), CSLF Technology Roadmap, Carbon Sequestration Leadership Forum. de Coninck, H. and S. Bakker (2005), CO2 Capture and Storage: State of the Art in the Climate Negotiations, Amsterdam: ECN. de Coninck, H., J. Anderson, P. Curnow, T. Flach, O. Flagstad, H. Groenenberg, C. Norton, D. Reiner and S. Shackley (2006), Acceptability of CO2 Capture and Storage: A Review of Legal, Regulatory, Economic and Social Aspects of CO2 Capture and Storage, Amsterdam: ECN. Dryzek, J. (1997), The Politics of the Earth: Environmental Discourses, Oxford: Oxford University Press. Greenpeace (2008), False Hope: Why Carbon Capture and Storage Won’t Save the Climate, Amsterdam: Greenpeace International. Hajer, M. (1995), The Politics of Environmental Discourse, Oxford: Oxford University Press. Hellin, M. (2008), ‘Carbon capture and storage: technology, discourse and politics’, unpublished Master’s Research Essay, Carleton University, Ottawa. IEA (2004), ‘Carbon Dioxide Capture and Storage Issues – Accounting and Baselines Under the United Nations Framework Convention on Climate Change (UNFCCC)’, IEA Information Paper, OECD/IEA, Paris. IEA (2005), Legal Aspects of Storing CO2, Paris: OECD/IEA. IEA (2008), CO2 Capture and Storage: A Key Carbon Abatement Option, Paris:OECD/IEA. IPCC (2005), IPCC Special Report on Carbon Dioxide Capture and Storage, IPCC Working Group III, IPCC and Cambridge University Press. IPCC (2007), Climate Change 2007: Synthesis Report, Intergovernmental Panel on Climate Change. Keith, D., M. Ha-Duong and J. Stolaroff (2006), ‘Climate strategy with CO2 capture from the air’, Climatic Change, 74: 17–45. Marchetti, C. (1977), ‘On geoengineering and the CO2 problem’, Climate Change, 1(1): 59–68. Murphy, R. and M. Jaccard (2008), ‘Geological carbon storage: the roles of government and industry in risk management’, in Glen Toner (ed.), Innovation, Science and Environment: Canadian Policies and Performance 2008–9, Montreal: McGill-Queen’s University Press, pp. 151–67.


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NETL (2006), ‘International carbon capture and storage projects overcoming legal barriers’, National Energy Technology Laboratory. Purdy, R. (2006), ‘Geological carbon dioxide storage and the law’, in S. Shackley and C. Gough (eds), Carbon Capture and its Storage: An Integrated Assessment, Aldershot: Ashgate, pp. 87–139. Reiner, D. and H. Herzog (2004), ‘Developing a set of regulatory analogs for carbon sequestration’, Energy, 29: 1561–70. Shackley, S., C. Gough and C. McLachlan (2006), ‘The public perception of carbon dioxide capture and storage in the UK’, in S. Shackley and C. Gough (eds), Carbon Capture and its Storage: An Integrated Assessment, Aldershot: Ashgate, pp. 141–69. Sharp, J., M. Jaccard and D. Keith (2005), ‘Public attitudes towards geological disposal of carbon dioxide in Canada’, Final Report, available at http://can metenergy-canmetenergie.nrcan-rncan.gc.ca / fichier / 78864 / public _ attitudes _ gc0 2_2005.pdf, last accessed 15 September 2009. Solomon, S., B. Kristiansen, A. Stangeland, T. Torp and O. Karstad (2007), ‘A proposal of regulatory framework for carbon dioxide storage in geological formations’, Bellona Foundation, Oslo. Stangeland, A. (2006), ‘A model for the CO2 capture potential’, Bellona Foundation, Oslo. Stephens, J. (2006) ‘Growing interest in carbon dioxide capture and storage (CCS) for climate change mitigation’, Sustainability: Science, Practice and Policy, 2: 4–12, available at http://ejournal.nbii.org, last accessed 29 June 2009. Vajjhala, S., J. Gode and A. Torvanger (2007), ‘An international regulatory framework for risk governance of carbon capture and storage’, Resources for the Future Discussion Paper, 07-13-rev. Vormedal, I. (2008), ‘The influence of business and industry NGOs in the negotiation of the Kyoto mechanisms: the case of carbon capture and storage in the CDM’, Global Environmental Politics, 8(4): 36–65. WCED (1987), Our Common Future, World Commission on Environment and Development, Oxford University Press.

2.

Technology leader, policy laggard: CCS development for climate mitigation in the US political context Jennie C. Stephens

This chapter reviews the politics and policy associated with the advancement of carbon capture and storage (CCS) in the US from a technology innovation perspective. Understanding the US political context is important for two reasons: first, the US has focused its governmental response to climate change on technology rather than policy to a much higher degree than other nations. CCS has been a critical component of this national technological approach, and the US has invested more money, in absolute terms, in CCS development than any other country in the world (Tjernshaugen 2008). And, second, due to its size, status and disproportionate contribution to accumulated greenhouse gas (GHG) emissions in the atmosphere, the US has unique potential for political and technological influence over the future trajectory of global atmospheric CO2 concentrations. This chapter will provide a review of the politics and policy related to CCS in the US by exploring both governmental and non-governmental activity through a technology innovation perspective. The goal of this chapter is to identify and explain the main political and policy controversies, dilemmas, actors and decisions related to the advancement of CCS in the US. The value of considering CCS politics and policy from a technology innovation perspective will first be introduced followed by some background and context on the US energy system and US activity related to climate change mitigation. A review of government initiatives related to CCS at both the federal and state levels will then be presented followed by a discussion of the influence of non-governmental actors including the fossil fuel industry, environmental groups and the scientific community. Critical issues and controversies associated with CCS development in the US will then be explored including the power of coal in US politics, international interactions in CCS advancement, and public perception of the technology. 22

CCS in the US

1

23

A TECHNOLOGY INNOVATION PERSPECTIVE

The interconnected complex concepts associated with ‘technology innovation’ (Gallagher et al. 2006) and ‘innovation systems’ (Hekkert et al. 2007) provide a useful perspective from which to explore the politics and policy of CCS. Technological innovation occurs within a broad, complex socio-technical system that involves much more than the technological advancements made by scientists and engineers; many interconnected social, economic and political factors both influence, and are influenced by, technological advancement (Rogers 2003; Stephens et al. 2008). Despite broad agreement that governments have a critical role to play in technology innovation (Martin and Scott 2000), the politics associated with determining the appropriate and adequate role of government in supporting, encouraging and facilitating technological innovation varies in different countries and different technology sectors (Kemp 1997; Wagner 2008). A useful set of distinctions to consider are the three discrete but clearly intertwined phases of technological innovation each of which are embedded in the larger socio-technical system: (i) basic research and development (R&D) where technological details of new ideas are explored and advanced, (ii) demonstration where new technologies are piloted and tested, and (iii) deployment where new technologies are adopted at scale, implemented and commercialized (Sagar and van der Zwaan 2006). Interactions and feedback among these three discrete phases of technological innovation are frequent, and both social and technical learning occurs at each phase. Due to the environmental, economic and geopolitical instability associated with current energy systems, energy technological innovation has been identified as particularly critical to transitioning to a more sustainable society (Gallagher et al. 2006; Holdren 2006; Lester 2008). The need for facilitating accelerated energy technology innovation is becoming increasingly urgent as a large portion of the human population has limited access to energy services, as the dangers associated with a societal dependence on oil are becoming more apparent, and as the risks associated with climate change continue to grow (Holdren 2006). Despite growing widespread acknowledgement of the need for energy technology innovation, the politics and policies associated with technology innovation within complex socio-technical energy systems are complicated by a diversity of competing priorities: economic, geopolitical and environmental. And, as will be discussed in more detail below, government support for many components of energy technology innovation has actually been declining, rather than increasing, in recent decades (Nemet and Kammen 2007). The term ‘carbon capture and storage’ does not actually represent a

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single technology but rather various different sets of technological components associated with capturing, transporting and storing CO2. Several of these sets of technologies are at different levels of technical readiness, different configurations of a complete CCS system can be envisaged for different situations, but most components of CCS have already been used in other industrial applications. Several recent reviews of CCS have concluded that priorities for advancing CCS include R&D to enhance the capture process to reduce the energy intensity and cost of capture, demonstrating underground CO2 storage in a geologically diverse set of geologic formations, and demonstrating and deploying integrated and scaled-up CCS systems that allow for ‘learning by doing’ of the different technological components (capture, transport, and storage) of CCS (IPCC 2005; Stephens and van der Zwaan 2005; MIT 2007). A technology innovation perspective provides a structure within which to explore the complexity of the different needs and challenges associated with advancing the different components associated with CCS.

2

THE US ENERGY AND CLIMATE CONTEXT

To provide some background, this section gives a brief synopsis of the US energy and climate change context. The US is a large and diverse country in both population and land; there are over 300 million US citizens and the 9.8 million square kilometres of land is highly variable in its geography and natural resources. The US economy, the largest national economy in the world, has maintained a low unemployment rate, a relatively stable overall growth rate in gross domestic product (GDP), and a high level of research and capital investment, increasingly from foreign investors. The US has the largest external debt of all countries in the world (as of spring 2008 this was over $13 trillion), and its national debt has been growing steadily during the past eight years and is currently over $9.8 trillion. The precipitous decline throughout the end of 2008 of many major US financial institutions has resulted in sudden economic instability which is associated with widespread mistrust in government oversight of the economic system. The Energy Context Despite a diversity and abundance of energy resources, the US has been a net importer of energy since the late 1950s when energy consumption began to outpace domestic production. In 2007, imported energy accounted for 29 per cent of all energy consumed in the US (EIA 2008).

CCS in the US

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Energy consumption is greatest in the industrial sector (about 33 per cent), then transportation (28 per cent), then residential (21 per cent) and finally commercial (17 per cent); consumption has been increasing in all four of these end-use sectors (ibid.). The US is the largest importer of crude oil and is the third ranking oil producing country, producing 7.9 per cent of the world total (IEA 2008). With respect to electricity generation, coal-fired power plants generate almost 50 per cent of all the country’s electricity, but the degree to which coal contributes to electricity generation varies greatly among different states. Nuclear power provides 19 per cent of the country’s total electricity generation, which makes the US the largest producer of nuclear power (producing 29.2 per cent of the world’s total nuclear power) (ibid.). In 2007, 72 per cent of all electricity generated in the US was from fossil fuels (coal, petroleum and natural gas), while renewable energy resources (including hydropower) accounted for 8 per cent (EIA 2008). In considering the politics and policy of CCS, several key characteristics of the US energy situation are worth highlighting: (i) the historic reliance on cheap energy resources, (ii) large current and future dependence on domestic coal, (iii) heavy dependence on imported oil coupled with political concerns about energy security, and (iv) significant regional differentiation in terms of energy production/consumption. The US has a long-term economic history of relying on cheap and abundant energy resources. The low cost of energy has had major implications on the evolution of US society, on lifestyle and behavioural choices of US citizens with respect to energy consumption and energy efficiency, and on the nation’s competitive advantage in the global economy. Due to the powerful societal and economic forces associated with ‘technological lock-in’ and ‘price stability’, maintaining low-cost energy is a dominant political priority. The US is heavily dependent on coal, and the country has massive undeveloped and widely distributed coal reserves. The scale and potential of this abundant domestic resource coupled with growing concern over the vulnerability associated with the country’s reliance on oil imports has resulted in a major national commitment to enhancing the future use of coal. As energy security has emerged recently as a major national focus of the energy discourse and debate, the analogy of ‘addiction’ is increasingly used to portray the country’s dangerous dependency on foreign oil. Domestic coal is viewed by many as a critical part of weaning the nation from its oil addiction as support has been growing for advanced coal technologies. The significant regional differences in energy production and consumption complicate the energy policy landscape and the associated politics,

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because very different energy concerns and energy realities emerge in the very diverse states and regions of the country. Distinct differences in the energy landscape can be demonstrated by examining states in different parts of the country. For example, Massachusetts is a typical Northeast state, with high population density, small land area, no noteworthy fossil fuel reserves or production, a relatively high retail price of electricity, and relatively low per capita energy consumption; the state is a net energy importer with about half of its electricity coming from natural gas, followed by coal and then nuclear power. Minnesota is a typical Midwestern state with a more rural, dispersed population, also with no noteworthy fossil fuel reserves or production, but with double the per capita energy consumption of Massachusetts. Minnesota’s electricity generation is dominated by coal (61 per cent) and nuclear (25 per cent), a mix that is representative of many Midwestern states. Texas, one of the largest states in the country with a low population density, is where the majority of US natural gas and petroleum reserves are located, and is a state whose history and economic development has always been heavily influenced by the energy industry and the state’s energy resources. In 2005 Texas supplied 25 per cent of all natural gas and 21 per cent of all oil produced in the US, and the growth of wind power in Texas has been extremely rapid in the past few years. These very different regional energy realities result in complex national energy politics and policies. Climate Change Policy and Politics The US was the largest emitter of CO2 in the world until 2006 when China’s aggregate CO2 emissions surpassed US total emissions; with regard to per capita CO2 emissions the US remains among the highest ranking countries (Levine and Aden 2008). Electricity generation is the largest source of CO2 emissions in the US, due largely to the nation’s high reliance on coal-fired power plants for generation. While CO2 emissions are now over 19 per cent greater than in 1990, and emissions continue to grow, energy CO2 intensity (CO2 emissions per unit of economic output) has been decreasing throughout the past decade. Paralleling the diversity and variability in energy production and consumption in different states and regions within the US, CO2 emissions also vary considerably among different states (Jiusto 2008). Despite the disproportionate contribution that the US has made to the accumulating concentration of CO2 in the atmosphere and despite the country’s potential as a world leader on critical global issues, the US has played a conspicuously difficult role in international climate change politics. At both the international and national levels, the US has been

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slow to respond and engage on the climate change issue. A high degree of scepticism about the contribution of human activity to climate change has been coupled with powerful economic and political interests who want to limit any regulatory or policy change that would incentivize CO2 emission reductions. This has resulted in deliberate attempts by many US politicians to slow down government action on climate change. At the World Environmental Summit in Rio de Janeiro in 1992, the US signed the UN Framework Convention on Climate Change (UNFCCC). The US senate then ratified the UNFCCC committing to a legally nonbinding agreement along with 191 other countries to adopt a national policy to limit GHG emissions, to develop and produce an inventory of such emissions, to report on national policies and to ‘aim’ to reduce emissions to 1990 levels by the year 2000. With minimal progress being made in the ensuing years, negotiations for a more stringent legally binding international agreement began after the Intergovernmental Panel on Climate Change (IPCC) released its 1995 assessment report; these negotiations concluded in December 1997 resulting in the Kyoto Protocol that included binding targets for reducing GHG emissions 5 per cent below 1990 levels between 2008 and 2012. Despite playing an influential and powerful role in the negotiations, the US is the only major industrialized country not to have ratified the Kyoto Protocol; justification for why the US has not done so include claims of ensuing economic hardship and strain on the economy, as well as a stance that the US should only agree to limit its emissions once other major emitters, including China, also commit to reduce their emissions. Following a 2007 informal, alternative, post-Kyoto non-binding international agreement that resulted from the G8+5 Climate Change Dialogues (the Group of Eight rich nations, plus Brazil, China, India, Mexico and South Africa), a major transition in the US climate change policy context is currently underway as the Obama administration has made it clear to the rest of the world that a new era of US leadership on climate policy is emerging. President Barack Obama’s selection of several prominent, outspoken scientists in critical posts within his administration has confirmed his commitment to serious US engagement and policy change with respect to climate change. The uncooperative failure of the US to follow through with ratification of the Kyoto Protocol coupled with its failure to develop a domestic climate change policy to reduce GHG emissions demonstrates the divisive and contentious nature of climate change politics in the US. Throughout the 1990s and into much of the 2000s, climate change was considered to be an issue associated primarily with the Democratic Party. The Republican Party (with a few exceptions) maintained and promoted scepticism about

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the reality and severity of climate change, and about half of the US population did not believe that climate change was a real problem that deserved any attention, concern, or action. Despite the economic challenges facing President Obama as he begins his new administration, he has made climate change policy a priority; but it is still uncertain how the divisive nature of climate change politics in the US will evolve. Since 2005, US public discourse on climate science and society’s response to climate change has been increasing rapidly (Nisbet and Myers 2007). Awareness of the seriousness and urgency of the problem recently has been increasing, as has understanding of the complexity and scale of change in human behaviours and technologies that will be required to stabilize GHG emissions to mitigate climate change (Leiserowitz 2007). Despite recent progress, disbelief and confusion about the degree to which human activity contributes to climate change persist and are frequently coupled with tepid understanding of, and limited commitment to, changes in policy, technology, lifestyle, or behaviour to reduce emissions. Obama’s choice of Harvard physicist John P. Holdren as his science advisor, an individual who has recently publicly chastised and deemed dangerous those who continue to deny or remain sceptical of the human influence on climate change (Holdren 2008a), demonstrates Obama’s commitment to building a political consensus in the US that climate change is a critical issue that deserves national policy action. In 2008 before Obama’s election, federal policy action on climate change in the US was progressing during the 110th Congress (which began in January 2007). Within the first three months of 2007, six different bills targeting GHG emissions through a cap were introduced and a couple of others were introduced in early 2008. While none of these bills has been passed, they laid a foundation for consensus building and established a starting point for the new Congress that reconvened in early 2009 with the new Obama administration (T-PAGE 2008). While national-level climate policy has been limited up until now, there has been significant climate policy progress at the regional, state and local levels. Ten north-eastern states have established the Regional Greenhouse Gas Initiative, the first mandatory CO2 emissions trading programme in US history designed to limit and then reduce CO2 emissions from the region’s electric power plants over the next decade. In California, Governor Arnold Schwarzenegger worked hard with the California Legislature to pass the 2006 Global Warming Solutions Act, a bill that puts Kyoto-like limits on California’s GHG emissions; this legislation involves all sectors and requires California to reduce to 1990 emission levels by 2020. Broadening California’s state-level action to include the western region of the country, the Western Climate Initiative

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has initiated a cap-and-trade programme among seven western states and four Canadian provinces. A Mid-West Greenhouse Gas Accord has also emerged recently initiating a similar regional cap-and-trade system. Cities in all 50 states have declared that they support Kyoto and have committed themselves to taking action toward reducing their emissions; the US Mayors Climate Protection Agreement had more than 700 signatories as of November 2007. The federal government has several non-regulatory programmes to address climate change including some focused on climate change science and mitigation technology. The US Climate Change Science Program is the most heavily funded such programme in the world with a $1.7 billion annual budget. A recent National Academy of Science (NAS) review of the effectiveness of the US Climate Change Science Program concluded that while the programme has been advancing the scientific understanding of climate change, it has not been effective in supporting decision making, studying regional impacts, and communicating with a wide group of stakeholders (NAS 2007). The US government has also been focusing on climate mitigation technology rather than climate policy. Given its history of leadership in scientific and technological research, and its human resource and institutional capacity for advancing science and technology, a national focus on climate science and climate mitigation technology is not surprising. It is within this context, with a strongly developed scientific and technological research and production base, that the US took the early lead technologically and politically in many respects with regard to advancing CCS (de Coninck 2008).

3

GOVERNMENT INITIATIVES RELATED TO CCS

In considering the innovation system associated with advancements in CCS, the government’s role is particularly critical due to the technology’s large scale and high cost. In addition, unlike other technologies that may have numerous benefits or potential co-benefits that may provide incentives for private firms to invest in technology innovation, there is only one fundamental reason to develop and advance CCS, and that is to reduce CO2 emissions associated with fossil fuel-based energy production. Given that the economic and regulatory system in the US has not incorporated a cost to CO2 emissions, there is limited current value to developing a technology that could avoid them. Some incentive does exist, however, and is derived from a combination of the anticipation of future CO2 regulation, eagerness to be perceived by the public and investors as being

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environmentally responsible and prepared for future carbon limitations, and also from a need to be in compliance with carbon regulations in other parts of the world. Nevertheless, the magnitude of investment needed to build a pilot plant and the uncertainty of the financial returns on investing in an unproven technology contribute to the private sector’s reluctance to invest in CCS without some government involvement or reassurances. This section acknowledges this critical role of government by reviewing government initiatives related to CCS at both the federal and state levels. Federal-level CCS Initiatives Federal support for technology innovation can take various different forms and can be channelled through multiple mechanisms depending on the targeted stage of the innovation process, that is, whether focused on R&D, demonstration or deployment. Government initiatives have different expectations and structures with regard to how the effort will interact with, integrate with, or influence the private sector. For example, at the R&D phase, federal money to support technology research can be allocated for specific R&D institutions (either public or private) or can be awarded through grants to private firms. Similarly at the demonstration phase, government initiatives could provide either full or partial support for pilot projects through grants, tax credits or loans. Federal initiatives to support actual technology adoption at scale, that is, deployment, include many potential mechanisms including regulations, mandates, subsidies, loans, and so on. One general but important influence in the development of CCS has been a political preference over the past 5–8 years for supporting the R&D phase of technology innovation for advanced technologies for climate change mitigation, rather than supporting federal initiatives aimed at deployment including regulations that would add a cost to emitting CO2. In fact, supporting R&D for CCS has been viewed by some as an alternative to supporting mandatory CO2 regulations. CCS has been presented by many within the political arena as a short-term alternative to regulation of carbon emissions. The Bush administration (2001–09), while expressing opposition to any national regulation designed to reduce CO2 emissions (Abraham 2004), consistently demonstrated political support for the development of CCS (NEC 2006). In fact, the FutureGen CCS, clean-coal demonstration project (discussed below) was at one point labelled ‘the cornerstone’ of the Bush administration’s climate change programme.

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Financial support for CCS R&D and demonstration Energy R&D efforts in the US are primarily coordinated and funded by the US Department of Energy (DoE). This section reviews DoE programmes related to CCS including research ongoing at the National Energy Technology Laboratory (NETL), the DoE’s Carbon Sequestration Regional Partnership Program, and the Bush administration’s flagship FutureGen clean coal CCS demonstration project. The DoE’s Carbon Sequestration Program, managed within the Office of Fossil Energy through research conducted at NETL, the only US national lab focused solely on fossil fuel energy technology, has maintained a strong focus on advancing CCS throughout the past decade (DoE 2007). NETL’s primary carbon sequestration R&D objectives are: (i) lowering the cost and energy penalty associated with CO2 capture from large point sources; and (ii) improving the understanding of factors affecting CO2 storage permanence, capacity, and safety in geologic formations and terrestrial ecosystems (DoE, 2008). Each year for the past seven years, the DoE and NETL have sponsored an annual conference on CCS to provide a forum for the exchange of experience among the CCS scientific and engineering communities domestically and internationally, to facilitate dialogue among technology developers, industry and the public, and to develop the capacity within the public and private sectors to move the technology forward. The aim of the conference is to focus on technologies that could be deployed in the US. Each year this conference has grown in size, and its scope has also broadened from being purely technical to including more social and political aspects of technology development. The DoE’s Carbon Sequestration Regional Partnerships (CSRP) programme, introduced in November 2002, created a national network of public–private sector partnerships aimed at examining the technical, political, economic and social viability of carbon storage as a mode of mitigating CO2 levels in seven different regions of the country. The CSRP supports region-specific research to determine the most suitable carbon storage approaches, technologies, regulations and infrastructure in different parts of the US. The programme began with preliminary laboratory research and is evolving now into its field-testing and validation stage. A deployment stage, involving injection of up to one million tonnes of CO2 per year into different geological formations at multiple sites, was launched in 2007. The FutureGen project, initiated in 2002, was the flagship programme for the Bush administration’s strategy on clean coal technology development and climate change mitigation; it was to be the first large-scale zero-emission, state-of-the-art coal-fired power plant, simultaneously demonstrating CCS, hydrogen production and other advanced coal

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technologies including coal gasification. The FutureGen project was a partnership with the DoE and an alliance of private sector energy companies. Throughout the development of this programme, the government’s level of commitment and sustained interest and funding of the project was somewhat uncertain. An extensive site selection process occurred throughout 2006 and 2007, and in January 2008 the industry alliance (without DoE support) announced selection of the site for the FutureGen plant to be built in Mattoon, Illinois. A few weeks later the US Secretary of Energy, Samuel Bodman, announced a restructuring of the FutureGen project which meant that the federal government was pulling out of its commitment to contribute funds to the state-of-the-art demonstration project. Instead, the DoE announced plans to restructure the programme from a research demonstration programme to a ‘near term commercial demonstration’ programme. The restructuring plans included redirecting funds towards CCS demonstration using multiple existing plants, each storing at least one million metric tons of CO2 annually, rather than the original plan of investing in both the construction and CCS costs associated with a new single, large 275 megawatt plant. The restructuring also altered the DoE cost-sharing from the original 74 per cent to a maximum of 50 per cent per demonstration project. Given the high level of industry support and engagement in the FutureGen project and the years of planning and siting processes, the government’s change of plans right before the commencing of the construction phase was extremely disappointing for many. While the rationale for preferring to fund several smaller demonstration projects integrated into existing power plants rather than funding one single, new, state-of-the-art power plant is understandable, and the rising capital costs of building the FutureGen plant were clearly a major challenge for the DoE, the political ramifications of restructuring a partnership that was the flagship Bush administration climate project after already investing significant resources has frustrated many. Despite disappointment and delay, the FutureGen Alliance (the industry partners) is not giving up on the initial proposed project; and with the new Obama administration, it is possible that the original FutureGen project could be revived. Before the presidential election, Obama was a strong supporter of bringing the FutureGen project to his home state of Illinois. Given that CCS is not a stand-alone technology, but needs to be integrated with other advanced coal technologies, it is useful to consider the DoE’s coal technology funding more broadly, including the DoE’s carbon sequestration programme, FutureGen, and also the Clean Coal Power Initiative. The 2005 Energy Policy Act included three types of incentives for R&D and demonstration of advanced coal: direct grants for up to 50 per cent of projects costs; investment tax credits up to 20 per cent of

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project costs; and federal loan guarantees for up to 80 per cent of project costs (Rein and Gallagher 2008). In addition to CCS, the term ‘advanced coal’ includes development of coal gasification, coal to liquids, advanced turbines and other coal technologies. Under the 2005 legislation, the Clean Coal Power Initiative within the DoE was given authorization to spend $200 million a year for eight years to fund industry/government partnerships for large demonstration projects of advanced coal technology. For fiscal year 2008 (FY08), total DoE spending on coal technology R&D and demonstration totalled $520 million, which is a 21 per cent increase from 2007 (ibid.). In the fiscal year 2009 (FY09) budget $648 million for coalrelated R&D and demonstration has been requested, an additional 25 per cent increase from FY08. These increases in federal support for ‘advanced coal’ have created some major political challenges associated with government involvement in incrementally advancing ‘clean coal’. Concerns that much of this money may support the coal industry without incorporating CCS to actually reduce CO2 emissions are strong. The recent increases in federal funding for CCS-related R&D and demonstration keep the US ahead of other countries in overall spending on CCS development, but this needs to be understood in the context of a relatively stagnant level of overall US federal funding for energy technology development over the past 30 years (Gallagher 2008). Despite increasing calls for drastic increases in federal funding for energy R&D and demonstration over the past decade (Sagar 2000; Holdren and Baldwin 2001; Holdren 2006; Nemet and Kammen 2007), the overall US energy R&D budget has remained relatively stable (Gallagher 2008). Federal energy policy related to CCS In addition to providing financial support for R&D and demonstration related to CCS, the federal government can also play a role in advancing a particular technology through specific policies and regulations. Several recent federal-level energy policies (both legislation that has been passed and legislation that has been proposed but not yet passed) have relevance to advancement of CCS. The Energy Policy Act of 2005 is a detailed piece of legislation that included wide-ranging energy technology incentives including grants, tax credits, and loan guarantees for advanced coal technologies some of which is specific to CCS. The Energy Independence and Security Act of 2007 signed into law in December of 2007 included several specific details related to CCS including $1.4 billion for CCS R&D and the regional partnerships, including funding for seven large-scale storage demonstration sites (not including FutureGen) as well as a comprehensive mapping of US CO2 storage potential. The two most influential of the

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proposed national cap-and-trade climate bills recently introduced in the US Congress are: (i) the Liberman–Warner bill (S.3036) that calls for 70 per cent emission reductions below 2005 levels by 2050, and includes a bonus for CCS plants, including retrofits, and 5–10 CCS demonstration plants funded with at least 12.5 per cent of the auctioning proceeds, and (ii) the Bingaman–Specter Bill (S.1766) that calls for 1990 emission levels by 2030 and also includes a bonus for CCS plants and support for both CCS demonstration plants and CCS deployment. In addition to these broad national energy and climate policies, there has been recent proposed legislation specific to CCS. The Clean Energy Production Tax Incentives Act (S.1508 proposed by Senator Dorgan of North Dakota) includes $750 million a year for IGCC and advanced coal projects, a sequestration tax credit of 75 cents/tCO2 for enhanced oil recovery (EOR) or $1/tCO2 (non-EOR), and up to $5 billion in bond financing support for CO2 capture (Hamilton 2008). The Carbon Reduction Technology Bridge Act (S.3208 proposed by Senator Conrad of North Dakota) includes an investment tax credit for CCS plants and CCS retrofits, and a sequestration tax credit for underground injection of CO2 for EOR and non-EOR circumstances (ibid.). Senator Boxer of California has introduced a bill (S.1523) to mandate CCS on the coal facility providing heating and cooling to the Capitol Hill building, including a $3 million grant programme to fund this demonstration. In addition an energy bill proposed by Senator Boucher from Virginia includes a fuel fee to raise $1 billion a year for CCS demonstration projects. With respect to funding CCS demonstration projects, there are several potential mechanisms for the DoE to allocate and distribute funds, including the establishment of a CCS trust fund, a semi-private energy technology corporation, a clean energy investment bank, and direct cost sharing (ibid.). Additional regulatory efforts related to CCS include the US Environmental Protection Agency’s rulemaking process for developing federal regulations for the geologic storage of CO2. In July 2008 the EPA’s Underground Injection Control (UIC) programme published proposed amendments to current UIC programme rules (73 FR 43, 491-43, 541, 25 July 2008). Recognizing that many states are already developing their own regulations, the amendments propose a new UIC injection well class for CO2 storage wells that provides a minimum federal requirement that states can add to with more stringent requirements. Another related effort is ongoing at the non-partisan think-tank organization, World Resources Institute in Washington, DC, where a stakeholder process among businesses, governments, NGOs and other interested parties is collectively developing and producing guidelines and recommendations to ensure public confidence in CCS practices.

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State-level CCS Initiatives In the geographically and demographically diverse US, state-level differences in factors influencing diffusion of emerging energy technologies are important to understand, because states play a crucial role in the deployment of energy technologies including siting, permitting and construction (Swain 2003; Rabe 2006; Stephens et al. 2008). Given the minimal federal regulatory action related to CCS, several states have been demonstrating leadership in this area by forging ahead and developing their own regulatory frameworks for underground CO2 storage. At the state level, there has been a flurry of recent policy initiatives associated with CCS advancement. In response to the Energy Policy Act of 2005 and the funding made available through the Clean Coal Power Initiative, several states have been trying to encourage projects within their borders by trying to pass policies that give some tax or regulatory incentives to CCS projects. A report recently published by the Interstate Oil and Gas Compact Commission (IOGCC) concluded that states are best suited to regulate geologic sequestration of CO2 and a model state statute and set of regulations were proposed (IOGCC 2008). While a few states have been successful in getting CCS legislation passed, many have had proposed bills that have not passed. Among the states that have passed legislation are Washington and Kansas. The state of Washington, as part of climate change legislation enacted in May 2007, adopted two rules in June 2008 to regulate CO2 storage: WAC 173-407 includes a performance standard for geologic storage and WAC 173-218 amends state UIC rules to include injection of CO2 into underground storage formations (Pollak 2008). In Kansas, the Carbon Dioxide Reduction Act charged the Kansas Corporation Commission to develop rules for storage of CO2 in geologic formations, created a fund to pay for costs associated with regulations and monitoring, and provided tax incentives for CCS. In addition, many of the petroleum-producing states have regulations already in place to manage EOR, natural gas storage, and underground acid gas disposal, so many of these same rules can be applied and potentially modified to regulate CO2 injection for geologic storage. Two other states, Montana and California, have proposed legislation to facilitate CCS deployment, but the framing of the state discussion about CCS in these states has been quite different. Montana has large coal resources, has demonstrated interest in advanced technologies including CCS to enable the conversion of coal to liquid fuel, and has plans to increase the export of coal-generated electricity. California’s proposed CCS legislation, in contrast, is primarily a response to aggressive state GHG regulations.

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NON-GOVERNMENTAL ACTORS

Within the CCS innovation system in the US there are several non-governmental actors who have been influential in CCS advancement, including the fossil fuel industry, environmental advocacy groups and the scientific research community. The Fossil Fuel Industry The emergence of CCS about a decade ago contributed to the US fossil fuel industry being able to engage on the climate change challenge in a new and more productive way. Because CCS provides a vision of a carbonconstrained future in which coal can still be used and oil industry subsurface expertise is valuable, CCS changed the way the fossil fuel industry envisiaged their future challenges. Interest and investment in CCS by US fossil fuel industries, particularly the oil and gas companies, has been growing, and recent interest by electrical utilities, including several announcements of proposed coal-fired power plants that may include CCS, demonstrate the fossil fuel industry’s stance on the importance of CCS in confronting climate change. During the 1980s and much of the 1990s, many representatives of the fossil fuel industry publicly denied the climate change problem, criticized climate change science, and actively supported research and public campaigns that highlighted the uncertainties and weaknesses in the theory of anthropogenic climate change (Levy and Rothenberg 1999; Kolk and Levy 2001; Gelbspan 2004). As the scientific consensus strengthened during the mid-to-late 1990s, however, some companies shifted their strategy away from denial of the problem (Kolk and Levy 2001); this shift was generally stronger and earlier in European-based multinational companies than in US-based companies (Levy and Newell 2000; Rowlands 2000). At the same time, interest and investment in CCS R&D began to expand. The prospect and potential of CCS implied a reduced threat of climate change mitigation efforts to fossil fuel industries (Keith and Parson 2000) and suggested the possibility of a fossil-based global economy throughout the next century even if controls on CO2 emissions were instituted. The US is a prime example of how both fossil fuel companies and nations rich in fossil fuels are attracted to the prospect of CCS because it may be a way to confront climate change while continuing use of fossil fuels in a carbonconstrained world. Oil and gas companies operating in the US have become particularly interested in geologic carbon storage in part because they are familiar with technologies and processes dealing with underground reservoirs and the

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injection of CO2. CO2 injection is a well-established industry technique used for EOR; in mature wells with declining oil production, the injection of CO2 loosens up residual oil (especially by reducing viscosity), making it available for extraction (van Bergen et al. 2004). This established commercial application of CO2 injection means that oil companies are comfortable and familiar with many critical technologies associated with underground carbon storage. Combining EOR and deliberate carbon storage provides low-cost, early deployment opportunities for gaining experience in geologic carbon storage (Holtz et al. 2001; Stevens et al. 2001; van Bergen et al. 2004; IPCC 2005). Although it is the coal companies, not the oil and gas companies, that will be most impacted if and when CCS becomes a reality for coal-fired power plants, the US coal industry has become involved in CCS R&D at a slower pace and in a more limited capacity than the oil and gas industry. Environmental Community Another important set of stakeholders influencing CCS advancement is environmental advocacy groups. These groups have a unique role in influencing both policy makers and the public through their capacities for political lobbying and education and outreach. The public tends to place greater trust in information about emerging energy technologies provided by environmental advocacy groups than information provided by other stakeholders, including industry or government (Huijts et al. 2007). With respect to CCS and geologic storage, many US environmental groups have not adopted a definitive position in favour or in opposition, but the Natural Resources Defense Council is one organization that has taken a strong position supporting the development and demonstration of CCS (Hawkins 2003, 2005). The strong level of support for CCS by some environmentalists is associated with a practical acknowledgement of the political potential of CCS to bring additional actors into climate policy discussions. In addition to this support, many environmental advocacy groups have expressed reservations and concerns about the environmental as well as the political implications of geologic storage (Hawkins 2001; Union of Concerned Scientists 2001; World Wildlife Fund 2005; Greenpeace 2006). Environmental concerns include both detrimental local impacts and the practical acceptance that such carbon management technologies may be needed to supplement other measures to stabilize CO2 levels (Stephens and Verma 2006). And political concerns include the risk that supporting CCS will detract from support and efforts to promote renewables. Overall, however, the environmental community in the US has adopted a general acceptance of CCS and the technology has actually come to play a critical

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role in anti-coal environmental claims; the standard line currently is that no new coal-fired power plants should be built in the US unless the CO2 produced at the plant is captured and stored, that is, ‘no new coal without CCS’. Although public opposition to CCS had been anticipated (Hawkins 2001; Huijts 2003; Palmgren et al. 2004), opposition has not been strong, although with a growing ‘anti-coal’ movement in the US more recent vocal opposition to CCS has emerged. A group called ‘Rising Tide’ has taken on CCS as one of several ‘false solutions’ being put forth for climate change mitigation. During the 2008 DoE/NETL Annual Carbon Capture and Sequestration meeting in Pittsburgh, Pennsylvania, Greenpeace representatives protested and actually disrupted one portion of the meeting. In May 2008 Greenpeace International published a report highlighting the dangers of advancing and relying on CCS (Greenpeace International 2008), however variation in positions on CCS among environmental advocacy groups with the same name but in different countries and at different scales (international, national and local branches of the same umbrella organization often have different priorities) is clearly evident. Recent comments from former Vice President Al Gore, and outspoken NASA climate scientist Jim Hansen, have encouraged civil disobedience, or direct, non-violent action, to prevent the building of new coal-fired power plants that do not include CCS (Clark 2007; Wall Street Journal 2008). The sense of desperation and seriousness associated with this encouragement from a mainstream politician like Al Gore is likely to bolster support for environmental groups’ positions on no coal without CCS and legitimize and promote a more radical and urgent position on climate change action. As concern about climate change grows, the anti-coal movement in the US has been growing (discussed in more detail in Section 6) Scientific Community Another set of stakeholders with influence on the development of CCS in the US includes scientists and academic researchers. The scientific community, through research direction, scientific assessments and professional organizations, has direct and indirect influence on government funding priorities and on the national-level discourse on climate change mitigation. Heightened attention within the scientific community to climate change mitigation and carbon management is evident and many US scientists were involved in the IPCC Special Report on Carbon Dioxide Capture and Storage, released in 2005, which added legitimacy to the concept of CCS and provided a comprehensive assessment of the potential and challenges of this emerging technology.

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As the complexity of the political challenges of reducing CO2 emissions are realized, some scientists and engineers have looked to CCS as another pathway to action – a pathway that requires the expertise of scientists and engineers. In technical analysis of different options for climate change mitigation, CCS has been identified as one technology among a portfolio of mitigation measures (Pacala and Socolow 2004). An interdisciplinary report from scientists at the Massachusetts Institute of Technology on the future of coal highlights CCS as the ‘critical enabling technology’ to allow CO2 emission reductions with continued use of coal to meet the world’s energy demands (MIT 2007). Some academic and scientific researchers who have been actively working on both the technical and non-technical aspects of CCS innovation have also played a mediating role in connecting industry representatives with government. Several academic/industry partnerships have emerged that have enabled industry representatives to be kept informed of progress from academics and academics to be kept informed about the realities of CCS advancement from the industry perspective. One specific example of this academic/industry partnership is the Carbon Mitigation Initiative that is a partnership among BP, Ford, Princeton University and Harvard University that began in 2001 based at Princeton. This partnership has created mechanisms for regular communication between industry and academia, enabling academics to explain to their industry partners their long-term and theoretically grounded perspectives on the challenges of climate change science, technology and policy, and the industry representatives to share their private sector perspective on the challenges and opportunities of both technical and non-technical aspects of CCS advancement and carbon management more generally. While the influence of scientists was minimized during the eight years of the Bush administration due to the dismantling of processes designed to promote the integration of scientific evidence and science-based advice in policy, the Obama administration has made it clear that an appreciation for and support of science and scientists within the federal government will be renewed. President Obama’s science advisor, John P. Holdren, has been a long-time advocate for a substantial increase in federal funding for energy technology innovation including the advancement of CCS (Holdren 2001, 2006, 2008b).

5

CRITICAL ISSUES

Three critical issues related to the politics and policy of CCS advancement in the US are highlighted in this section: the power of coal in US politics

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and growing opposition to coal; US–international interactions in CCS advancement; and public perception of CCS. The Power of Coal in US Politics and Growing Opposition to Coal The US relies on coal for 50 per cent of its electricity generation, so many people and places throughout the country are involved in coal mining, coal transport and the operation of coal power plants. The scale of the country’s coal industry and the nation’s reliance on coal are dominant factors that have contributed to the country’s reluctance to seriously consider climate policy that involves carbon regulations. Regional variation and complexity associated with the coal industry is also critical; it has been largely politicians from the many states of the Midwest and the plains where coal is a dominant part of the state economy who have expressed the strongest concern about proposed climate change legislation. Given that national political representation in the US gives considerable power to individual states, informal coalitions of coalreliant states are extremely influential. For these coal-reliant states and politicians representing those states, CCS has provided a potential vision of a carbon-constrained future in which the coal industry could still be viable. From a political perspective, therefore, CCS has been extremely valuable in contributing to the engagement of critical actors in national climate policy discussions, constituents who had been reluctant to engage. Despite the powerful political influence of coal, public opposition to building new coal-fired power plants has grown rapidly in the past few years. In 2005 over 100 new coal-fired power plants were in various stages of planning, but cancellations in proposed plants have been frequent and only a handful of new plants have actually been built. In 2007, 59 proposed coal plants were officially cancelled, in 2008, plans for 19 proposed plants were cancelled, and within the first couple of months of 2009 plans for an additional five proposed coal-fired power plants had been cancelled (Source Watch 2009). While economic factors and rising capital costs clearly contributed to the cancellation of many of these proposed plants, some plants have been cancelled in direct response to concerns about CO2 emissions and the economic and environmental liability of locking-in to a high carbon-emitting power plant. Several states, including Florida, California, Georgia and Kansas, have made it clear that coal-fired power plants can only be built if CCS is included. In Georgia during the summer of 2008 a Fulton County Superior Judge ruled that a proposed coal plant could not go forward until it receives an air-pollution permit limiting its CO2 emissions. This ruling

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was important because it was the first time that a US judge applied the Supreme Court’s April 2007 classification of CO2 as a pollutant. Much of the rhetoric surrounding ‘no coal without CCS’ is associated with critiques of the phrase ‘clean coal’. The assertion is often made by environmentalists and those advocating aggressive action on climate change that there is no such thing as ‘clean coal’ (Jones 2008). The positive notion that coal can become ‘clean’ suggests that the US can reconcile environmental, economic and security concerns in its future energy infrastructure. The term ‘clean coal’ has become increasingly problematic, however, because many industry-supported information campaigns promote the term without including substantive information explaining what it means. This vagueness coupled with the obvious attempt for the term to portray a positive spin on an environmentally problematic fuel, has led to increased suspicion of ‘green-washing’ that is, a perception that the coal industry is using a baseless claim in an attempt to re-market itself in a more environmentally benign way (Hawkins 2008). The phrase ‘clean coal’ has become increasingly controversial as opposition to coal has been growing while the political use of this ill-defined term has increased. And the December 2008 massive environmental disaster associated with the spill of a coal ash storage pond outside a coal plant in Tennessee has raised awareness of the negative environmental consequences of continued use of coal in the US. In this context CCS can be viewed as playing a new moderating role in opposition to coal. A few years ago anti-coal advocates who called for a moratorium on coal-fired power plants were considered radical and impractical. Now some of the same advocates can use CCS as a qualifier to their calls for a moratorium on such plants, that is, no new coal plants unless they have CCS, and their anti-coal position seems more reasonable and less absolute. Given the long anticipated time horizon before CCS may be implemented (due to the need still to demonstrate the technology at scale and also the complicated changes to the regulatory and economic system that would be necessary to create incentives for actual CCS implementation), a call for no new coal plants without CCS is, in the short term, equivalent to a call for no new coal plants. In response to the calls for ‘no new coal plants without CCS’ much consideration has gone into proposals to build coal-fired power plants that are ‘sequestration-ready’ or ‘CCS-ready’ with the notion that plants could be built now that anticipate adding CCS once the technical and economic readiness of CCS is established. The problem with this notion is that there is no clear definition of what ‘CCS-ready’ should include; it could simply involve leaving additional space for a CO2 capture component to be added at a later date, but given that adding CO2 capture is not a simple

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end-of-pipe process, a retrofit at a later date could be expensive and complicated (Stephens 2005; Stephens et al. 2009). Given the many uncertainties and likely obstacles to mandating installation of CO2 capture at some future date, the incremental approach to building CCS-ready power plants has received justifiable criticism. International Interactions The US has historically viewed itself as a leader in technological innovation, so advancement of CCS has always been associated with an intention to have international influence. Government investment and support for CCS, while primarily motivated by domestic interests, has also been justified by the potential for international influence, particularly on the other dominant large coal-reliant country, China. The benefits of international cooperation in energy technology development have been identified in several US-based influential studies relevant to US strategy on energy policy (PCAST 1999; NCEP 2004). The recognized benefits of international cooperation include accelerated progress in technology development including accelerated learning, globalized learning about the technology particularly in countries that might not independently invest in the technology, and expanded expertise in and awareness about the technology throughout the world (de Coninck et al. 2009). The US government has been instrumental in two noteworthy international initiatives designed to promote and support the advancement of CCS: the Carbon Sequestration Leadership Forum (CSLF) and the Asia-Pacific Partnership on Clean Development and Climate (APP). In 2003, before the 2005 publication of the IPCC Special Report on CCS, the US government under President Bush’s leadership launched the CSLF, an international forum designed primarily for the exchange of CCS information among different countries. Initial membership of the CSLF has grown and the group now has 22 countries as members, including several emerging economies (China, India and South Africa). While initial US leadership and the creation of the CSLF had promise to provide international coordination on CCS advancement, the organization has been criticized for having limited effectiveness in contributing to developments in CCS (de Coninck 2008). The CSLF has provided some useful guidance on technical issues but has involved a limited number of stakeholders from the participating countries. The second international initiative is the APP which was initiated by the US and six other countries in 2005. The aim of this initiative is to ‘accelerate the development and deployment of clean energy technologies’, and one of the eight task forces within the

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partnership is focused on cleaner use of fossil fuel, which has CCS as one of its priority thematic areas. How the Obama administration will continue, adjust and potentially restructure US involvement in these international initiatives on CCS advancement has yet to be seen. It is also not yet clear whether and how the Obama administration will engage with the new Australian government initiative, the Global CCS Institute, launched in the fall of 2008, with the aim of facilitating CCS demonstrations worldwide. Public Perception and Communication Although awareness of the potential of CCS to contribute to reductions in atmospheric CO2 emissions is increasing among the public and among specific energy/climate stakeholders, awareness and understanding of CCS remains limited in the US, and recognition of the need for communication strategies related to CCS and other emerging energy technologies is growing (Reiner et al. 2006; Reiner 2008; Stephens et al. 2009). Confidence about the technical feasibility of CCS has been increasing, yet like any technology its deployment will be influenced by many social factors including public perception. Public perception and social acceptance are framed by, among other influences, individual and collective decisionmaking behaviour, perceptions of risk, ability to interpret and assimilate information, and the media portrayal of related information (Bielicki and Stephens 2008). At a June 2008 workshop on public perception of CCS held at Harvard University, many different considerations related to public perception and communication efforts in the US were identified based on focused discussions of four specific CCS public communication efforts: (i) a public information meeting on CCS in Wiscasset, Maine, where the Twin River Energy Facility, a coal and wood biomass gasification plant, was proposed; (ii) the BP Carson proposed Hydrogen Power Project in Carson, California; (iii) the extensive and geographically diverse CCS outreach experiences of the US regional carbon sequestration partnerships; and (iv) the outreach efforts associated with the FutureGen project in Illinois (ibid.). An important distinction was made between issues, concerns and communication associated with public acceptance of CCS in general terms and those associated with a specific community’s acceptance of CCS – especially when that community is confronted with a proposed CCS project in their locale. Perceptions of the ‘messenger’ – the individual or institution presenting the information – are very important. For example, people have different reactions to, and levels of trust in, representatives of the government, academia, industry and non-profit organizations. When

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a community is considering a specific CCS project proposed in a specific site, it is important to recognize that although the proposed project may be technically viable and optimal in that particular location, public perception of the project may be significantly influenced by the degree to which the area is already saturated with industrial activity, that is, people who have experienced environmental injustice in the past may be more likely to oppose new projects in the future regardless of the particular project or its merits. Recognizing that many factors contribute to community preferences and risk tolerances, it is critical for communicators to realize and accept that technical issues are only one part of the communication process; people are also concerned about a fair decision process, relationships (trust), and accountability. And the value of positive economic implications of a project was highlighted in the example of the FutureGen project in Illinois. The economic benefits of this proposed project including more than 1,000 new jobs contributed to a favourable public perception and media portrayal of CCS.

6

CONCLUSIONS

Of the many interconnected factors simultaneously contributing to US policy and politics associated with CCS, some of the current tension surrounding the advancement of the technology could be exacerbated now with growing mistrust in both government and big business as a result of the US financial crisis and the subsequent recession. The individualistic American society, where citizens have a long history of being wary, sceptical and distrusting of both government initiatives and corporate greed, may now further exacerbate the already difficult challenge of mobilizing the US to take responsibility for its disproportionate contribution to the global climate change problem. On the other hand, the Obama administration has prioritized energy and climate, so there is clear potential for drastic change in US policy that could accelerate the advancement of CCS. Optimism for reducing the paralysing political divisions of US climate and energy policy is growing, and substantial increases in federal support for energy R&D and demonstration appear likely. Obama has clearly indicated his own strong belief that CCS is a critical climate change mitigation technology that should be advanced. Nevertheless, current uncertainty associated with CCS advancement, including technical, regulatory and economic uncertainty will create major challenges. Rapidly rising capital costs coupled with the US financial crisis and the global recession have made virtually all cost estimates obsolete. Also uncertainty about what types of government involvement and

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support, what mechanisms are most effective to incentivize the advancement of CCS, further complicate the politics and policy of CCS in the US. Within the growing anti-coal movement some direct, strong opposition to CCS has emerged yet CCS has increasingly been included in discussions of how to confront climate change. Clearly, the Obama administration has potential to drastically change the current CCS innovation system by adjusting the US government’s influence on R&D, demonstration and deployment and altering the conditions within which the private sector, the environmental community, and the general public respond to and engage with this controversial technology.

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Hamilton, M. (2008), ‘How not to build CCS: uncertainty in rising costs and US public policy’, presentation at the MIT Carbon Sequestration Forum IX, 17 September, Cambridge, MA. Hawkins, D. (2001), ‘Stick it Where? Public Attitudes toward Carbon Storage’, Presentation at the 1st National Conference on Carbon Sequestration, May 15–17, 2001, Washington, DC: National Energy Technology Laboratory. Available at http://www.netl.doe.gov/publications/proceedings/01/carbon_ seq01.html. Hawkins, D.G. (2003), ‘Passing gas: policy implications for geologic carbon storage sites’, 6th International Conference on Greenhouse Gas Control Technologies, Elsevier Science. Hawkins, D.G. (2005), ‘CO2 Capture and Storage: Just Do It’, United States Energy Association, available at http://www.usea.org/Ericeprogram/PresentationsRemarks/Hawkins per cent201100.pdf (accessed 15 March 2006). Hawkins, D. (2008), Natural Resources Defense Council, Personal Communication, Statement made during a panel discussion at the 9th International Conference on Greenhouse Gas Control Technology, November 16–20, 2008, Washington, D C. Hekkert, M.P., R.A.A. Suurs, S.O. Negro, S. Kuhlmann and R. Smits (2007), ‘Functions of innovation systems: a new approach for analysing technological change’, Technological Forecasting and Social Change, 74 (4): 413–32. Holdren, J.P. (2001), ‘The energy-climate challenge: issues for the new US administration’, Environment, 43 (5): 8–21. Holdren, J.P. (2006), ‘The energy innovation imperative, addressing oil dependence, climate change, and other 21st century energy challenges’, Innovations, Technology, Governance and Globalization (Spring): 3–23. Holdren, J.P. (2008a), ‘Convincing the climate-change skeptics’, Boston Globe, 4 August. Holdren, J.P. (2008b), ‘Presidential Address: Science and technology for sustainable well-being’, Science, 319: 424–34. Holdren, J.P. and S.F. Baldwin (2001), ‘The PCAST energy studies: toward a national consensus on energy research, development, demonstration, and deployment policy’, Annual Review of Energy and the Environment, 26: 391–434. Holtz, M.H., P.K. Nance and R.J. Finly (2001), ‘Reduction of greenhouse gas emissions through CO2 EOR in Texas’, Environmental Geosciences, 8 (3): 187–99. Huijts, N. (2003), ‘Public Perception of Carbon Dioxide Storage’, Masters Thesis, Eindhoven University of Technology. Huijts, N.M.A., C.J.H. Midden and A. Meijnders (2007), ‘Social acceptance of carbon dioxide storage’, Energy Policy, 35: 2780–89. IEA (2008), Key World Energy Statistics, Paris: International Energy Agency. IOGCC (2008), CO2 Storage: A Legal and Regulatory Guide for States, Interstate Oil and Gas Compact Commission, available at http://iogcc.publishpath.com/ Websites/iogcc/pdfs/Road-to-a-Greener-Energy-Future.pdf, accessed 1 October, 2008. IPCC (2005), IPCC Special Report on Carbon Dioxide Capture and Storage, Geneva: Intergovernmental Panel on Climate Change, Working Group III. Jiusto, S. (2008), ‘An indicator framework for assessing US state carbon emissions reduction efforts (with baseline trends from 1990 to 2001)’, Energy Policy, 36: 2234–52.

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Jones, V. (2008), The Green Collar Economy: How One Solution Can Fix Our Two Biggest Problems, New York: Harper Collins. Keith, D.W. and E.A. Parson (2000), ‘A breakthrough in climate change policy?’, Scientific American, 282 (2): 78–9. Kemp, R. (1997), Environmental Policy and Technical Change, A Comparison of the Technological Impact of Policy Instruments, Cheltenham, UK and Lyme, NH, USA: Edward Elgar. Kolk, A. and D.L. Levy (2001), ‘Winds of change: corporate strategy, climate change and oil multinationals’, European Management Journal, 19 (5): 501–09. Leiserowitz, A. (2007), ‘American Opinions on Global Warming, A Yale University / Gallup / ClearVision Institute Poll’, available at http://environment.yale. edu/news/Research/5310/american-opinions-on-global-warming-summary/, accessed 5 September, 2008. Lester, R.K. (2008), ‘Energy Innovation: What’s Here and What’s Coming’, Remarks prepared for presentation to the National Governors Association Centennial Meeting, July 11–14, 2008, Philadelphia, PA. Levine, M.D. and N.T. Aden (2008), ‘Global carbon emissions in the coming decades: the case of China’, Annual Review of Environment and Resources, 33 (1): 19–38. Levy, D.L. and P. Newell (2000), ‘Oceans apart? Business responses to the environment in Europe and North America’, Environment, 42 (9): 8–20. Levy, D.L. and S. Rothenberg (1999), ‘Corporate strategy and climate change: heterogeneity and change in the global automobile industry’, Kennedy School of Government Working Paper, Harvard University, Cambridge, MA. Martin, S. and J.T. Scott (2000), ‘The nature of innovation market failure and the design of public support for private innovation’, Research Policy, 29(4–5): 437–47. MIT (2007), The Future of Coal: Options for a Carbon Constrained World, Cambridge, MA: MIT Press. NAS (2007), Evaluating Progress of the US Climate Change Science Program: Methods and Preliminary Results, National Academy of Science, Washington, DC: National Academy Press, available at http://books.nap.edu/catalog. php?record_id=11934, accessed 15 September, 2008. NCEP (2004), Ending the Energy Stalemate, A Bipartisan Strategy to Meet America’s Energy Challenges, Washington, DC: National Commission on Energy Policy. NEC (2006), ‘Advanced Energy Initiative (Report of the National Economic Council)’, The White House, Washington, DC. Nemet, G.F. and D.M. Kammen (2007), ‘US energy research and development: declining investment, increasing need, and the feasibility of expansion’, Energy Policy, 35 (1): 746–55. Nisbet, M.C. and T. Myers (2007), ‘The polls – trends – twenty years of public opinion about global warming’, Public Opinion Quarterly, 71 (3): 444–70. Pacala, S. and R. Socolow (2004), ‘Stabilization wedges: solving the climate problem for the next 50 years with current technologies’, Science, 305 (5686): 968–72. Palmgren, C.R., W.B.d. Bruin, D.W. Keith and M.G. Morgan (2004), ‘Initial public perceptions of deep geological and oceanic disposal of carbon dioxide’, Environmental Science and Technology, 38 (24): 6441–50. PCAST (1999), ‘Powerful Partnerships: The Federal Role in International

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Cooperation on Energy Innovation’, President’s Committee of Advisors on Science and Technology, Washington, DC. Pollak, M. (2008), Personal Communication, University of Minnesota, 28 September. Rabe, B. (2006), ‘Race to the Top: The Expanding Role of the US State Renewable Portfolio Standards’, Pew Center on Global Climate Change, 38. Rein, A. and K.S. Gallagher (2008), ‘Federal Government Incentives for Advanced Coal’, Belfer Center for Science and International Affairs Working Paper, Kennedy School of Government, Harvard University, Cambridge, MA, March. Reiner, D. (2008), ‘A Looming Rhetorical Gap: A Survey of Public Communications Activities for Carbon Dioxide Capture and Storage Technologies’, European Commission FP6 ACCSEPT Project, available at http://www.electricitypolicy. org.uk/pubs/wp/eprg0801.pdf, accessed 20 September, 2008. Reiner, D.M., T.E. Curry, M.D. Figueiredo, H. Herzog, S. Ansolabehere, K. Itaoka, M. Akai, F. Johnsson and M. Odenberger (2006), ‘An international comparison of public attitudes towards carbon capture and storage technologies’, 8th International Conference on Greenhouse Gas Control Technologies, Trondheim, Norway, 19–22 June. Rogers, E.M. (2003), Diffusion of Innovations, New York: Free Press. Rowlands, I.H. (2000), ‘Beauty and the Beast? BP’s and Exxon’s positions on global climate change’, Environment and Planning C, 18: 339–54. Sagar, A.D. (2000), ‘Evidence of under-investment in energy R&D in the United States and the impact of federal policy: a comment on Margolis and Kammen’, Energy Policy, 28 (9): 651–4. Sagar, A.D. and B. van der Zwaan (2006), ‘Technological innovation in the energy sector: R&D, deployment, and learning-by-doing’, Energy Policy, 34 (17): 2601–8. Source Watch (2009), ‘Coal issues portal’, available at http://www.sourcewatch. org/index.php?title=Portal:Coal_Issues (accessed 31 January 2009). Stephens, J.C. (2005), ‘Coupling CO2 capture and storage with coal gasification: defining “sequestration-ready” IGCC’, Belfer Center for Science and International Affairs Discussion Paper, Kennedy School of Government, Harvard University, Cambridge, MA. Stephens, J.C., J.M. Bielicki and G.M. Rand (2009), ‘Learning about carbon capture and storage: changing stakeholder perceptions with expert information’, Energy Procedia, 1 (1), 4655–63. Proceedings of the 9th International Conference on Greenhouse Gas Control Technologies (GHGT-9), Washington, DC, 16–20 November 2008. Stephens, J.C. and P. Verma (2006), ‘The Role of Environmental Advocacy Groups in the Advancement of Carbon Capture and Storage (CCS)’, Paper presented at Fifth Annual Conference on Carbon Capture and Sequestration, May 12, 2006, Alexandria, VA. Stephens, J.C., E.J. Wilson and T.R. Peterson (2008), ‘Socio-Political Evaluation of Energy Deployment (SPEED): an integrated research framework analyzing energy technology deployment’, Technological Forecasting and Social Change, 75: 1224–46. Stephens, J.C. and B. van der Zwaan (2005), ‘CO2 capture and storage (CCS): exploring the research, development, demonstration, and deployment continuum’, Belfer Center for Science and International Affairs Discussion

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Paper, Belfer Center for Science and International Affairs, Kennedy School of Government, Harvard University, Cambridge, MA. Stevens, S.H., V.A. Kuuskraa, J. Gale and D. Beecy (2001), ‘CO2 injection and sequestration in depleted oil and gas fields and deep coal seams: worldwide potential and costs’, Environmental Geosciences, 8 (3): 200–209. Swain (2003), ‘The Role of Government in the Development and Diffusion of Renewable Energy Technologies: Wind Power in the United States, California, Denmark and Germany, 1970–2000’, PhD Thesis, Fletcher School of Law and Diplomacy, Tufts University, Medford, MA. T-PAGE (2008), ‘Climate Change and Sustainable Energy Policies in Europe and the United States, Transatlantic Platform for Action on the Global Environment (T-PAGE)’, joint publication from the Institute for European Environmental Policy (IEEP) and the Natural Resources Defense Council (NRDC), available at http://www.ieep.eu/projectminisites/t-page/, accessed 1 October, 2008. Tjernshaugen, A. (2008), ‘Political commitment to CO2 capture and storage: evidence from government RD&D budgets’, Mitigation, Adaptation, Strategy Global Change, 13: 1–21. Union of Concerned Scientists (2001), ‘Policy context of geologic carbon sequestration’, available at http://www.ucsusa.org/ (accessed 15 March 2006). van Bergen, F., J. Gale, K. Damen and A.F.B. Wildenborg (2004), ‘Worldwide selection of early opportunities for CO2-enhanced oil recovery and CO2enhanced coal bed methane production’, Energy, 29 (9–10): 1611–21. Wagner, M. (2008), ‘Empirical influence of environmental management on innovation: evidence from Europe’, Ecological Economics, 66 (2–3): 392–402. Wall Street Journal (2008), ‘Gore’s Rebellion’, Wall Street Journal, editorial page, 29 September. World Wildlife Fund (2005), ‘More questions than answers on carbon capture and storage’, available at http://www.wwf.ca/AboutWWF/WhatWeDo/ ConservationPrograms/RESOURCES/PDF/css_statement.pdf (accessed 16 March 2006).

3.

CCS in Australia: from political posturing to policy potential Darren Sinclair and Neil Gunningham

The prospect of using carbon capture and storage (CCS) technology to mitigate greenhouse gas (GHG) emissions is a major component of the climate change policy debate in Australia. Not only is it viewed by many as a way of reducing emissions from within Australia – potentially avoiding costly closure and replacement of an existing coal-fired power plant infrastructure – but also as a means of securing the longterm viability of Australia’s valuable coal and natural gas exports. In respect of the latter, it is anticipated that indigenous CCS technology may be exported to major international consumers of Australian coal, in particular rapidly developing countries such as China. Unsurprisingly, CCS has received widespread support from both sides of the political spectrum and business in Australia. Environmental non-governmental organizations (NGOs) have been far less enthusiastic, although even some environmental groups have now moderated or withdrawn their opposition. There have been substantial CCS developments across a range of areas including technology, institutions, policy, legislation and regulation. These developments have accelerated in recent years, culminating in the start of Australia’s first CCS pilot project and the completion of draft Commonwealth offshore CCS legislation. The current support which CCS is receiving from across much of the political spectrum, however, belies a chequered history. For until the demise of the Howard government in November 2007, CCS had been the subject of an extremely heated and divisive debate and the subject of deep political division. This debate, however, has taken place largely outside the public gaze, and CCS has yet to capture the imagination of the Australian community which, even today, remains largely ignorant of either the benefits or limitations of this technology. This chapter traces the political history of CCS and locates it within the broader context of Australian climate change policy. It shows the interconnections between economics and politics and details the links 50

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between a powerful industry lobby and a Liberal government whose key ministers were already receptive climate change sceptics. It goes on to track progress to the point where today there is a ‘mainstream’ view that CCS can and should play a major role in Australia’s climate change policies and practices over the coming decades – assuming of course that CCS becomes both technologically and economically viable. We are hardly the first to point out that these are very large assumptions.

1

AUSTRALIA’S ECONOMY AT A GLANCE

Australia has a population of over 21 million (Australian Bureau of Statistics 2008), and a surface area of some 7,692 thousand square kilometres (APEC 2007). It has enjoyed steady, above-average economic growth over the last decade with a total GDP of approximately Aus$1 trillion in the 2006/07 financial year (Australian Bureau of Statistics 2008). This equates to a GDP per capita of US$42,553 in 2007 (APEC 2007), placing Australia among the wealthiest nations in the world. The Australian economy is diverse and increasingly globalized, with the share of GDP devoted to trade in goods and services sitting at approximately 21 per cent (OECD 2007). However, Australia remains heavily dependent on resources (often with substantial embodied energy) to generate a major component of export revenue. Services, agriculture and motor vehicles/ parts are also major exports. Australia’s largest export destinations are Japan, China, South Korea and India. Domestically, the Australian economy is increasingly dominated by the services sector, with manufacturing declining from 21 to 12.5 per cent as a share of GDP over the last three decades (ACCI 2007).

2

POPULATION GROWTH

A distinguishing feature of Australia, as compared to most other developed economies, is its relatively high levels of population growth (an attribute which it shares with Canada and the United States) – the current growth rate of 1.8 per cent per annum is the highest it has been for half a century (Australian Bureau of Statistics 2009). On current projections, migration and indigenous growth combined will deliver a total Australian population of approximately 30 million by 2050 (with migration contributing 80 per cent of this total growth). Some commentators argue that high population growth has risks for Australia’s climate change policies (Hamilton and Turton 1999). Birrell, for example,

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highlights the inherent dangers of population growth for Australia’s GHG emissions: from a global perspective, Australia, Canada and the United States are the very worst countries to locate migrants in. This is because the per capita emission of greenhouse gases per unit of GDP in these three countries is twice as high as in Western Europe and Japan despite similar GDP per capita levels (in Australia and Canada – though not the United States). (Birrell 2007)

3

GREENHOUSE GAS EMISSIONS

The major contributors to Australia’s GHG emissions are summarized below:1 ●

●

●

●

●

Stationary energy is the largest single source of emissions and of this, 70 per cent is electricity generation. Stationary energy emissions are projected to reach 306 Mt of carbon dioxide (MtCO2) by 2010, an increase of 56 per cent over the 1990 level, after the effects of current greenhouse measures, and to 361 MtCO2 by 2020, an increase of 84 per cent over the 1990 level. Transport emissions are mainly from road transport (88 per cent) and are projected to reach 88 MtCO2 per annum over the Kyoto period, an increase of 42 per cent over the 1990 level, after the effects of current GHG emissions abatement measures are taken into account. Transport emissions are projected to increase to 104 MtCO2 by 2020, an increase of 67 per cent over the 1990 level. Fugitive emissions are dominated by the mining and handling of black coal (69 per cent) and are projected to reach 37 MtCO2 per annum over the Kyoto period, an increase of 26 per cent over the 1990 level, after the effects of current GHG emissions abatement measures are taken into account. Fugitive emissions are projected to increase to 52 MtCO2 by 2020, an increase of 23 MtCO2 or 79 per cent over the 1990 level. Industrial processes emissions are projected to reach 38 MtCO2 per annum over the Kyoto period, an increase of 49 per cent over the 1990 level, after the effects of current GHG emissions abatement measures are taken into account. Industrial process emissions are projected to increase to 49 MtCO2 by 2020, an increase of 95 per cent over the 1990 level. Agriculture emissions are projected to reach 93 MtCO2 per annum over the Kyoto period, an increase of 6 per cent over the 1990 level, after the effects of current GHG emissions abatement measures are

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taken into account. The emissions are projected to remain at 2010 levels through to 2020. Forestry, in the form of commercial forestry, environmental plantings and managed native forests, is projected to sequester approximately 20.5 MtCO2 per annum under Kyoto Protocol rules over 2008–12, and 20 MtCO2 in 2020.

In summary, total emissions are projected to grow by 45 MtCO2 between 1990 and the Kyoto target period (2008–12). This emissions growth is driven by Australia’s relatively high rates of economic and population growth and international demand for Australia’s resources. Although emissions will rise in absolute terms, the GHG emissions intensity of the economy is projected to decline by 44 per cent from 1990 to the Kyoto period. Over the period to 2020, emissions per real dollar of GDP are expected to decline further to 54 per cent below the 1990 level. Emissions per capita are projected to decline by 13 per cent over the period from 1990 to the Kyoto period (from 33 tonnes per capita to 28 tonnes per capita). The projected reduction in emissions between 1990 and 2020 is estimated to be 12 per cent (from 33 tonnes per capita to 29 tonnes per capita).

4

CCS IN AUSTRALIA: CONTEXT AND HISTORY

In the context of international climate change negotiations, successive governments have argued that there are a number of characteristics that distinguish Australian circumstances from that of most other developed countries, and which justify higher than average GHG emissions. Prominent among these are faster population growth rates, larger travelling distances between major population centres, a heavy dependence on fossil fuels, and a comparatively energy-intensive export sector. In 1996, the newly elected Howard government, which contained a substantial and influential number of prominent, self-confessed climate change sceptics,2 managed to extract generous concessions during the Kyoto Protocol negotiations, in particular, an Australian target that allowed an 8 per cent increase over 1990 emission levels (Department of Climate Change 2008). Despite this favourable outcome, the Howard government still refused to ratify the Protocol, and subsequently was accused of playing a ‘spoiler’ role in international climate change negotiations by ‘trying to kill the Kyoto Protocol in favour of voluntary, “technology-orientated” and “market friendly” alternatives’ (Green 2001). The Howard government’s intransigence towards international and domestic efforts to address climate change is reported as having been strongly influenced by

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neo-liberal ideology, which has arguably come to dominate Liberal Party thinking about policy issues in general and the environment in particular. Thus, for example, ‘emissions trading, therefore, comes to be seen as an ideological issue, a left-wing agenda to constrain economic freedom in the name of a suspect cause’ (Pearse 2007, p. 133). Australian Industry Greenhouse Network Another key influence on the evolution of Australia’s sceptical climate change policy stance has been the Australian Industry Greenhouse Network (AIGN).3 This group formed in the early 1990s, comprising representatives from a range of mining, resource processing, petroleum and energy supply companies. The essential purpose of the AIGN was to resist calls for strong policy action directed at reducing domestic GHG emissions. Their concern was that such action would damage the Australian economy, in particular, the industries they represented. There was also a related concern that a global reduction target could impact negatively on their exports of energyintensive products. Thus there was also opposition to any potential environmental trade barriers being placed on Australian goods. From its inception, the AIGN had access to senior bureaucrats engaged in climate change policy formation within the Commonwealth government, notably from the then Department of Primary Industries and Energy (DPIE) and to a lesser extent the then Department of Industry, Science and Technology. Such engagement was viewed as a necessary counterpoint to the policy influence of environmental NGOs within other areas of the federal bureaucracy. In order to add to the ‘policy clout’ and credibility of the AIGN, the DPIE, without consulting other government departments, launched the Greenhouse Challenge programme. This is a voluntary programme to implement GHG reduction targets within individual companies and/or across industry sectors. The programme has since grown and evolved although its practical contribution to emission reductions remains modest (Parker 1999). This may be of limited concern to its proponents, whose principal motivation was to forestall the implementation of domestic climate change policies, such as taxes, permits or regulations that might impact negatively on the resource/energy sectors. It has served to add political and policy weight to the voice of the AIGN. Although the AIGN was active in the early 1990s, it was not until the election of the Howard government in 1996 that its influence extended to the upper echelons of government and deep into the federal bureaucracy. Within the government, several senior ministers, including those with responsibility for economic, resource and industry portfolios, were self-described ‘climate change sceptics’ whose sympathies lay with ‘real’

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energy-intensive industries rather than with ‘theoretical’ environmental concerns. Over time, a natural complementarity between the views of the Howard government and the AIGN flowered into a deep and ongoing relationship. Indeed, the AIGN is credited with being instrumental in the decision of the Howard government not to ratify the Kyoto Protocol. It is also seen as being influential in the stalling of any serious domestic climate change policies over the last decade. For example, consistent with the views of the AIGN, the Howard government consistently ruled out the imposition of any form of carbon tax and/or emissions trading regime (until the last few months of its tenure) (Christoff 2006). In the last two years, the capacity of the AIGN to infiltrate and influence government climate change policy settings has been detailed extensively in the media, particularly following the release of High and Dry (Pearse 2007), an insider’s account of the so-called ‘greenhouse mafia’ (a term allegedly used by members of the AIGN to refer to themselves). According to the book’s author, Guy Pearse (a former Liberal Party staffer), members of the AIGN worked in concert with senior bureaucrats, and were given privileged and unparalleled access to, and input into, the formation of government climate change policy, including the writing of cabinet submissions (ibid.). The following exchange discussing the role of the AIGN on an Australian current affairs television programme is illuminating (ABC Online 2006b): Interviewer: Who were they and how influential were they? Pearse: . . . this small group of fossil fuel industry lobbyists had a highly disproportionate impact on government policy . . . It was really incredible about the extent of the influence that the fossil fuel industry in Australia had over government greenhouse policy. . . . Interviewer: What sort of things did they brag about? Pearse: . . . they had an incredible corporate knowledge of government policy . . . they talked about knowing where all the skeletons were buried. . . . So you ended up with this unique situation, a circular situation where the advice that the government was receiving from its bureaucrats was almost identical to the advice they were receiving from industry associations because effectively the same people were writing it.

According to one commentator, the extent of the AIGN influence exceeded that of even the fossil fuel lobby groups in the United States: The Howard Government has allowed the greenhouse mafia extraordinary influence over Australia’s stance on climate change. Alone among the nations of the developed world, Australia has included key members of fossil fuel lobby

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Technology-driven Climate Change Policy During its tenure, the Howard government was not entirely silent on climate change issues. What was in vogue was a focus on technologydriven solutions, an approach that enjoyed the full support of the AIGN. This policy emphasized the funding and development of new technologies that can mitigate or reduce GHG emissions, and thereby avoid regulatory solutions. However, some technologies were much more strongly supported than others. While renewable energy was given short shrift, nuclear power and CCS technology were strongly endorsed. Not surprisingly, the AIGN were enthusiastic advocates of the latter – CCS delivered the quinella of not being reliant on regulatory policy solutions and of being compatible with Australia’s energy status quo, namely coal-fired power stations. In this regard, the US FutureGen clean coal project was a source of inspiration, with the Howard government pledging to contribute Aus$15 million before the 2007 federal election. Leading Australian resource companies had already contributed in excess of Aus$50 million by this time (Wilkinson and Cubby 2008). CCS technology also fitted neatly into Australia’s international policy stance that sought to circumvent the Kyoto Protocol and to avoid a commitment to collective targets while supporting technology-sharing arrangements with other countries. CCS was an emissions reduction technology, it was argued, that could be deployed in rapidly growing economies such as China that were likely to remain heavily dependent on fossil fuel power stations into the foreseeable future. This would provide, so it was argued, ‘a better alternative at this time than emissions trading’ (Baker 2007) – a view endorsed in Australia’s commitment to the Asia Pacific Partnership on Clean Development and Climate (better know as AP6). Further, the Howard government argued that: while CCS technology has the potential to contribute to emissions reduction in Australia, it is the broader deployment of CCS, particularly to large economies such as the United States, China and India (which account for 41 per cent of global greenhouse gas emissions) that could potentially deliver significant global environmental benefits. (Australian Government 2006)

Closely aligned with the policy stance of the Bush administration in the United States, this technology-driven approach was projected as a viable

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means of overcoming the perceived shortcomings of the Kyoto Protocol, namely the ability for developing countries to avoid emission reduction targets, despite their massive projected growth in emissions. Thus CCS technology became a key plank of the Howard government’s push, with the support of the AIGN, to provide international and domestic policy alternatives to the Kyoto Protocol and to GHG emissions regulation, respectively. This is not to suggest that the AIGN (or the Howard government) necessarily had a deep-seated commitment to the success of CCS. Certainly some would take a more cynical view. For example, Pearse, explaining the appeal of CCS to resource/energy industries, argues that ‘there are no plans on any scale or in any meaningful timeframe to capture most emissions from existing coal fired power stations’ (Galacho 2007). In essence, he suggests that for the AIGN, CCS was a stalling tactic. Tensions within the Business Community The AIGN’s sway was not limited to government circles. It was instrumental in promoting its policy stance within broader industry organizations, most prominently the Business Council of Australia (BCA), the peak organization representing big business in Australia. Thus there was a significant, but far from exclusive, overlap in membership between the two groups. The BCA, of course, represented a far broader constituency. However, the AIGN members, by possessing a highly coordinated and unanimous policy position, were very effective in convincing the BCA as a whole to endorse their policy stance, despite the presence of some prominent dissenting voices: I think if you look at the BCA structure, the mining companies and energy companies the companies that have the really strong interest in this issue are quite few in number, but it’s perhaps a case of, to reverse an old saying, it’s the squeaky oil getting the wheel, in this case it’s those companies that have been able to get an influence over BCA position or in this case block it because they had the strongest interest in it and the most to lose. (ABC Online 2006b)

In fact, this policy grip was so tight that it was not until early 2003 that internal tensions within the BCA over climate change policy forced a change of policy direction. Previously, the BCA had officially been opposed to ratification of the Kyoto Protocol. But in that year, the head of the BCA’s greenhouse task force, Meredith Hellicar, issued a discussion paper to members of the BCA recommending that it should ‘change its position to one of supporting ratification’ (EnviroInfo 2003). This position was opposed by the resource/energy companies, including members of the AIGN, who argued

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that it would ‘undoubtably marginalise the BCA within government and within the greenhouse debate’ (ibid.). Unable to resolve the internal dispute, the BCA announced in February 2003 that it would no longer oppose ratification of the Kyoto Protocol (Baker 2007). Much to the embarrassment of the Howard government, the BCA subsequently released a report that claimed that Australia’s economy would be hurt by the government’s continuing refusal to adopt an effective climate change policy stance. Internal tensions within the BCA were further inflamed in 2004, when six of Australia’s largest companies, including five members of the BCA, a major resource company and a major energy supply company, broke ranks to form the Australian Business Roundtable on Climate Change (ABRCC). They did so in partnership with Australia’s largest environmental NGO, the Australian Conservation Foundation (ACF). Presumably frustrated with the slow pace of policy movement within the BCA, including opposition from AIGN members, the ABRCC sought to ‘advance understanding of the business risks and opportunities associated with climate change and to work cooperatively on solutions to the issue’ (ABRCC 2006a). After commissioning the Commonwealth Scientific and Industrial Research Organisation (CSIRO) and the Allen Consulting group to quantify the impacts of climate change on, and the costs to, Australia respectively, the ABRCC released ‘The Business Case for Early Action’. Among this report’s key recommendations are: [to] set a long-term aspirational goal for Australia to significantly reduce greenhouse gas emissions as our contribution to a global effort designed to avert dangerous climate impacts; set a short-term binding target for Australia in 2020 to facilitate a smooth transition to a low-carbon economy and as a milestone towards achieving the long-term goal; and introduce a national marketbased carbon pricing mechanism to deliver cost-effective emission reductions. (ABRCC 2006b, p. 7).

More recently, in early 2007, the BCA’s climate policy position had advanced to the extent that it was now advocating ‘price and other signals . . . to effectively evolve to a low-emission global economy’, in particular, through the adoption of both short- and long-term targets, and the implementation of a national emissions trading scheme (BCA 2007, p. 1). In effect, the BCA has officially endorsed the essential elements of the ABRCC’s earlier report. Declining Influence, Unfortunate Legacy These developments within the business community were a serious blow to the influence of the AIGN. And with the election of the Rudd Labor

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government in late 2007, the unfettered access enjoyed by the AIGN to senior bureaucrats and ministers has waned. Nevertheless, the close association between the AIGN, its policy stance and CCS technology arguably did nothing to advance the long-term cause of CCS. On the contrary, the close association between CCS and a self-serving industry lobby group created a perception in the eyes of some, especially environmental NGOs, that CCS is both inextricably linked with the policies of climate sceptics, and/or necessarily in competition with ‘green-friendly’ technologies such as renewable energy (Risbey 2008). Thus the political and policy association of CCS with climate change sceptics and fossil fuel vested interests has left an unfortunate legacy, with one side of the climate change debate exaggerating CCS’s potential contribution, and the other side being unduly pessimistic, suspicious and hostile. Neither approach is compatible with considered and dispassionate policy analysis. In the long term, notwithstanding NGO scepticism, the likelihood is that CCS, if proven to be technically and environmentally viable, will become an important emissions reduction technology in an economy that is heavily dependent on a large coal-fired power station infrastructure. But it will certainly not become the only such strategy. Rather, it will become a part of a broader technological and policy mix that is also likely to include renewable energy, energy efficiency, alternative fuels and land-use changes, including carbon sinks. And even in this policy mix, CCS only becomes a plausible policy option in conjunction with a comprehensive GHG mitigation policy strategy, namely emission regulations, carbon tax or emissions trading. Only if such a policy drives up the costs of polluting power stations to a point where CCS becomes financially viable, will it be credible to introduce it on a commercial scale.

5

CONTEMPORARY CCS POLITICS AND POLICY

Superficially, at least, the climate change policy debate has changed substantially with the election of the new federal Labor government in late 2007. This has led to Australia’s ratification of the Kyoto Protocol – an event of large symbolic value, the announcement of a long-term ambitious target of a 60 per cent reduction in emissions by 2050, a 20 per cent renewable energy target by 2020, and the commissioning of a report into the design of a national emissions trading scheme (Rudd 2007). Whether these policy steps will translate into tangible changes on the ground remains to be seen. However, the atmospherics surrounding CCS appear to be shifting as the taint of the previous government’s climate change obstructionism and perceived association with fossil fuel interests is no longer present.

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We describe and discuss the contemporary policy stances of each of the critical stakeholder groupings with regard to CCS below. Federal Political Parties The two major political parties/groupings in Australia, the Australian Labor Party (ALP) and the Liberal/National coalition, have clashed in the last decade over climate change policy. However, the two issues that created the greatest divergence, namely the ratification of the Kyoto Protocol and the introduction of nuclear power, were in many ways symbolic rather than substantive. In the case of the former, Australia was reportedly on track to meet its Kyoto target (bearing in mind that the country had successfully negotiated a favourable Protocol target which allowed an 8 per cent increase over 1990 emission levels), even though the previous conservative government had refused to ratify the Protocol. This intransigence, therefore, was largely interpreted as being ideological,4 and closely related to the Howard government’s concerns to express solidarity with the United States – on this as on many other matters, including the Iraq war. In terms of the latter, the politics of nuclear power greatly outweighed its potential contribution to a reduction in Australia’s GHG emissions. Even the former government’s estimation was that there was no prospect of building a nuclear power station in Australia for approximately 25 years – and this was for a single power station. Within the then Howard government, some senior ministers had strongly questioned the viability of nuclear power in Australia (ABC Online 2006a). Today, the new Rudd Labor government has ratified the Kyoto Protocol, with the support of the Liberal/National opposition, and the Liberal/National coalition has effectively dropped a commitment to the adoption of nuclear power (Lateline 2008). Both parties also support the introduction of a renewable energy target. With these largely symbolic issues out of the way, and broad agreement on a renewable energy target, for a period there was a degree of convergence of climate change policy. More recently, however, with the advent of the global financial crisis, there has been increasing policy divergence. The Rudd government is poised to introduce its proposed emissions trading scheme, and has stated that it will not delay its implementation date of mid-2010. It claims that delaying the introduction will increase the costs of emissions abatement into the future. In contrast, the Liberal/National coalition argues that worsening financial conditions dictate a delay in the proposed emissions trading scheme. Their argument is that such a trading scheme will place additional costs on business during a time of economic crisis, and lead to greater unemployment. They are also questioning the

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design of the Rudd government’s scheme, criticizing its claimed complexity, at the same time as arguing for greater investment in technologydriven solutions, such as ‘biochar’.5 Debate over an emissions trading scheme is building to be one of the major political ‘hotspots’ in the lead-up to its proposed introduction in 2010. Despite growing disagreement over the timing and nature of an emissions trading scheme, both major parties are enthusiastic advocates of CCS technology. For example, the ALP announced the National Clean Coal Initiative with Aus$55 million in CCS-related activities in the lead-up to the last election (ALP 2007). In addition to these new commitments, the Rudd government’s existing climate change policy includes further CCS initiatives, including a Aus$150 million project to demonstrate carbon capture and storage in New South Wales; Aus$50 million to install a large scale post-combustion plant on an existing coal-fired power station in the Victoria’s Latrobe Valley; Aus$50 million from the Clean Coal fund towards a National Carbon Mapping and Infrastructure Plan to map suitable areas and conduct detailed seismic drilling and work to test their geology; and Aus$75 million investment in a national research programme to develop clean coal and related low emission technologies (ibid.). The Commonwealth government has also been drafting amendments to legislation (the Offshore Petroleum Act 2006 (Cth)) governing offshore petroleum exploration and mining in Commonwealth waters (greater than three nautical miles from Australia’s coastline) (Robinson 2007). The intention was to put in place appropriate access and property rights to allow for offshore carbon dioxide injection and storage. As an indication of the converging CCS policy positions, a recent House of Representatives Standing Committee on Science and Innovation investigation into CCS, comprising representatives of both major political parties, concluded that although they did ‘not view CCS as a magic bullet for reducing global CO2 emissions’, it was nevertheless an important policy option. They concluded: ‘CCS has the potential to become an essential component of any future global CO2 mitigation strategy’ (House of Representatives Standing Committee on Science and Innovation 2007). With little argument over the substance of CCS as a viable mitigation policy option in Australia, then, the two major political parties are left to squabble over the ownership of CCS-related policy announcements. For example, the former resources minister, Ian Macfarlane, accused the then opposition of ‘copying’ his government’s policies (ABC Online 2007). One area of policy divergence is how CCS is treated under national renewable energy targets. In particular, both parties announced relatively ambitious renewable energy targets in the lead-up to the last federal election. Briefly, energy suppliers are required to meet a minimum national

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target of energy from renewable sources. In both cases, the target is to be phased in over a number of years. However, they differed in their treatment of CCS. Under the Liberal/National coalition’s policy, CCS was to be included as a ‘renewable’ technology. In the case of the ALP, CCS is not included in the renewable energy target. Although this stance has drawn support from environmental NGOs, it may make CCS less financially attractive than it otherwise would be. To a large degree, the relative financial costs of CCS will be ultimately determined by the imposition of a national emissions trading scheme. Again, both major parties have committed to this in principle – the variation lies in the detail, with most disagreement over the start date, and the associated trading caps. As of early 2009, the ALP has only committed to a long-term reduction target of 60 per cent of 2000 levels by 2050. The real political debate will focus on a proposed, but as yet, undefined, interim target for 2020. Following Professor Ross Garnaut’s report into the development of an emissions trading scheme within Australia (Garnaut 2008), the Commonwealth government released a climate change ‘green paper’ which outlines the government’s preferred approach to an emissions trading scheme, including a 2010 start date and limited concessions for the energy supply industry (Australian Government 2008). If and when introduced, the proposed emissions trading scheme has the potential to reach an essential milestone in the commercial viability of CCS – the creation of a price signal that will, over time, make CCS more competitive with conventional fossil fuel power generation, in particular, coal-fired power stations. State Governments Throughout Australia, state governments have been strongly supportive of the development of CCS. In doing so, they have largely focused on the development of an appropriate regulatory framework to accommodate CCS activities. State governments participate in the Ministerial Council on Mineral and Petroleum Resources (MCMPR) (a cooperative initiative of Australian federal and state governments) which, in November 2005, endorsed a set of guiding principles for CCS with the intention of establishing a consistent national policy framework for the development of CCS across Australia – and these have been instrumental in dictating the terms of the CCS regulatory debate. Further, at their most recent meeting, ‘Ministers agreed that there was a need to consider and develop a national regulatory and management framework for the onshore and offshore environment, based on agreed principles’ (MCMPR Communiqué 2007).

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Victoria, in particular, has taken a leadership role by releasing a discussion paper entitled ‘A Regulatory Framework for the LongTerm Underground Geological Storage of Carbon Dioxide in Victoria’ (Department of Primary Industries 2008). In addition, the Victorian Department of Primary Industries anticipates a series of discussion forums for interested parties and stakeholders, as well as written responses to its paper, culminating in the creation of Victorian CCS legislation by 2009 (Minister for Energy and Resources 2008). Apart from Victoria, several other state jurisdictions have begun to address CCS through legislation, some more advanced than others. In 2003, Western Australia passed sitespecific legislation for a gas processing project on Barrow Island. Although this legislation encompasses a broad range of issues, it also includes provision for the injection and storage of carbon dioxide. Other states, notably Queensland and South Australia, have elected to modify existing onshore petroleum legislation to accommodate the pipeline transport and storage of CO2 in natural reservoirs. Further, Queensland has released a discussion paper proposing the creation of CCS specific legislation, in particular the granting of tenure through exploration and retention permits. Industry and Industry Organizations Resource and energy supply companies and industry associations have been the most prominent industry voices in the CCS policy debate, expressing unambiguous support for CCS’s potential contribution to Australia’s GHG mitigation, consistent with their historical support for technology-based policy solutions. This support, however, is invariably tinged with concern as to who might bear the costs of achieving GHG abatement targets. For example, the Energy Supply Association of Australia has stated: Geosequestration of carbon emissions through carbon capture and storage has the potential to contribute very significantly to a least cost solution to constraining greenhouse gas emissions. However, the uptake of this technology will be dependent on the application of a greenhouse gas emission constraint and clear financial reward for adopting low emission technologies. (ESAA 2006)

The Australian Coal Association and the Minerals Council of Australia released a joint statement on the potential of CCS: The capture and permanent geological storage of CO2 offers important possibilities for making the further use of fossil fuels more compatible with climate change mitigation. This submission emphasises the crucial role of research, development and demonstration (RD&D), particularly for the improvement of

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They also stress that a ‘Nationally consistent legal and regulatory framework for CCS activities both onshore and offshore in Australia is urgently needed’ (ibid.). In terms of major resource companies, Rio Tinto’s CCS submission is representative of industry views more generally (Rio Tinto 2006). According to Rio Tinto ‘the future of its coal businesses will depend on the timely development of low emission technologies which will rely upon the availability of Carbon Capture and Storage’. Consequently, Rio Tinto is a strong supporter of CCS research and commercialization initiatives. In this respect, Rio Tinto recognizes that ‘the investment required is considerable and this will impose costs on industry and users alike’. Nevertheless, ‘there is an opportunity for Australia to show world leadership in demonstrating CCS technologies which will have significant potential application internationally’. In order to achieve this, however, ‘governments will have a key role to overcome potential funding shortfalls’. Rio Tinto therefore sees this central government role as including: (a) (b) (c) (d) (e)

Promoting an increase in the number, pace and scope of CCS projects specifically addressing all the major capture techniques and geo-sequestration scenarios. Adequately resourcing and providing incentives for CCS projects. Raising the profile of CCS within the domestic and international community. Supporting attempts to increase global acceptance of CCS. Developing the policies and legal frameworks to enable rapid development, commercialisation and deployment of CCS. (Ibid.)

Beyond the resource and energy sectors, other parts of the business community have also come out in the support of CCS. For example, ABRCC states ‘that in order to reduce emissions significantly, low and zero emission technologies must be mobilized across the economy, with electricity supplied almost entirely from fossil fuels with carbon capture and storage as well as renewables’ (ABRCC 2006b, p 20). The BCA has adopted a similar stance, noting that climate change mitigation ‘measures do require the deployment of new technology, in the power sector in particular (such as post combustion capture and storage)’ (Sims 2007, p 49). And the Australian Chamber of Commerce and Industry, in referring to the development of technologies such as CCS, notes that ‘Australia has the expertise and technical capacity to play a leading role in exporting technology to developing countries’ (ACCI 2006, p 2).

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Where concerns are expressed by industry, they tend to focus on the detail, not the principle of CCS. In particular, there are concerns over potential clashes in tenement rights, especially those held by the petroleum and gas industries, long-term liability issues, and the danger of creeping regulation. For example, the Australian Petroleum Production & Exploration Association (APPEA) states that ‘resolving the issue of long term responsibilities and liabilities is paramount’ and ‘APPEA accepts that regulation is an important element of ensuring the community interests are adequately serviced, but strongly contends that existing mechanisms and practices need only be amended to apply to geosequestration except where there are obvious gaps’ (APPEA 2004). In summary, industry views CCS as a promising emissions reduction strategy. The fossil fuel industries, including both users and suppliers, see CCS as a lifeline under a future, much stricter, climate change policy regime. There are concerns among the resource/energy sectors, however, about the potential additional costs associated with CCS, and the prospect of their industries shouldering the burden of those costs. They therefore anticipate a central role for government in overcoming financial hurdles. Research Institutions Within Australia there is a large and growing commitment to clean coal research, with CCS technology representing a major component. As such, there are numerous sources of research funding including the ACA’s COAL 21 Fund, the ACA Research Program, the Queensland Clean Coal Technology Fund, the Commonwealth Low Emissions Technology Fund, and the Cooperative Research Centre for Coal in Sustainable Development (Mullard 2007). Over and above these, however, the key CCS research agency in Australia is the Cooperative Research Centre for Greenhouse Gas Technology (CO2CRC). The CO2CRC is a centrally administrated collaboration engaging over 100 individual researchers across Australia and New Zealand, and several research institutions, including international research organizations. It also has over 15 industry partners, including major multinational resource companies, along with major resource industry associations, including the ACA, and several federal and state government agency partners. The combination of funding from private and public sources is projected to give the CO2CRC a budget of approximately Aus$140 million over seven years. At present, there are three main domestic strands to the CO2CRC research programme. First, is the study of geological formations across Australia and New Zealand suitable for the storage of carbon dioxide.

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According to Bradshaw et al. (2004): ‘Australia has a CO2 storage potential in excess of 1600 years of current annual total net emissions . . . [However, based on sink matching and economic assumptions] Australia may have the potential to store a maximum of 25 per cent of our total annual net emissions, or approximately 100–115 MtCO2 per year’. Second, is research and development into carbon capture technologies, in recognition of the fact that capture represents up to 80 per cent of the cost of CCS. Third, is the implementation of a number of pilot projects to trial the capture, transport, injection, storage and monitoring of carbon dioxide. In addition to these domestic activities, the CO2CRC is engaged in a series of international collaborations. Apart from joint research programmes with universities in North America and Asia, specific international projects involving the CO2CRC include Sleipner, in the North Sea off Norway, and the US/CLSF Frio Brine Project and the Carbon Capture Program in the United States. The CO2CRC also contributes to the Intergovernmental Panel on Climate Change (IPCC), the Carbon Sequestration Leadership Forum and participates in the International Energy Agency Greenhouse Gas Research and Development Program. Enjoying the support of both major political parties, and the resource sector, the CO2CRC is clearly at the centre of CCS developments, both technical and policy based, within Australia. For example, it would be unlikely that a CCS-related research project would obtain private sector financial backing without having first gained the imprimatur of the CO2CRC – the major industry research bodies, such as the ACA Research Program, are closely entwined with the CO2CRC and see it as the primary vehicle through which to advance CCS in Australia. Although the CO2CRC claims to stop short of an overt CCS advocacy role, its support for, involvement in, and oversight of a series of CCS pilot projects throughout Australia has been the catalyst for much of the policy, legislative and regulatory groundwork that has occurred, or is underway. In particular, the CO2CRC is more than a passive research partner in these projects; it is an active commercial participant. To this end it has formed a subsidiary company to finance and conduct pilot projects. Many Australian resource companies were participants/contributors to the US FutureGen project. The decision by the Bush administration to withdraw funding from the FutureGen project has placed additional pressure on the CO2CRC to provide tangible evidence of the viability of CCS. As such, the head of Australia’s CO2CRC has responded to the demise of FutureGen as follows: ‘it would be nice to think that some of the money being spent in the US could be spent here’ (Wilkinson and Cubby 2008). In this respect, the CO2CRC views Australia as being a leader in CCS. Indeed, there is confidence that Australia does not lag the United States:

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‘We’re several years ahead of the US in some respects, especially commercialisation’ (ibid.). Environmental Parties and NGOs Outside of the two major political parties/coalitions, and industry, environmental parties and NGOs have been far more cautious in their responses to CCS. Perhaps in part reflecting their distrust of the previous federal government’s motives and alliances, several environmental NGOs have been highly critical of CCS. For example, the Friends of the Earth remain concerned that devoting resources to CCS will perpetuate Australia’s reliance on coal: Investing so much of our country’s research funds for climate change into geosequestration will divert important funding from renewable technologies . . . geosequestration is an expensive, unproven and potentially dangerous solution to CO2 emissions that does not deal with the source of the problem. It will only, at best, provide an 8 per cent reduction in emissions from electricity production by 2020, which is no reduction on 1990 levels of emissions, and may not become useful until 2015. (Friends of the Earth Australia 2006, emphasis in original)

There is also concern that proposed liability arrangements will unfairly burden Australian taxpayers: current regulatory proposals by the Ministerial Council for Mineral and Petroleum Resources include government taking the liability for leakage and maintenance after the proponent (corporation) has completed the project, which is generally between 30 and 50 years. This moves the burden to the government and therefore tax-payers for ensuring the project does not leak or contaminate surrounding areas for thousands of years – a completely unacceptable injustice for future generations of Australians! (Ibid.)

Finally, there is the fear that CCS, particularly in the form of abrupt leakages, represents a grave environmental risk. Greenpeace, in its submission (Greenpeace Australia 2006), neatly encapsulates these serious concerns about CCS: Carbon capture and storage technology reveals three major flaws: ● ● ●

Too costly: Costly and unsuitable for a significant proportion of coal fired power generation in Australia; Too little: Ineffective at delivering significant emission reductions and could even jeopardize emissions stabilization in the future; and Too risky: Carries significant financial, health and environmental risks.

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Further, criticism has not been restricted to the now-defunct Howard government. During the recent federal election year, the Greens, the major environmental political party in Australia, accused the ALP of wasting money on their clean-coal policy: ‘the problem with the search for clean coal, it may turn out to be the search to turn lead into gold – simply not available’ (ABC Online 2007). In their opinion, ‘what Kevin Rudd’s doing is following John Howard into this supposition that there is a technology called clean coal’ (ibid.). In contrast to these overtly negative views, other environmental NGOs have begun to adopt a more nuanced stance, opening the door to CCS as an interim technology, so long as the health and environmental risks can be managed and it does not detract from the adoption of renewable technologies. For example, the ACF, arguably the largest and most prominent environmental NGO in Australia, articulates the following policy stance on CCS: The use of less polluting fuels (such as near-zero emission coal, LPG or natural gas) to replace more polluting fuels (such as conventional coal and petroleum), and also the use of mitigating technologies such as geosequestration, are only acceptable in the context of a clear transitional strategy which leads to reduced energy consumption, reliance on renewable energies, and is otherwise acceptable in terms of environmental effects. (ACF 2005)

As noted earlier, it was the ACF that formed the ABRCC in partnership with key industry representatives, and its report clearly states that CCS should be actively pursued as part of a suite of climate change mitigation strategies (ABRCC 2006b). WWF Australia has taken an even more favourable position on CCS, which some may argue is reflective of their relatively ‘business-friendly’ approach as compared to other environmental NGOs. Under their ‘Priorities for a Living Australia’ policy publication, they even contemplate the construction of new, additional coal-fired power stations, so long as they are equipped with CCS technology (WWF-Australia 2007). Without doubt the most dramatic, and speedy, turnaround in opinion towards CCS on the part of an environmental party or NGO belongs to Dr Karl Kruszelnicki, candidate for the Climate Change Coalition in the recent federal election, and a well-known physicist. In the midst of the election campaign, Kruszelnicki publicly criticized clean coal and CCS in the strongest possible terms: ‘it is a furphy, a pork pie to cover up the fact that there is no such thing as clean coal . . . one cubic kilometre of CO2 to get rid of every day? It’s not possible’ (Bibby 2007). Further, he then went on to liken CCS to Nazi propaganda: ‘Goebbels, the Nazi propagandist, said if you are going to tell a lie, tell a big one, and this is

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a beauty’ (ibid.). Within a week, however, Kruszelnicki had recanted in spectacular fashion: I was wrong. We’re very happy to admit our mistake on that. We’re stuck with the fact that we have still got to make electricity in the short term from carbon of some sort. Something is better than nothing, so sequestering carbon dioxide is better than just letting it go out. . . . It’s an interim technology we should explore to buy as much time as we can get. (Warren 2007)

This incident exemplifies a broader shift that has occurred in the Australian environmental community – although some remain opposed, increasingly, there is an acceptance that CCS has the potential to act as a transitional technology until renewable energy and energy efficiency become the mainstream, dominant technologies. In this respect, their position has moved considerably closer to that of the major political parties, and indeed, many industry groups. This has culminated in a historic realignment of parts of the environmental community. This realignment has reached a new threshold in the formation of a new CCS taskforce, as described below.

6

CCS PROJECTS, TASKFORCE AND SHIFTING ALLIANCES

There is growing pressure on advocates of CCS to demonstrate its potential by progressing from the research to an implementation and commercialization phase. To this end, there are 13 CCS demonstration projects across Australia in various stages of implementation (CO2CRC 2009). These include the DF3 Kwinana Project in Western Australia, which is a 500 MW hydrogen power plant fuelled by sub-bituminous coal, with integrated carbon separation, capture and storage, the latter based on offshore saline formations (anticipated to be operational by 2014); the Moomba Carbon Storage Project in South Australia which intends to create a regional hub for capturing and storing CO2 from pre-existing gas processing plants and using the CO2 for enhanced oil recovery (due to commence in 2010); and the ZeroGen project in Queensland, based on the linking of coal-based gasification for power stations and CCS – the crucial structural component of the project being the creation of a 200 kilometre pipeline to transport CO2 to the Denison trough, where it is anticipated that up to 400,000 tonnes of CO2 would be stored per annum (due to commence in 2012). It should be noted, however, as the above examples attest, that the majority of these 13 projects are some way off implementation, being in essentially planning, feasibility or research phases. The race has been on, therefore, to establish Australia’s first actual CO2 injection site. This

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has culminated in the development of the Otway project in Victoria. The Otway project is a multi-party project with support and funding shared among 15 companies and seven government agencies, and involving researchers from several countries. The coordinating and operating agency is CO2CRC Pilot Project Pty Ltd, a commercial subsidiary of the aforementioned CO2CRC. This is, by a substantial margin, the most advanced CCS project in Australia. Indeed, underground CO2 injection commenced in early April 2008. The Otway project has reached its first major milestone with the storage of 10,000 tonnes of carbon dioxide 2 kilometres underground in a depleted natural gas reservoir. According to the project managers: We are closely monitoring the carbon dioxide through one of the world’s most comprehensive geosequestration monitoring programs and every indication is that the carbon dioxide is behaving just as researchers have predicted. The injection process is proceeding very well and we are now starting on our next 10,000 tonnes. (CO2CRC 2008)

The first injection of CO2 is viewed by supporters as a key turning point in the development of CCS in Australia, and has coincided with the creation of the new Carbon Capture and Storage Taskforce – an event that has created deep division in the environmental community. Described as a historic alliance of unions, industry, environmental organizations and the research sector, the taskforce counts among its membership the ACA, the Construction, Forestry, Mining and Energy Union (CFMEU), the Climate Institute (an independent research advocate of climate change policy), WWF-Australia, as well as the CO2CRC, and aims to promote the development and implementation of CCS in Australia (CO2CRC 2008). The formation of the taskforce has been accompanied by a flurry of media statements from the participating members who variously claimed that: ‘The proposed CCS taskforce will play a vital role in ensuring that Australia is CO2 storage-ready before 2020’ (ACA Executive Director Mr Ralph Hillman); ‘rapid demonstration of CCS in Australia is essential to securing employment prospects in regional Australia (CFMEU National President Mr Tony Maher); rapid deployment of CCS ‘is needed if we are to avoid dangerous climate change . . . We need to build demonstration plants now if we expect commercialisation before 2020. The only way we can ensure this will happen is through a coordinated effort by Commonwealth and State Governments and by industry’ (WWF CEO Greg Bourne, Climate Institute 2008). Not surprisingly the participation of environmental organizations/ institutes, namely WWF and the Climate Institute, has caused considerable angst within parts of the environmental community in Australia.

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The fact that the above environmental groups are seen to have aligned themselves with a traditional enemy, the coal industry, only increases the sense of betrayal felt by some. Greenpeace, for example, has criticized them for adopting a ‘coal industry position’, and have opposed resources being directed to carbon geo-sequestration as ‘[CCS] won’t be ready for at least another 12 years . . . we need to be putting public money into energy efficiency and renewables. We don’t need public money to be poured into enormously profitable companies’ (Hammer 2008). Similarly, Environment Victoria claimed it could divert money from other policy alternatives: ‘if they call on the Government to focus on carbon capture and storage, that will distract from energy efficiency and renewables’. It remains to be seen whether this industry/environmental alliance is merely a short-term political device to split the environmental movement, or a genuine attempt to take a leadership role on CCS development and implementation. It also remains to be seen what the broader implications are for climate change policy, and in particular for the relationships and alliances between different political lobby groups. In particular, will this realignment of interests herald a fundamental shift in the political and policy landscape? According to one commentator, ‘just how large a rift develops between WWF and other environmental groups is likely to depend on how much public money is called for under the joint proposal’ (ibid.). To date, the major political parties have welcomed the creation of the taskforce, for example, the federal opposition noted this it was a ‘step in the right direction’. More tellingly, perhaps, unlike some of its more vocal peers, Australia’s largest (and arguably most mainstream) environmental organization, the ACF, has provided no public criticism of those environmental groups participating in the taskforce or of the taskforce itself. If we interpret silence as acquiescence, then this is indeed an indication of the potential for CCS to confound conventional expectations, and, also, importantly, to escape its chequered and highly partisan political past.

7

CONCLUSION

CCS has suffered at the hands of political and policy posturing from all sides of the climate change debate in Australia. Until recently, this worked against a rational, considered assessment of its potential contribution to reducing GHG emissions, including its associated potential risks and costs. If not complete consensus, there is certainly a convergence of views, including among the major political parties, the business community, the research community, state and federal governments, and some elements

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of the environmental NGO community, and broad agreement from all except the more radical environmental groups, that CCS has considerable promise as a transitional policy strategy, at least. Consequently, there is a determination to proceed with a number of pilot projects to test this potential in the field. To this end, CCS has achieved considerable progress in terms of research, technical and regulatory development. These have culminated in Australia’s first pilot carbon dioxide injection project in April 2008. Beyond this, however, and assuming that all the technical and environmental risks can be overcome, whether CSS can fulfil its potential will depend in large part on whether the price signal afforded to CO2 emissions (for example, under an emissions trading scheme) is sufficient to make commercial investment in CCS an attractive financial proposition.

NOTES 1. These descriptions are adapted from Department of Climate Change (2008). 2. John Howard himself is on record in 2006 as saying that he still regards climate change as a theory, not an impending reality (Christoff 2006); the Finance Minister, Nick Minchin, stated in February 2007 that he remains a sceptic about the science of climate change (Baker 2007); and as recently as August 2007, four members of the Howard government released a dissenting report ‘we do not believe the evidence unequivocally supports the hypothesis of anthropogenic warming’ (House of Representatives Standing Committee on Science and Innovation 2007). 3. The views expressed in the following two paragraphs are based on the recollections of one of the authors, Darren Sinclair, who worked for the then Department of Industry, Science and Technology, in particular, on climate change policy, and who attended a number of the AIGN meetings between 1992 and 1995, and who was also a member of Australia’s International Negotiations on Climate Change delegation in the lead-up to Kyoto in 1992 and 1993. He subsequently left the bureaucracy, following the election of the Howard government in 1996. 4. This was despite the misgivings of some senior ministers about not signing and the BCA breaking ranks with the Howard government by not opposing the ratification of the Kyoto Protocol in 2003. 5. Biochar has been attracting growing interest due to its potential in carbon sequestration and in improving soil health (CSIRO n.d.).

REFERENCES ABC Online (2006a), ‘Report won’t change Opposition’s nuclear stance’, 21 November. ABC Online (2006b), ‘Four Corners: Interview – Dr Guy Pearce’, 13 February. ABC Online (2007), ‘Greens say Labor wasting money with clean coal technology’, 25 February. ACA and MCA (2006), ‘Submission: House of Representatives Standing Committee

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on Science and Innovation: Inquiry into Geosequestration Technology’, Australian Coal Association and Minerals Council of Australia September. APEC (2007), Fact Sheet: Australia, Asia Pacific Economic Cooperation. APPEA (2004), ‘CoAG Consultation Regulation Impact Statement’, Submission by the Australian Petroleum Production & Exploration Association, December. Australian Bureau of Statistics (2008), National Statistics, Canberra. Australian Bureau of Statistics (2009), ‘Australia Experiences High Population Growth’, Media Release, 18 March. Australian Business Roundtable on Climate Change (ABRCC) (2006a), ‘Fact Sheet’, 6 April. Australian Business Roundtable on Climate Change (ABRCC) (2006b), ‘The Business Case for Early Action’, April. Australian Chamber of Commerce and Industry (ACCI) (2006), ‘Emissions trading – caution required’, ACCI Review, Number 136, 1–4. Australian Chamber of Commerce and Industry (ACCI) (2007), ‘The Future of Australia’s Manufacturing Sector: A Blueprint for Success’, ACCI Issues Paper, March. Australian Conservation Foundation (ACF) (2005), Energy, November. Australian Government (2006), Australian Government Submission into the House of Representatives Inquiry on Geosequestration, Canberra. Australian Government (2008), Carbon Pollution Reduction Scheme Green Paper, Canberra, July. Australian Labor Party (ALP) (2007), ‘National Clean Coal Initiative’, Fact sheet – campaign launch. Baker, R. (2007), ‘PM feels the heat’, The Age, 25 February. Bibby, P. (2007), ‘Clean coal a furphy: Dr Karl’, The Sydney Morning Herald, 1 November. Birrell, B. (2007), ‘Population Pressures’, ABC News, 21 June, http://www.abc.net. au/news/stories/2007/06/21/1957512.htm, accessed 15 March 2008. Bradshaw, J., G. Allinson, B. Bradshaw, V. Nguyen, A.J. Rigg, L. Spencer and P. Wilson (2004), ‘Australia’s CO2 geological storage potential and matching of emission sources to potential sinks’, Energy, 29, (9–10), July–August, 1623–31. Business Council of Australia (BCA) (2007), ‘Strategic Framework for Emissions Reduction’, April. Christoff, P. (2006), ‘Crisis? What Crisis’, The Age, 1 November. Climate Institute (2008), Media Release, 16 April. CO2CRC (2008), CO2 Futures, Issue 17, August. CO2CRC (2009), ‘CCS Activity in Australia 2008’, available at http://www.co2crc. com.au/dls/gen/CCS_activities_2008.pdf (accessed 24 March 2009). Commonwealth Scientific and Industry Research Organisation (CSIRO) (n.d.), Biochar, Factsheet. Department of Climate Change (2008), 2007: Tracking to the Kyoto Target: Australia’s Greenhouse Emissions Trends 1990 to 2008-2012 and 2020, Canberra: Commonwealth of Australia. Department of Primary Industries (2008), ‘A Regulatory Framework for the Long-Term Underground Geological Storage of Carbon Dioxide in Victoria’, Discussion Paper, Canberra, January. EnviroInfo (2003), ‘Business Council Faces Split on Kyoto’, Hallmark Edition. ESAA (2006), Submission to Parliamentary Inquiry into Geosequestration, Energy Supply Association of Australia, 18 August.

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Friends of the Earth Australia (2006), Submission to Parliamentary Inquiry into Geosequestration, 10 August. Galacho, O. (2007), ‘Carbon’s rocky road’, Herald Sun, 15 December. Garnaut, R. (2008), ‘Garnaut Climate Change Review’, Draft Report, 4 July. Green, J. (2001), ‘Australia rains on greenhouse talks’, Green Left Weekly, Issue 458. Greenpeace Australia Pacific (2006), ‘Inquiry into geosequestration technology’, August. Hamilton, C. (2007), ‘The Greenhouse Mafia’, New Matilda, 2 May, http://newmatilda.com/2007/05/02/greenhouse-mafia, accessed 28 August 2008. Hamilton, C. and H. Turton (1999), ‘Population policy and environmental degradation: source and trends in greenhouse gas emissions’, People and Place, 7 (4), 42–62. Hammer, C. (2008), ‘Green groups in carbon plan rift’, The Age, April 15. House of Representatives Standing Committee on Science and Innovation (2007), ‘Between a Rock and a Hard Place: The Science of Geosequestration’, Parliament of the Commonwealth of Australia, Canberra, August. Lateline (2008), ‘Nick Minchin defends Howard govt defence contracts’, 26 February. MCMPR Communiqué (2007), ‘Summary of Ministerial Council Meeting’, Melbourne, 3 August. Minister for Energy and Resources (2008), ‘Community to get chance to clear the air on carbon capture and storage’, Media Release, 14 January. Mullard, B. (2007), ‘Climate Change Background Paper: Mineral Resources’, NSW Department of Primary Industry. Organization for Economic Cooperation and Development (OECD) (2007), OECD Country Statistical Profiles: Australia, Paris: OECD. Parker, C. (1999), ‘The greenhouse challenge: trivial pursuit?’, Environmental and Planning Law Journal, 16 (1) 63–74. Pearse, G. (2007), High and Dry, Part III: Carbon Capture: How Australia’s Biggest Polluters Captured John Howard, Camberwell, Victoria, Australia: Viking. Rio Tinto (2006), Submission to Australian Government Inquiry into Geosequestration Technology. Risbey, James (2008), ‘“Clean” coal fraud – renewables now!’, Greenleft, No. 748. Robinson, A. (2007), ‘Carbon Capture and Storage – Development of Legislative Framework’, Allens Arthur Robinson Report, Focus: Climate Change – November 2007. Rudd, K. (2007), ‘An Action Agenda for Climate Change’, Annual Fraser Lecture, Canberra, 30 May. Sims, R. (2007), ‘Determining the Appropriate Policy Principles to Guide the Response to the Greenhouse Challenge’, a commissioned report for the Business Council of Australia, April. Warren, M. (2007), ‘I was wrong: Kruszelnicki’, The Australian, 8 November. Wilkinson, M. and B. Cubby (2008), ‘US move a blow to clean-coal project’, The Age, 5 February. WWF-Australia (2007), ‘Priorities for a Living Australia: Federal Policy Proposals to Tackle Dangerous Climate Change and Build Environmental Resilience’, February.

4.

CCS in Canada Mark Jaccard and Jacqueline Sharp

On the surface, Canada is an obvious candidate for world leadership in the development of carbon capture and storage (CCS). It has an impressive fossil fuel endowment which includes oil, natural gas, coal and oil sands. It has repeatedly made strong national commitments to reduce GHG emissions. It is a rich, technologically advanced country, with access to capital and know-how. Its oil industry already uses carbon dioxide for enhanced oil recovery and the country’s western region has almost ideal conditions for extensive geological storage of carbon dioxide. Some of its key environmental organizations and activists support CCS as part of a climate strategy that emphasizes efficiency and renewables. And since at least 1999, when Canada first presented its plan to achieve its Kyoto commitment, the country’s political leaders have explicitly and repeatedly presented CCS as a critical component of Canada’s climate strategy. Yet, in spite of these favourable conditions and forceful public pronouncements, CCS in Canada has made negligible progress over the past decade. There have been publicly sponsored studies of the CCS potential and of the policies needed to realize it. There has been publicly funded research into determining the best technological options and locations. There have been studies of public opinion and strategies for increasing public awareness and support. And private corporations are working with government to assess investment opportunities. But, today in Canada, there is still no large-scale CCS project under development. Why is this? Does this indicate that CCS might never happen in Canada? Or, are delays of this extent to be expected when one considers all of the factors? Is CCS actually moving ahead at a reasonable pace, given the many challenges that must be addressed from technological to financial to political to public opinion? In this chapter, we try to shed some light on CCS in Canada in order to explain developments to date and to speculate on likely developments in the future. Section 1 sets the stage by describing the unique and highly favourable geological and technological potential for CCS in Canada. Section 2 contrasts, at a superficial level, Canada’s GHG emissions and its climate policy goals with those of other industrialized countries. Section 3 75

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explains why Canadian climate policy has been so ineffective from a GHG emissions reduction perspective, notably because of the regional tensions within the country and a reluctance to drift far from US climate policy (in reality if not in words). Section 4 describes how CCS presents a way for Canada to resolve some of these challenges, and explains why it is seen as a desirable option to a significant contingent of Canadian interest groups, even if the general public is still largely unaware of the technology. Section 5 explains the extent to which CCS is incorporated in current and emerging Canadian climate policy and Section 6 peers into the future to assess what is likely in store for CCS in Canada.

1

THE POTENTIAL FOR CCS

As the second largest country in the world, it is not surprising that Canada has a great geographical diversity of physical resources, which is reflected in the energy systems of different parts of the country and even in the perspectives of the inhabitants of these different regions with respect to their economic priorities and environmental policies. The western sedimentary basin, lying just east of the Rocky Mountains in the Canadian prairies, is rich in coal, oil and natural gas. The economies of Alberta and Saskatchewan, the two provinces whose territories cover most of the basin, are focused to a considerable degree on the exploitation, domestic use and export of these fossil fuel resources. Alberta especially is known worldwide for its oil sands: oil-impregnated sands whose total oilproducing potential rivals that of Saudi Arabia, the country with the world’s largest oil resources. Alberta and Saskatchewan generate almost all of their electricity from coal-fired power plants, which is in marked contrast to their neighbouring provinces of British Columbia to the west and Manitoba to the east, both of whose electricity systems are almost entirely based on hydropower. This patchwork of resources and electricity systems continues right across the country. Ontario to the east of Manitoba, the acknowledged centre of the country, with the largest population, the largest city (Toronto) and the country’s capital (Ottawa), once had modest oil resources, but these are largely depleted. It still has some coal, although it prefers to import coal for the thermal power plants that provide about 25 per cent of its electricity, with the rest of its power coming from nuclear, large hydropower and small percentages from natural gas and renewables like small hydropower, biomass and wind. The electricity systems of Quebec and Newfoundland are almost entirely hydropower based, while the other Atlantic provinces of Prince Edward Island, New Brunswick and Nova

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Scotia rely on a mix of coal, nuclear, hydropower, natural gas, oil and some renewables. Oil and natural gas are exploited in the Atlantic Ocean offshore of Newfoundland and Nova Scotia. As they become depleted, these fields may eventually offer the prospect of CCS as part of a strategy for enhanced oil recovery, as has been considered in Norway. Likewise, the coal-fired plants in New Brunswick and Nova Scotia might also one day be associated with CCS. And, while the Ontario government has a commitment to close all of its coal-fired plants or convert them to biomass fuelling, it is possible that one day the province may instead opt to retrofit some form of carbon capture technology on to these plants, with carbon storage occurring either in Ontario or in an adjacent US jurisdiction. However, the best prospects by far for CCS in Canada are in Alberta and Saskatchewan. The large point sources of CO2 emissions in these two provinces account for 26 per cent of all CO2 emissions in the country and the two provinces possess the best sites for geological storage of CO2 along with the technological capabilities from previous experience with injecting CO2 for enhanced oil recovery. Figure 4.1 shows the potential areas for geological storage of CO2 in Canada’s western sedimentary basin and overlays on these the major CO2 industrial sources. The basin extends into parts of Manitoba and British Columbia, as well as the Northwest Territories and the Yukon Territory to the north. But it is located mostly in Alberta and southern Saskatchewan, with the best potential in Alberta. With its oil sands production plants, natural gas processing plants, oil refineries, petrochemical plants and coal-fired power plants, Alberta’s production of CO2 dwarfs even that of Saskatchewan, such that Canadian discussions about the potential for CCS focus especially on that province. If these CO2-emitting activities continue to expand in Alberta and Saskatchewan over the next decades, the CO2 emissions in 2050 could be as high as 600 megatonnes per year (Mt/y), a quantity comparable to Canada’s current total emissions of over 750 Mt/y. Development of CCS would require massive investments in both provinces, especially Alberta, with the construction of an extensive network of CO2 pipelines connecting major CO2 sources with optimally located storage sites. In this regard, there is much talk by industry and government of the need for a CO2 ‘backbone’ pipeline that would rationalize the capture and storage activities throughout Alberta, including a link with CCS activities in southern Saskatchewan. The pipeline would connect the CO2-producing oil sands facilities in northern Alberta with depleted oil fields in central and southern Alberta and with coal electricity plants in Alberta and Saskatchewan. The assessment of carbon capture in many parts of the world focuses

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126º 62º

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49º 126º

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Source:

Bachu and Stewart (2002).

Figure 4.1

Western sedimentary basin: CO2 sources and potential geological storage

on coal-fired power plants. But Alberta possesses a diversity of industrial CO2 sources, which will require a diversity of carbon capture technologies. A key source of concern is the emissions from oil sands production, as in the longer term this source is expected to continue its growth of the past decade. Oil production from oil sands has grown from about half a million barrels per day in 1995 to an expected 2 million barrels per day in 2010, with some estimates lifting it to over 4 million barrels per day in 2020 (Canadian Association of Petroleum Producers 2006). Figure 4.2 provides one depiction of how CO2 might be captured in oil sands extraction and processing activities. It shows two different oil sands production techniques: open pit mining of the sand, near Fort McMurray, Alberta and ‘steam assisted gravity drainage’ (SAGD) to extract oil from deep, unminable oil sand deposits nearby. Thus, the left side of the figure shows the capture of CO2 from bitumen upgraders that transform mined oil sands into petroleum. The CO2 byproduct could be sent in a pipeline to distant storage sites in the south. Alternatively, as the figure depicts, the CO2 could be combined in a slurry with petroleum coke (a byproduct of oil sands upgrading) that is then piped to nearby SAGD facilities. CO2 from all the stages in this combined process could then be captured, gathered

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79 SAGD operations

Fort McMurray

Steam

Bitumen upgraders

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CO2 capture

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Source:

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CO2/coke separation

CO2

Sequestration SAGD void

CO2 CO2 pipeline to EOR or sequestration

Smurzlo (2008).

Figure 4.2

Possible carbon capture and storage in oil sands facilities

and sent to the main CO2 pipeline for transport to storage sites in central or southern Alberta.

2

GHG ABATEMENT TARGETS: ASPIRATIONS VERSUS REALITIES

As Canada has considered its GHG mitigation options, CCS has emerged especially in western Canada where the region’s large fossil fuel endowment is coincident with a favourable geology for CO2 storage. Only CCS could allow the country’s political leaders to argue that Canada could both ramp up its production of fossil fuels, especially oil sands, while also being a responsible member of the global community by agreeing to aggressive GHG reduction targets. At the negotiation of the 1997 Kyoto Protocol, Canada committed to reduce its GHG emissions to 6 per cent below their 1990 level by 2010, a target that was virtually identical to the targets of the US (7 per cent) and the European Union (8 per cent). This enabled the Canadian government, and indeed all environmentally concerned Canadians, to claim with pride that Canada was again demonstrating its environmental leadership, an image that many Canadians hold of their country. Not many people paid attention to the fears expressed by some industrial leaders that Canada’s target differed so much from a country like Australia, which like Canada

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had a rapidly growing population and fossil fuel industry. Australia had negotiated a Kyoto target that was 8 per cent above its 1990 emissions, claiming that its situation differed greatly from that of Europe. Nor did many people pay attention to those arguing that using 1990 as the base year gave the Europeans a much easier target because so many GHG reductions had already occurred since 1990 for reasons that were independent of climate policy – in particular, the substantial switch from coal to gas associated with UK electricity sector reforms in the early 1990s and the collapse of extremely inefficient coal-fired industries in East Germany after German reunification in 1990. And few people commented on the fact that since Canada already generated well over 60 per cent of its electricity from hydropower, it would need to reduce GHGs via more costly actions in industry, transportation and buildings instead of simply by reducing the use of coal in electricity generation, an argument that Norwegians had used to receive a Kyoto target of 1 per cent above 1990 levels. The five years between the signing of Kyoto and its slated ratification in 2002 provided ample opportunity for Canadians to realize that their target was one of, if not the, most difficult and expensive among all the Kyoto signatories (Harrison and Sundstrom 2007). And during these five years, Canadian emissions rose rapidly, making it all the more obvious that the target would not be attained. At the same time, both Australia and the US, the two most comparable countries in terms of population and economic growth, opted not to ratify the treaty. Nevertheless, with strong backing from environmentalists and fairly wide support from the largely uninformed Canadian public, the Canadian government ratified the Kyoto Protocol in 2002, thereby ensuring the strong environmental legacy of Prime Minister Jean Chrétien. Some observers noted that Chrétien, who was near the end of his long political career, would not be around in 2010 to deal with the fallout from selecting an ‘aspirational target’ that was impossible to achieve (Simpson et al. 2007). Figure 4.3 illustrates the challenge posed for Canada and the US relative to other major OECD economies, given the 1990 base year selected by the Kyoto Protocol. In the period from 1990 to 2006, Canada and the US had average annual economic growth of about 3 per cent, more than a full percentage point higher than other major OECD countries, with the exception of the UK. This was caused both by higher population growth and by higher economic growth per capita. As one would expect, GHG emissions rose more rapidly in Canada and the US relative to their OECD counterparts. While this rapid growth in emissions should not be seen as an excuse for inaction, it explains in part why Canada would increasingly look to CCS as a key option in GHG emissions abatement. Progress in energy

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Annual GDP growth and per capita GDP growth

3.5

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Per capita GDP growth Total GDP growth

3.0 2.5 2.0 1.5 1.0 0.5

d ni

te

K U

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at es St

gd

om

n in

aly It

Ja pa

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ce G

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C

an

ad

a

0.0

Source:

Energy Information Administration (2003), updated 2006.

Figure 4.3

Comparative economic growth, 1990–2006

efficiency and some fuel switching to renewables were unlikely on their own to reverse the rising emissions trend resulting from economic growth and, especially, growth of the oil sands production facilities.

3

GHG ABATEMENT POLICY: FORMIDABLE CHALLENGES

The GHG abatement target Canada committed to at Kyoto was not the first time the country had established targets for GHG emission reductions. Like other major industrial countries, it made previous commitments as early as 1988 at a G7 meeting, where it promised to hold its emissions in 2000 to their 1990 level, and also at the World Conference on the Changing Atmosphere, where it committed to have emissions in 2005 at 20 per cent below 1990 levels (Sustainability Report 2004). Then, at the Rio Conference in 1992 it reaffirmed its commitment that emissions in 2000 would be no higher than their 1990 levels (Government of Canada 1992).

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Canadian GHG emissions (Mt CO2e)

900 800 Green 700 Plan

National Action Program

Action Plan 2000

Climate Change Plan for Canada

Project Green

EcoENERGY

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500 400

Kyoto (1997) World Conference on Changing Atmosphere (1988)

300 200 100 0 1990

Source:

1995

2000

2005

2010

Simpson et al. (2007).

Figure 4.4

Canadian targets, policies and emissions

Following these earlier commitments, and then again following Kyoto in 1997, the government launched major policy initiatives to reduce GHG emissions in line with its commitments. In fact, since its first target in 1988, the government has initiated six separate climate policy packages, each with its own name. Figure 4.4 shows the evolution of GHG emissions over the last two decades in relation to the various reduction targets (below the emissions line), along with the timing and names of the major policy initiatives (above the line). The figure suggests that Canadian climate policy has been completely ineffective. Policies have not reversed the rising emissions trend, with the result that two commitments – for emissions levels in 2000 and 2005 – have already been missed and a third – the Kyoto commitment for 2010 (or an average of 2008–12) – is about to be missed by as much as 30 per cent. This evidence is alarming to those Canadians who want to see the country play a leadership role in addressing the climate change risk. But it is also alarming to those who worry about the possible legal and economic repercussions when their country fails to comply with an international agreement such as the Kyoto Protocol, which includes penalty mechanisms for non-compliance. Part of the reason for this failure undoubtedly stems from the challenges that all countries are facing in implementing effective GHG abatement policies. Canadian policies thus far have mostly involved admonishments to voluntary actions by individuals and businesses to improve energy

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efficiency, with a few subsidies to help things along. To get substantial emission reductions, however, it is now widely recognized by independent experts, and increasingly by industry, environmentalists and public policy advisors, that compulsory policies are required that either directly price emissions or indirectly reflect an emissions cost by regulating technologies and fuels (Stern 2007). Direct pricing of emissions is achieved with either carbon taxes or with an emissions cap-and-trade regulation which results in prices for tradable emissions permits. Indirect costing of emissions results from policies that restrict technology choice (for example, vehicle efficiency or emission standards) or fuel choice (for example, a percentage requirement for renewable electricity generation or for a percentage requirement for biofuel content in gasoline and diesel). Several jurisdictions, particularly European countries, have implemented some of these policies. In the case of direct pricing of emissions, Scandinavian countries have had pricing schemes in place for almost two decades. In 2002, the European Union committed to an emissions cap-and-trade system, which came into force in early 2005. Despite these examples of emissions pricing and the clear failure of its own policies to achieve its earlier targets, Canada has made little progress in the transition toward the compulsory pricing and regulatory policies that are required. There are a couple of key reasons. A major reason is that Canada is a relatively decentralized federation, with considerable powers bestowed upon its provincial governments, powers that include ownership and control of natural resources. Alberta’s provincially owned petroleum resources were the cause of a substantial national dispute between that province and the federal government during and after the oil price shocks of 1973 and 1979. The federal government responded to these shocks by controlling domestic oil prices, taxing some of the economic rents earned by oil producers, which were located mostly in Alberta, and creating a state-owned oil company (PetroCan) to participate in all stages of the oil industry, from exploration and development to refining and retail distribution. The Alberta government claimed that the federal government was interfering with its natural resources far in excess of its authority under the constitution. Nonetheless, the Liberal Party, which had long held federal power in Canada, consolidated these policies in its National Energy Program of 1980, which although it was dismantled once the Conservative Party took control of the federal government in the late 1980s, has remained a symbol for western Canadians of central Canadian efforts to confiscate their resource wealth. For many Albertans, the GHG emissions reduction commitments of the Canadian government in the 1990s, especially in the period after Kyoto in 1997, represented yet another incursion of the federal government into

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their natural resource domain. Once again, the Albertan petroleum industry was in an expansionary phase, this time with the development of oil sands instead of conventional oil. Once again, the international price of oil was rising, especially after 2000, increasing dramatically the revenues at stake. Once again, the federal government’s actions potentially threatened the ability of Alberta to determine how and at what speed it would develop its petroleum resources. Once again, some of the federal policies, in this case to reduce GHG emissions, could result in a revenue transfer from Alberta to the rest of the country, an example being a carbon tax – which would collect about 33 per cent of its revenue from Alberta and return only about 15 per cent back to that province, if the revenue were recycled using country-wide income and corporate tax cuts. As it often does, financial self-interest also had an effect on human perceptions of scientific evidence. As late as 2002, polls indicated that substantially fewer Albertans than central Canadians believed in the likelihood of human-induced climate change from combusting fossil fuels (Maclean’s Magazine 2002). The Alberta government, controlled by the Conservative Party for over three decades, thus received widespread local support in its resistance to federal climate policies, other than those noncompulsory policies that would not price emissions and would not hinder the continued, rapid expansion of Alberta’s oil sands. A second key reason for the failure of Canada to implement effective climate policy was the importance of the US as a trading partner. The US accounts for 79 per cent of Canadian exports (Global Insight 2008). Assuming that the two countries needed to act in concert, with comparable targets, the Canadian delegation at Kyoto was directed to negotiate a target close to that of the US (Simpson et al. 2007). A comparable target was seen as safe because, on the one hand, it would show that Canada was a committed environmental participant, like the US government of President Bill Clinton and Vice-President Al Gore, and, on the other hand, it would ensure that the Canadian economy was not burdened with a more expensive target than that of its major trading partner. This would allow the federal government to justify its target to all Canadians except perhaps those inhabiting fossil fuel-rich Alberta and Saskatchewan. The US target of a 7 per cent reduction of emissions from 1990 levels was bound to be more expensive to achieve than Europe’s target of an 8 per cent reduction. As noted above, the dramatic drop of British and German emissions since 1990 and the much slower population and even economic growth rates of Europe compared to North America since that time meant that a similar percentage reduction in both jurisdictions would require a much greater effort, hence much higher economic costs in the US (and in Canada). Once US legislators came to appreciate this reality – thanks

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to analysis by the Energy Information Administration (an independent analysis agency of government which Canada sorely lacked) – it became obvious that they would not ratify Kyoto. Bill Clinton dared not push for ratification during his final years in office, and the election of George Bush in 2000 ensured US withdrawal, which was formally announced in 2002. In spite of the US withdrawal, and in spite of a great outcry from the Albertan government and Canadian business leaders, the Canadian Liberal government of Prime Minister Chrétien ratified the Kyoto Protocol in 2002. At the same time, Chrétien promised Albertans and the oil industry that government climate policy would not include a charge on GHG emissions (Jaccard 2007). The government did propose an emissions trading system, but it negotiated this with industry from the signing of the Kyoto Protocol in 1997, right through the ratification of the Protocol in 2002, without ever actually implementing it. These negotiations were continued by a new Conservative government, first elected to minority status in 2006. One might suggest that Canadian governments have been playing a double game – feigning international leadership by setting aggressive targets while, in fact, waiting for the US to finally act. Some might argue that while Canadian climate policy was a failure from the perspective of meeting GHG emission reduction targets, it was actually a political success. The combination of aggressive targets with ineffective policies meant that the Canadian government mostly achieved its political goal, which was to retain support in central Canada by appearing to care seriously about climate change while, at the same time, doing little in order not to antagonize Albertans and Canadian business leaders. This perception of Canada’s policy is only reinforced by the fact that revenues from Alberta and Saskatchewan’s rapidly growing petroleum industry were becoming significant at a national level. In 2006, for example, while the petroleum industry paid Can $20 billion in income tax and royalties to the Alberta government, it also paid Can $5 billion in income tax to the federal government (Manning and Kerr 2006). And because of its high per capita provincial revenues, the Alberta government also transfers, under Canada’s equalization formula, substantial funds to the federal government for distribution to provinces that are less well off. All Canadian politicians are increasingly aware of the financial power of western Canada’s petroleum industry, and with financial power comes political power.

4

CCS: THE CANADIAN COMPROMISE

The continued growth of Canadian GHG emissions over the past decades has exposed the government’s claim that its non-compulsory policies were

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effective, and this has motivated a growing chorus of researchers, environmentalists, journalists and even some business leaders and politicians to acknowledge the need for compulsory policies like carbon taxes, emission caps, and regulations on technologies and fuels. Some have even argued for a halt to expansion of Alberta oil sands and coal-fired power plants (Marsden 2007). Of course, the dominant view in Alberta and Saskatchewan is quite different. With broad public support, political leaders in these two provinces continue to warn central Canada not to interfere with their right to exploit their natural resources. The risk of yet another constitutional and political crisis is substantial. From a legal perspective, this would pit the authority of the federal government to make and comply with international treaties and to protect the environment against the authority of the provinces over natural resources.1 From a political perspective, this would replay the east–west tension that plagued Canadian politics from the mid-1970s to the mid-1980s. This constitutional and political situation helps explain why CCS has come to be seen by many Canadian political leaders in a very attractive light. If CCS can work from a technical, economic and public acceptance perspective, it could play a big role in resolving this conflict. CCS enables Canada to finally make progress in reducing its GHG emissions while allowing Alberta and Saskatchewan to continue exploiting their petroleum and coal resources. If CCS can work on a massive scale, it removes the conflict between fossil fuels and the climate risk. Regions endowed with fossil fuels can still use these resources for their economic and social benefit without becoming pariahs in the global community. Indeed, these specific conditions in Canada make it a microcosm for testing this broad strategy for using fossil fuels more sustainably (Jaccard 2005). Thus, the position in Alberta and Saskatchewan has gradually shifted over the past decade from one of denial of the climate change risk, including resistance to effective GHG abatement policies, to one of promotion of CCS as a solution that allows continued fossil fuel use. And CCS does more than resolve the internal conflict within Canada. It also addresses the risk that Alberta’s oil sands might one day be excluded from the US, which is by far its major market. Environmental organizations in the US increasingly argue for a ban on imports from Canada’s oil sands facilities. The reason is that a barrel of oil from the oil sands produces three to five times more GHG emissions in its production stage than does a barrel of oil from a typical conventional oil well. Recent political and regulatory proposals in the US have sensitized Albertan producers to the risk of market exclusion because of these high GHG emissions. In its aggressive climate policy initiatives, California has emphasized the importance of accounting

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for ‘upstream emissions’ when it acquires electricity or petroleum products from outside its jurisdiction. In other words, the production emissions associated with electricity imported into California from a coal plant in Wyoming or Alberta should be accounted for, perhaps resulting in an additional permit fee or even market exclusion. Likewise, the production emissions associated with petroleum products from Albertan oil sands should be accounted for, perhaps leading to market exclusion (Crane and Prusnek 2007; Lauerman 2009). Similar developments may occur at the federal level in the US. Although later weakened through amendments, Section 526 of the Energy Independence and Security Act of 2007 would have blocked the US government, including the military, from buying unconventional fuels with higher lifecycle GHG emissions than conventional petroleum (Chi Ha 2008). The implications of this policy for Alberta oil sands are uncertain, but these developments have helped to make the risk a real concern to business and political leaders in Alberta. CCS has also attracted the interest of the electricity generation companies in Alberta and Saskatchewan, where most electricity is generated by coal. Here the situation is similar to other countries in that environmentalists are making inroads in convincing the public and gradually politicians that new coal plants without CCS can no longer be countenanced, given the huge reduction in GHGs that scientists say must occur over the next several decades. Corporate leaders are aware that, as in the US, the next initiative to construct a new coal-fired power plant in Canada will become a lightning rod for environmentalists, perhaps leading to civil disobedience. The Albertan electricity sector is dominated by TransAlta, a private company based in Calgary, and EPCOR, a municipally owned utility based in Edmonton. Both of these are conducting detailed studies on the prospects for CCS integration into their next power plants. The Saskatchewan electricity sector is controlled by the provincially owned SaskPower. It had been planning to build North America’s first greenfield clean-coal plant with CCS, but after project costs more than doubled from Can $1.5 billion to Can $3.8 billion, the project was abandoned in late 2007 (Johnstone 2007; SaskPower 2009). While previous Liberal governments at the federal level had shown a growing interest in CCS, the election of a Conservative minority government in 2006, led by Stephen Harper from Alberta, provided additional impetus to the development of a national effort to resolve the climate versus fossil fuel tension with its potential for east–west conflict in the Canadian federation. Indeed, greater cooperation between the Alberta and federal governments has led to a flurry of reports by industry and government on CCS, ranging from studies of specific projects to strategic studies for national and provincial policy. One notable study is that of the

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GHG emissions (Mt CO2e)

1,400 CCS and EE overlap

1,200 1,000 Policy emissions

Output change

Energy efficiency (EE)

Top line is BAU emissions

CCS Fuel switching

800 600 400 200 – 2005

Source:

2010

2015 2020

2025

2030

2035

2040

2045

2050

NRTEE (2008).

Figure 4.5

Sources of GHG reduction by 2050

Carbon Capture and Storage Task Force appointed by the Alberta and federal governments. It released its conclusions in early 2008 calling for Canadian CCS leadership, which should include: 1. 2.

3. 4.

creation of a government-industry collaborative to fund the first CCS projects, including a recommended Can $2 billion of public funding; government-industry co-operation to ensure the coordinated development of carbon capture projects, carbon storage projects and a CO2 pipeline system to link these; government development of regulatory protocols for ensuring disposal rights and allocating long-term liabilities; and widespread efforts by government, industry and other public opinion leaders to educate the public about the potential benefits and risks of CCS for Canadians (ecoEnergy CCS Task Force 2008).

This task force report estimated the long-term potential for CCS in Canada at close to 600 MtCO2/year, which is in line with a report the previous year by the National Roundtable on the Environment and the Economy, an advisory body to the federal government tasked with assessing how Canada could reduce its emissions 60–70 per cent by 2050 (NRTEE 2007). Figure 4.5 from their report shows that CCS could account for at least 500 MtCO2/year by 2050. The federal government has allocated Can $375 million to CCSrelated activities since 2006, including the commitment to provide Can $250 million for the proposed coal-fired generation plant with CCS in

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Saskatchewan. In its 2009 budget, the government committed an additional Can $1 billion over five years to clean energy technologies of which Can $150 million is for research and Can $850 million is for funding clean technology demonstrations. While the funding is open to various clean energy technologies, only CCS is explicitly referenced as a potential recipient of this support. As of early 2009, the government had shortlisted eight separate projects for funding. Finally, the federal government also committed in its 2009 budget to provide an accelerated capital cost allowance tax break for investments in CCS. The Alberta and Saskatchewan governments have also allocated substantial funds for CCS, although again the full dispersement of the money will not occur until an actual project is launched. Alberta has committed Can $2 billion to partially fund the construction of three to five large-scale carbon capture and storage projects by 2015, with priority being given to projects that can be constructed quickly and will result in the greatest GHG reductions. Twenty companies have been shortlisted to submit detailed proposals, with project evaluation and selection scheduled for April 2009 (Alberta Energy 2008). The Saskatchewan government is supporting the rebuilding and retrofitting of SaskPower’s Boundary Dam coal-fired power plant to enable post-combustion CO2 capture, with the plan being to sell the captured CO2 for enhanced oil recovery (EOR) projects. The federal and provincial governments are each contributing Can $240 million to the project, with the remaining Can $758 million to be provided by the provincially owned utility SaskPower (Mining Weekly 2008; Saskpower 2008). As noted, the major electricity companies in Alberta and Saskatchewan – EPCOR, TransAlta and SaskPower – are interested in CCS and at times appear to be on the verge of committing to a major CCS project. The major oil sands companies, such as Suncor and Syncrude, also express interest in CCS, although again specific projects have not been forthcoming. The oil company, EnCana, is also a major player in CCS discussions by virtue of its construction and operation of a significant CO2 pipeline, which transports CO2 from North Dakota for the purposes of underground injection at an enhanced oil recovery project in southern Saskatchewan (near the town of Weyburn). These corporations also participate alongside other firms in collective industry initiatives to enhance the prospects for CCS. One important entity is the Integrated CO2 Network (ICO2N), which has proposed a framework for funding, designing and building a network of CO2 pipelines in western Canada. Another is the Alberta Saline Aquifer Project (ASAP), which is a consortium of 34 companies that are developing a pilot site for commercial scale CCS targeting saline aquifers for storage sites. ASAP’s

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initial goal is to sequester 1,000 tonnes of CO2 per day by 2010, reaching 10,000 tonnes by 2015. While CCS has garnered growing support from political and industry leaders, the technology presents a quandary for environmentalists. On the one hand, environmentalists have traditionally promoted energy efficiency and renewable energy sources as the cornerstones of a sustainable energy system. Humanity should reduce its use of both fossil fuels and nuclear energy and eventually replace these completely with renewables. On the other hand, reducing GHG emissions within just a few decades is a monumental task, so the potential contribution of CCS cannot be overlooked. As the Canadian example shows, it is significantly less difficult to convince regions that are endowed with fossil fuels to pursue CCS than to convince them to forgo altogether the exploitation of these wealth-providing resources. If rapid progress in reducing emissions is to occur, it may be necessary to compromise on CCS. While most were initially opposed to CCS, several environmental organizations in Canada have gradually shifted to this more accommodating position. They are willing to support research into CCS and to accept it as one of the considered options for GHG reduction provided that industry pays almost all the costs, that CCS proves to be relatively cost effective, and that its risks are shown to be negligible (Sharp 2006, 2008a). However, environmental organizations also insist that CCS should only be allowed as part of a consolidated effort that puts most emphasis on energy efficiency and renewables. The Pembina Institute, an environmental organization with origins in Alberta, has devoted considerable effort to developing its position on CCS, including organizing a stakeholders workshop on CCS in November 2008. According to the report from the workshop: The Pembina Institute views CCS as one of a number of potentially effective technologies for reducing GHG emissions on the scale required to combat catastrophic climate change. It is also critical that CCS is seen as part of the portfolio of solutions and that we ensure adequate attention is also paid to more sustainable, low-impact solutions such as ramping up on renewable energy and energy efficiency. The urgent need to deal with Canada’s rising emissions . . . compels consideration of CCS, but it is not without environmental risks and barriers to implementation. (Pembina Institute 2008)

A similar position is held by other prominent environmental organizations, such as the Sierra Club, the World Wildlife Fund and the David Suzuki Foundation. Like Pembina, these organizations support consideration of CCS to the extent required for rapid emission reductions, as long as the greatest effort is made in energy efficiency and renewables. They also

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want liability for storage sites to remain with industry much longer than what is being suggested by regulatory experts, government and industry. And they are all also concerned that CCS is largely unproven, has significant risks which have not yet been adequately addressed, and may well prove too expensive relative to alternatives. Greenpeace Canada, in keeping with the position of Greenpeace International, is the one major environmental organization that is completely opposed to CCS. It argues that CCS is too expensive and that its pursuit by government will crowd out investments in more desirable options for GHG emission reductions, again these being efficiency and renewables. Ultimately, the success of CCS in Canada will depend on public acceptance. But, as in other countries, the likelihood of public acceptance is a huge uncertainty because the public is almost completely unaware of the technology. And the preliminary surveys conducted thus far suggest that support for CCS is likely to be uncertain for some time to come, dependent upon early experiences with the technology. While initial public opinions about CCS are mildly positive, they are also unstable, and susceptible to large swings based on how the media portrays CCS and the level of support CCS enjoys in other countries. Initial surveys of current and potential public perceptions in Canada suggest that CCS will be seen as less risky than nuclear power plants and may even be comparable in perceived risk to coal-fired power plants, and oil and gas production and refining (Sharp 2008b; Sharp et al. 2009). However, a significant mishap in the early years of CCS development could turn public opinion strongly against this option, just as nuclear accidents had a profound effect on that industry in the US in the 1980s.

5

CCS AND EMERGING CLIMATE POLICY

For most of the past two decades, provincial climate policies have differed little from the federal government, being largely information and subsidy programmes, without any application of the compulsory policies that make it costly to choose or use technologies that emit GHGs. However, this changed abruptly in 2007 when the British Columbia government followed California’s lead in setting aggressive GHG targets and then matched these with the development of compulsory policies. In January 2007, BC radically changed its electricity policy, mandating the stateowned BC Hydro to acquire virtually all of its new electricity supply from non-emitting sources. The policy specified that coal-fired power plants would only be permitted if they included CCS. This led to the withdrawal

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of two proposed plants, whose proponents had already signed letters of intent with BC Hydro. BC also joined the California-led Western Climate Initiative, a collaborative effort between US states and Canadian provinces to develop a region-wide emissions cap-and-trade system. In 2008, Ontario, Manitoba and Quebec joined the initiative, meaning that absolute caps on GHG emissions would ultimately apply to 75 per cent of the Canadian population. This approach to climate policy differed significantly from that developed by the governments of Canada and Alberta. Both of these crafted a regulatory approach that some argue is tailor-made to ensure that oil sands expansion is not overly hindered by climate policy. In particular, both established ‘intensity-based’ emission caps on industrial GHG emissions, applying a mix of softer measures to emissions from the rest of the economy. An intensity-based cap requires that emissions per unit of output (for example, CO2/tonne of steel) decrease over time. While government public relations people refer to this as a ‘cap’, policy analysts avoid the word; instead they call it a ‘performance standard’ because it is not an absolute cap on emissions (Newell 2008). Indeed, if output grows faster than the regulated rate of intensity decline, then emissions would actually increase. The Alberta policy, already in force in 2008, called for a one-time decrease in emissions intensity of 12 per cent (Alberta Environment 2009). It is silent on reductions in future time periods. Federal policy called for an 18 per cent intensity reduction in 2010, from 2006 intensity levels, and a further decline of 2 per cent per year thereafter (Environment Canada 2008). The draft federal policy also referred specifically to CCS by setting intensity standards for new oil sands production facilities and new coal-fired electricity plants completed after 2018 based on the assumption that such plants would include CCS. Both the Alberta and the federal industry policies also provide a mechanism to raise funds that might eventually be applied to support CCS. In the case of Alberta, for each tonne of CO2 emissions in excess of their intensity target, industry must pay Can $15 into a government-administered technology fund. The government claims that it is likely to use such funds to support transformative investments, such as early CCS projects, including perhaps the CO2 backbone pipeline shown above in Figure 4.2. The federal government policy includes a similar payment of Can $15/tCO2 into a technology fund, which it too has tentatively earmarked for early investments, especially CCS.2 Since most of the technology fund revenue would come from Alberta and since the technology fund investments in CCS would be in Alberta, this approach is seen as also alleviating concerns about regional transfers within the Canadian federation. While the industry-focused climate policies of both Alberta and the

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federal government appear to finally put Canada on the path of compulsory climate policies, it is important to recognize that both policies contain potential loopholes that might allow industry not to reduce emissions at all. Both the Canadian and the Albertan regulations allow industry to opt for offsets instead of reducing their emissions. An offset is a payment to some other party to reduce their emissions. A regulated entity would purchase an offset where its price is lower than the cost of reducing its own emissions. The challenge with offsets, however, is that these are subsidies from a regulated entity to an unregulated entity, and as such there is no way of verifying how much the unregulated entity would have emitted in the absence of the offset payment. History cannot be replayed twice. In its cap-and-trade system, the EU has capped the offset option at 15 per cent of the required emissions reduction. It wanted to make sure that industry actually reduced its emissions. However, there is no cap in the Alberta and Canada policies. Thus, Canadian industry might not reduce its emissions, but would instead pay other firms and individuals in the economy to ‘appear’ to reduce their emissions. It could take a decade before we learn how effective or perhaps ineffective this policy was. If it can ensure the permanent storage of CO2, CCS can make a major contribution to the global public good of reducing GHG emissions. But for this to happen, advocates of CCS need to convince the public and regulators that this technology can be safe at a local level and provide secure storage over the very long term. This requires the development of regulatory policies for carbon capture facilities, CO2 pipelines and especially CO2 storage sites. Since storage sites are supposed to hold CO2 virtually forever, the liability must ultimately transfer from industry to society. In this regard, the federal and Alberta governments have stepped up their efforts to research and negotiate long-term management of CO2 disposal sites. This is an area in which Alberta already has some experience. Alberta has over 50 sites where acid gas from the natural gas industry is disposed of by injection into geological storage, most of it in deep saline aquifers (International Energy Agency Greenhouse Gas R&D Programme 2008). In some cases, the CO2 content of the acid gas is above 80 per cent. And in some cases, the storage sites are near major population centres. Nonetheless, the public permitting process has generally been uncontroversial. The acid gas injection programme operates without problems and, in fact, there is little public awareness of the extensiveness of the activity. While this experience is not completely analogous, its success augers well for effectively organized, operated and regulated CCS operations.

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FUTURE DIRECTIONS: CANADA AS POLICY TAKER

Canada is dependent on CCS for resolving a long-standing tension between its fossil fuel-rich western prairie provinces of Alberta and Saskatchewan, on the one hand, and central Canada, on the other. While central Canada still dominated the country economically and politically just a few decades ago, the shift of population growth to western Canada and, more importantly, the shift of economic power to Alberta, with its vast oil sands resource, is reflected in the country’s emerging climate policies. In recent years, Canada’s climate policies have evolved to ensure that GHG emission imperatives would not overly hinder the continued exploitation of western Canada’s plentiful fossil fuel resources. The government’s performance-based industrial regulations have been designed in part to ensure continued growth of the oil sands and continued use of coal for electricity generation. And any revenues resulting from these regulations, by firms exceeding their intensity-based emission allowances, are concentrated in a technology fund that can be returned to the fossil fuel areas to fund demonstrations and even major investments in CCS. Finally, the government has separately allocated substantial funds from general revenues (recently committing a further Can $1 billion) to finance CCS research and development and even the first industrial CCS investments. But even these substantial financial commitments from government are unlikely to spur industry to commit even larger sums of its own unless there is a prospect that future GHG emissions truly will have a price associated with them, that governments will indeed implement compulsory policies that price and regulate GHG emissions. In this regard, the end of the eight-year George Bush presidency and the new domination of the US Congress by the Democrats suggest to many observers that by 2010 or 2011 the US will finally pass legislation to place an absolute cap on national GHG emissions. When this occurs – even prior to this occurring – the Canadian government will be under extreme pressure to enact a similar policy, presumably with harmonization of the systems in each country. In fact, the Canadian government has already started to anticipate this eventuality. Within days of President Obama taking office, the Canadian prime minister announced that he had proposed to the US government a shared GHG cap-and-trade system with the US. If policy does move in this direction, industry and government support for CCS in Canada should get even stronger in the next few years. At the same time, however, the international price of oil has fallen from its peak above US$140 per barrel in 2008 to less than US$40 per barrel in early 2009. This fall in the oil price was triggered in part by the global

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financial crisis. Both of these major developments create new challenges for CCS, especially for oil sands-related CCS. First, several new oil sands projects have been delayed or cancelled, reducing the opportunities for CCS investments. Second, government revenues from the petroleum industry have fallen rapidly, decreasing the funds available for CCS. The future of CCS in Canada is thus very uncertain. On the one hand, a resurgent US focus on climate policy will put pressure on CCS in the oil sands sector. On the other, that sector may be less able to invest in CCS because of financial constraints and lower oil prices. One possible outcome is that CCS with coal-fired power plants, in both Alberta and Saskatchewan, will again become the focus of attention for industry and government.

NOTES 1. A recent study by one of Canada’s leading legal experts maintains that the federal government has clear authority to regulate GHG emissions (Hogg 2008). 2. It is not clear if the federal payments will be additive to the Alberta payments by industry, or if payments to the Alberta government will be seen as sufficient by the federal government. In its current incarnation, the technology fund is slated to be phased out by 2018.

REFERENCES Alberta Energy (2008), ‘Carbon Capture and Storage’, available at http://www. energy.gov.ab.ca/Initiatives/1438.asp, last accessed 15 February, 2009. Alberta Environment (2009), ‘Alberta’s Climate Change Strategy’, Alberta Environment, Edmonton, AB, available at http://www.environment.alberta. ca/2792.html, last accessed 15 February, 2009. Bachu, S. and S. Stewart (2002), ‘Geological sequestration of anthropogenic carbon dioxide in the Western Canadian Sedimentary Basin: suitability analysis’, Canadian Journal of Petroleum Technology, 41 (2), 32–40. Canadian Association of Petroleum Producers (2006), ‘Canadian Crude Oil Production and Supply Forecast 2006–2020’, available at http://member net.capp.ca/raw.asp?x=1&dt=NTV&e=PDF&dn=103586, last accessed 15 February, 2009. Chi Ha, K. (2008), ‘Defense Bill Raises Conflicts’, The Hill, Washington, DC, 4 June, available at http://thehill.com/business--lobby/defense-bill-raisesconflicts-2008-06-04.html, last accessed 15 February, 2009. Crane, D. and B. Prusnek (2007), ‘The Role of a Low Carbon Fuel Standard in Reducing Greenhouse Gas Emissions and Protecting Our Economy’, White Paper, State of California, Office of the Governor, Sacramento, CA, available at http://gov.ca.gov/index.php?/fact-sheet/5155/, last accessed 15 February 2009. ecoEnergy Carbon Capture and Storage Task Force (2008), ‘Canada’s Fossil

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Energy Future: The Way Forward on Carbon Capture and Storage’, ecoEnergy CCS Task Force, Calgary, AB. Energy Information Administration (2003), International Energy Annual, Washington, DC: EIA. Environment Canada (2008), ‘Turning the Corner: Regulatory Framework for Industrial Greenhouse Gas Emissions’, Government of Canada, Ottawa, available at http://www.ec.gc.ca/doc/virage-corner/2008-03/pdf/COM-541_ Framework.pdf, last accessed 15 February, 2009. Global Insight (2008), ‘Canada’s trading partners over the past 10 years: does the changing landscape matter?’, Perspectives, 4 February, available at http:// www.globalinsight.com/Perspective/PerspectiveDetail11472.htm, last accessed 15 February, 2009. Government of Canada (1992), ‘The Rio Earth Summit: Summary of the United Nations Conference on Environment and Development’, Government of Canada, Ottawa, available at http://dsp-psd.pwgsc.gc.ca/Collection-R/LoPBdP/ BP/bp317-e.htm#Now, last accessed 15 February, 2009. Harrison, C. and L. Sundstrom (2007), ‘The comparative politics of climate change’, Global Environmental Politics, 7 (4), November, 1–18. Hogg, P. (2008), ‘A Question of Parliamentary Power: Criminal Law and the Control of Greenhouse Gas Emissions’, C.D. Howe Institute Backgrounder No. 114, Toronto. International Energy Agency Greenhouse Gas R&D Programme (2008), Geologic Storage of CO2: Staying Safely Underground, Cheltenham, UK: IEA. Jaccard, M. (2005), Sustainable Fossil Fuels: The Unusual Suspect in the Quest for Clean and Enduring Energy, Cambridge and New York: Cambridge University Press. Jaccard, M. (2007), ‘Canada’s Kyoto delusion’, Literary Review of Canada, Toronto, January/February, 8–12. Johnstone, B. (2007), ‘Coal industry not surprised project dropped’, Leader Post, 12 September, Regina, Canada, available at http://www2.canada.com/reginal eaderpost/news/business_agriculture/story.html?id=980eefb2-63de-4a0c-9e7d677aa2c23eb3, last accessed 15 February, 2009. Lauerman, V. (2009), ‘Dreaming yes, Paranoia no’, National Post, 2 February, Toronto, available at http://www.financialpost.com/trading_desk/energy/story. html?id=1244202, last accessed 15 February, 2009. Maclean’s Magazine (2002), ‘Maclean’s 2002 Year-End Poll’, Maclean’s Magazine, available at http://www.thecanadianencyclopedia.com/index.cfm?PgNm=TCE &Params=M1SEC677158, last accessed 15 February, 2009. Manning, P. and F. Kerr (2006), ‘Alberta is Already Spreading the Wealth’, Globe and Mail, Toronto, 1 August. Marsden, W. (2007), Stupid to the Last Drop: How Alberta Is Bringing Environmental Armageddon to Canada (And Doesn’t Seem to Care), Mississauga, Canada: Knopf Canada. Mining Weekly (2008), ‘Canada’s Saskatchewan investing in carbon capture and storage demo plant’, Mining Weekly, Johannesburg, available at http://www. miningweekly.com / article / canada039s-saskatchewan-investing-in-carbon-cap ture-and-storage-demo-plant-2008-03-21, last accessed 15 February, 2009. National Roundtable on the Economy and the Environment (NRTEE) (2007), ‘Getting to 2050: Canada’s Transition to a Low-emission Future’, NRTEE, Ottawa, available at http://www.nrtee-trnee.com/eng/publications/

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getting-to-2050/Getting-to-2050-low-res.pdf, last accessed 15 February, 2009. Newell, R. (2008), Climate Technology Deployment Policy, Washington, DC: Resources for the Future. Pembina Institute (2008), Pembina eNews Special Issue: Carbon Capture and Storage, Pembina Institute, Drayton Valley, Canada, available at http://www. pembina.org/enews/archive/2008-12ccs.html, last accessed 15 February, 2009. SaskPower (2008), ‘New Federal Funding Opens Door to Major Carbon Capture Demonstration Plant in Saskatchewan’, 27 February, available at http://www. saskpower.com/aboutus/news/?p=368#more-368, last accessed 15 February, 2009. SaskPower (2009), ‘Clean CO2al project’, available at http://www.saskpower.com/ cleancoal/, last accessed 15 February, 2009. Sharp, J. (2006), ‘Survey of Stakeholder Attitudes toward Carbon Capture and Storage in Ontario’, Report to the Power Workers Union of Ontario, M.K. Jaccard & Associates, Vancouver. Sharp, J. (2008a), ‘Carbon Capture and Storage – Online Survey of Sector Experts’, Pembina Institute, Drayton Valley, Canada. Sharp, J. (2008b), ‘Carbon Capture and Storage: The Views of the Canadian Public’ Pembina Institute, Drayton Valley, Canada. Sharp, J., M. Jaccard and D. Keith (2009), ‘Anticipating public attitudes toward underground CO2 storage’, International Journal of Greenhouse Gas Control, in press. Simpson, J., M. Jaccard and N. Rivers (2007), Hot Air: Meeting Canada’s Climate Change Challenge, Toronto: McClelland & Stewart. Smurzlo, C. (2008), ‘The integration of CO2 transportation and sequestration’, paper presented to the Canadian Institute CO2 Capture and Storage Conference, Calgary, Atlanta, 29 January. Stern, N. (2007), The Economics of Climate Change: The Stern Review, Cabinet Office, HM Treasury, London. Sustainability Report (2004), ‘An Environment and Sustainability Chronology’, Institute for Research and Innovation in Sustainability, Toronto, Ontario, available at http://www.sustreport.org/resource/es_timeline.html, last accessed 15 February, 2009.

5.

Technology as political glue: CCS in Norway Andreas Tjernshaugen and Oluf Langhelle

At first glance Norway’s role as a CCS pioneer may look odd. The country’s power supply is nearly 100 per cent hydroelectric, with no CO2 emissions. Furthermore, Norway is a major exporter of natural gas to the rest of Europe, which means that a breakthrough in CCS technology for coal-fired power plants is not necessarily in the country’s business interest. In many European countries, a fuel shift from coal to gas is considered an attractive option to reduce greenhouse gas (GHG) emissions in the short term. This would of course help increase the value of the large Norwegian gas reserves.1 The explanation for Norwegian policy makers’ keen interest in CCS can be found in four circumstances. First and most fundamentally, the conflict between climate and energy policy targets has been particularly intense and politically salient in Norway from the late 1980s onwards. This is mostly due to the combination of a large, economically important, offshore oil and gas industry with growing emissions, and a relatively high level of ambition in environmental protection. Norway is probably the only country in the world where a government has resigned on the issue of climate change and CO2 emissions. Second, the power sector somewhat surprisingly became the main flashpoint of climate policy controversies during the 1990s, because of plans to introduce power plants fired with natural gas from the Norwegian continental shelf to the country’s previously emissions-free power supply. An entrenched political conflict over gas-fired power has been the main driver for Norwegian CCS policy. During 1997–2005, CCS increasingly looked like the only strategy that could overcome this conflict to unite a majority coalition in Norwegian politics. Third, the particular regulatory environment and political signals in Norway combined with the relevant expertise and project opportunities in the oil and gas industry-led energy companies to launch early and ambitious CCS initiatives from the 1990s onwards. These include Statoil’s pioneering storage project for CO2 separated from natural gas at the Sleipner field in 98

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the North Sea, which was motivated by a unique CO2 tax on the offshore oil and gas industry. There have also been a number of proposals from industry to build power plants along the coast with CO2 capture, to use the CO2 for enhanced oil recovery (EOR), with final storage in offshore geological structures. While none of these has been realized to date, they have certainly helped convince Norwegian politicians that CCS is feasible and realistic. Fourth and finally, in Norway CCS has been promoted by highly visible environmental activists. Starting in the late 1980s, the technologists behind the first CCS initiatives were in close dialogue with the environmental movement as well as industry. From the mid-1990s, the Bellona Foundation embraced CCS as a compromise solution to the country’s entrenched climate/energy controversies, and forcefully promoted the idea to politicians and the public. These four circumstances fostered a unique situation: CCS became a recurring topic in political debate from 1997 and onwards, at times making its way to the very top of the national political agenda. Starting that year, CCS also became a key issue in the permitting process for proposed fossil-fuelled power plants, with some degree of ‘capture-readiness’ considered a minimum requirement. The state has sought to help develop improved CCS technologies through unusually generous funding for research, development and demonstration (RD&D) (Tjernshaugen 2007; van Alphen et al. 2009). Finally the state is currently planning to provide funding to capture CO2 from two gas-fired power plants, as well as pipelines and geological storage at offshore storage sites. In the following we shall give a more detailed account of the emergence of the Norwegian enthusiasm for CCS. First, we outline some characteristics of the Norwegian energy system, industrial policy traditions, and domestic climate change politics that all shaped the national CCS debate. Then the main section of the chapter traces the policy process. The account is mostly structured chronologically, with an emphasis on political events. Finally, we offer some reflections on what we see as main challenges for the specific approach to CCS that has developed in the Norwegian context.

1

ENERGY RESOURCES AND INDUSTRIAL DEVELOPMENT

Norway’s energy system and economic structure are exceptional. Hydroelectricity provides nearly 100 per cent of domestic power generation for the electrical grid. Abundant power from the country’s waterfalls has made the country one of the top per capita electricity consumers worldwide. Households rely heavily on electricity for winter heating.

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The government has historically sought to promote industrial growth based on cheap electricity, and industries utilizing electricity to produce metals represent a substantial source of export income and are crucial for employment in a number of industrial towns along the western coast of the country. These industries also have significant political influence (Kasa and Malvik 2000). However, increasing power prices due to energy market integration and termination of beneficial long-term power contracts with the state has placed the profitability of these industries under pressure. The other main energy resource is oil and gas from the Norwegian continental shelf, which is mostly exported. After Norway started producing oil in the North Sea at the beginning of the 1970s, it has followed a unique development trajectory as a high-income, industrialized country with fossil fuels as its dominant export industry. No other industrialized country has a similar share of its economy linked to fossil fuel extraction. This does of course make concerns related to the petroleum industry particularly relevant to domestic policy makers. As we shall soon see, the large oil and gas sector is the source of many of the concerns, initiatives and resources which were behind the Norwegian engagement in CCS. It is important to note that Norway’s special history of energy-related industrial development has also had consequences in terms of institutions and mentality. For instance, it is a characteristic trait of the Norwegian ‘system of innovation’ that both public R&D funding and engineering education tend to be strongly geared towards the needs of major companies in the large, natural resource-based industries, such as Statoil and Norsk Hydro (Narula 2002). The experience of more than a hundred years of hydro-powered industrialization, topped by 30 years of petroleumfuelled growth, has led many Norwegians to look almost instinctively to large energy resources as the foundation for future prosperity and jobs. A recurrent theme in industrial policy is a push to diversify away from the country’s heavy reliance on natural resources (oil and gas, fish and hydroelectricity) by developing more advanced industries refining or improving extraction of those very resources. At the same time, government has traditionally been active in seeking to direct industrial activity for the benefit of regional development, employment, and the country’s technological capacity. For instance, oil and gas companies have been required to bring crude oil or natural gas to shore for processing in Norway, even where they would have preferred to pipe or ship the hydrocarbons directly to export markets. In recent years, a key policy goal has been increased domestic use of natural gas (Norwegian Ministry of Petroleum and Energy 2002). This goal, embraced by major political parties, regional interests and influential trade unions, is supposed to promote growth, job creation and innovation. However, it is sometimes discussed as if it were a goal in and of itself.

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A key factor in the development of CCS policy was the ambition on the part of energy companies and political leaders to introduce gas-fired power stations as a supplement to hydroelectricity. Part of the backdrop was intense environmental conflicts about new dam construction during the 1970s and 1980s, which led to a growing consensus in the 1980s and 1990s that there was little room for new large-scale hydroelectric projects. Initially, it was hoped that gas-fired power might prove a less controversial source of increased generating capacity. To its promoters, gas-fired power promises to satisfy two key political commitments: securing more electric power for households and energy-intensive industries, and using more natural gas within Norway’s borders. This helps explain the intense political engagement in favour of developing gas-fired power even at times when no private actors saw profitable investment opportunities. In fact, rising gas prices have made the profitability of gas-fired power marginal at best, and at times clearly negative.

2

NORWAY’S CLIMATE POLICY DILEMMA

Despite its status as a major exporter of fossil fuels, Norway made an early and strong commitment to help solve the problem of human-induced climate change. At least in principle, all branches of industry as well as the whole political spectrum apart from the populist Progress Party accepted the urgency of the problem from the outset of the debate. Norway’s selfimage as an environmental leader following the acid rain controversies of the 1970s and 1980s is one part of the explanation. Another is the prominent role played by former prime minister Gro Harlem Brundtland in international environmental affairs. In 1987, the World Commission on Environment and Development (WCED) headed by the Norwegian prime minister at the time, Gro Harlem Brundtland, presented its report Our Common Future (WCED 1987). Here, the question of human-induced climate change was highlighted as one of the main challenges facing the world. The report contributed to attracting political attention to the issue internationally and even more so in Norway (Lafferty and Meadowcroft 2000; Langhelle 2000). The ensuing debate placed the question of a national CO2 target firmly on the political agenda. In the pro-environmental political climate of the time, a broad majority in parliament soon passed a more stringent CO2 target than that proposed by the Brundtland government, and decided to stabilize emissions at the 1989 level by 2000 (Nilsen 2001; Reitan 2001). About the same time, negotiations concerning a global regime to limit human-induced climate change began. This process led to the adoption of the United Nations Framework

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Convention on Climate Change (UNFCCC) at the 1992 ‘Earth Summit’ in Rio de Janeiro. The Convention set a non-binding goal of stabilizing industrialized country GHG emissions at 1990 levels by 2000, very similar to the target defined by the Norwegian parliament. Seeking to lead the way in climate protection, parliament adopted a CO2 tax as early as 1991. The tax applied to emissions from road transport, offshore oil and gas extraction and some other sectors, while land-based export industries were largely exempted. However, trying to combine the roles of climate policy leader and fossil fuel exporter created a policy dilemma. During the first years of the 1990s it became clear that it would be difficult for Norway to fulfil its national stabilization target. In particular, unforeseen growth in oil and natural gas output from fields in the North Sea – partly as a result of technological advances in oil recovery – led to increases in anticipated emissions growth. Another concern for policy makers was that the sector where many European nations saw the largest potential for low-cost emission reductions – power generation – was already emissions free in the base year 1990. Consequently, abatement costs are relatively high in Norway, and paying for emission reductions abroad appears economically attractive. Not surprisingly, Norway was a leader in the push to introduce flexible implementation rules into the UNFCCC and the Kyoto Protocol including emissions trading and the multi-gas approach. Pointing to high domestic abatement costs, Norwegian negotiators also secured a Kyoto target that allowed a 1 per cent increase in emissions from 1990 levels. This approach was far from uncontroversial. From the early 1990s and up to the present day, the Norwegian climate policy debate has been characterized by the confrontation between two conflicting views (Hovden and Lindseth 2004). One, promoted by the environmental movement and its political allies, holds that Norway is obliged through international treaties to reduce GHG emissions within the country’s borders. The other, promoted by the oil and gas industry among others, emphasizes that mitigation efforts must happen through international frameworks such as the Kyoto mechanisms in order to be effective as well as cost efficient, and that the balance between domestic and international action should primarily be decided by the market. The clash between these two approaches has recurred in debates over the original national stabilization target (declared unachievable by the Brundtland government in 1995) as well as in the interpretation of Norway’s Kyoto commitment and proposals for climate policies beyond Kyoto. Supporters of domestic emissions reduction typically seize on the clause stating that use of the Kyoto mechanisms should be supplemental to national efforts. The view emphasizing international implementation has quite

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consistently been supported by a political majority composed of the Conservative, Labour and Progress parties. Still, the minority view emphasizing domestic emission reductions has remained influential – supported usually by the smaller Liberal, Christian Democratic, Centre, and Socialist Left parties, and a minority in the Labour Party including its youth branch. This is because the energy/environment issue area represents one of the core political cleavages which cuts across the traditional left–right axis in Norwegian politics (Knutsen 1997). The Liberal and the Socialist Left parties have been the two strongest contenders for filling the space occupied by Green parties in many Western European countries. Cross-cutting cleavages such as the energy/environment issue area are often crucial to building a sufficiently broad political coalition to form an effective government. In many cases they even divide political parties internally. Traditionally, nature conservation versus hydroelectric dams was the main issue activating the energy/environment axis. Over the past two decades, climate policy has become more important, with the question of CO2 emissions from gas-fired power plants as the most contentious issue. Environmental activists self-consciously modelled their mobilization against gas-fired power on earlier anti-dam movements, and succeeded in activating the same lines of conflict (Tjernshaugen 2007). It is an unusual aspect of Norwegian climate policy debates that gas-fired power, in many countries seen as an attractive alternative to emissions-intensive coal, is so controversial. The difference mainly lies in Norway’s emissions-free power sector in the baseline year for the national, UNFCCC and Kyoto targets. Any fossil-based power generation for the electric grid would add a new, major source to Norway’s domestic GHG emissions, which would of course make it even harder to meet targets to stabilize or reduce those emissions. Political disagreement about climate policy largely continues to follow the same fault-lines today, even if compromises in parliament and coalition governments often obscure the picture. When the centre-left coalition government announced new national emission targets in 2007, following a wave of renewed concern about climate change, the question of whether to reduce emissions at home or abroad was again at the centre of the debate. Prime Minister Jens Stoltenberg (Labour), a strong supporter of implementation through international mechanisms, proposed to make the economy ‘carbon neutral’ by 2050. This would involve reducing Norway’s own GHG emissions and offsetting the remaining through the purchase of emission reductions worldwide. Negotiations in parliament resulted in a compromise on emission targets among all parties except the Progress Party. It states that Norway should be ‘carbon neutral’ by 2030 provided that other industrial nations agree to ambitious targets.

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An interim target for 2020 is to reduce GHG emissions by 30 per cent compared with 1990. In very tentative terms, the compromise suggests that measures within Norway may contribute as much as two thirds of the difference between the 2020 target and a business as usual scenario. It was also decided to over-fulfil the Kyoto Protocol emissions reduction commitments for the years 2008–12 by 10 percentage points (the new target is 9 per cent under the 1990 level). This will probably be realized by buying permits abroad. There is as yet no comprehensive plan for how Norway will reach its targets (Kallbekken 2008). Norway’s freedom of action is bounded by the EU emissions trading directive, which limits the use of the Kyoto mechanisms in some respects. As a non-EU member state, but as a party to the European Economic Area (EEA) agreement, Norway is outside the EU negotiating and burden-sharing block in the Kyoto/UNFCCC process, but implements a large share of EU directives and participates in the EU framework programmes for R&D.

3

THE BEGINNING: CCS IN THE OFFSHORE OIL AND GAS INDUSTRY

CCS was first introduced to the Norwegian context as a way to reduce CO2 emissions from offshore oil and gas installations.2 In 1986 engineers at SINTEF Petroleum Research sent a research proposal to the then fully state-owned oil and gas company Statoil.3 Based on their experience from research into various methods for EOR, they proposed to develop a combined CCS/EOR concept for the Norwegian continental shelf. Most of the offshore production installations are powered by small gas turbines, which are the main source of CO2 emissions from oil and gas activity on the Norwegian continental shelf. The SINTEF researchers proposed to capture CO2 from the exhaust of such turbines, inject it into oil reservoirs to help enhance oil recovery, and to store it permanently in the depleted reservoir. Applying CO2-assisted EOR to offshore fields would have been a world first, as would have been underground storage of CCS for the purpose of climate protection. Their first study, running from 1986 to 1988, was sponsored by Statoil. However, the Norwegian Pollution Control Authority (SFT) was soon enlisted as a sponsor for a broader study of opportunities for CCS. During the early 1990s, SINTEF Petroleum Research worked with Statoil and others on several CCS-related research projects, including an EU-funded mapping of the potential for geological storage under the North Sea which was found to be huge.

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One of the SINTEF engineers, Erik Lindeberg, played a key political role in promoting CCS as a potential solution to the emissions from offshore petroleum activity, along with electricity cables from land to replace offshore gas turbines, and reduced flaring of natural gas. Lindeberg shared his ideas with an expert group at Statistics Norway preparing an assessment of the potential for reducing GHG emissions in Norway, and in 1990 he met with the relevant committee in parliament. Apparently these interventions helped convince decision makers that there was a considerable technological potential to reduce emissions from offshore oil and gas installations that might be unleashed by imposing a CO2 tax (Nilsen 2001: 115). In his private life Erik Lindeberg was active on the far left of Norwegian politics, and he clearly had considerable skill as a policy entrepreneur. For instance he contacted a local trade union branch in the mechanical supplier industry, pointed out the manufacturing jobs that would be needed to build offshore CCS facilities, and secured their help in getting the attention of key members of parliament. As early as 1988, he presented the concept to young environmental activists including several individuals who would play key roles in the later CCS debate. A few years later, the Minister of the Environment also visited to learn more about SINTEF’s CCS proposals, and helped secure funding for their work (Tjernshaugen 2007: 118–20). The original CCS concept from Lindeberg and his colleagues was never realized. In March 1993 the Norwegian Oil Industry Association (OLF), a body representing oil and supply companies active on the Norwegian continental shelf, presented the final report from a major programme assessing the sector’s environmental challenges and potential for improvement. The programme was initiated after strong urging from the Ministry of Petroleum and Energy, which foresaw conflicts between climate policy and future development of new oil and gas fields. The report generally tended to dampen optimism regarding technological solutions, including supplying electricity from land to replace the offshore gas turbines. It effectively put to rest CO2 capture from offshore gas turbines as a short-term option, pointing to the large amount of energy lost in the capture process and unfeasibly high cost (Nilsen 2001: 157–62). Two years later, a government white paper on climate policy did not mention post-combustion capture from gas turbines among the currently feasible mitigation options, but referred to ongoing research aiming to ‘develop technology which may be implemented technically and economically on petroleum installations’ (Norwegian Ministry of the Environment 1995: 127, authors’ translation). Another CO2 source existed in connection with some petroleum installations, however. The natural gas from the Sleipner West field in the North

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Sea contains a much higher amount of CO2 than considered acceptable for sale without treatment. Standard practice in such cases is to remove such excess CO2 and release it to the atmosphere before the gas is sold. Statoil chose an alternative process to capture this CO2 from the natural gas in an offshore separation plant and inject it in a water-saturated sandstone formation (a saline aquifer) nearly a kilometre below the seabed. The key driver for this decision was the Norwegian CO2 tax on offshore oil and gas activity. The capture and storage process demanded additional investments of about US$80 million. This, however, was close to what Statoil would have had to pay out in CO2 tax without CCS. The capture and storage concept for Sleipner West was initially conceived while the field was in the planning stage in 1990, and ‘the technical team was influenced by the discussions taking place in the Storting (Norwegian parliament) about climate change and a possible national carbon tax’ (Statoil 2002: 4, see also Christiansen 2001: 508–9). CO2 storage was operative from the start of production in 1996. Both large-scale capture of CO2 on an offshore installation and CO2 storage in a saline aquifer were tried for the first time in this project (Statoil 2002: 5). It was also the first commercial-scale CO2 capture and storage project motivated by reducing emissions (as opposed to projects aimed at producing CO2 for EOR or other industrial use). The capture and storage process is still in operation, and removes about one million metric tons of CO2 annually. When Norway reports its GHG emissions to the UNFCCC secretariat, the amount stored by Statoil in the Utsira formation is subtracted from the total (Norwegian Ministry of the Environment 2002b: 72). Building on its experience from Sleipner West, Statoil has also introduced a similar arrangement for geological storage of CO2 removed from natural gas from the Snøhvit field in the Barents Sea off the coast of northern Norway. Again the CO2 tax provided an incentive, along with Statoil’s need to present an environmentally acceptable project to government in order to obtain the necessary permits for its controversial first expansion into the arctic Barents Sea. The operation started up from 2008.

4

THE CCS DEBATE COMES ONSHORE

As a result of the work by Lindeberg and his colleagues, several CCS scenarios are mentioned in an early catalog of mitigation options for climate policy prepared by the SFT. Along with capture from offshore gas turbines, they include capture from gas-fired power plants on the mainland of Norway or from other point sources on the continent of Europe (SFT 1990). Despite this, in the Norwegian debate up until the mid-1990s, CCS

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was almost exclusively considered as an option to deal with emissions from offshore oil and gas activity. However, it was the prospect of onshore, ‘CO2-free’ power plants fired with natural gas that eventually propelled CCS technology onto the centre stage of Norwegian politics. The background was a fierce political struggle over whether to build conventional gas-fired power plants. During the 1990s this grew into the most politically explosive environmental issue in Norway. In the first major controversy over gas-fired power in 1990–91, the environmental movement and its allies in the Storting and within the Labour cabinet successfully opposed plans for a gas-fired power plant on the north-western coast of Norway. Citing the national stabilization target, the authorities denied the power plant the necessary building permits, but an equally controversial associated methanol production facility was approved in a political compromise. CCS strategies were never specifically proposed for this project, but the prospect of future technological solutions to the emissions challenge appears to have played a role in the considerations of Labour Party leaders (Tjernshaugen 2007: 118). The next stage in the conflict started during the summer of 1994, when new plans for gas-fired power plants in Norway were unveiled. The company Naturkraft was established to develop and run two power plants on the western coast. The owners were the petroleum company Statoil, power company Statkraft (both at the time fully owned by the state) and the partially state-owned industrial conglomerate Norsk Hydro, which operated power-intensive aluminium factories. Their plans (and later initiatives from other developers) were opposed by a coalition composed largely of the standard environmentalist side of the energy/environment political cleavage. The issue became particularly charged when a group of young environmental activists from the organization Nature and Youth launched a campaign threatening the government with massive civil disobedience, self-consciously modelled on earlier Norwegian anti-dam movements. Their mobilization resonated with a major national political trauma associated with the Alta controversy, a conflict over a hydroelectric dam in an area traditionally belonging to the Sami people, the indigenous population in much of northern Scandinavia. The anti-gas activists never expected CCS to play an important role in the conflict over gas-fired power. It was an environmental nongovernmental organization (ENGO), the Bellona Foundation, that played the key role in introducing CCS to that controversy as a potential compromise. Because the organization has come to play a highly visible role in the CCS debate not only in Norway but even on the European stage, it might be worth spending a few words presenting it. Bellona was founded

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in the 1980s by young environmental activists interested in the use of Greenpeace-style, media-friendly direct action against industrial pollution in Norway. During the 1990s the question of nuclear waste in the former Soviet Union became a main issue for the organization, which increasingly came to emphasize a more expertise-based form of advocacy over protest action. Bellona has embraced a pragmatic, technologicaloptimist brand of environmentalism and emphasizes dialogue with industry. Because Bellona is governed by a self-recruiting board and thus diverges from the traditional Norwegian NGO form based on local chapters and internal membership democracy, the basic government funding that is an important income source for many Norwegian ENGOs was not made available to Bellona. Instead, they have been very successful in securing funding from Norwegian businesses through the sale of advertisements in their publications, and long-term cooperative agreements including funding of Bellona’s work and dialogue on technological and policy issues. Key companies and interest groups in the energy and powerintensive industries have been among Bellona’s partners. Visible policy disagreements between Bellona and the same companies from time to time, along with the strong standing of the organization and its president Frederic Hauge in the Norwegian public sphere over 20 years, ensure that these arrangements are not generally seen as compromising Bellona’s integrity as an environmental advocacy group. The starting point for Bellona’s involvement with CCS was proposals by Lindeberg and colleagues at SINTEF. In 1995, on the day the Labour government presented a white paper on the use of natural gas in Norway, Bellona’s president was interviewed in the Oslo newspaper Aftenposten about a proposal to build a large, gas-fired power plant on a decommissioned offshore installation, with CO2 capture and storage under the seabed. The plant would replace inefficient turbines on offshore petroleum installations and might in addition generate power for the grid. A government spokesperson said the idea was constructive, and that government experts would consider the idea. The Bellona Foundation secured modest funding from the Ministry of Energy, and commissioned a scoping report by Thorleif Holt and Erik Lindeberg at SINTEF describing the concept (Holt and Lindeberg 1996). The idea was followed up in Bellona’s written statement for the public hearing round on Naturkrafts’s environmental impact analysis for their projected power plants. The statement suggested that Naturkraft had precipitously dismissed the idea of capture and storage as currently unworkable (Palm and Lynnebakken 1996). In the debates over gas-fired power during the second half of the 1990s, the Bellona Foundation played a very different role from that of other ENGOs and sometimes disagreed with them. While the broad coalition

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against gas-fired power plants emphasized their ‘no’ to gas-powered plants, mostly because of emissions, the Bellona Foundation emphasized technological alternatives that would remove these emissions. In 1995, the latter refused to sign a joint petition with the other ENGOs, choosing instead to polish their alternative, ‘technological’ profile. But there was, in fact, a considerable degree of informal coordination between the two camps. The Bellona Foundation showed restraint in an early phase of the debate in order not to get in the way of the other groups’ message. Later on, the anti-gas-fired power plants activists mostly avoided polemics against Bellona’s ideas, and used the contrast between the proposed ‘nonpolluting’ gas-fired power plants (that is, with CCS) and the conventional ‘polluting’ ones to good effect, even if many had doubts about the CCS concept as such. Naturkraft’s response to the challenge from Bellona was to insist that while the technology they were planning to use was state of the art, the existing CCS solutions were too expensive and energy consuming to be workable in practice. However, Naturkraft was in trouble. In May 1997, Labour Prime Minister Thorbjørn Jagland released a statement asking Naturkraft to postpone the actual building of the plants, and the company saw little choice but to comply (while the Labour Party had been in favour of building gas-fired plants, its youth branch and other insiders with a green bent represented a vocal minority). Formally, Naturkraft was asked not to start building until it had completed an application to the SFT for an emissions permit for NOx and other criterion pollutants, which required certain bureaucratic procedures that would not be finished until December that year or later. But this also meant that building would not commence before two important events in the autumn of 1997: the elections for the Storting, and the Kyoto conference which would establish Norway’s international obligations to limit GHGs. Clearly, Jagland hoped to avoid massive environmental mobilization and unrest during the electoral campaign. With the youth branch of his party threatening to boycott the electoral campaign, removing the issue from the agenda was obviously expedient. The prime minister also hoped that the Kyoto conference would yield results that might strengthen the case for gas-fired power. Jagland experienced enormous pressure from the media and the opposition at this time following a series of political disasters including the forced resignation of two cabinet ministers. He also made a number of public blunders in his handling of the Naturkraft project, and procrastinated for several days before unambiguously declaring that the project should be postponed. When seeking to regain the initiative in the days that followed, the prime minister stressed the need to build consensus around Norway’s energy policy. A key element of his rather hastily assembled strategy was

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the development of CCS technology. Jagland now publicly invited Bellona to provide input to the final decision on Naturkraft’s concession regarding the possible application of CCS. In a speech to the congress of the Norwegian Confederation of Trade Unions (LO), Jagland praised CCS as a very promising solution. He marvelled at the prospect of nearly CO2free electricity from natural gas in Norway and worldwide, and he also noted the possibility of storing CO2 in the oceans, a field where he said Norwegian scientists were world leaders. He promised funding for RD&D of CO2-reducing technologies. Specifically, he promised sufficient public funding for an ongoing R&D project into membrane-based CO2 capture technology to build a ‘full-scale demonstration plant’. In interviews after the speech he suggested that the cost might be in the order of 100 million NOK. Remarkably, it later became clear that the prime minister’s office had discussed the matter neither with the managers of the R&D project nor with the Research Council which funded the ongoing project, none of whom were expecting support on that large a scale. Because Labour lost power following the election that fall, Jagland was never challenged to follow up on his promise. CCS technology became part of the formal rules with which Naturkraft and other power plant developers had to comply from June 1997, when the Ministry of Oil and Energy presented its final decision on Naturkraft’s application to build two power plants, after formal complaints from ENGOs on the earlier decision. The application was upheld, but with some additional requirements. These included two important new clauses. The first was that Naturkraft should prepare to apply CCS in the future. The power plants were to be built in a way that enabled installation of capture facilities as soon as that technology was deemed ‘available’. In present terminology, they should be ‘capture-ready’. The company was also required to engage in R&D on CCS technology. The second important decision was that for the first time, CO2 emissions from power plants was defined as ‘pollution’ as understood by the Norwegian Pollution Control Act, requiring permits from the SFT. This requirement (resulting from a legal challenge by the Bellona Foundation) set the stage for the next rounds of conflict about gas-fired power after the election in the fall of 1997. As we shall soon see, those discussions further increased the political salience of CCS. The Norwegian CCS debate is shaped by its early and perhaps unusual beginnings. Particularly important is Bellona’s early promotion of CCS with an environmentalist framing, and the relatively weak position of actors questioning CCS from an environmentalist standpoint (Greenpeace, for example, has very little support in Norway due to the culturally significant conflict over Norwegian whaling). The integrity of geological storage

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has mostly been taken for granted in the Norwegian context. The political discussion has rarely been about whether CCS is acceptable or desirable. Rather, the key questions have been whether CCS can yet be considered commercially available technology, and how to accelerate the technology’s development.

5

TECHNOLOGY THAT SOLVES POLITICAL PROBLEMS

Prime Minister Thorbjørn Jagland’s manoeuvring in 1997 established a pattern. During the years that followed, Norwegian politicians have repeatedly looked to CCS to solve political difficulties related to gas-fired power plants in particular and climate policy more generally. Sometimes CCS has simply served as a rhetorical weapon or legal argument against political opponents. Increasingly, though, CCS has been used as a compromise – as political glue to keep political parties or coalitions together. Meanwhile environmental activists, trade unions, research institutes as well as businesses and organized interest groups have adapted their strategies to take advantage of politicians’ weak spot for CCS. As a consequence, Norwegian political life has converged on CCS as an important compromise solution to the country’s climate policy dilemma. The new Christian Democrat prime minister from 1997, Kjell Magne Bondevik, led a coalition with the Centre and Liberal parties. All three parties had strongly supported the campaign against gas-fired power. However, Bondevik’s minority government faced a parliamentary majority (Labour, Conservatives, and the populist Progress Party) supporting the Naturkraft project. Consequently, the government sought to avoid, or at least to postpone, direct confrontation with parliament, while building the case for rejecting gas-fired power. In this situation, CCS became useful for Bondevik and his partners, none of whom had any explicit CCS policy before the election in 1997. From Bondevik’s early days in government, the prospect of more or less ‘pollution-free’ power from natural gas with CCS was used rhetorically to draw a stark contrast with what the prime minister consistently referred to as ‘strongly polluting gas-fired power plants’. Expected technological breakthroughs in CCS were also used as one of several arguments for postponing the Naturkraft project. In April 1998, one of the Naturkraft owners, Norsk Hydro, took everyone by surprise and presented competing plans for a power plant with precombustion CCS. The project, which seems to have been launched partly in response to the strong political opposition to conventional gas-fired

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power, was named Hydrokraft. Natural gas would undergo a reforming process resulting in separate streams of CO2 and a hydrogen-rich fuel gas which could be burned in a conventional gas turbine (Norsk Hydro had patented the special gas mixture that allowed this). The CO2 would be transported offshore in a pipeline, and used by Norsk Hydro and its partners for EOR on the Grane field in the North Sea before permanent storage. Norsk Hydro expected to reduce CO2 emissions by about 90 per cent compared to conventional gas-fired plants (Larsen and Ruud 2005). The Hydrokraft project took Naturkraft’s management by surprise. It was welcomed by the ENGOs and the Bondevik government as yet another reason to stop Naturkraft’s plans. Crucially, even the pro-gas Labour Party said that Naturkraft should halt its project until it was clarified whether Norway could have gas-fired power without the CO2 emissions. Naturkraft’s owners soon decided to postpone their project indefinitely. In February 1999, Aker Maritime, a major Norwegian supplier of offshore oil and gas technology and installations, launched a competing concept for gas-fired power with CCS. Later that spring, the Hydrokraft project was also postponed, with economic considerations given as the reason. However, Hydro’s surprise manoeuvre and the political response had already changed the terms of the debate, despite protestations from Naturkraft and from engineering professors that Norsk Hydro had in reality proposed a long-term research project, not a plan that might be realized in the short term. When the SFT issued an emissions permit in 1999, it demanded that Naturkraft reduce the CO2 emissions from its project by 90 per cent, to comply with parliament’s demand that ‘best available technology’ should be used. Alternatively, the company could buy emission permits or credits on the international markets envisioned by the Kyoto Protocol – a poor consolation since the Protocol was still a long way from entering into force, and the market mechanisms in question subject to protracted international negotiations as well as domestic policy development. The SFT’s decision caused a showdown between the Bondevik Government and the parliamentary majority during the spring of 2000, which ended with Bondevik’s resignation. This conflict also gave rise to the first proposal in parliament for realizing CCS through subsidies. Two weeks before the crucial vote in parliament, the Bellona Foundation’s president proposed the following survival strategy for Bondevik in a newspaper interview: offer sufficiently generous financial support for full-scale CCS to make it profitable for developers, and accept the power plants. The Christian Democrats, Centre Party and Liberal parliamentary groups seized on the idea with enthusiasm, and quickly developed a proposal for an extensive support package with the help of Bellona, which in turn had

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developed its ideas in dialogue with Norwegian industry actors. The proposal, which had not been reviewed in any detail by any of the ministries, was rejected by parliament. Despite warnings that it might provoke Bondevik’s resignation, the majority in parliament also instructed the government to change the guidelines on CO2 in the emissions permits for Naturkraft’s power plants. As a consequence, Bondevik stepped down in March 2000 and was replaced by a short-lived Labour government led by Jens Stoltenberg, which soon granted the necessary permits for CO2 emissions from the planned gasfired power plants. However, unfavourable energy prices kept the plans on the shelf for a long time. The Labour Party had its own internal disagreements to deal with regarding gas-fired power. During the party’s brief spell in power, two important developments took place. First, the government stepped up RD&D funding for CCS from about 9 million NOK annually in 1997– 2000, to 20 million earmarked for gas-fired power with CCS in 2001, with an eye to establishing a ‘pilot/demonstration plant’ by 2005 (Norwegian Ministry of the Environment 2001: 81, 86; personal communication, T.Riis, Research Council of Norway). Second, the Labour Party and the LO, which although formally independent enjoy a close political partnership, established a high-level task force to study how domestic use of natural gas could stimulate employment in an environmentally acceptable manner. The group included strong supporters of increased use of natural gas from the trade union movement as well as their traditional opponents from the Labour Party’s environmental wing. They reached a consensus in recommending a significant expansion of gas-based industry and power generation, along with ambitious plans for developing and deploying CCS and other measures to mitigate the environmental consequences. The specific proposals, including a state-owned ‘innovation company’ with start-up capital of 4 billion NOK to develop and deploy CCS solutions, were not immediately realized. However, the task force helped enlist the national trade union movement as strong supporters of CCS. They saw CCS as a way to make a large expansion of gas-based industry and gasfired power politically feasible, and as a potential source of new manufacturing jobs in equipment supply. Meanwhile a special Gas Technology Commission was appointed by the government to consider the specific proposals. Elections in the fall of 2001 brought Kjell Magne Bondevik back into office, this time with a coalition of pro-gas Conservatives and anti-gas Christian Democrats and Liberals. Gas-fired power and CCS was a major sticking point in the negotiations about a common political platform. The implementation of specific policies in this area remained a source

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of conflict between the coalition partners throughout the four years of Bondevik’s second government, with Christian Democrats and Liberals pressing for more CCS funding, and more restrictions on CO2 emissions. The coalition partners’ common political platform stated that while the consents already granted to Naturkraft’s two power plants (as well as the consent for a gas-fired plant planned by another group of investors) would not be rescinded, no further permissions would be granted for fossil-fuelled plants without CCS – at least not before an emissions trading scheme was in place.4 The Government would seek to establish economic incentives that made what was often referred to as ‘CO2-free’ power plants feasible – and that would, Christian Democrats and Liberals hoped, convince the consent holders to go for power plant concepts with CCS. In the end it was determined that this subsidy should amount to 0.093 NOK/kWh for five years, corresponding to 1.5 billion NOK for each of Naturkraft’s 400 MW power plants. New, renewable electricity was to get the same subsidy – but, interestingly, only from the day that the first gas-fired plant with CCS was in place (Norwegian Ministry of the Environment 2002a). The political platform also promised to step up funding of RD&D for gas-fired power plants with CCS through the Research Council. From 2002 the budget for the Research Council’s programme was increased to 50 million NOK annually, except for the 2003 budget when a political deal with the Progress Party in parliament forced the minority Bondevik government to cut back this and other environment-related programmes. In March 2002, the government-appointed Gas Technology Commission presented its report, which was a setback for proponents of early deployment of gas-fired power with CCS, including Bondevik and the Christian Democrat Minister of Oil and Energy. The majority recommended a three-stage approach: an R&D phase followed by a demonstration phase, culminating in a commercial phase (which was expected to lie at least 10 years into the future). Among the problems with skipping the first two stages and going straight for a commercial-scale plant, the Commission cited the risk of choosing a technological dead end. The Commission noted an additional challenge: demand for CCS for gas-fired plants was likely to be modest outside of Norway, and it might be difficult to engage foreign suppliers of gas turbines in RD&D activities. One Commission member – representing the Bellona Foundation – dissented, recommending early commercial-scale deployment (NOU 2002). In 2004, the Bondevik government proposed to establish a 2 billion NOK ‘Fund for environmentally friendly gas technology’, based on recommendations from the Gas Technology Commission. The proceeds of about 100 million NOK a year would be administered by an innovation company,

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later named Gassnova, which would fund demonstration projects for gas-fired power with CCS. Gassnova and the Research Council were to operate a joint programme (combining the Research Council’s 50 million NOK and Gassnova’s 100 million NOK) called Climit. In 2005, its total budget was about 150 million NOK. In parallel with the public, explicitly political and often contentious, processes emphasized here, research institutes, companies, government agencies and various organized interest groups engaged in more specialized and technical discussions about CCS. During the tenure of the second Bondevik government (2001–05), visions for a large-scale Norwegian CCS industry solidified and gained momentum. A key element was an infrastructure of CO2 pipelines to storage sites on the Norwegian continental shelf – potentially able to handle large CO2 streams from the continent of Europe along with CO2 captured in Norway (see, for example, Hustad 2004). The idea was that EOR would pay for the infrastructure and for early capture facilities, but that the system eventually would move on to emphasize CCS (the estimated capacity for storage in aquifers on the Norwegian continental shelf is many times larger than the capacity in depleted hydrocarbon reservoirs). Regional networks in key industrial areas including Grenland and the Trondheim region also developed visions for regional CCS clusters to complement their original policy goals of securing natural gas pipelines to feed local industries and power plants. Meanwhile funding emerged as the key challenge. Bondevik’s government tried with little success to put pressure on Naturkraft and other would-be owners of gas-fired power plants to pay at least part of the bill for applying CCS to reduce their emissions. The project owners pointed out that the profitability of gas-fired power projects was typically marginal even without the extra cost of CCS – and if required to capture and store CO2, they would simply not build any power plants. On the other hand, several analyses claimed that CO2-assisted EOR might be very profitable. The oil and gas companies were interested, but did not appear willing to shoulder the cost for a CO2 infrastructure, an investment with a very long time horizon, coordination challenges and uncertainty. The Bellona Foundation among others argued forcefully that the key to realize a CO2 infrastructure was engagement from the state, which receives a very large share of the proceeds from petroleum production through special taxes as well as its role as a passive investor in all licenses on the Norwegian continental shelf (Jakobsen et al. 2005). The fact that the Norwegian state was rich with cash from oil and gas revenues made the solution all the more compelling: the state would pay for capture as well as transportation and storage of CO2.

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CCS AS NORWAY’S ‘MOON LANDING’

The elections in 2005 resulted in a new government led by Jens Stoltenberg (Labour), which has raised the profile of CCS to the extent that Stoltenberg now calls it ‘Norway’s moon landing project’. The new governing coalition involving the Labour Party, the Socialist Left Party and the Centre Party referred to itself as ‘red–green’ – with green symbolizing the Centre Party’s rural and agrarian base as well as the Socialist Left’s environmentalism. It was the first time the Socialist Left Party was in government, the first time since the immediate aftermath of the Second World War that the Labour Party joined a coalition government and the first government for a long time supported by a parliamentary majority. The prospect for such a new political majority was the occasion for intense political manoeuvring in 2004 and 2005. It was clear to most observers that CCS would have to be a part of any political deal that united the Labour and the Socialist Left parties behind a common energy policy. With this in mind, all three parties formulated election manifestos that promised financial support for largescale deployment of CCS. In the Labour Party, representatives of trade unions and industry gave crucial input to policy development. The Bellona Foundation gave input to the Centre Party and others. However, the greatest policy shift took place in the Socialist Left Party. Up until its 2005 Congress, it had been the only major party articulating a principled opposition to fossil power, with or without CCS (supporting CCS only as a measure applied to power generation for offshore oil and gas installations, which is already fossil based). This was a contentious issue within the Socialist Left Party, not least because a key constituency for the party – the environmental movement – was and is so strongly split. Among the major organizations active in the climate change area, the Future in Our Hands (FIVH) and the Nordic branch of Greenpeace remain strongly sceptical. Among their arguments is concern that support for renewable energy might be crowded out by CCS, and that carbon from extra oil extracted through CO2-assisted EOR might cancel out climate benefits from CCS. On the other hand, the Bellona Foundation, and the Zero Emissions Resource Organization (ZERO) – a similar group founded by former Bellona staff members – see promoting CCS as a key part of their mission. At their congresses in 2005, Friends of the Earth Norway and its independent youth branch Nature and Youth both adjusted their position in a more CCSfriendly direction – a move that helped tip the balance in the Socialist Left Party in favour of a CCS strategy. Activists who had participated in the campaign against gas-fired power in the 1990s, and who began using CCS as a tactical argument against the Naturkraft project from 1997/98 and

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onwards, played key roles in the adjustment of positions in Friends of the Earth Norway as well as the Socialist Left Party around 2005. Younger activists from Nature and Youth even demonstrated at the Socialist Left’s congress to demand a clear ‘no’ to CO2 emissions from power generation, and a ‘yes’ to CCS as a way to avoid them. Despite the convergence towards government-subsidized CCS as a compromise, gas-fired power and CCS was one of the major hurdles in post-election negotiations for a common political platform. Reportedly, the issue was close to disrupting the negotiations. The final document was hailed by the Socialist Left Party and environmental activists as an end to the longstanding conflict over gas-fired power, but did in fact contain ambiguities which led later to repeated conflict among the coalition partners. Nevertheless it outlined a very ambitious plan for deployment of CCS at future gas-fired power plants with government subsidies as a key policy instrument: including government-led and -funded building of CO2 pipelines for geological storage in offshore locations. The most pressing issue for the negotiators was what to do with the gasfired power plant that Naturkraft had already decided to build at Kårstø in south-western Norway. At the insistence of the Socialist Left and Centre parties, it was decided that the government would sponsor full-scale CCS at the facility. The original target year of 2009 was soon abandoned as unrealistic, and the project quickly ran into even larger problems. In late 2008, planning for a retrofit of post-combustion capture by 2011/12 was still ongoing. At the same time, the government warned that it was very possible that the project would never be realized. The reason was simple: after test runs of the power plant in late 2007, the owners shut it down and it did not operate at all during 2008 due to unfavourable market conditions – in other words expensive gas and cheap power. The owners now suggest that the power plant may be non-operational for extended periods. The risk of building a very expensive capture facility – representing at least a tenfold scale-up from existing gas separation facilities using similar technology – that may be idle most of the time – has caused a great deal of concern. The consequence could be that benefits in terms of emissions reduction as well as technological learning may be minimal. Another key issue that negotiators from the three parties struggled to address after the 2005 election was how to deal with new applications for gas-fired power projects. They somewhat vaguely decided that all new projects should be ‘based on’ CCS. At first, these political signals seemed to create the desired response from industry. In March 2006, Statoil and Shell launched a joint project to combine a large gas-fired power plant with CO2 capture in north-western Norway with offshore EOR and final storage. They expected financial support from the government, and

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received an enthusiastic response from most politicians. However, extensive technical and economic studies of the reservoirs in question later showed that the EOR component was not feasible, which seriously undermined the financial basis of the project. With analyses of specific project scenarios repeatedly reaching the same negative conclusion, CO2-assisted EOR recently seems to be receiving less attention in Norway. In the fall of 2006, a third gas-fired power project nearly caused the red–green coalition to break up. Statoil’s plans for a major upgrade of its refinery at Mongstad in western Norway included a new gas-fired cogeneration facility which would deliver power and heat to the refinery, and some additional power to the grid. On the one hand, energy integration with the refinery would ensure good energy efficiency. On the other hand, the plans represented a major new CO2 source, and the red–green coalition’s platform demanded that new gas-fired power should be ‘based on’ CCS. Simultaneous negotiations between the three governing parties, and between Statoil and the government, about the timing and stringency of CCS requirements concluded with a two-step plan. First, the recently merged Statoil Hydro, the Norwegian government and an international consortium of energy companies would build a test centre for CO2 capture technologies at Mongstad, operative from 2010 (later postponed to 2011).5 Second, the state would fund full-scale, post-combustion capture of CO2 from the cogeneration plant, operative from 2014. Statoil Hydro contributes a sum equal to its avoided emissions costs, and assumes some risk in case of cost overruns. The agreement caused a major political uproar, and was unanimously condemned by the ENGOs. The controversy coincided with a surge in public attention to the climate change issue. To stress the potential importance of improved capture technologies, Prime Minister Jens Stoltenberg characterized the testing and subsequent full-scale deployment of capture technologies at Mongstad as Norway’s ‘moon landing project’. The grandiose characterization was used in a newspaper chronicle (Dagens Næringsliv, 21 October 2006), and again in his televised New Year speech in 2007. Setbacks and news about similar initiatives abroad have led to mocking references to a ‘belly landing’, ‘crowded conditions on the moon’ and the like from the opposition and various commentators, but the project remained very important for the Stoltenberg government. The reorganized state-owned company Gassnova SF is responsible for the state’s contribution to CCS projects including the Test Center at Mongstad, as well as the planning for full-scale CO2 capture at the Kårstø and Mongstad power plants. Gassnova also oversees planning for the pipeline infrastructure and offshore storage sites for CO2 from these projects. Moreover, Gassnova still plays a key role in allocating R&D funding for

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CCS technologies, which in 2007 was further increased under the broad climate policy agreement between the red–green government and the Conservative, Christian Democrat and Liberal opposition parties.

7

WIN–WIN–WIN SOLUTIONS ALL THE WAY ROUND?

The Norwegian approach to CCS that was developed in dialogue among a broad array of societal actors, and that was incorporated in the red–green government’s platform in 2005, was designed to offer what one proponent has called ‘win–win–win solutions for everyone’.6 It successfully mobilized extremely broad support, at times amounting to a virtual political consensus. For instance, in late 2005 the incoming red–green government received a letter urging quick action on developing a CO2 pipeline infrastructure – signed by an unusual alliance including the LO as well as the Confederation of Norwegian Enterprise (NHO) which is the largest employers’ association, and the environmental groups Bellona, Friends of the Earth Norway, Nature and Youth and ZERO. During the winter of 2005/06, the opposition praised the ambitions of the government, but chastised it for acting too slowly. Outside of parliament dissenting voices certainly did exist, but they had little influence. Over the next three years underlying disagreements and practical difficulties with implementation have become visible, and today the focus of CCS policy is again contested. We shall conclude our study of the politics of CCS in Norway by pointing out a few critical questions that pertain specifically to the Norwegian CCS strategy based on post-combustion capture from gas-fired power plants, offshore geological storage in conjunction with EOR (at least to start with), strong reliance on government funding, and high hopes for technology improvement and export for the benefit of the Earth’s climate – and Norwegian industry. First, CO2-assisted EOR projects on the Norwegian continental shelf now seem unlikely to materialize any time soon. A series of assessments of scenarios for specific fields have concluded that CO2-assisted EOR is unfeasible or unprofitable in each case (see references in IEA 2008: 94). The reasons include high costs for any kind of activity on offshore installations compared to the onshore locations where CO2-assisted EOR has previously been applied, along with the fact that a large part of the EOR potential is already exhausted by freely available seawater or natural gas. After disappointing conclusions from Shell and Statoil’s high-profile study of an EOR and storage scenario at the Heidrun and Draugen fields off

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mid-Norway, there is minimal activity in this area within both industry and government. Consequently, it now seems unlikely that EOR will drive the development of a CO2 infrastructure on the continental shelf, as was widely expected only a few years ago. This limits the prospect for rapid development of a large CCS industry around the North Sea, despite the willingness of the state to pay for at least some elements of a pipeline infrastructure. Second, even when development of CCS projects goes ahead at full speed, the multiple goals that ‘win–win–win’ solutions are supposed to satisfy are not always as compatible as they appear at first sight. Many decision makers have assumed that because Norway has shown such an early and strong interest in CCS, Norwegian firms should be particularly well placed to position themselves as technology exporters and equipment suppliers for CCS including capture technology. This is perhaps due to a tacit assumption that CCS represents ‘a technology’, where the reality is that the method requires assembling and integrating different technological components from different established industries. The most expensive equipment for CCS is related to capture, including gas separation equipment and even specialized gas turbines in the case of advanced capture concepts. Norway has no producers of gas turbines, and the only Norwegian firm that entered the competition to supply gas separation facilities for the planned government-funded CCS projects, AkerKvaerner, met very tough competition from foreign suppliers. Apart from making divergent policy priorities visible, controversies over foreign versus domestic capture technology has demonstrated for Norwegian policy makers that a world record in early CCS enthusiasm by no means automatically translates into a leading position as a technology supplier. On the other hand, Norway is clearly well equipped to take a leading position with regard to geological storage of CO2. This activity basically relies on the skill-set of the upstream oil and gas industry. Furthermore Statoil Hydro is an indisputable pioneer in the area, and there is a huge storage capacity on the Norwegian continental shelf. Positioning Norway as a CO2 transport and storage expert and as a seller of storage capacity to European countries could well prove a more promising industrial strategy with respect to CCS than trying to become a capture equipment supplier. Third, among the Nordic countries, a division of labour seems to have emerged with regard to low-carbon energy technologies: the Danes export wind turbines, the Swedes develop biomass energy, while Norway emphasizes CCS. To many observers this has appeared as a sensible arrangement that plays to each country’s comparative advantages. Some doubts are emerging in Norway: is CCS really so uniquely suitable as Norway’s chief energy technology export article? In the wider world, it is the combustion

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of coal, not natural gas that is usually seen as the key application for CCS.7 The ambition to become a technology supplier would suggest developing solutions tailored to coal-fired power plants. The planners for the Test Centre at Mongstad emphasize that they will use a variety of flue gases from the refinery and the cogeneration plant including ones that resemble the carbon-rich exhaust from coal-fired plants. Nevertheless, public subsidies for full-scale capture are planned for gas-fired plants – and Norway does not have any special expertise or interests related to coal-fired power. Again, it is not clear that policies primarily developed to solve Norway’s special climate/energy dilemmas are ideal as steps towards the technological solutions needed abroad. Meanwhile two renewable technologies that have received much less political attention are emerging as promising energy technology exports. First, based on expertise from traditional metallurgical industry, successful companies are emerging that produce components for photovoltaic solar cells, mostly for export (sunshine is not one of Norway’s comparative advantages). This new solar industry already employs hundreds of Norwegians, largely based on incentives for solar energy offered by other countries’ governments. Second, companies and research institutes are seeking to utilize strong Norwegian expertise and skills in marine technology and operations to develop improved concepts for offshore wind turbines including in deep-water locations. This would reduce land-use conflicts related to wind energy and make larger and more reliable wind resources available in Norway and elsewhere. The last point relates to renewable energy. Obviously there is place for more than one promising low-carbon energy technology in Norway. Norwegian promoters of CCS have been quick to point out that CCS should be considered a supplement, not an alternative, to new renewable energy sources. This is undoubtedly sincere. However, there is little doubt in our minds that Norway would have had a stronger policy to support development and deployment of renewable energy today if the environmental movement and its political allies within the shifting governing coalitions had not focused so much of their attention and political energy on securing restrictions on gas-fired power development and funding for CCS. A long-promised, stable regulatory framework for renewables is still not in place in Norway. Offshore wind turbines in particular might have benefited from earlier and more forceful political support. None of this is to say that CCS should not be part of Norway’s response to the climate change challenge. However the Norwegian consensus mentality has at times obscured very real tradeoffs between different policy priorities with respect to CCS and energy technologies more generally. Part of the reason why politicians sometimes appear to be taken by surprise when such tradeoffs become apparent may be that their constant bickering

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and tactical manoeuvring in the field of gas-fired power and CCS has to a large extent left long-term strategy development to actors outside of the formal political system.

NOTES 1. Concerns have in fact been voiced in Norway that government-sponsored efforts to improve CCS technology may reduce this competitive advantage (Morgen 2005). 2. The main source for the following account is Tjernshaugen (2007). Other useful sources include Nilsen (2001), Quiviger (2001), Ihlen (2004), van Alphen et al. (2009) and Braend (2008) – the last four are in English. 3. The actual name of the research organization was the Continental Shelf Institute (IKU), which was owned by the research foundation SINTEF. IKU later changed its name to SINTEF Petroleum Research, which is used throughout this chapter to avoid confusion. 4. The opposition later pointed out that the Bondevik government did in fact give a concession to the land-based gas turbines that power the Snøhvit LNG project, which do in fact constitute a gas-fired power plant without CCS (only excess CO2 from the natural gas is captured and stored at the Snøhvit LNG factory, not the CO2 originating from combustion in the gas turbines). 5. In 2007, Statoil and the oil and gas division of Hydro merged into Statoil Hydro. The company is publicly listed (Statoil was partially privatized from 2001), but the government retains a majority of shares. An agreement has been signed between the government, DONG Energy, Shell, Statoil Hydro and Vattenfall for cooperation in the planning phase of the Mongstad Test Centre. The state-owned company Gassnova represents the government in the project. 6. Thomas Palm, ZERO, cited in Tjernshaugen (2007: 212). 7. But see IEA (2008), where some model-based scenarios suggest a larger potential for gasfired power generation with CCS than coal-fired power with CCS. However, in addition to technical and economic considerations typically included in such model projections, political concerns including energy security, employment and regional development may come into play and favour coal over gas in some countries.

REFERENCES Braend, T. (2008), Carbon Capture and Storage in Norway, Air Pollution and Climate Series No. 22, Göteborg: Air Pollution and Climate Secretariat. Christiansen, A.C. (2001), ‘Climate policy and dynamic efficiency gains: a case study on Norwegian CO2-taxes and technological innovation in the petroleum sector’, Climate Policy, 1 (4): 499–515. Holt, T. and E. Lindeberg (1996), ‘Offshore gas power with CO2 removal supplied from a plant located on an abandoned platform’, a pre-study Bellona Foundation/IKU Petroleum Research Report, Oslo. Hovden, E. and G. Lindseth (2004), ‘Discourses in Norwegian climate policy: national action or thinking globally?’, Political Studies, 52: 63–81. Hustad, C.W. (ed.) (2004), ‘Large-Scale CO2 Sequestration on the Norwegian Continental Shelf: A Technical, Economic, Legal and Institutional Assessment’, Document prepared in collaboration between SINTEF Petroleum Research;

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CO2-Norway AS; Norwegian School of Management; Center for International Climate and Environmental Research – Oslo (CICERO); University of Oslo, Faculty of Law and Institute for Petroleum and Maritime Law. IEA (2008), CO2 Capture and Storage: A Key Carbon Abatement Option, Paris: International Energy Agency. Ihlen, Ø. (2004), ‘Rhetoric and resources in public relations strategies: a rhetorical and sociological analysis of two conflicts over energy and the environment’, Doctoral Thesis, Faculty of Arts, University of Oslo. Jakobsen, V.E., F. Hauge, M. Holm and B. Kristiansen (2005), ’Environment and value creation: CO2 for EOR on the Norwegian shelf – A case study’, Bellona Foundation, Oslo, August. Kallbekken, S. (2008), ‘Slik skal Norge oppfylle klimamålene’, Klima. Norsk magasin for klimaforskning, 1: 4–7. Kasa, S. and H. Malvik (2000), ‘Power, environmental politics, industry interests and party strategies: an analysis of the political barriers to an expansion of the CO2-tax in Norway’, Tidsskrift for Samfunnsforskning, 41 (3): 295–323. Knutsen, O. (1997), ‘From old politics to new politics: environmentalism as a party cleavage’, in K. Strøm and L. Svåsand (eds), Challenges to Political Parties:The Case of Norway, Ann Arbor, MI: University of Michigan Press, pp. 229–62. Lafferty, W.M. and J. Meadowcroft (eds) (2000), Implementing Sustainable Development, Oxford: Oxford University Press. Langhelle, O. (2000), ‘Norway reluctantly carrying the torch’, in Lafferty and Meadowcroft (eds), pp. 174–208. Larsen, O.M. and A. Ruud (2005), ’HydroKraft: mapping the innovation journey in accordance with the research protocol of CondEcol’, Working Paper 3/05, ProSus, Oslo. Morgen, M. (2005), ‘CO2-teknologi truer gassformuen’ (CO2 technology threatens natural gas assets), Ukebrevet Mandag Morgen (weekly newspaper), 10 January. Narula, R. (2002), ‘Innovation systems and “inertia” in R&D location: Norwegian firms and the role of systemic lock-in’, Research Policy, 31 (5): 795–816. Nilsen, Y.S. (2001), En felles plattform? Norsk oljeindustri og klimadebatten i Norge fram til 1998, Senter for teknologi innovasjon og kultur Universitetet i Oslo: Unipub. Norwegian Ministry of the Environment (1995), ‘St.meld.nr.41 (1994–1995). Norsk politikk mot klimaendringer og utslipp av nitrogenoksider (NOx)’. Norwegian Ministry of the Environment (2001), ‘St.meld.nr.54 (2000–2001). Norsk klimapolitikk. 22 juni 2001’. Norwegian Ministry of the Environment (2002a), ‘St.meld.nr.15 (2001–2002). Tilleggsmelding til St.meld.nr.54 (2000–2001) Norsk klimapolitikk. 22 mars 2002’. Norwegian Ministry of the Environment (2002b), ‘Norway’s third national communication under the Framework Convention on Climate Change, June 2002’. Norwegian Ministry of Petroleum and Energy (2002), ‘St.meld.nr.9 (2002–2003). Innenlands bruk av naturgass mv’. NOU (2002), ‘Gassteknologi, miljø og verdiskaping’, Utredning fra en ekspertgruppe oppnevnt av Olje- og energidepartementet, 5 October 2001. Palm, T. and H. Lynnebakken (1996), ‘Naturkraft AS – Konsekvenstutredning gasskraftverk høringsuttalelse fra Bellona. Bellona Arbeidsnotat 2:1996’, Bellona Foundation, Oslo.

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Reitan, M. (2001), ‘Den nye miljøpolitikken og de etablerte institusjonene’, in B.S. Tranøv and Ø. Østerud (eds), Den fragmenterte staten, Oslo: Gyldendal akademisk. Quiviger, G. (2001), ‘Building New Power Plants in a CO2 Constrained World: A Case Study from Norway on Gas-Fired Power Plants, Carbon Sequestration, and Politics’, Massachusetts Institute of Technology, Cambridge, MA, available at http://sequestration.mit.edu/pdf/Quiviger_thesis.pdf (accessed 29 June, 2009). SFT (1990), Tiltakskatalog for reduksjon av klimagasser i Norge, edited by Statens forurensningstilsyn. Statoil (2002), ‘Underground CO2 storage for a better climate’, Statoil ASA, Research Centre. Tjernshaugen, A. (2007), Gasskraft. Tjue års klimakamp, Oslo: Pax Forlag A/S. van Alphen, K., J. van Ruijven, S. Kasa, M. Hekkert and W. Turkenburg (2009), ‘The performance of the Norwegian carbon dioxide, capture and storage innovation system’, Energy Policy, 37 (1): 43–55. WCED (1987), Our Common Future (Brundtland Report), World Commission on Environment and Development, Oxford: Oxford University Press.

6.

Electricity gap versus climate change: electricity politics and the potential role of CCS in Germany1 Barbara Praetorius and Christoph von Stechow

1

GERMANY’S EMERGING ELECTRICITY POLICY DILEMMA

Over the past decade Germany has been an international climate policy leader. It has formulated ambitious targets for reducing national CO2 emissions: in 2007, the government declared that by 2020 emissions would be reduced by 40 per cent from 1990. It hopes to reach this target with a set of 29 policies and measures launched in December 2007 and June 2008 (the Integrated Energy and Climate Programme, IECP). The policy programme aims to encourage energy efficiency, renewable energy and cogeneration and includes additional measures on both the supply and the demand sides (BMWi 2008b). The German electricity system is highly carbon intensive: 43 per cent of CO2 emissions are related to electricity overwhelmingly generated in large fossil fuel-fired plants. Coal, in particular lignite, is a major domestic energy resource which dominates electricity generation, providing almost half of total electricity (BMWi 2008a). Nuclear energy, currently the next most important pillar of electricity generation with some 25 per cent, is slated to be phased out by 2025. The share of gas-based power generation is likely to increase, but this faces difficulties due to infrastructural constraints and rising prices. Electricity from renewable energy, in particular from wind turbines, has increased its share to 15 per cent in 2008 and, after installation of major offshore wind farms, is expected to deliver around 25–30 per cent of electricity supply by 2020. Another specific characteristic of the German electricity system is the envisaged increase in the share of cogeneration: in 2007 around 12 per cent of electricity was produced in such highly efficient power stations, usually located close to or in larger cities. This share is supposed to increase to 25 per cent by 2020. With the phasing-out of nuclear energy and the decommissioning of old 125

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fossil energy plants have come announcements concerning the construction of a large number of mostly coal-based generation plants. But a substantial number of these projects have been blocked by local opposition.2 This environmental anti-coal movement advocates other options such as renewable energy, gas-fired plants and cogeneration that could theoretically fill the future gap. But the general belief is that these alternatives will struggle to come on line early enough. It is against this background that a public debate about a forthcoming electricity gap (Stromlücke) is currently developing momentum discussing the timing and focus of crucial investments until 2020. This debate will turn out to be important for understanding the different perspectives on CCS and the potential role of CCS in Germany’s future electricity supply. The electricity sector and German politics thus have to face the difficult issue of how to reconcile all these conflicting trends and targets. In such a context CCS is becoming increasingly attractive. It promises a low-carbon coal power station and may thus resolve at least part of the dilemma. Successful CCS would allow for the continued use of coal; it is compatible with the existing infrastructure (that is, mostly large-scale centralized power plants) and would be implemented by existing actors. On the other hand, its opponents fear that CCS may further delay the urgent transition to a decentralized carbon-free electricity system. But CCS may also be considered as an innovation that ‘buys time’ for radical restructuring and may serve as a ‘bridging technology’ towards a sustainable energy future. CCS could thus pave the way out of the current carbon focus of electricity generation. In fact, an increasing number of German utilities are currently involved in R&D programmes on CCS: the first pilot plant is in operation, and demonstration plants are being planned.3 CCS is still at an early stage of development and raises a number of questions which will be discussed in this chapter in the German context. While the security of storage is a major issue in the German debate, the availability of storage capacities is not regarded as a key problem: in theory the total storage capacity for CO2 is substantial, with estimations in the range of some 80–150 years if all CO2 from power plants (about 320 Mt/a) were to be stored (COORETEC 2003; Christensen and Holloway 2004). The debate about appropriate institutional framework conditions is also ongoing, but without major conflicts at the moment, with the exception of disputes about the respective CCS roles to be assigned to the Environment and Economy ministries. After the adoption of the EU Energy and Climate Package (which includes directives on renewable energy, on the next period of the emissions trading scheme and on CCS) in December 2008, the ministries developed a joint draft for a national CCS law, but this failed to win legislative approval before the 2009 general

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election. Meanwhile, public acceptance is still an open issue: a recent assessment of social and acceptability issues, including analysis of public risk perception as well as the perception of CCS more generally (WI et al. 2008), concludes that CCS has so far not received much public attention, and that most information is communicated by ‘multipliers’ such as media, NGOs and politics. Pilot plant operators like Vattenfall are also investigating local and regional attitudes towards their pilot installations (Daniels and Heiskanen 2006). In summary, Germany faces a multifaceted dilemma involving ambitious climate mitigation targets, a nuclear phase-out, gas supply constraints, anti-coal movements, and the need for new electric generating capacity to guarantee energy security in the medium term. In the following sections, the discussion about the potential role of CCS in the future German electricity system will be assessed against the background of this dilemma. After an introduction to the German energy policy context, we consider two scenarios for the potential contribution of CCS and highlight the differing underlying assumptions. These are important to understand the debate about the potential electricity gap and the related stance on CCS. We then look at the evolution of the debate about CCS as an option for climate gas mitigation over the past years with a specific focus on actors’ positions and activities in the course of the technology development. We present the actors in the coal-to-electricity system and identify the setting, interests and views of the actors and their constellations. In the final section, we discuss our findings with regard to specificities of the German case.

2

FROM WHERE DOES THE DILEMMA ARISE? GERMANY’S ENERGY CONTEXT AT A GLANCE

The German context for discussing CCS is special in some respects and fairly typical of industrialized countries in others. The next sections give a brief idea of the origin of the debates about electricity gaps and climate protection. Some Facts and Figures Germany is a high-income country, and it is among the world’s largest consumers of energy. In 2006, final energy demand reached 9,387 petajoule (PJ). Total final energy consumption has more or less remained on this level since the early 1990s, while electricity consumption increased from 473 terawatt hours (TWh) in 1990 to 541 TWh in 2007 (up by 14

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Table 6.1

Structure of German electricity capacities and generation, 2007 Power generation (TWh)

Hard coal Lignite Oil Natural gas Nuclear Wind Hydro Others Total Source:

Generation capacities (GW)

(TWh)

(%)

(GW)

(%)

145.0 156.0 8.0 74.5 140.5 39.5 27.5 45.5 636.5

23 25 1 12 22 6 4 7 100

29.3 22.5 5.4 21.3 21.3 22.2 10.1 5.3 137.4

21 16 4 16 16 16 7 4 100

BMWi (2008a).

per cent). Industry, in particular the chemical and metal industries, is the largest electricity consumer, followed by private households. To date electricity exports or imports have not played a major role. In terms of domestic natural resources, only natural gas and lignite are available in significant quantities. Germany is a major lignite producer with 176.3 million metric tonnes extracted in 2006. Despite the plan to phase out subsidies for hard coal generation (costs are three times the world market price), the production of hard coal is still considerable, totalling 20.9 million metric tonnes in 2006. This is reflected by the structure of installed electricity capacities and generation: 37 per cent of installed capacity and 48 per cent of electricity generated in 2007 were coal based (Table 6.1). With another 12 per cent share of power production covered by natural gas combustion (capacity: 16 per cent), the carbon intensity of electricity production is quite obvious. Germany is the most populous country within the EU; its current population of about 82 million people is expected to decrease slightly in the future (Destatis 2008). The country’s population density is currently 230 inhabitants per square kilometre. Germany’s economy is the fifth largest in the world. In 2007, it reached a total GDP of €2,423.8 billion (or €29,445 per capita). The economy is export oriented, with €1,133 billion of exports in 2007 while total imports reached €962.2 billion (DIW 2008). After a period of stagnation with an average growth rate of 0.7 per cent between 2001 and 2005, the economy grew by 2.6 per cent in 2007. The unemployment rate fell from 11.4 per cent in 2005 to 8.3 per cent in 2007 and even further in 2008 (ibid.). The economy is dominated by the services sector which accounts for 69.5 per cent of total GDP, followed by industry

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(29.6 per cent) and agriculture (0.9 per cent). Germany ranks among the world’s largest and most technologically advanced producers of iron, steel, coal, cement, chemicals, machinery, vehicles, machine tools, electronics, food and beverages, ships and textiles. Within the industry sector, the automotive industry is the biggest with a share of 15 per cent, followed by the electrical industry (6 per cent). Currently, as in other countries, the international financial crisis is having an increasingly adverse impact on the national economy, implying reduced energy demand in the short run. Electricity Sector Reform and Market Structure Investments in electricity generation currently face completely altered framework conditions compared to the early 1990s. The electricity market in Germany was fully liberalized in 1998, which has caused substantial changes in the market setting. Prior to liberalization, the electricity system consisted of about 900 local utilities, some 60 regional distributors, and about nine large and mostly private generation and transmission companies. In April 1998, following the EU Directive 96/92/EC, full competition on all levels was introduced in the formerly protected market. Legal unbundling of generation, transmission and distribution/sales activities became compulsory by 1 July 2007. Yet, the subsequent development of key competition indicators has been rather disappointing. A wave of major mergers reduced the number of large players to four, E.ON, RWE, Vattenfall and EnBW, plus some large municipalities and regional suppliers. The big four own the long-distance high-voltage electricity grid and generate some 80 per cent of total electricity (with E.ON and RWE alone having supplied some 53 per cent in 2006); additionally, they have at their disposal 286 shareholdings (of greater than 10 per cent) in regional and local utilities (Monopolkommission 2007). Hence, both horizontal and vertical concentration have increased after liberalization (Brunekreeft and McDaniel 2005; Öko-Institut 2005; London Economics 2007). Investigations into factual market power based on the Lerner Index4 estimated a mark-up on marginal cost pricing of about 20 per cent for 2005 (von Hirschhausen et al. 2007; Zimmer et al. 2007). One reason was the poor regulation of network access after liberalization. Grid access was initially organized by self-regulation (so-called ‘negotiated grid access’), which proved an effective means of restraining competition and blocking new entrants. In 2005, motivated by an intervention by the European Commission, an independent regulator (Bundesnetzagentur, Federal Network Agency) was established, which began to implement a revenue cap regulation (the so-called ‘incentive regulation’). Recently, the Federal Network Agency was able to force the utilities to make cuts to their requested power transmission fees.

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This effect, however, could not offset the power price rise due to increasing fuel and CO2 certificate prices. To sum it up, the state’s influence on the power sector is now largely restricted to regulative action and the promotion of new energy technologies, whereas investment decisions crucially depend on private enterprises. Nuclear Phase-out and the Decommissioning of Old Plants Like Austria, Sweden, Italy and Belgium, Germany announced its intention to phase out nuclear energy around the turn of the century. In 2000, the then German government, consisting of a coalition of the Social Democratic Party (SPD) and the Green Party reached an agreement with energy companies for the phased shutdown (by 2025) of the country’s 19 nuclear power plants. A respective revision of the Nuclear Law entered into force in 2002. In 2003 and 2005, the two first power plants in Stade and Obrigheim were turned off. But in 2006 nuclear power still represented 26 per cent of the electricity mix. In 2005, a grand coalition of Christian Democrats (Christian Democratic Union and Christian Social Union: CDU/CSU) and Social Democrats won the German federal election. While the CDU would like to renegotiate with energy companies in order to postpone the phase-out of nuclear power stations, the SPD still retains the phase-out policy. It therefore remains to be seen which direction nuclear policies will take after the next general election scheduled for September 2009. As a large number of hard coal and lignite combustion plants were built in the 1970s and 1980s, many of them will probably reach their commercial or technical lifespan within the next decade (DEBRIV 2006). Depending on underlying assumptions about the technical state of these plants, as well as the development of the electricity, fossil fuel and CO2 certificate prices, 19 GW to 33 GW of fossil fuel-based plants will be shut down (including gas-based power plants) by 2020. Adding nuclear phase-out and renewable capacity shutdown, 50 per cent of total installed electricity capacity will be decommissioned by 2020; and 75 per cent by 2030 (Nitsch 2008). Thus, even assuming very ambitious efficiency gains over the coming years, the need for a massive investment in new power generation capacity is evident (DENA 2008; Schröer 2008; Trendresearch 2008). Climate Policy Targets Unlike the case of nuclear phase-out and new coal combustion stations, there is little dissent in Germany over the importance of climate mitigation. True, after the onset of the global financial crisis, industry started

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1,200

Mt CO2

1,100

1,000 1997 Kyoto target for 2005 900

800 2007 IECP target for 2020

Source:

2006

2005

2004

2003

2002

2001

2000

1999

1998

1997

1996

1995

1994

1993

1992

1991

1990

700

UNFCCC (2008).

Figure 6.1

CO2 emissions trajectory in Germany, 1990–2006

lobbying against some details of proposed climate policy instruments (such as the auctioning of emission certificates). However, the government resisted these efforts in the case of the electricity industry. In the case of other industries, in particular the automotive industry, lobbying was more successful. Yet the main lines of the policy orientation have remained firm. Overall, the ambitious 2007 IECP remains the dominant guide for policy makers throughout the main political parties. In terms of emissions reduction, there is also a success story to be told so far. In the Kyoto Protocol, the reduction target of the European Community was set to 8 per cent for the period from 1990 to 2012. With a reduction target of 21 per cent, Germany assumed one of the most ambitious GHG emission reduction targets. While the countries of the European Community reduced their emissions by 4.6 per cent on average between 1990 and 2006, Germany reached a reduction of 19.3 per cent during the same period (UNFCCC 2008). Figure 6.1 shows the CO2 emissions trajectory in Germany from 1990 to 2005. The strong decline in emissions after 1990 is, however, mainly due to the collapse of Eastern German carbon-intensive industry after reunification, which explains the slowing decrease towards the turn of the century. Yet, the decrease has not come to a complete halt, which is also a result of climate protection policies. In the power sector, stringent policy targets for renewable energies and an accommodating Renewable Energy Sources Act have been one means to reach this target; others have included efficiency improvements and clean-coal technologies.

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Table 6.2

Measures and effects of the IECP

Measures 1 Electricity saving 2 Modernization of existing fossil power plants 3 Renewable electricity generation 4 Cogeneration 5 Refurbishment of buildings/heating systems 6 Heat from renewable energies 7 Transport 8 Other GHG Total emission reductions In % of base year Source:

Expected CO2 reduction 1990–2020 (mill t) 25.5 15.0 54.4 14.3 31.0 9.2 33.6 36.4 219.4 36.6

UBA (2007).

Germany continues to follow an ambitious GHG mitigation strategy, now aiming at 40 per cent reduction compared to 1990 levels by 2020. The IECP presented by the government at the end of 2007 promises a reduction of GHG of 36.6 per cent (UBA 2007). The programme consists of 29 measures in eight areas; the expected effect on CO2 emissions is summarized in Table 6.2. Again, the increasing share of renewable energy for power generation and heating has a dominant role in this mitigation strategy; it is supposed to deliver almost 30 per cent of the targeted GHG reduction. A vital part of these measures was the 2008 amendment of the Renewable Energies Law (Erneuerbare-Energien-Gesetz, EEG), which grants priority grid access to renewable energy sources in power generation, and the Renewable Heat Law (Erneuerbare-Energien-Wärmegesetz), a corresponding act for the heat market. The target is to increase the share of renewable energy in power generation from 14 per cent today to between 25 and 30 per cent by 2020. Renewable energies used for heating are expected to reach a share of 14 per cent by 2020 (BMWi 2008b). Cogeneration is supposed to add to climate protection with an electricity generation share of 25 per cent, compared to some 12 per cent at present. But even if all goals of the IECP are met by 2020, given the nuclear phase-out, at least 45 per cent of electricity generation will still be based on large-scale fossil fuel combustion plants. As gas combustion is expected to be expensive due to gas prices rising again in the medium to long terms, even beyond 2020 a significant share of electricity generation will still rely on coal combustion.

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The IECP therefore suggests developing a road map for CCS as a technology option to reduce CO2 emissions from large point sources such as coal-based power plants. This policy goal fits well with the European strategy and Green Package, as it includes the creation of a legal framework for CCS and funding for R&D and for two to three demonstration plants among the 10–12 plants envisaged in Europe. The government also supports including CCS in the European emissions trading scheme (BMWi/ BMU/BMBF 2007).

3

POLARIZING THE DEBATE: SCENARIOS FOR THE FUTURE CONTRIBUTION OF CCS

In this section, we shall show that it is by no means clear how significant the eventual contribution of CCS will be. Expectations for the future contribution of CCS technologies to electricity generation and CO2 mitigation are diverging and often ill-founded. We therefore look deeper into two recent analyses on the economic potential of introducing CCS in Germany and the suggested ‘optimal’ mix of energy technologies, and at the underlying assumptions regarding costs and other decisive factors. These two scenarios are typical of the political debate in Germany. Simplifying this complex issue, the future market potential of CCS mainly depends on how the costs of the process develop compared to those of other CO2 reduction strategies. Carbon capture increases the cost of electricity generation because of the additional plant equipment and the decrease in conversion efficiency. Accordingly, retrofit of existing plants will require large additional capital investment which might render old plants uneconomic before the end of their lifetime. In addition, CCS imposes additional costs for the transport and storage infrastructure. The acceptance of such major investment costs and the related risks in a liberalized energy market depends on expectations as to whether CCS will be made mandatory, which in turn depends on climate and energy policies, and on the costs and availability of CCS versus alternative mitigation options. In the relevant literature, the range of estimated costs for electricity generation with CCS is great, depending on the underlying assumptions, in particular those on investment costs, conversion efficiencies, future interest rates, fuel prices and on the costs of CO2 emission certificates (Table 6.3). Expressed as costs of mitigating a ton of CO2, these estimates provide an indication of the level of the CO2 price that would allow these costs to be offset. WI et al. (2007) estimate CCS costs to be around 40–45 €/tCO2 for coal plants, and around 60 €/tCO2 for NGCC (natural gas combined cycle)

134 6.35 2.48 43.20

With CO2 capture, transport and storage Cost of electricity generation (€cent/kWh) Total cost penalty for CCS (€cent/kWh) Mitigation cost (€/t CO2)

Ecofys 2004

IGCC plant WI et al. 2007

6.68 2.22 39.20

40.0 42.2 42.0 86.2 86.6 85.7 1,733 2,375 2,000 55.0 87.5 85.0 5.57 6.95 6.28 1.09 1.77 1.82

46 47 50 1,335 1,685 1,300 37.1 575.5 53.0 4.48 5.18 4.46

IEA 2003

51.0 86.1 850 35.0 5.77 1.42

59 424 14.8 4.35

IEA 2003

52.0 86.6 890 51.7 5.99 1.72

58 480 37.3 4.71

Ecofys 2004

6.28 1.84 63.70

51.0 85.9 900 54.0 6.08 1.64

60 400 34.1 4.44

WI et al. 2007

NGCC plant

Source:

Praetorius et al. (2009).

Note: Calculations are based on common assumptions with respect to interest rate (10 per cent), depreciation period (25 years), plant factor (7000 h/a) and fuel prices for 2020 (5.7 €/GJ for natural gas and 2.3€/GJ for coal). Transportation costs are not included, except for WI et al. (2007). Costs and prices are in real values with a base year of 2000.

36.0 33.7 40.0 85.3 85.0 85.3 1,823 1,880 1750 78.0 79.7 80.0 6.29 6.48 5.95 2.14 2.09 2.08

49 950 48.3 3.87

WI et al. 2007

With CO2 capture Conversion efficiency (%) Emission reduction (%) Investment cost (€/kW) Operation & maintenance cost (€/kW) Cost of electricity generation (€cent/kWh) Cost penalty for CCS (€cent/kWh)

Ecofys 2004

44 42 1,086 1,085 33.0 50.0 4.15 4.39

IEA 2003

Pulverized coal plant

Expected cost and performance measures of new electricity generation technologies with and without CO2 capture and storage, 2020

Without CO2 capture Conversion efficiency (%) Investment cost (€/kW) Operation & maintenance cost (€/kW) Cost of electricity generation (cent/kWh)

Table 6.3

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plants in 2020. This includes transport and storage which together account for about 10–13 €/tCO2. These values approximately represent the average in the much wider range of IPCC (2005) estimates. Vattenfall, by contrast, hopes to reduce the specific cost for their oxyfuel demonstration plant in Germany to 20 €/tCO2 for carbon capture (excluding transport and storage). It is, however, to be expected that the costs of CCS will decline over time with more R&D and cumulative experience in applying the technology. Based on historical case studies, Rubin et al. (2007) estimate cost reductions in the capture system due to technology learning to be as high as 40 per cent for NGCC (post-combustion), 20 per cent for IGCC (precombustion), 26 per cent PC (pulverized coal post-combustion) and 13 per cent for oxyfuel combustion per 100 GW of cumulated capacity installed. Such cost estimates are one major input into scenario analyses of future energy and electricity systems. In Germany, a number of studies have been carried out, some including CCS as an option within the future generation mix. Two differing assessments will briefly be presented here. The first one is based on a computable general equilibrium (CGE) model and estimates the share of CCS resulting from different assumptions on the future CO2 price. The second assessment is a scenario-driven study that has been influential among environmental NGOs and ‘green’ research institutes, as it assumes ambitious CO2 emissions reduction targets and shows how they can be reached and at what cost. The first model presented here is input driven: in their general equilibrium model analysis with the Second Generation Model (SGM Germany), Schumacher and Sands (2006) show that both coal- and natural gas-based combined cycle plants (IGCC and NGCC) would supply generation shares at a carbon price of at least 30 €/tCO2 and increasingly supply these shares with CCS at higher carbon prices. The CGE model is based on bottom-up engineering descriptions of electricity generation technologies, combined with the top-down dynamics of a general equilibrium model. Given a set of assumptions regarding cost and technology vintages, the different technologies compete for their shares. Via the price mechanism, the model also includes endogenous shifts towards renewable energy sources and efficiency improvements: as the carbon price increases, renewable electricity generation takes up an increasing share in electricity supply independent of additional policy support. At the same time, electricity demand decreases. The authors show that a given political emissions reduction target can be achieved at equal or lower marginal costs (and thus costs to society) when CCS is included in the mitigation mix. Power generation with CCS would, for example, represent about one-third of total generation in 2050 in a scenario with a price of €50 per ton of CO2 (Figure 6.2). In contrast, the recent Lead Study 2008 (Nitsch 2008) commissioned by

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TWh 700 Baseline nario

600

ce Policy s

Wind 500

Nuclear

Subsidized wind NGCCccs

400

NGCC 300 IGCC 200

Advanced coal (PCA)

Coal (PC)

IGCCccs PCAccs

100 Gas

Source:

20 50

20 45

20 40

20 35

20 30

20 25

20 15

20 10

20 05

20 00

19 95

Note: zero.

20 20

Oil Hydro & other renewables

0

The baseline indicates the development of total electricity generation if CO2 price is Praetorius and Schumacher (2009).

Figure 6.2

Electricity generation mix with CCS technologies at stepwise increase of CO2 price up to 50 €/tCO2

the Ministry for the Environment is driven from the output side (Figure 6.3). It shows scenarios of possible future developments in the German energy system for specific policy objectives (such as the target of the IECP to reduce CO2 emissions by 40 per cent by 2020 as compared to 1990 levels, and 80 per cent by 2050) and derives scenarios that meet these targets. In the so-called ‘lead scenario’, targets also include a decrease in electricity consumption of 6 per cent by 2020, a major increase in the share of renewable energy in electricity generation (30 per cent by 2020; 50 per cent by 2030; 82 per cent by 2050), an increasing share of cogeneration in electricity generation (20 per cent by 2020; 25 per cent by 2030; 27.5 per cent by 2050), and an increasing share of gas combustion in electricity generation (a 70 per cent increase by 2020), which, however, would decrease again after 2025. A number of alternative scenarios and sensitivity analyses complete the assessment and underline its general consistency.

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700 600 Nuclear Conventional gas

500

Conventional lignite Conventional coal

TWh

400

Cogeneration (fossil based) Biomass Water

300

Wind Geothermal

200

PV Imported renewable

100 0 2005 2010 2015 2020 2025

Source:

2030 2040 2050

Nitsch (2008).

Figure 6.3

Electricity generation structure, Lead Study 2008

Given the assumptions in the lead scenario, the need for building new fossil fuel plants would decline substantially (only 29 GW by 2020) as compared to current plans and other studies. In 2050, only 32.4 GW (or 19 per cent) of overall generation capacities would be based on fossil fuels (compared to 79.5 GW or 62 per cent of 127.8 GW in 2005). This obviously reduces the potential of CCS to a marginal amount, particularly because a large part of the remaining fossil power capacity would consist of small cogeneration plants not suited for CCS, or would have been built before the expected commercialization of CCS in 2020. The Lead Study also comprises alternative scenarios; only one of them (Scenario D2) with lower annual energy efficiency improvements (2.5 per cent instead of 3 per cent annually) explicitly includes CCS. The scenario also assumes that more coal-based fossil fuel plants will be built before 2020 than was assumed in the lead scenario. Despite this increased potential for CCS deployment (including retrofit), the maximum amount of CCS plants by 2050 is 18 GW, representing only about 10 per cent of total generation capacity. This result is in stark contrast to the first model analysis, which anticipates a 30 per cent share under a policy scenario with a price of 50 €/tCO2. Major reasons for these divergent assessments of the future role of CCS are the different assumptions on the development of renewable energy sources and cogeneration: the Lead Study sets them exogenously to meet the policy target of emission reductions, while the equilibrium model

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determines the share of advanced wind technologies endogenously, that is, in a competition with fossil fuel technologies with and without CCS technology. Moreover, the Lead Study assumes significant cost reductions for renewables, permitting more than 100 TWh per annum to be imported from other European countries. In contrast, technical innovation in the model analysis only occurs as a shift across generating technologies, as new technologies become available. The reason for this is the modelling of investment behaviour in a logit allocation logarithm in response to changes in prices, whereas the designated investments in the Lead Study are determined independently of prices. The assessment up to now indicates that the emergence and the deployment of CCS would significantly affect the absolute and relative shares of lignite, hard coal and of natural gas in electricity generation. The degree to which CCS will be able to compete with other clean energy technologies such as renewable energy remains an open issue. In any case, CCS will be most competitive for large, centralized power plants, ideally situated close to the storage location. Correspondingly, the economic potential of CCS to contribute to climate change mitigation remains limited to the share of centrally generated electricity. In consequence, the degree of CCS deployment also affects the degree of centralization of the entire future electricity system, as CCS deployment runs somewhat contrary to decentralized energy generation technologies. This also has consequences for the deployment of combined heat and power (CHP) generation. Centralized coal power plants have a significantly lower CHP potential, because the distribution of very large amounts of heat via district heating requires ample heat sinks and sites of power plants, which may not coincide with the optimum power plant siting for carbon storage. One open question therefore is to what extent these two trends are complementary or contradictory, and whether one will become dominant and exclusive at some point. These are just a few insights into the scenario world. There are a large number of further technical differences between these (and other) scenario analyses and models for the future electricity system in Germany and abroad. Depending on the beliefs (or hopes) about future cost developments of the different mitigation options, about input and CO2 emission certificate prices, about the functioning of the market and about implicit and explicit policy measures to reach emission targets, such scenarios are being used to justify a variety of ex ante optimal technology choices and input mixes that have obvious consequences on the degree of CCS deployment in the future electricity supply system. This finds a direct reflection in the structure of actor coalitions and networks that can be identified in the German energy policy context.

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4

139

IS THERE REALLY A GAP? POSITIONS ON SUSTAINABLE ELECTRICITY FUTURES

For a long time, CCS was not much of a political issue in Germany; most of the activities have developed rather recently. Initially, the debate took place almost exclusively in expert circles, involving a relatively limited set of actors.5 The main drivers were research organizations, the oil and gas industry and a few political bodies such as the economics ministry and the German Council for Sustainable Development (for an earlier account of the actors’ network, see Fischer and Praetorius 2008). In the last three to five years, the debate has gained new momentum. One major driver has been international climate policy: the negotiations for the second commitment period of the Kyoto Protocol are taking off, climate change has been a topic at G8 summits and recent flood events and heat spells have heightened public attention. In parallel, CCS technology is being recognized on an international level by the climate policy community, as shown by the IPCC Special Report on Carbon Dioxide Capture and Storage (IPCC 2005) and by an increasing number of technology platforms and research initiatives. All in all, however, with respect to European-level debates about CCS, Germany appears to be more of a policy taker than a policy driver. European and international initiatives provide an important context for national activities. In the last few years, such activities around CCS have boomed, both nationally and internationally (European Commission 2004; Linßen et al. 2006; Radgen et al. 2006). In this vein, political interest in CCS in Germany is beginning to increase as well. As indicated earlier, the debate about the future electricity system is currently defined by two major issues: long-term electricity supply security on the one hand, and climate protection on the other. Both goals feature prominently in the scenarios highlighted above, and they also highlight the cleavage line in the current debate about the existence of an ‘electricity gap’ or, as DENA, which coined the latter term, now proposes, of an ‘efficiency gap’ (because of the low efficiency of old coal-based power plants, which via simple replacement by highly efficient plants would help to save energy and to avoid CO2 emissions). In this debate, CCS serves both sides as an instrument to strengthen their case. One can roughly differentiate between actors who claim to prioritize supply security and affordable energy supply in order to avoid disruptive effects for industry, and actors who claim to prioritize emission reductions targets and a quick transition towards a sustainable energy supply. The ‘supply security’ faction usually advocates new coal combustion plants (some of them also calling for postponement of the nuclear phase-out) and do not question the status quo of centralized electricity generation.

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The ‘climate protection’ faction, by contrast, opposes new coal combustion plants without CCS, and nuclear energy, and has a preference for the transition towards a more decentralized power infrastructure (Baake et al. 2008; Fischedick et al. 2008). A subfaction of the latter group is more radical and opposes CCS on the grounds of more fundamental arguments. The Supply Security Faction The first faction maintains that nuclear phase-out, the forthcoming decommissioning of old and inefficient fossil fuel plants and increasing electricity demand could lead to an ‘electricity gap’ as envisaged by the German energy agency DENA (2008) or in top-down modelling exercises which – by the nature of the models – mostly do not include the potential contribution of distributed generation technologies, or visions of smart grids, to secure and sustainable energy systems (Praetorius et al. 2009). In their eyes, new large-scale coal combustion plants are vital for energy security and for holding down energy costs for energy-intensive industries. As lignite is abundantly available in Germany, it would not make sense to abstain from using it. New plants could then be retrofitted once CCS technologies are commercially available. Moreover, a larger number of very old and inefficient coal plants are still running today. With the looming electricity gap, utilities might be forced to prolong their lifetime, which would in turn harm the earth’s climate much more than replacing them with highly efficient coal plants today. This perspective is shared by the electricity and mining sector, the related trade unions, the power plant industry and the ministries for the Economy and for Research. Typical research institutes supporting this position include Prognos, the IER (Institut für Energiewirtschaft und Rationelle Energieanwendung) in Stuttgart, and the Cologne-based Energy Research Institute (Energiewirtschaftliches Institut, EWI), as well as most of the mainstream economic research institutes, mostly contracted by the Ministry for the Economy. Both major political parties currently forming the Grand Coalition government of Social Democrats (SPD) and Christian Democrats (CDU), as well as the Liberals (FDP: Free Democratic Party) also support the idea of building new coal power plants to secure energy supplies at affordable prices for German industry. The related medium-term vision of a sustainable, nearly carbon-free and secure electricity system is based on coal combustion, soon to be retrofitted with CCS. The latter is envisaged to enhance the acceptability of coal combustion and to justify the construction of new coal-based power plants. Combined with promoting current technological progress

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in electrical conversion efficiencies – euphemistically labelled ‘clean-coal technology’ – they hope to be able to build new coal-fired plants before the commercial availability of CCS (Gabriel 2007; GVSt 2007; Grossmann 2008). With retrofitting they claim to reconcile climate protection, energy security and an economic energy supply. This position and strategy of incumbent players is not surprising, as it could help to preserve much of the status quo in the medium term: their transmission infrastructure without the obligation to invest in more decentralized grids, their centralized (cash cow) electricity plants, and – in the case of RWE and Vattenfall – their stake in national lignite resources (Baake et al. 2008).6 The Climate Protection Factions The second perspective prioritizes climate protection and argues that there are enough technological and behavioural options available to meet a sustainable level of energy demand. This faction bases its argumentation on bottom-up scenario studies such as offered by Nitsch (2008) in his Lead Study. Large coal-fired power plants are seen as a relict from the old days in which the need for a centralized technical structure with large power plants in a centrally planned electricity system dominated the perspectives and perceptions of society. A distributed generation (DG) future may still be somewhat visionary but achievable in the mid-term (say 2050). They prefer more flexible, smaller electricity generation units (such as gas combustion plants) which are compatible with bigger shares of fluctuating energy supply from renewables (for example, wind, photovoltaics, and solar-thermal electricity production). Newly built large coal-fired plants would emit GHGs for another 40–50 years and determine the electricity system structure for a similar period; it would thus be at odds with a DG strategy. This faction is split into two subfactions, one of which is compromising on climate change from a rather pragmatic perspective. The other is strictly opposed to CCS as a matter of principle. The first – pragmatic – subfaction comprises, among others, research institutes that typically work for the Ministry for the Environment and the Federal Environmental Office (Umweltbundesamt, UBA). This includes the Institute for Applied Ecology (Öko-Institut), the Wuppertal Institute (WI) and the Potsdam Institute on Climate Research (PIK). The pragmatic perspective is also shared by some NGOs like the Worldwide Fund for Nature (WWF), Deutsche Umwelthilfe (DUH) and Germanwatch, the Green and the Left parties and some advisory bodies, such as the Scientific Environmental Advisory Board (Sachverständigenrat für Umweltfragen,

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SRU). The pragmatic subfaction criticizes new coal combustion plants without CCS as this would lead to an unacceptable medium-term base of emissions (DUH 2008). They see the need for CCS to reach international climate protection targets in time, and they are not opposed to researching and developing CCS as one option among others to save the planet. In the national context, therefore, they fight any plan for new large coal-fired plants by stressing CCS as a precondition for new capacity. At the same time, enthusiastic advocacy for CCS technology expressed by representatives of the incumbent electricity industry is criticized on the grounds that they are using CCS as a fig-leaf for the early construction of new coal combustion capacity without CCS (albeit with the retrofit option). The pragmatists tend to doubt the credibility of the ‘CCS promise’ in spite of considerable investment plans and political activities. They suspect the dominant big utilities of being wedded to large-scale coal combustion for electricity generation. In fact, lignite resources and process sites are owned and controlled by two of the four big utilities – RWE and Vattenfall – which are both active in developing CCS. They also point out that electricity security problems would largely disappear if government accomplished the goals formulated in the IECP, that is, a substantial increase in energy efficiency, a 25–30 per cent share of electricity from renewable energy, and 25 per cent from cogeneration. And this would reduce the need for new coal-fired plants. In their public argument, they therefore stress the requirement for CCS and ask for a moratorium on coal plants without CO2 sequestration, with the ultimate aim of constraining the incumbents’ influence on shaping the future electricity supply structure. As CCS is still in an early stage, this strategy is indirectly supporting distributed generation structures based on more sustainable energy carriers, which this pragmatic faction would eventually prefer to any CCS (Bündnis 90/Die Grünen 2008). The second subfaction of climate protection is much more radical in opposing CCS. With the exception of WWF, Germanwatch and DUH, many German NGOs completely reject the idea of CCS for fundamental reasons. This includes the German Greenpeace section, the German section of Friends of the Earth (Bundesverband Umwelt- und Naturschutz Deutschland, BUND), the Nature and Biodiversity Conservation Union (NABU), and Robin Wood. They see no need for funding CCS whatsoever, as energy sources which are more sustainable than CCS are expected to be available at lower costs than CCS by the year 2020. CCS is seen as an end-of-pipe technology which would only serve the interests of the oligopolistic power utilities. It should therefore be financed – if at all – by industry without public support. Despite its small size, the radical NGO faction is in fact very active in promoting their position in public and thus

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actively participates in shaping the public perception of CCS. As in the case of opposition to coal plants in general, they have enough influence to slow down new coal investments at local levels. For many actors on the German electricity market CCS is thus a useful means of supporting their different visions of the future energy supply. But by exploiting the prospect of the CCS technology as a communication instrument, the actors risk reducing the credibility of the CCS option, as the acceptance of CCS requires trust in the relevant political, industrial and scientific actors (Bundesregierung 2007). Development of Actors’ Positions, Activities and Constellations Having said that, for most actors, CCS is a technology that should be promoted by public R&D and funding of pre-commercial plants in order to accelerate technical innovation, cost reductions and eventual deployment. The difference between these two main factions lies in the more or less pronounced role envisaged for CCS in the future electricity supply. For the first faction, CCS could serve as a ‘bridging technology’ towards a more sustainable energy supply – and thus buys time for the costly change of infrastructure. For the second faction, CCS is rather a stopgap in case the development of the other mitigation options do not come up to expectations – particularly from a global perspective. Moving on from this conclusion, we shall now take a deeper look at the development of positions and activities of the stakeholders, namely industry, NGOs, ministries and political parties. Industry stakeholders Historically, the main driver in CCS was the oil and gas industry. While not involved in electricity generation, the oil and gas industry has had longstanding expertise in using CO2 for enhanced oil recovery and could benefit from CCS with a double dividend: first, by receiving CO2 from the electricity industry which they need for EOR and second, by offering and selling off the related CO2 emission reductions to participants of the emissions trading system. Recently, however, the presence of oil companies in the debate has perceptibly decreased. BP is now particularly interested in hydrogen-related developments, such as IGCC; Shell is still involved in a number of projects, of which CO2SINK is the most prominent one. One reason for this loss in interest may be the increasing awareness of technical problems associated with the combination of enhanced oil and gas recovery and carbon storage, for example, in terms of leakage. At the same time, the engagement of the electricity industry changed and – more importantly – has increased massively over the last couple

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Table 6.4

Shares of coal and lignite in electricity generation, 2006

Hard coal Lignite Total share Total generation, in TWh Note: gas.

Vattenfall

RWE

E.ON

EnBW

4.8 74.3 79.1 70.6

27.9 37.3 65.3 181.8

27.6 7.1 34.7 120.8

n.a. n.a. 19.3* 74.9

* EnBW does not disclose its coal shares; the share is for fossil fuels, including oil/

Sources:

EnBW (2006); E.ON (2007); RWE (2007); Vattenfall (2007).

of years. In the early twenty-first century, their strategic pattern was the ‘Three-Step’ concept, a vision they shared with the coal-mining industry. It stipulates that the first step (and priority) towards climate-friendly electricity is to apply existing best-practice technology (and to export it worldwide), and the second is to develop power plants with increased conversion efficiency. Only then, as the third step, does CCS enter the picture, as a technology for the rather remote future. One major reason behind this reluctance to assign higher levels of importance to CCS has been the expected loss in conversion efficiency and the increase in cost. The level of engagement somewhat corresponds to the share of coal-based generation in electricity companies’ German portfolio, that is, those companies with high coal and lignite shares are more dynamically involved in CCS activities (Table 6.4). Yet, there has been a change in strategy that can be observed. Until recently, most industry players were involved in R&D activities in order to keep up to date with state-of-the-art or future technologies. They kept their engagement rather low key, calling for public funding as a condition for their own investment. At the outset of the debate on CCS, they were not very active in publicly promoting the technology. This picture changed recently with rising natural gas prices and the likelihood of rising carbon prices in the medium and long terms – with the result that CCS has become more attractive. The three biggest electricity companies, E.ON, RWE and Vattenfall, along with the power plant constructor Siemens PG now hold key roles in the EU Technology Platform ZEP and are all involved in a number of projects on both national and EU levels aimed at the technological and commercial development of CCS. The ‘Three-Step’ concept is still used in public communication but is increasingly being modified to endorse CCS in a more committed fashion. As mentioned earlier, the commitment to CCS might also help the

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utilities to justify new coal combustion plants and to promote their interests in the centrally organized electricity transmission grid. This is probably why they have started to openly communicate their investment plans for CCS: by 2014, E.ON plans to invest around €100 million in its seven post-combustion projects (E.ON 2008). RWE even announced that it plans to invest €2 billion in an IGCC plant of 450 MW, with the necessary infrastructure to be completed by 2014 (RWE 2008). Even EnBW has established a research consortium on post-combustion technologies despite its more sceptical stance on the economic viability of CCS (EnBW 2008). The most advanced company, however, is Vattenfall with its 30 MW oxyfuel pilot plant that started operations in the summer of 2008 and will be followed by a demonstration plant of 250–350 MW (Vattenfall 2008). In addition, Vattenfall and RWE are also involved in post-combustion research projects. For the power plant industry involved in CCS, one stimulus could be the international dimension of the technology, for example in view of China’s increase in energy needs and related coal power plants. Yet, the real level of commitment is largely dominated by national considerations. International markets seem to be more of a theoretical argument, even more so given that the biggest future coal users (like China) have not yet committed to emission reductions. It also remains an open question to what degree they will be interested in climate mitigation technology and whether they have suitable storage opportunities. But this might change when CCS is accepted under the Clean Development Mechanism (CDM). The main technology providers are Siemens and Alstom. Both are busy developing CCS technologies for pilot and demonstration plants. Siemens works mostly on post-combustion and on IGCC, while Alstom focuses on IGCC and oxy-combustion technologies. Alstom’s declared target is to offer CO2 capture technologies commercially by 2015, but, ‘like other early-mover commercial scale projects, carbon capture and storage – CCS – will need the appropriate regulatory and financial framework to ensure a speedy ramp-up of the technology and large commercial use’ (Alstom 2008). The public profile of the power plant industry, however, has not been as pronounced as that of the utilities, which is probably due to the fact that the ultimate decision on the technology choice for specific power plant investments depends on the latter. To support their stance, the electricity and power plant industry jointly founded the Information Centre on the Climate ‘IZ Klima’ for promoting the idea of CCS in the public and to focus such promotion activities. In November 2008, IZ Klima published a draft piece of legislation for CCS for Germany, based on the requirements of the EU draft directive. The

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official intention was to accelerate the legislative procedure in Germany, so as to avoid further delays with demonstration plants and lengthy permit procedures. In fact this proved to be a successful attempt at advancing their own idea of CCS legislation: the draft proposed by the Ministry for the Economy shortly afterwards was almost identical (Stratmann 2008). The coal-mining industry, in contrast, has remained surprisingly passive for a long time; their associations have not promoted CCS but rather the idea of ‘clean-coal’ technologies with a focus on generation efficiencies, filters and new materials. DEBRIV, the association of lignite mining industries, prioritizes the idea of higher generation efficiencies to CCS, and only recently declared the ‘CO2 free power station’ to be on its way, requesting reliable policy framework conditions for its development (DEBRIV 2007). The Association of Hard Coal (Gesamtverband der deutschen Steinkohle, GVSt) claims that clean coal technologies would be superior to CCS in terms of the cost of climate gas mitigation, and prefers to increase efficiency worldwide from an average of 30 per cent to the level of best-available technologies at around 45 per cent (GVSt 2007). This would indeed increase the power output from the same input by 50 per cent, whereas CCS decreases the efficiency at high cost. Altogether, aside from a few information sheets, they have not yet appeared as a driver or discussant in the actors’ network. It seems as though the mining industry leaves it up to the power industry to deal with the issue, as it is ultimately closely related to power generation. Moreover, climate protection has never been much of an issue for the mining industry, as they consider coal to be indispensable, at least for the time being. Finally, CCS creates additional costs for power generation from coal which threatens to undermine its competitiveness compared to other technologies and fuels, for example, renewable energy. Yet, CCS would open up a future for coal mining which may otherwise disappear in the case of stricter emission reduction targets. All in all, the rather passive position of the mining industry may be explained by the fact that the cost and benefit relation of CCS is still unclear. Federal ministries Other early drivers can be found among the federal ministries. The ministries involved in CCS are the Ministry for the Economy and Technology (BMWi), the Ministry for Education and Research (BMBF) and the Ministry for Environment, Nature Conservation and Nuclear Energy (BMU). These three ministries exhibit a particular division of labour. The BMBF is mainly involved with storage (for example, the GEOTECHNOLOGIES research programme since 2000, co-funded by the German Research Foundation (DFG)), while the BMWi fosters

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the capture side within the framework of COORETEC (CO2 reduction technologies) – a research initiative, operating since 2003, that is part of the fifth energy research programme of the federal government ‘Innovation and New Energy Technologies’. Coordinated by the BMBF and the BMWi, the electricity and power plant industry, the oil and gas industry and technology-oriented researchers thus cooperate in developing, funding and executing R&D programmes and projects. The coalmining and trading industry is connected to this loose network, mainly via organizational links with the electricity industry: mining enterprises and power producers are part of the same corporations or are grouped under the same umbrella organizations; the trade union ‘Industriewerkschaft Bergbau, Chemie, Energie’ (IGBCE) also deals with both sectors. In contrast to this technology-oriented research, the BMU focuses on a socio-political, economic, and/or socio-ecological approach to evaluating CCS. Coordinating environmental NGOs, the renewable energy lobby and other parts of the scientific community, their research agenda includes comparisons of CCS scenarios to scenarios with renewable energy technologies, fostering the dialogue between different actors (WI et al. 2007), and assessing the public perception of CCS (WI 2006; WI et al. 2008). Similarly, the Federal Environment Agency (UBA) – a subordinate body to the BMU – assessed CCS technologies, concluding that CCS could, at the most, be considered a ‘bridging technology’ towards a future system based on renewable energies (Radgen et al., 2006; UBA 2006). The research coordinated by the BMU thus has the role of pointing to the risks and limitations of the technology, but the BMU itself has increasingly shifted to a more coal-friendly perspective (including CCS) since the new government took power in 2005 (Gabriel 2007). In September 2007, the three ministries conjointly launched an analysis of CCS with the conclusion that its deployment is necessary and possible, despite the many challenges in terms of technology, economics and risks (BMWi/BMU/BMBF 2007). The future role of CCS is seen as particularly relevant given the continuing importance of coal for electricity generation, the huge lignite reserves of the country and the rising share of coal in global power generation, opening up export opportunities. In their policy recommendations, they urge the government to support the formulation of an institutional framework, and to foster R&D, for example, by building 2–3 CCS demonstration plants in Germany. The report contains a long and detailed list of recommendations, including clear messages to the public on the importance of accepting this new technology. This document can also be considered the present position of the government. The government’s commitment to CCS can also be assessed by taking into consideration the fact that a national CCS law was approved by the government

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even though concerns of certain states meant that it had not passed into law by September 2009. Environmental NGOs It was some time before environmentalists brought their positions to the table. Today, only a few of them – most prominently Greenpeace – reject CCS upfront; most are open to dialogue about CCS, although they do not like its end-of-pipe character. All NGOs demand a clear legal framework and technical approval requirements for CCS. In their view, CCS risks coming too late, regardless of the eventual options and related risks of storing the captured CO2. Environmentalists particularly fear that CCS might reduce funds for R&D on renewable energies, and that it could be used as a fig-leaf for investment in large centralized, fossil fuel-based power plants which in turn would cement supply structures and incumbents’ influence that would hold back energy-saving policies, cogeneration, and renewable energy technologies. Against the background of rising coal combustion worldwide, some NGOs, however, such as WWF and Germanwatch, regard CCS as an inevitable mitigation option and therefore promote public funding for demonstration plants. Political parties It took politicians much longer to realize the importance of CCS for the energy policy debate than other actors. Up to 2005, none of the main parties had a declared position. The final report of the Enquête Commission on ‘Sustainable energy supply in a global and liberalized world’ of the 14th German Bundestag, published in 2002, did not recognize CCS as a relevant option; they judged CCS to be a medium- to longterm prospect with a limited potential to contribute to climate protection in time, geographical and quantitative terms (Enquête 2002). Since then, the parties have developed a much more differentiated position. The CDU/CSU regards CCS as the core R&D task to ensure CO2 mitigation (CDU 2007); the FDP states that CCS is the missing link between conventional and renewable electricity supply systems which would help to delay the need to transform the electricity system towards a renewable one (FDP 2007). Both parties plead for the continuation of power generation from domestic coal for energy security reasons, and defend the interests of industry that relies on cheap energy. The SPD claims to invest in R&D and to formulate an appropriate institutional framework in order to develop CCS as an option – but to avoid a premature commitment to this option (SPD 2007). Only the Greens/Bündnis 90 point to a number of critical points and doubt the timely availability of CCS; at the same time, they

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request a moratorium on new coal plants without CCS (Bündnis 90/Die Grünen 2007). This partly contradictory position – scepticism towards CCS while declaring it as a condition for new coal-fired plants – reflects the opposition to coal combustion in general and to its advocates, rather than a coherent strategy to promote CCS. Meanwhile, the Left sees CCS as a ‘Trojan horse of the coal industry’ and demands instead the establishment of standards for maximum CO2 emissions per kWh of electricity. This hardening of political positions contributed to an increase in debates in the Bundestag, including hearings and many proposals and inquiries. In its reply to one of these inquiries, the government stated that it expects CCS to be commercially available by 2020, depending on the results of ongoing R&D activities (Bundesregierung 2007).

5

SMOOTHING THE TRANSITION TOWARDS SUSTAINABILITY?

CCS is increasingly promoted as a potential option within a portfolio of options to mitigate climate change and is therefore moving from the fringes to the centre stage of climate policy debates. Many issues about the future role of CCS in Germany are similar to the international debate, but Germany also shows some unique features. These include: ● ●

● ●

the strong general political commitment to climate change mitigation (even in times of financial crisis); the tensions among climate change mitigation targets, nuclear phaseout, gas supply constraints, anti-coal movements and the need for investment in electricity capacities to secure energy security; the strategic importance of lignite as a major domestic energy resource for the security of electricity supply in Germany; and the technical challenge of incorporating a rising share of up to 55 per cent of cogeneration and renewable energies into the electricity generation system by 2020.

Germany has a tradition of applying a broad mixture of energy and climate policy instruments. Although the market mechanism has often been emphasized as the best lever for successful climate mitigation, there are a mixture of instruments including emissions trading and ecological taxes, but also efficiency standards, subsidy-based market introduction programmes, and the like. To some extent, this diversification is also true for the structure of the electricity sector, and for the technology mix. Electricity generation is dominated by large plants, but it is increasingly

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based on a broad mixture of technologies and fuel inputs, including renewable energy, distributed energy, cogeneration and so on. A national commitment to one technology or market structure (for example, as in France) does not exist. Beside the handful of dominant utilities, over 800 local utilities and some independent producers and traders are also active in the market. At this stage, they have only limited influence on market dynamics; in the medium term, however, they may well gain in importance, as they will increase their generation basis as envisaged by the government’s IECP. Such a potential diversity opens space for the development of diverging perspectives and disputes. CCS has strong protagonists. Considering the carbon intensity and the high degree of centralization of the German electricity system, CCS seems more compatible with the prevailing electricity system structures than other mitigation strategies, at least in the short to medium terms. CCS serves vested interests of incumbent actors, as it allows for the postponement or reconsideration of radical changes in these system structures. It is therefore no surprise that these actors mainly see CCS optimistically as a ‘bridging technology’ that allows for a smooth transition away from the current carbon focus of electricity generation towards a more sustainable future. In their eyes, CCS could reconcile fossil fuel use with climate targets, making it possible to define fossil fuels as ‘transitional’ fuels. These actors see it as an option to buy time to advance with renewable and alternative carbon-free technologies. CCS also allows for the continuation of the exploitation of domestic lignite resources and is thus compatible with policy objectives on energy security and national employment. In addition, Germany would like to be the technology leader on CCS for export ambitions and consequently pushes CCS pilot and demonstration plants. The potential supporters of CCS, however, also complain about the high first-mover costs of this technology and ask for financial support and reliable framework conditions. The critics of CCS point to the fact that it probably prolongs the dominance of the current coal-to-electricity path in Germany to some 100 years instead of about 40 years. Also, as carbon separation is only economically viable for large point emitters, the current structure of centralized coal-fired power plants would be partly conserved, implying a continuation of the lock-in of the existing system structure and a contradiction to political targets of increasing the shares of cogeneration and renewable energies. Despite their scepticism towards CCS technology, the critics try to discredit coal and to hinder new coal combustion capacity by pointing to CCS as the lesser of the two evils and as a possible stopgap if their assumptions concerning the transition of the energy system turn out to be overoptimistic.

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Despite the different visions of the future electricity supply structure (particularly regarding the share of coal and the degree of centralization), there is a considerable degree of consensus on many CCS topics among most actors. Remarkably, there is little fierce opposition to CCS – though little enthusiastic support, either. First, the technology seems to promise interesting options – albeit not sustainable in the long run – for climate protection, but the remaining uncertainties are substantial so that all actors agree on the need for further scientific exploration and public discussion. Second, CCS is conceived as an international issue that cannot exclusively be decided upon at the national level, as the future global energy demand, the needs of newly industrializing countries, export options, foreign storage potential and international climate regimes will influence CCS and the future role of coal. Third, actors agree that CCS is not a ‘magic bullet’ that will solve the climate issue without further changes in the energy system. Actors acknowledge in principle that, on the one hand, fossil fuels (and specifically coal) will continue to be important in Germany for some time. On the other hand, however, CCS can only serve as a temporary solution. In consequence, the debate merely revolves around the exact time span for fossil fuel and CCS use, around the degree of centralization of the emerging energy system, and around the timing and focus of investment for the future. Environmental NGOs tend to adopt a wider time horizon, discussing energy futures up to the year 2050 and beyond, stressing the need for a quick transition towards a sustainable energy supply system. Industry, coal organizations and the BMWi (with few exceptions) prefer to restrict their goals and visions to a shorter term, pointing out that every statement concerning time lines beyond 2030 is highly speculative. Independent of the outcome of this debate, however, all investment will not flow into one single technology, such as CCS plants. Rather, a mix of central and decentralized options based on different fuels is likely to result. Such a trajectory seems reasonable from both an investor’s and society’s point of view as long as it is compatible with climate protection and other sustainability demands, and as long as the transition period is used to develop alternatives to the fossil system that may ultimately result in a low-carbon future electricity system. The most important precondition for any further engagement with CCS is thus to create a reliable and stringent regulatory and climate policy framework, covering all relevant aspects of security and liability, thereby creating a level playing field for all mitigation technologies. A responsible future technology and climate policy needs to consider all the different mitigation options. Aside from this, CCS is relevant not only for Germany. In his famous

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report, Stern (2006) pointed out: ‘The forecast growth in emissions from coal, especially in China and India, means CCS technology has particular importance. Failure to develop viable CCS technology, while traditional fossil fuel generation is deployed across the globe, risks locking-in a high emissions trajectory’. This also implies a technological leadership role for industrialized countries like Germany, as no emerging country will invest in mitigation technology that is developed but not deployed in industrialized countries. Any idea of a ‘global rollout’ of CCS needs such a step-by-step development and diffusion process (Gibbins and Chalmers 2008). Simultaneously, this opens up a new export market for power plant industries. To this end, technology development and implementation in Germany and other export aspirants is an important step. In Germany itself, however, CCS remains but one option within a broad portfolio of climate protection measures that compete for implementation. Such a broad portfolio allows for those options with the lowest CO2 mitigation cost to be chosen, and CCS can assume a specific role within that portfolio during a transition from a carbon-based towards a carbonfree electricity system. CCS is an incremental innovation that has a certain potential to smooth a transition towards a less carbon-intensive energy future, provided that the related uncertainties are resolved, in particular with respect to leakage, liability and acceptance. The actor constellation in Germany currently opens up such possible trajectories for using CCS as one technology among others contributing to a more sustainable electricity system.

NOTES 1. This chapter reports and updates a case study within the research project TIPS (Transformation and Innovation in Power Systems, www.tips-project.de) coordinated by DIW Berlin. We gratefully acknowledge funding by the German Ministry for Education and Research (BMBF) within its Socio-Ecological Research Framework (SÖF). 2. Another reason for renouncing such plans was the massive increase in investment cost for coal-fired plants, due to the global boom in building new coal plants, in particular in China and India. 3. Vattenfall launched its 30 MW oxyfuel pilot boiler at its Schwarze Pumpe power station near Spremberg in the State of Brandenburg in September 2008; RWE is planning to build a 450 MW IGCC demonstration plant with CCS by 2014 in Hürth (near Cologne); and E.ON is focusing on post-combustion solutions. 4. The Lerner Index relates the difference between market prices and marginal cost to the market price. It has a value between 0 and 1, where 0 indicates that no market power is exercised. 5. This is still reflected by the structure of actors involved in this area. Globally, more than 60 per cent of actors involved in CCS are situated in research institutes and universities. In Germany, about two-thirds belong to R&D institutions, and one-third to industry (Radgen et al. 2006).

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6. Vattenfall is also influenced by its Swedish mother company which declared that they would halve CO2 emissions by 2030 compared to 1990 levels. For Vattenfall Germany, this is not achievable without CCS as long as they intend to keep their inherited resource base, that is, lignite mines in East Germany.

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DEBRIV (2006), ‘Perspektiven der deutschen Braunkohlenindustrie 2006’, Neuss, 18 May, available at http://www.braunkohle.de/tools/ download.php?filedata=1173702263.pdf&filename=Hartung_Text. pdf&mimetype=application/pdf (accessed 27 December 2008). DEBRIV (2007), ‘Braunkohlenindustrie sieht große Bedeutung heimischer Ressourcen. Modernste Kraftwerke mit hohen Wirkungsgraden und geringen CO2-Emissionen. Rechtsrahmen für CO2-Abscheidung und -Speicherung vordringlich’, Press release, Cologne, 22 August 2007, available at http:// www.presseportal.de/pm/9341/1036201/debriv_dt_braunkohlen_industr_verein (accessed 27 December 2008). DENA (2008), ‘Kurzanalyse der Kraftwerks-und Netzplanung in Deutschland bis 2020 (mit Ausblick auf 2030), Annahmen, Ergebnisse und Schlussfolgerungen’, 15 April, Deutsche Energie-Agentur, Berlin. Destatis (2008), ‘Bevölkerungsstand’ (population statistics), 8 April, available at http://www.destatis.de/jetspeed/portal/cms/Sites/destatis/Internet/ DE/Content/Statistiken/Zeitreihen/LangeReihen/Bevoelkerung/Content75/lrbev 03a,templateId=renderPrint.psml (accessed 27 December 2008). DIW (2008), ‘Die wichtigsten Daten der volkswirtschaftlichen Gesamtrechnung für Deutschland’, Wochenbericht des DIW, 75 (14): 163. DUH (2008), ‘Stromlücke oder Stromlüge? Zu einer interessengeleiteten Debatte über die Zukunft der Stromversorgung in Deutschland’, 7 April, Deutsche Umwelthilfe, Frankfurt. E.ON (2007), ‘Strategy and Key Figures 2007’, available at http://www.eon.com/ en/downloads/Strategie_Kennzahlen_Update_March_2007_en.pdf (accessed 27 December 2008). E.ON (2008), ‘E.ON weitet Forschungsprojekte zu CO2-Vermeidung aus’, Dow Jones Newswires, 2 July, available at www.finanzen.net/nachricht/E_ON_ weitet_Forschungsprojekte_zu_CO2_Vermeidung_aus_748872 (accessed 27 December 2008). Ecofys (2004), ‘Global Carbon Dioxide Storage Potential and Costs’, Report by order of the Rijksinsituut voor Volksgezondheit end Milieu, EEP-02001, Utrecht, available at: http://www.ecofys.com/com/publications/documents/glo balcarbondioxidestorage.pdf (accessed 10 June 2008). EnBW (2006), ‘Unternehmensbericht 2006’, Karlsruhe. EnBW (2008), ‘Gibt es bei der EnBW Forschungsaktivitäten, um die CO2Abscheidung für einen großtechnischen Einsatz verfügbar zu machen? Häufige Fragen zum Steinkohlekraftwerk RDK 8’, available at www.enbw.com/content/ de/der_konzern/enbw/neubauprojekte/steinkohlekraftwerk_rdk_8/faq/index.jsp; jsessionid=C0A5ACCCB45BB961D60734789D3B4427.nbw05 (accessed 27 December 2008). Enquête (2002), ‘Nachhaltige Energieversorgung unter den Bedingungen der Globalisierung und der Liberalisierung’, Final Report, Enquête Kommission ‘Nachhaltige Energieversorgung’ des deutschen Bundestages, Berlin. European Commission (2004), European CO2 capture and Storage Projects, Brussels: Directorate-General for Research, Directorate J – Energy, Unit J2 – Energy production and distribution systems. FDP (2007), ‘Potenziale der Abtrennung und Ablagerung von CO2 für den Klimaschutz nutzen’, Antrag der Fraktion der FDP, Berlin, 25 April, Bundestag, Drucksache 16/5131, 16. Wahlperiode (legislative period). Fischedick, M., K. Pietzner et al. (2008), ‘Gesellschaftliche Aktzeptanz von

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CO2-Abscheidung und -Speicherung in Deutschland’, Energiewirtschaftliche Tagesfragen, 58 (11): 20–23. Fischer, C. and B. Praetorius (2008), ‘Carbon capture and storage: settling the German coal vs. climate change dispute?, International Journal of Environmental Technology and Management, 9 (2/3): 176–203. Gabriel, S. (2007), ‘Klimaschutz und Konsequenzen’, Speech, Dusseldorf, 22 March 2007, available at www.bmu.de/reden/bundesumweltminister_sigmar_ gabriel/doc/39094.php (accessed 27 December 2008). Gibbins, J. and H. Chalmers (2008), ‘Preparing for global rollout: a “developed country first” demonstration programme for rapid CCS deployment’, Energy Policy, 36 (2): 501–7. Grossmann, J. (2008), ‘Hoffnungsträger Kohle. Die Abtrennung und Speicherung von CO2 ist eine Schlüsseltechnologie für das 21. Jahrhundert. Jetzt müssen alle Kräfte gebündelt werden, um sie großtechnisch einzuführen’, Gastkommentar (guest commentator), Financial Times Deutschland, Hamburg, 10 July. GVSt (2007), Optionen für die Zukunft. Steinkohle Jahresbericht 2007, Gesamtverband der deutschen Steinkohle, Essen, October. IEA (2003), World Energy Investment Outlook, Paris: International Energy Agency. IPCC (2005), ‘Fact sheet on Carbon Dioxide Capture and Storage’, available at www.ipcc.ch (accessed 27 December 2008). Linßen, J., P. Markewitz, D. Martinsen and M. Walbeck (2006), Zukünftige Energieversorgung unter den Randbedingugen einer großtechnischen CO2Abscheidung und Speicherung, Federal Ministry of Economics and Technology, Berlin. London Economics (2007), ‘Structure and Performance of Six European Wholesale Electricity Markets in 2003, 2004 and 2005’, Part II: Results for Germany and Spain, London. Monopolkommission (2007), Strom und Gas 2007 – Wettbewerbsdefizite und zögerliche Regulierung, Special Report 49, Berlin/Bonn. Nitsch, J. (2008), ‘Leitstudie 2008. Weiterentwicklung der “Ausbaustrategie Erneuerbare Energien” vor dem Hintergrund der aktuellen Klimaschutzziele Deutschlands und Europas’, Stuttgart, DLR Institut für Technische Thermodynamik. Öko-Institut (2005), Power Generation Market Concentration in Europe 1996–2004. An Empirical Analysis, Berlin. Praetorius, B., D. Bauknecht, M. Cames, C. Fischer, M. Pehnt, K. Schumacher and J.-P. Voß (2009), Innovation for Sustainable Electricity Systems. Exploring the Dynamics of Energy Transitions, Berlin, Heidelberg: Physica/Springer. Praetorius, B. and K. Schumacher (2007), ‘Carbon capture and storage vs. energy efficiency: incompatible antagonists or indispensable allies?’, paper presented at the Eceee 2007 Summer ‘Study Saving energy – just do it!’, Conference, La Colle sur Loup, European Council for an Energy Efficient Economy. Praetorius, B. and K. Schumacher (2009), ‘Greenhouse gas mitigation in a carbon constrained world: the role of carbon capture and storage’, Energy Policy (forthcoming). Radgen, P., C. Cremer, S. Warkentin, P. Gerling, F. May and S. Knopf (2006), ‘Verfahren zur CO2-Abscheidung und -Deponierung’, Dessau, Fraunhofer Institut für Systemtechnik und Innovationsforschung (ISI) and Bundesanstalt für Geowissenschaften und Rohstoffe (BGR).

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Rubin, E.S., S. Yeh, M. Antes, M. Berkenpas and J. Davison (2007), ‘Use of experience curves to estimate the future cost of power plants with CO2 capture’, International Journal of Greenhouse Gas Control, 1: 188–97. RWE (2007), ‘Facts & Figures 2007’, German Power Plant Portfolio 2006, Hamm. RWE (2008), ‘Standortentscheidung getroffen: RWE will Kraftwerk mit Kohlevergasung und CO2-Abscheidung in Hürth bauen’, Press release, Hamm, 29 August. Schröer, S. (2008), ‘Atomausstieg und Versorgungssicherheit: Existiert eine Stromlücke?’, Wirtschaftsdienst, 2008 7: 474–8. Schumacher, K. and R.D. Sands (2006), ‘Innovative energy technologies and climate policy in Germany’, Energy Policy, 34 (18): 3929–41. SPD (2007), ‘Klimaschutz und nachhaltige Energiepolitik. Eckpunkte für die Umsetzung der europäischen Ziele in der Klimaschutz- und Energiepolitik in Deutschland’, Resolution of the Parliamentary Group of the SPD of 22 May, Social Democratic Party, Berlin. Stern, N. (2006), Stern Review on the Economics of Climate Change, Cambridge: Cambridge University Press. Stratmann, K. (2008), ‘Energiebranche schreibt Gesetze selbst’, Handelsblatt, available at www.handelsblatt.com/politik/deutschland/energiebranche-sch reibt-gesetze-selbst;2103092 (accessed 27 December 2008). Trendresearch (2008), ‘Kraftwerke 2030: Kapazitäten und Handlungsoptionen im deutschen Kraftwerksmarkt’, Bremen, available at http://www.trendresearch. de/studien/09-0127.pdf (accessed 27 December 2008). UBA (2006), ‘Technische Abscheidung und Speicherung von CO2 – nur eine Übergangslösung’, Positionspapier des Umweltbundesamtes zu möglichen Auswirkungen, Potenzialen und Anforderungen, Climate Change, N. 04/2006, Umweltbundesamt, Dessau. UBA (2007), ‘Wirkung der Meseberger Beschlüsse vom 23.08.2007 auf die Treibhausgasemissionen in Deutschland im Jahr 2020’, Umweltbundesamt, Dessau. UNFCCC (2008), ‘Greenhouse Gas Inventory Data – Detailed data by Party’, available at http://unfccc.int/2860.php (accessed 27 December 2008). Vattenfall (2007), ‘Energie aus dem Nordosten’, Daten und Fakten 2006, Berlin. Vattenfall (2008), ‘Demokraftwerk für CO2-emissionsarme Kohleverstromung geplant. Vattenfall will Technologieführerschaft ausbauen’, Press release, Berlin, 22 May. von Hirschhausen, C., H. Weigt and G. Zachmann (2007), Preisbildung und Marktmacht auf den Elektrizitätsmärkten in Deutschland. Grundlegende Mechanismen und empirische Evidenz, Study for the Association of Industrial Power Suppliers, VIK, Dresden. WI (2006), ‘Socio-Economic Research on the Acceptance of Carbon Capture and Storage (CCS) at International and National Levels’, Project flyer, Wuppertal Institute for Climate, Environment and Energy. WI, DLR, ZSW and PIK (2007), ‘Strukturell-ökonomisch-ökologischer Vergleich regenerativer Energietechnologien mit Carbon Capture and Storage’, Wuppertal, Stuttgart, Potsdam, WI (Wuppertal Institut für Klima, Umwelt, Energie); DLR (Deutsches Zentrum für Luft- und Raumfahrt); ZSW (Zentrum für Sonnenenergie- und Wasserstoff-Forschung); PIK (Potsdam Institut für Klimafolgenforschung).

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7.

CCS in the UK: squaring coal use with climate change? Ivan Scrase and Jim Watson

Carbon capture and storage (CCS) technologies have recently risen to prominence in UK energy and climate policy debates. For many years these technologies were repeatedly dismissed as impractical or costly, but the rationales for policy support have now strengthened. CCS technologies are now seen as a critical element of the UK’s response to the twin challenges of climate change and energy security. In 2009 the government announced that no new coal-fired power station will be built in the UK unless it demonstrates CCS on at least 400MW of its gross capacity. Support for these technologies is not only driven by national policy concerns, but is also influenced by the government’s position in international climate change diplomacy. Part of the transition in the fortunes of CCS is due to a greater awareness of CCS technologies and some progress in their development. But as these drivers imply, the political context and understanding of the social problems to which policy should respond have changed radically too. These now favour CCS technologies which offer significant greenhouse gas emissions reductions while allowing the continued use of fossil fuels. While CCS has potential applications in abating emissions from the use of natural gas in power stations and industry, the emphasis within this chapter is on coal since in the UK CCS has been approached principally as a ‘cleaner coal’ technology. The policy landscape is still rapidly evolving, and concrete actions to support CCS have become the subject of intense debate within government, in the press and among stakeholders. Forthcoming regulatory and financing decisions at the EU and UK levels make it difficult to reach firm judgements about future investment decisions or the eventual contribution that CCS technologies might make. This chapter therefore sets out to provide an explanation and critique of the evolving context for these decisions. It does so in the light of political and policy developments to June 2009, and the views of key stakeholders. Historical background information and details of the current context and strategy have been drawn from major UK policy documents and other grey literature and press articles. 158

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Background interviews with individuals representing 11 key organizations1 were used to clarify the authors’ understanding of current policy controversies around CCS, and stakeholders’ distinctive views on them. The chapter is structured as follows. Section 1 characterizes the UK policy context in terms of national energy balances and the place of coal, structural change in energy markets, and major policy drivers. Section 2 then examines CCS against the background of UK energy innovation policies. It focuses on institutional structures and funding streams, the history of ‘cleaner coal’ and ‘carbon abatement’ research, development and demonstration (RD&D) in the UK, and the background to the UK’s current commitment to funding two to four demonstration projects. Section 3 then turns the focus to the main actors and key debates around CCS technologies and policies in the UK. Section 4 concludes by reviewing the way CCS has entered the political realm in the UK and the central policy challenges that remain to be resolved.

1

THE UK ENERGY CONTEXT AND POLICY DRIVERS

This section first provides basic data concerning UK energy production, trade and use, and explains the historical and contemporary importance of coal in the UK fuel mix. The UK’s liberalized energy markets are then discussed, before we examine the two central energy policy drivers: climate change and energy security. UK Energy Balances and the Position of Coal Annual UK energy production in 2007 stood at 186 million tonnes of oil equivalent (mtoe), and net imports totalled 48 mtoe (BERR 2008). Production increased rapidly between 1980 and 1999: expansion of the oil and gas industries offset a sharp decline in coal output. By 2007 UK coal production had fallen to 11 mtoe (from 211 mtoe in 1980) and net coal imports reached 28 mtoe, mostly for use in power stations (Figure 7.1). Since 2000, oil and gas production from the North Sea has also declined. The UK became a net importer of gas in 2004 and of oil in 2005, having been a net oil exporter since 1980 and a net gas exporter since 1997. UK primary energy supply in 2007 included natural gas (91 mtoe), oil (84 mtoe), coal (40 mtoe), nuclear electricity (14 mtoe), and renewables (5 mtoe) (ibid.). Notably since 1970 there has been a strong shift away from coal and towards natural gas (Figure 7.2). The contribution from renewables has remained limited. Electricity use accounts for 18 per cent

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Million tonnes of coal

160 140 120 100 80 60 40 20 0 1970

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1980 Deep mine

Source:

1985

1990

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Open cast

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Imports

BERR (2008).

Figure 7.1

UK coal production and imports, 1970–2007

250 200

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Coal

19 70 19 73 19 76 19 79 19 82 19 85 19 88 19 91 19 94 19 97 20 00 20 03 20 06

0

Source:

BERR (2008).

Figure 7.2

Supply of primary energy in the UK, 1970–2007 (mtoe)

of UK final energy consumption; direct uses of oil and gas (for example, transport and space heating) account for 48 per cent and 31 per cent, respectively (ibid.). Coal use in electricity generation declined rapidly in the 1990s then stabilized in the early twenty-first century, and has recently increased due to higher gas prices and reduced availability of ageing nuclear power stations. In 2006 coal returned briefly to its previous position as the number 1

Capacity (GW)

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90 80 70 60 50 40 30 20 10 0

1991

1996 Conventional fossil Nuclear Hydro

Source:

2001

2006

Gas-fired CCGTs Gas turbines and oil engines Other renewables

Digest of UK Energy Statistics (various years).

Figure 7.3

Changes in UK electricity capacity, 1991–2006 (GW)

fuel for electricity generation. In 2007, sources of electricity generation in the UK (Figure 7.3) included gas (43 per cent), coal (35 per cent), nuclear (15 per cent) and renewables (5 per cent) (ibid.). The UK has large geological reserves of coal, but the cost of mining them are high by international standards, and therefore economic reserves are actually quite small. Many deep coal pits have been allowed to flood, and to re-open them would be very expensive. However, the recent emphasis on energy security as an energy policy driver has led some to argue for renewed deep and open cast mining, on the grounds that it could strengthen ‘energy independence’. Others have made the case for coal in general because they argue that it will maintain or increase the diversity of fuels used to generate electricity. In 2007–08 international coal prices increased to the extent that UK coal became more competitive, and some mines were re-opened and further open cast mining operations initiated. UK Energy Market Structure and Main Policy Drivers Since a series of privatizations in the 1980s, the predominant characteristic of the energy sector has been to ‘sweat’ existing assets (Helm 2007) such as power plants, transmission lines and pipelines. After privatization there was an initial unbundling of energy companies, followed by consolidation. Six large multinational companies now almost completely dominate the market for electricity and gas. This market structure bears directly on debates about CCS. For those who wish to see new, large-scale technologies like CCS being deployed, consolidation means that market players are more likely to be financially strong enough to take the associated risks.

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On the other hand, in a liberalized market companies will invest wherever risks and returns are most favourable, which in practice still means a preference for further gas-fired generation. The high and volatile fossil fuel prices of the past few years have led to a renewed interest in coal-fired power generation in the UK. Power companies clearly see coal as one way to diversify their portfolios – and have announced a number of concrete plans for new plants. This interest is perhaps an indication that they do not expect the carbon price in the EU Emissions Trading Scheme (EU ETS) to render such new capacity unprofitable – perhaps coupled with a belief that CCS technologies will be available and economically attractive should carbon prices rise significantly. However, it is far from clear when CCS technologies will be available for commercial deployment, and what their costs will be. Much depends on detailed UK and EU policy on CCS, the adequacy of funding to demonstrate and commercialise these technologies, and on public acceptability. In late summer 2008 there were major protests and some clashes with police as climate change campaigners descended on Kingsnorth in Kent to protest against ministerial consent for E.ON’s proposed 1.6 gigawatt (GW) ‘carbon capture ready’ coal-fired power station (see Section 3). Much of the UK discussion of energy security focuses on a perceived ‘energy gap’, which is in fact an ‘electricity gap’ that is expected to arise if new power generation capacity is not developed in the near future. While there are many plans by companies to build new gas-fired power plants in anticipation of plant closures, alternatives to this such as nuclear power and coal are seen by government as necessary to limit future UK dependence on imports, specifically imports of Russian gas. Although concerns about dependency on Russian gas imports are understandable, there is little evidence that this will be significant for many years to come. Projections by consultancy Oxera for the 2007 Energy White Paper show that the UK’s gas supplies are likely be sourced from a variety of locations and through a range of transit routes (Oxera 2007). In the period to 2020 this includes some continuation of supplies from the UK continental shelf, piped gas from Norway, LNG imports from countries such as Qatar and supplies from continental Europe via inter-connectors. Only the last of these includes Russian gas. By contrast, the UK now imports more than twice as much coal as it produces, and 45 per cent of its imports come from Russia (and most of the remainder from South Africa or Colombia) (DTI 2006a). It is therefore simplistic to present the substitution of gas-fired electricity generation with coal as making a major contribution to energy security. Until recently, energy security arguments were rarely made for the development of new coal-fired capacity – either with or without CCS.

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However, in 2006 a Coal Forum was set up by the Department of Trade and Industry (then responsible for energy supply policy) with a remit to ‘find solutions to secure the long-term future of coal-fired power generation and UK coal production’ (DTI 2006b), and efforts to promote CCS were stepped up. In 2008 the energy minister argued, ‘given the geopolitics of energy insecurity in future, diversity in terms of energy resource is absolutely vital. If we did not have coal it would bring forward an extra dash for gas. We need to think of the national security implications of that’ (House of Commons Environmental Audit Committee 2008a). That the UK government has begun to use energy (and even national) security arguments to make the case for CCS is perhaps an indication that ‘clean coal’ technologies are being taken more seriously (see Section 3). It also shows how politically important and contentious the issues around CCS became in 2008. While energy security is the main driver for renewed interest in coal in the UK, promoting CCS is seen as vital to square this with policies to mitigate climate change. UK emissions of carbon dioxide (CO2) fell by 7.4 per cent between 1990 and 2000, but began to increase again in the early years of this decade. The 2006 Climate Change Programme (Defra 2006) and the 2007 Energy White Paper (DTI 2007) set out the policies to move the UK towards a long-term target of a 60 per cent cut in CO2 emissions by 2050 (from a 1990 base). The White Paper’s analysis of expected emissions reductions by 2020 included an expectation that 0.3–1.9 GW of new power plant capacity with CCS would be operational by that date. Critics argue that government is not doing enough in areas such as energy efficiency and promoting renewables to achieve these ambitious reductions, and that progress so far on CCS has been too slow. There is now political agreement that tackling climate change must be a very high policy priority, and the gap between targets and real progress may change as a result of a new Climate Change Act that became law in November 2008. Legally binding five-year national ‘carbon budgets’, set at least 15 years ahead, chart the pathway towards an 80 per cent cut in CO2 emissions by 2050. The Act also created a Committee on Climate Change (CCC) to advise on meeting these targets and to scrutinize progress. In their first report in December 2008 the CCC stressed the importance of CCS, and pointed to a need for a ‘clear and publicly stated expectation that coal-fired power stations will not be able to generate unabated . . . beyond the early 2020s (CCC 2008: 199). In April 2009 a policy statement to this effect was made (see Section 3). To date the UK’s claim to international leadership on climate change mainly rests on the fortuitous fall in carbon emissions in the 1990s, and its efforts to promote the policy agenda through international diplomacy.

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However, with emissions rising again recently, support for CCS is seen by the UK government as an important indication that they remain committed to climate change mitigation. As such the Foreign and Commonwealth Office (FCO) has become a significant player in UK climate policy. This has started having consequences for the position of CCS technologies, since much of this diplomacy is designed to engage rapidly developing countries such as China and India. As a result of this perspective the FCO and the Department for Environment, Food and Rural Affairs (Defra) are said to have been sensitive to suggestions that new coal-fired plants could be built in the UK without speedy implementation of CCS. The creation of a new Department of Energy and Climate Change in early October 2008, which took over energy and climate policy functions from Defra and the Department for Business, Enterprise and Regulatory Reform (BERR) has helped to resolve tensions around this and other issues.

2

UK INNOVATION POLICY, ‘CLEAN COAL’ AND CCS

This section first explains UK innovation policy in general terms, focusing on funding streams and recent institutional changes. This is followed by a detailed look at the way cleaner technologies for fossil fuels (particularly coal) have been discussed in the UK, drawing on major UK energy policy documents over two decades. This leads into current debates around the UK’s plans to demonstrate post-combustion CCS and the construction of ‘capture ready’ coal-fired power stations. UK Innovation Policy and Institutions Publicly funded energy research and development (R&D) in the UK declined sharply in the late 1980s and 1990s, with privatization of the utility sector and national laboratory facilities. In the mid-1970s total publicly funded energy R&D totalled approximately £1.2 billion, with nuclear fission absorbing all but £0.2 billion (which was divided between nuclear fusion, fossil fuels and demand reduction). By 2004 total public R&D funding had fallen to less than £100 million, with renewables and nuclear fusion taking the largest shares. During the past few years, funding has begun to rise again rapidly, not only for R&D but also for demonstration and deployment of low carbon technologies. Figure 7.4 charts the trends in public R&D spending on energy. Until recently the key energy RD&D funding institutions were: (i) the research councils, which fund university research (£40 million of funding

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1400 1200 Other renewables

1000

Nuclear Renewables

800

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600 400 200

19 74 19 77 19 80 19 83 19 86 19 89 19 92 19 95 19 98 20 01 20 04

0

Source:

IEA R&D Statistics Database (http://www.iea.org/textbase/stats/rd.asp).

Figure 7.4

UK energy R&D spending, 1974–2005 ($m, 2005)

per year of which £19 million is for nuclear fusion and £13 million is for renewables), (ii) government departments (principally the DTI/BERR for low carbon and renewable energy RD&D, and Defra for energy efficiency RD&D) and (iii) the Carbon Trust, a government-funded but independent, business-led organization supporting the uptake of low carbon technologies in both the private and public sectors. For many years, energy innovation policy has been characterized by limited government intervention to compensate for perceived market failures (for example, Scott and Steyn 2001; Jaffe et al. 2005). In the field of sustainable energy, two market failures are most commonly cited. First, that the social costs of carbon emissions from the energy system are not fully internalised. This means that technologies that emit less carbon are at a disadvantage. Second, there is a tendency for the private sector to underinvest in R&D because individual firms cannot fully capture the returns from their investments. Further market failures are sometimes added to these two – for example, the tendency of markets to underinvest in other relevant public goods such as energy security. The natural response to the first two market failures is to create a policy framework that prices carbon emissions and provides government funding for R&D. However, many argue that government technology policies have to do more than this (for example, Bonvillian 2007). There may be a need for government to support other stages of the innovation process. For

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example, there has been increasing attention on the ‘valley of death’ that faces developers as they try to move technologies from the demonstration or prototype phase to incorporation in commercial products (for example, Gallagher et al. 2006). Institutions such as the Carbon Trust in the UK have a remit to support innovations through this stage. Despite these rationales, the government has been nervous about becoming too involved in supporting specific low carbon technologies such as CCS. The standard argument is that to do much more than support R&D would risk ‘picking winners’ (Watson 2009). This argument has been used by ministers and civil servants with regard to investment (for example, for new power plants) and to supporting innovation (for example, in renewables). On the face of it, the argument makes sense in the context of the liberalized energy markets that have been established in many countries. Advocates of this view (for example, Helm 2006) contend that governments should set frameworks that emphasize outcomes of policy and should leave technology choice to private investors. Despite its immediate attractiveness, this general reluctance to pick winners – or at least to acknowledge that this takes place – is flawed for a number of reasons. These include the need to set priorities if budgets are limited and the propensity of market mechanisms to select the cheapest technologies (and hence, to provide less support for less well-developed technologies). Recently, increasing political attention to addressing urgent climate and energy security concerns has highlighted the shortcomings of ‘not picking winners’ arguments. In June 2009 the Energy Secretary announced that the government was considering giving more explicit guidance on the desirable UK energy mix for the first time since the liberalization of the industry in the early 1990s (Pagnamenta 2009). Energy RD&D budgets have increased significantly, and there has been more emphasis on a strategic approach to technology support. Three new institutions and programmes have been created – the Energy Technologies Institute (ETI), the Technology Strategy Board (TSB) and the Environmental Transformation Fund (ETF). The ETI aims to bridge basic research and early demonstration of energy technologies by funding up to 100 per cent of the costs of large collaborative projects (£5m–£25m). It is a 50:50 public–private partnership, with up to £550 million committed by government over 10 years. Offshore wind power was the focus of the first round of funding, and in 2008 work began on developing a portfolio of CCS-related projects, beginning with an appraisal of UK storage capacity. The TSB is a new public body to direct public R&D expenditure across a range of sectors, overseen by a business-led governing board. It has a yet larger new budget of around £200 million per year to invest in collaborative R&D competitions (encouraging business investment in technology)

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and ‘knowledge transfer’ activities. Its stated vision is ‘for the UK to be seen as a global leader in innovation and a magnet for technologyintensive companies, where technology is applied rapidly and effectively to create wealth’ (Way 2008). The TSB focuses on seven ‘application areas’ for technologies including environmental sustainability, and energy generation and supply. In 2008 the TSB was funding 16 ‘carbon abatement technologies’ (CATs) projects with a total value of £11 million, including projects on CO2 sequestration and storage, biomass co-firing and supercritical steam power. While the research councils, TSB and ETI all focus primarily on R&D, the Carbon Trust, regional development administrations, and devolved administrations (Scottish, Welsh and Northern Irish) all fund demonstration of new technologies and subsidize their uptake. Nevertheless a significant funding gap has existed between the R&D stage and full commercialization. This situation should improve somewhat from 2008 with the creation of the ETF. Its aim is to accelerate the commercialization of low carbon and energy efficiency technologies in the UK, using £400 million administered jointly by BERR and Defra. This absorbs previously existing BERR and Defra funding programmes, including BERR’s demonstration programme for hydrogen and low carbon fossil technologies. A further £800 million will be spent within the ETF on international projects via the World Bank. Within the development community, there is some concern that these international funds could be directed to large-scale low carbon projects (for example, CCS). They argue that this would take funding away from other development goals or adaptation to the effects of climate change. Similar concerns have so far prevented inclusion of CCS in the Kyoto Protocol’s Clean Development Mechanism (de Coninck 2008). ‘Cleaner Coal’ and CCS in the UK Innovation Policy Portfolio, 1987–2008 The British coal industry was state owned from 1947 to 1994. In 1987 the British Coal Corporation reported on ‘environmental work’ at its Coal Research Establishment (CRE) (BCC 1987). Two activities were central: improving generation efficiency and reducing sulphur emissions. ‘Smoke’ and nitrogen oxides were also identified as significant emissions from coal combustion, but not CO2. Then in 1994 the DTI created the Clean Coal Technologies Programme to replace British Coal’s support for the CRE’s R&D work. Reducing CO2 remained absent as a significant focus in the government’s strategy for this programme. This latter omission is more surprising, given that the UK signed the United Nations Framework Convention on Climate Change in June

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1992. Moreover, with a new target at the time of reducing CO2 emissions to 1990 levels by 2000, the government’s 1993 ‘Coal White Paper’ had stated: ‘Unless the technical options for the removal and disposal of CO2 from power stations flue gases become commercial reality (which seems unlikely), CO2 emissions pose substantial long term problems’ (DTI 1993: 63). It found that: ‘The indications are that this option would be very expensive and would have significant environmental implications of its own’ (ibid.: 65). Under the new privatized coal industry regime, government policy was to ‘stimulate the development of clean coal technologies wherever they have prospects of being economically attractive and environmentally acceptable’ (DTI 1994: 2). This stopped well short of supporting any substantial clean coal demonstration programme, and this reluctance remained government policy for at least a decade thereafter. The UK signed the Kyoto Protocol in 1997, and in 1999 a Foresight Energy Panel identified ‘cleaner coal power generation technology as an area likely to make a major contribution to UK wealth creation well into the 21st century’ (DTI 1999: 9). In 1999 the DTI strategy became one of promoting ‘cleaner’ (rather than ‘clean’) coal. Improving the efficiency of coal-fired power generation as a means to reduce CO2 emissions was first explicitly identified as a policy goal at this time (ibid.: 15). However CCS was still not mentioned among emissions control technologies in the cleaner coal technology (CCT) programme, and the case against supporting large-scale demonstrations of any clean coal technologies was remade: there is currently a surplus of existing [subcritical] coal-fired capacity . . . [which] opens the UK industry to an approach of incremental improvements to existing plant . . . Although the environmental benefits from such an approach are not as good as those obtainable from currently available cleaner coal plant, the difference is not sufficiently decisive as yet to justify the very large differences in costs between the two approaches. (ibid.: 11).

In a further review in 2001, the government concluded that there was no case to support commissioning of new supercritical, ultra-supercritical or ‘integrated gasification combined cycle’ (IGCC) plant in the UK, nor did it ‘see a need to argue in favour of any one cleaner coal technology over another . . . the arguments in favour of one or the other are best left to the market to resolve’ (DTI 2001: 5). While cutting CO2 emissions had become central to the CCT programme, the review suggested that a CCS plant would reduce carbon emissions at a cost of £160–£170 per tonne of carbon avoided. This cost was prohibitive and in 2001 it was concluded, ‘there remain uncertainties, both as to the feasibility and the economics’

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of CCS (ibid.: 7). However oil companies operating in the North Sea had a potential interest in using CO2 for enhanced oil recovery (EOR) from partly depleted fields. The review then recommended ‘assessing in a systematic way the legal, scientific, engineering and economic aspects of both EOR and of geological CO2 capture and storage’ (ibid.: 4). In its 2003 Energy White Paper: Our Energy Future – Creating a Low Carbon Economy (DTI 2003a) tackling climate change moved centre stage. The emphasis in the short term was on renewables and energy efficiency, but CCS linked to EOR was discussed. In addition, longer-term modelling conducted for the government considered how to meet the White Paper target of a 60 per cent reduction in carbon emissions by 2050. This identified CCS as one of the technologies that are ‘consistently important for attaining a low carbon future across [a] range of scenarios’ (Marsh et al. 2003: ix). Given the ‘potentially significant strategic role that might be played by CCS in longer-term energy security’ there was a promise in the 2003 White Paper to ‘set up an urgent detailed implementation plan . . . to establish what needs to be done to get a demonstration project off the ground . . . [using] funding from international sources’ (DTI 2003a: 91). The window of opportunity for EOR in the North Sea was short given depletion rates, but UK Treasury funding for demonstration projects was clearly still not promised. The DTI duly reviewed the feasibility of CCS in the UK, and now concluded that the costs ‘compare favourably with other large scale abatement options’ (DTI 2003b: ii), but industry would not invest without ‘substantial additional financial incentives’, even for EOR projects. Nevertheless, ‘[w]ith the UK’s strong industrial base in power engineering and oil and gas production it could win a substantial share of the potentially much larger global market for CCS technology’ (ibid.: iii). A large-scale demonstration of CCS was now seen by the DTI as a real possibility and the ‘ultimate goal’ (ibid.: iv) of work in this area. Its primary function would be to ‘showcase UK technologies and capabilities’ to the world, with a view to capturing global markets for CCS technology. The DTI, or at least those responsible for clean coal, had been under pressure from their industrial stakeholders to win funds for a large demonstration plant of one kind or another for decades, and the opportunity now appeared to be emerging to focus this on CCS. In 2004, National Economic Research Associates (NERA 2004) evaluated the CCT programme, and made recommendations for a new programme focused on CATs. However, with existing funding levels, NERA found they did ‘not believe that Government funding for a large-scale demonstration plant is justified’ (ibid.: vii). Then a study of the commercial

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feasibility of EOR in 2004 found that it was not an attractive proposition in the North Sea (DTI 2004b), but left the option on the table as a potential means of demonstrating CCS. In theory, EOR could reduce the costs of demonstrating CCS because of the potential revenues from oil recovery. However when the DTI then consulted on its proposed CAT strategy the emphasis had shifted to CCS and hydrogen production, and government identified ‘a need for major demonstration projects’ to make CCS commercially available by 2020 (DTI 2004a: 12). The CAT strategy was then published in June 2005, listing ten action points including R&D (on higher efficiency power generation, biomass co-firing and parts of the CCS technology chain), work on national and international regulatory frameworks and market mechanisms, and international collaborations on CCS. The last includes involvement in monitoring storage integrity at Sleipner (Norway), and the ‘Near Zero Emissions Coal Project’ (nZEC) which aims to build capacity and links between UK and Chinese CCS experts and to study options to demonstrate CCS in China.2 The CAT strategy has largely proceeded as planned. As the next section of this chapter explains, the main focuses for political controversies have been UK plans to demonstrate CCS and whether to allow new ‘capture ready’ coal-fired capacity in advance of CCS being successfully proven at scale. It appears that the political case for support for CCS and for funding demonstration plant had largely been won by 2004. In 2005–06 the front runner for possible funding appeared to be BP and Scottish and Southern Energy’s proposal to convert an existing gas-fired power station at Peterhead in Scotland to run on hydrogen. This would have been a large 350 Megawatt (MW) demonstration of pre-combustion carbon capture technology, with CO2 sent through an existing pipe to the Miller oil and gas field in the North Sea for EOR purposes. However, in May 2007 BP announced that it was closing the Miller field and transferring the project to Abu Dhabi, because the government had been too slow to commit its support to the project. According to one interviewee for this research, at the time senior figures in government felt that they could not simply ‘pick a winner’ by backing BP’s scheme: if there was to be funding for a demonstration project there would have to be an open competition for the funds. This competition was announced in autumn 2007, and (surprisingly, given the government’s reluctance to pick technological ‘winners’) was restricted to a 300 MW post-combustion carbon capture project fuelled by coal. In June 2008 a consultation on CCS asked how to define ‘capture readiness’ (see Section 3, below). At the same time it was announced that four (out of nine) projects seeking the CCS competition funds had

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been selected for further consideration. These included E.ON’s proposed Kingsnorth power station, which became the scene for major environmentalist direct action protests later in the summer of 2008. Given this controversy, government announced there would be a further consultation on policy for new coal, and then in April 2009 announced that no new coalfired power stations would be built unless they captured and stored carbon dioxide from at least 400 MW of gross capacity. Financing was promised for demonstrations at this scale on up to four new coal-fired power stations, with the aim to demonstrate a range of technologies including pre-combustion (DECC 2009). At the same time it was announced that full-scale retrofit of CCS to all plants would be required within five years of the technology being judged commercially available. Controversies around these developments, and about the pace and nature of UK support for CCS, are examined in Section 4.

3

MAIN ACTORS AND KEY DEBATES ABOUT CCS TECHNOLOGIES IN THE UK

The Main Actors The debate about CCS technologies, and their place within future UK energy system development, is a relatively specialized one. A good indicator of the main actors in this debate is given by the responses to recent policy consultations (HM Treasury 2006; House of Commons Science and Technology Committee 2006). Eight major groups of actors can be identified among respondents: industrial lobbies (for example, the UK Carbon Capture and Storage Association), equipment suppliers and the construction industry (for example, Alstom), electricity utilities (for example, E.ON UK), fossil fuel companies (for example, BP), academic groups (for example, UK Energy Research Centre), environmental non-governmental organizations (NGOs) (for example, Greenpeace), scientific and engineering institutions (for example, the Royal Society), and government bodies (for example, BERR). Until 2008 BERR (the industry ministry) was responsible for energy supply, and was the lead government department in developing CCS policies. Defra (the environment ministry) also had a broad energy policy remit which included energy efficiency, environmental policy/regulation and international climate change policy. In October 2008, the climate change and energy functions of these departments were merged in a new Department of Energy and Climate Change (DECC). The FCO is also involved in international discussions around energy issues including

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CCS. The Treasury has taken a longstanding interest in ‘clean coal’ programmes, and has traditionally been reluctant to make public funds available to support demonstration programmes. Its outlook has changed somewhat since its 2007 Stern Review on the Economics of Climate Change made a forceful economic case for action to cut greenhouse gas emissions. Nevertheless the Treasury has not been as ready to promote CCS as departments like BERR might have liked. For example it remains unclear how much money will actually be available to fund the ‘commercial scale’ demonstration projects. Business development agency Scottish Enterprise is active in CCS policy consultations, and hopes to attract investment to Scotland. The Scottish government sees CCS as a major opportunity, and actively championed BP’s proposals to demonstrate the technology at its gas-fired Peterhead power station. The Welsh Assembly government has also welcomed the possibility of CCS activity in Wales. English regional development agencies are notably absent, though several regions on the east coast have begun to make studies of the availability of onshore and offshore CO2 storage sites. Renew (formerly Renew Tees Valley Ltd) responded to the above consultations. This is a private body with links to Progressive Energy Ltd, aiming to attract inward investment in green energy projects to this heavily industrialized area in North East England. Yorkshire Forward has also presented a case for developing an infrastructure network for CCS on the Humber estuary. As CCS is approached primarily as a technology that would be applied to coal-fired power stations it is surprising that the UK coal industry has not been more active in the debate. The Trades Union Congress has a Clean Coal Task Group that has argued in favour of CCS and reviving the UK’s deep coal-mining industry (TUC Clean Coal Task Group 2008). Similar arguments, but with the emphasis on open cast mining, have been advanced by BERR’s Coal Forum, made up of senior executives from power generation companies and mining interests. In general, however, the argument that promoting CCS would benefit the UK coal industry is not clear. Coal imports might simply increase, and in the longer term a requirement for CCS (or an emissions limit on power stations that effectively made it mandatory for coal) could raise costs and thereby rule out any new coal-fired capacity. Two law firms and just one trades union, Prospect (which represents professional engineers) responded to the two consultations. Consumer groups such as Energywatch and the National Consumer Council have been very quiet on CCS to date. There has been some public debate and an increasing amount of media coverage of CCS, but less than in relation to other low carbon technologies such as nuclear and wind power. The

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general public has been the subject of some research on public attitudes, notably by the UK Tyndall Centre (Shackley et al. 2004) and by academics at Cambridge University and MIT in the US (Reiner et al., 2006). In spring 2008 there was a flurry of press interest around the issue because new coal-fired power stations became a serious prospect. The political profile of the debate was again raised in the summer during the direct action protests at Kingsnorth. Key CCS Debates in the UK This subsection examines five main issues that have been the most prominent in recent economic, political and technical debates about CCS in the UK: the legitimacy of CCS, the specific technological focus of government support for CCS, the UK’s approach to full-scale demonstration, financing of demonstration and deployment, and the issue of consent for new ‘capture ready’ coal-fired electricity generation capacity. There are many other aspects of CCS that are also subject to some debate. For example, it is not clear who should take responsibility for the provision and financing of CO2 pipeline infrastructure. A central issue is who should pay for this infrastructure, which could facilitate a number of CCS projects at some future date. So far, the government has made it clear that industry should meet these costs. There are also many detailed legal and regulatory issues – for example, how responsibility for CO2 storage sites should be shared between private firms and the state. Issues of public acceptance are also potentially important. However, as this chapter has shown, much of the public debate has been about new coal-fired plants, and there is little sign yet of widespread public opposition to CCS per se. The legitimacy of CCS There is strong support for the UK’s focus on CCS in principle, but many of those involved in developing CCS technologies feel that progress has been too slow and the level of government support too low. A typical view was expressed recently to a parliamentary inquiry by the Carbon Capture and Storage Association: CCS is urgently needed as the world will continue to be dependent on reliable fossil energy for the foreseeable future and demand for energy is forecast to increase significantly . . . While the CCS community was heartened by plans to provide policy support, the rate of progress of defining the policy in the UK has been slower than envisaged and seems disproportionately slow compared to the urgent need to reduce [greenhouse gas] emissions and the ability and willingness of industry to act. (House of Commons Environmental Audit Committee 2008b)

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In direct contrast to such views, there is a significant constituency that is sceptical of CCS, principally the environmental NGOs. Some give qualified support to the principle of government support for CCS. For example, the Green Alliance is supportive as long as the promotion of renewables and energy efficiency are given a greater priority by government. The Worldwide Fund for Nature has taken a similar position and has advanced a pragmatic argument that CCS could be an important ‘bridging technology’ until the time comes when fossil fuels are no longer so dominant (WWF UK 2006). Interestingly some of the most historically sceptical NGOs have shifted to a more supportive stance in recent years. Friends of the Earth gave CCS a ‘cautious welcome’ in 2005, and explicitly stated that they had reversed their previous opposition (Friends of the Earth 2005). By contrast, Greenpeace UK, while welcoming the 2009 announcement requiring CCS use in all new coal-fired power stations, remain very concerned about support for CCS technologies. They consider public support should go to other, more immediately effective means to cut greenhouse gas emissions. They are strongly opposed to any new coal-fired generation capacity in the UK without full CCS, and have endorsed calls for an emissions limit on all generators that would allow new coal provided that CCS is used. One of the arguments put forward by Greenpeace is that CCS technologies risk perpetuating the ‘lock-in’ of centralized energy systems: the government’s system is designed to accommodate for large, inefficient and remote power stations owned by large companies like the coal and nuclear utilities. In other words, nuclear and coal power stand like two bouncers at the door blocking the way for renewables and efficiency – and perpetuating our outdated, inefficient and centralised energy system. (Greenpeace 2008: 8)

They link such arguments to their preferred vision for the future which focuses heavily on the merits of more decentralized energy systems that are based on renewables and combined heat and power. By doing so, they allude to a live debate in the academic literature around lock-in to high carbon energy systems (for example, Unruh 2000, 2002). Markusson and Haszeldine (2008) note that there is more than one lock-in scenario to consider, depending both on the ‘capture readiness’ of new capacity and whether or not CCS actually becomes available later (see below for more on the ‘capture ready’ debate). Government argued that capture readiness would help prevent carbon lock-in, but if CCS fails to deliver then the reverse may be more accurate (if the promise of CCS were used to justify unabated new coal-fired capacity in the short term). On the grounds that CCS may not deliver, and that government commitment to it had been far from wholehearted, environmental activist and national

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newspaper journalist George Monbiot has described it as a ‘great green scam’ (Monbiot 2008). What kind of CCS should be prioritized? Among proponents of CCS, there is an active debate about which particular technologies are the most desirable. Many organizations maintain that all variants should be supported – and that it is too early to tell which (for example, pre- or post-combustion) will turn out to be the most technically and/or economically attractive. This view is borne out by the range of plans that have been announced by power companies to develop CCS projects,3 subject to the required financial support being made available. Some companies have expressed clear preferences for pre- or postcombustion CCS technologies. In the former camp, Progressive Energy claims that pre-combustion CCS will be cheaper than the alternatives (House of Commons Science and Technology Committee 2006, Vol. 2). BP have also stated, on the record, that pre-combustion carbon capture technology ‘can be considered slightly ahead of post-combustion [carbon capture]’ (BP 2006: 4). Centrica (formerly British Gas) has also favoured pre-combustion technology – probably because of its compatibility with the current technology of choice in UK power generation, the combinedcycle gas turbine (CCGT). Some advocates of pre-combustion CCS also emphasize the link between this technology and the production of hydrogen and a potential ‘hydrogen economy’. Some other companies disagree with this view. The equipment supplier Doosan Babcock emphasizes that the technologies required for coal-fired power generation with pre-combustion carbon capture are not yet commercially available (Mitsui Babcock 2006). This is an important point. The IGCC power plant technology that would be used with precombustion CCS does exist, but it has barely developed beyond the demonstration stage (Watson 2006). Furthermore, post-combustion carbon capture could be retrofitted to hundreds of existing plants throughout the world. In principle, this could include many of the new plants being constructed in China and India. This consideration formed a key part of the government’s rationale for focusing on post-combustion CCS in its 2007 competition for demonstration funds. A change of policy in April 2009 means that at least two demonstrations will be supported, including one using pre-combustion technology. Demonstration projects As Section 2 showed, the debate about the full-scale demonstration of ‘cleaner coal’ technologies and CCS has been a long one. It has been a process characterized by repeated delay, no doubt partly due to

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discussions within government between supporters and sceptics. As these delays continued, they started to have an impact on project developers. As noted in Section 2, the absence of a clear and immediate commitment to one or more full-scale demonstration plants in the 2007 Energy White Paper was a delay too far for oil company BP, who cancelled their project at Peterhead in Scotland despite having already spent $50 million developing it (Macalister 2007). Then, in October 2007 BERR issued a press notice setting out key requirements for a single project, stating that it should demonstrate the CCS technology on a coal-fired power station, with CO2 stored offshore. It also revealed that a ‘phased approach’ would be acceptable, provided that the full chain of CCS technologies was demonstrated by 2014, and that it should then capture around 90 per cent of the CO2 produced by the equivalent of 300 MW generating capacity ‘as soon as possible thereafter’. Critics noted that under these proposals the scale at which CCS would be demonstrated in the UK by 2014 could be very small, and that the phrase ‘as soon as possible thereafter’ for demonstration at 300–400 MW scale did not necessarily bode well with respect to the often stated aim of having CCS commercially available by 2020. In November 2007, BERR provided more details about the competition and confirmed that pre-combustion technologies were excluded (BERR 2007), to the dismay of the Carbon Capture and Storage Association which warned that many projects would now be shelved. The decision to explicitly ‘pick a winner’ in the form of post-combustion CCS applied to coal-fired generation has proven highly controversial. The rationale stated by BERR (ibid.: 9) was that this is ‘a technology that is relevant and transferable to key global markets, particularly the big emerging economies’. Individuals interviewed for this research said that the decision to select this technology was reached by BERR also on the basis of finding a niche for the UK given what other nations are focusing on. However critics have noted that if the aim was to demonstrate the feasibility of CCS this could have been achieved much more quickly in the UK by opening the competition to gas-fired power stations. Others were dismayed that IGCC technology was not being backed since they believe that the potential efficiency is greater – and it therefore appears a more logical combustion technology for new coal-fired power stations where CCS is to be used. In this context, and bearing in mind that the UK government has traditionally been reluctant to ‘pick winners’, there was inevitably speculation as to possible additional rationales behind the government’s decision. It is possible that the way the competition was handled was in part a deliberate tactic to postpone spending the large sums of money involved, or even a signal to potential investors in nuclear power that CCS would not be a

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serious competitor in the short term. Such theories have been aired in the heated debates around CCS in the UK, but are largely unsubstantiated. Indeed the evidence is that nuclear power will be at least as slow to implement as CCS. A more likely reason is that the Treasury would not allow public funds to be spent on more than one plant, and that the selected technology and application were those most favoured by the business and political coalitions around ‘cleaner coal’ in the UK. In June 2008 four proposals were selected to go forward in the competition, including E.ON’s controversial Kingsnorth power station. One of these plants has since pulled out of the competition. Funding for other demonstrations in the UK remained a possibility, but this depended on developments in EU policy as much as future decisions by the UK government. The Secretary of State for Energy and Climate Change has lent his support to the construction of more than one demonstration. The EU agreement on its climate change programme in November 2008 confirmed the availability of significant funding for CCS from the ‘new entrants reserve’ of the EU ETS. A further EU announcement in February 2009 promised assistance within the Commission’s economic stimulus package, which allocated up to €250 million to a UK CCS demonstration. Support for up to three more demonstration projects in the UK was then announced in April 2009, though the exact financing arrangements remain unclear. Financial support Public funding is required for both the demonstration and (if this is successful) commercial deployment of CCS. Given the absence of fullscale demonstrations so far, it is unclear how much financial support will be required. Estimates of the precise costs of CCS in the UK vary widely. For example, BP said to the House of Commons Science and Technology Committee that £40/tonne of CO2 would be required for their proposed gas-fired power plant with CCS (House of Commons Science and Technology Committee 2006). Progressive Energy have claimed a cost as low as £10/tonne for coal using pre-combustion carbon capture (Progressive Energy 2006). Shell stated recently that a range of €50–100 tonne (approximately £40–80/tonne in 2008) should be expected. Shell’s chief economist also said that initial plants would be at the upper end of this range (Mortished 2008). The likelihood is that some of these cost estimates will tend to be too low. Experience in other large and complex technologies is that pre-commercial cost estimates tend to be optimistic. Large, complex ‘mega-projects’ often experience serious cost over-runs (Flyvbjerg et al. 2003). This has been the case in the past for nuclear power, and it is probably the case for advanced

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cleaner coal technologies such as IGCC. This ‘appraisal optimism’ is not random (MacKerron 2004): supporters of new technology, besides a natural enthusiasm, also face incentives that will systematically tend to produce low cost estimates. This asymmetry of incentives arises because optimistic cost estimates will tend to help approval of projects, but if costs do over-run the bill will generally fall to be paid by other parties (governments or consumers). In advance of real commercial experience, cost estimates therefore need to be treated with caution. Almost all proponents of CCS agree that the current carbon pricing mechanism for power generators (the EU ETS) is not yet sufficient to finance major investments. So far, the price of carbon within the EU ETS has been too low – and too volatile – to be considered ‘bankable’ by investors in capital-intensive technologies such as CCS. Indeed, prices in the EU ETS dropped significantly in early 2009 to around €10/tonne. Various possible interim financing mechanisms have been proposed to help establish CCS demonstration projects in the EU, in the hope that by around 2020 the EU ETS alone will be sufficient to support investment (for example, International Emissions Trading Association 2008). As noted in the previous subsection, recent EU announcements included some progress on this. CCS demonstration plant developers will be allowed to access up to 300 million EU ETS allowances, and further capital support has been offered via a European economic stimulus package. There is also the possibility that revenues from auctions of allowances by member state governments could be recycled to support low carbon technologies including CCS. The UK government has committed itself to 100 per cent auctioning, but it disagrees with the Commission on recycling of revenues. As a general principle, the UK Treasury is opposed to the hypothecation of taxation revenue in this way. Capture ready and Kingsnorth The debate about the government’s approach to fossil fuel electricity generation in advance of the availability of CCS has recently become a heated one. This has centred on utility E.ON’s application for consent to build two 800 MW supercritical coal-fired generation units at its site at Kingsnorth in South East England. These units are to replace an existing plant which is due to be retired by 2015. Ministerial consent is required, and can be granted subject to conditions. It would be a condition of consent that a new plant should be ‘capture ready’ – that is, that it should be capable of having CCS equipment added at a later date. BERR came close to granting consent for Kingsnorth on this basis in late 2008 but backed down under protests from environmentalists, other government departments and high profile advisors.

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Kingsnorth would not have been the first UK power station to have this requirement attached to its consent, but it would be the first coalfired power station (the previous three have been for gas-fired stations). In a letter to the Secretary of State (Greenpeace 2007) in March 2008, Greenpeace pointed out that this was the first application for a large coalfired power station in the UK for 25 years, and called for there to be a public inquiry before consent was granted. Using Freedom of Information Act powers Greenpeace UK then obtained details of an email exchange between E.ON and the civil servant drawing up planning conditions. This appeared to show that the civil servant had withdrawn a suggestion to include a condition about CCS after the utility objected to this.4 In the event E.ON issued a press release announcing that they would enter Kingsnorth into the government’s CCS demonstration competition, but asking that the government delay giving consent for its construction until after the government had clarified the definition of ‘capture ready’ (E.ON UK 2008). A consultation on CCS and the definition of ‘capture ready’ took place between June and September 2008. It focused on a range of technical questions about the definition of ‘capture ready’ for both UK and EU policy. Four elements were emphasized as part of this definition: the provision of enough space for carbon capture equipment, the availability of appropriate storage sites, the availability of a means of transporting CO2 to a storage site, and the feasibility of fitting carbon capture equipment to an existing plant. The consultation did not deal with wider questions about the extent to which any definition of ‘capture ready’ would be sufficient in the absence of more certainty about the cost and feasibility of CCS technologies. Furthermore, the consultation implied that only the first element of its ‘capture ready’ definition (the provision of sufficient space for CCS equipment) should be strictly applied. This gave the impression that the government favoured a ‘light’ regulatory approach which would not require plant developers to undertake extensive feasibility studies, or to retrofit CCS by a certain date. Sentiment among some stakeholders did not appear to strongly support the concept of ‘capture ready’: some energy companies say they understand the regulatory risks and will make any new capacity capture ready of their own accord. Other stakeholders saw the concept as at best a distraction and at worst a smokescreen to get unabated coal capacity built in advance of CCS being available. A number of organizations also voiced scepticism about the value of ‘capture ready’ conditions in the absence of further measures to mandate CCS (or at least rule out new unabated coal plants). These included the House of Commons Environmental Audit Committee (2008b) and the government’s own environmental regulator – the Environment

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Agency (2008). The CCC also called for a clear expectation that coalfired power stations will not be able to operate unabated beyond the early 2020s. Given the widespread resistance to new unabated coal capacity it was unlikely that resolving the regulatory definition of capture ready would significantly reduce the political opposition to proposals such as E.ON’s. In February 2009 the energy minister announced that a decision on Kingsnorth would be postponed once again pending a further review of policy towards new coal-fired plants. In April 2009 government announced that all of the proposed CCS conditions would apply, but this was rather overshadowed by the simultaneous announcement that no new coal-fired power station would obtain consent without some use of CCS from day one (DECC 2009). Pressure remains on government to require full CCS on any new coal-fired plant from day one, but government is also keen not to introduce a policy that would rule out new coal-fired investment.

4

CONCLUSIONS

In a short space of time, CCS has become a prominent option in UK policy debates for reducing carbon emissions. CCS is clearly no longer a marginal technology in the UK government’s assessment, and some clear actions have been promised to make it a reality. But, as in other countries, there appears to be some way to go yet before the talk and promises translate into low carbon fossil fuel power stations in the UK. In short, CCS now appears to be serious politics in the UK, but not yet serious business. Some parallels can be drawn with the recent renewed enthusiasm for nuclear power in the UK. Nuclear was not seen as an attractive option as recently as 2003, with its high costs and unresolved issues around waste disposal. CCS was also dismissed as excessively costly. Potentially, it also has similarly difficult liability issues attached to it. Nevertheless, with climate change moving up the political agenda, and fears that ‘the lights will go out’ if new electricity generation capacity is not secured, both nuclear and CCS are now seen as central to achieving deep reductions in emissions from the UK electricity system. Little has changed in the period since 2003 to make the economics of CCS more attractive. For nuclear, some cost sharing of future liabilities has been promised, though it is likely that new reactors will need financial support beyond this. The two technologies differ fundamentally, however, in that nuclear power stations have been in operation for decades around the world. CCS remains unproven at scale, and very little firm evidence can be drawn upon in estimating future costs.

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To make CCS a reality, the UK government is supporting two to four demonstration projects at the 300–400 MW scale. As a result of this and similar demonstrations in other countries, the government and industry are looking for economic and technical uncertainties to be diminished significantly. As in other countries, support for CCS is associated with multiple risks. It is difficult to improve confidence in CCS technologies until the first demonstrations are up and running – in practice this is likely to take until at least 2015. There are also uncertainties about the technical performance and the eventual costs of CCS. If CCS is a serious option, then many feel that government will have to do more to reduce economic and financial risks, and make it an attractive proposition for investors. As of June 2009, it remains unclear whether the appropriate financing arrangements will be implemented to achieve this. Because the UK now plans to support several demonstrations, and these are likely to be matched by other demonstrations in other countries, this should have a positive effect on many of the multinational firms involved and help develop supply chains in the UK. However, the main economic problem is that the carbon price in the EU ETS is too low and too uncertain for investors to rely on it as a source of finance. It remains to be seen whether recent progress on specific financing mechanisms for CCS at the European level will make a significant difference to the prospects for demonstration and deployment. Direct public ownership of power stations appears to be an unlikely option in the UK for the foreseeable future. However, the government’s role is likely to be significant. Part ownership – or at least some form of coordinated planning – may have to be seriously considered with respect to pipeline infrastructure. In addition, the liability for geological CO2 stores will be shared between industry and government. With respect to the latter, learning lessons from past experience of energy investments with large associated public liabilities (for example, waste from nuclear power plants and health claims from coal mining) will be important. The little evidence there is on public views about CCS suggests that opposition to this technology is not strong. Even its most vocal critic, Greenpeace, says it is not opposed to the technology in principle. However, the government’s handling of the issue of ‘capture-readiness’ of new fossil power stations has already stirred up controversy. Leaked emails relating to the planned Kingsnorth power plant leave the impression – right or wrong – that some parts of government lack the strength to impose meaningful conditions on industry relating to the addition of CCS. However, as some had speculated (for example, Lean 2008), the creation of the Department of Energy and Climate Change signalled a shift in policy towards CCS. A much more interventionist

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approach is now on the table, and while the UK’s hesitancy may have cost it leadership in developing the technology, its April 2009 (DECC 2009) announcement requiring use of CCS at all new coal-fired power stations may yet make it a major international player. Much depends on whether the policy is backed up by sufficient financial incentives, and whether it will survive the economic and political uncertainties the UK faces – including the strong possibility of a Conservative government at the next general election.

NOTES 1. We would like to thank the following organizations for participating in background interviews for this chapter: ALSTOM Power Ltd; BP Alternative Energy; British Geological Survey; Carbon Capture and Storage Association; Climate Change Capital; Department for Business, Enterprise and Regulatory Reform; Doosan Babcock Energy; Greenpeace UK; Prime Minister’s Policy Directorate; and Scottish and Southern Energy. We would also like to acknowledge financial support from the UK Economic and Social Research Council. 2. Available at www.defra.gov.uk/environment/climatechange/internat/devcountry/china. htm, accessed 9 June, 2009. 3. See project descriptions available at http://www.ccsassociation.org/ccs_projects/uk_ projects.html, accessed 9 June, 2009. 4. The emails are available at http://www.greenpeace.org.uk/files/pdfs/climate/FOI-1.pdf, accessed 9 June, 2009.

REFERENCES Bonvillian, W. (2007), Testimony before Congressional hearing on ‘Establishing the Advanced Research Projects Agency-Energy (ARPA-E) – HR 364’, House of Representatives Subcommittee on Energy and Environment, Committee on Science and Technology, Vol. 14. BP (2006), ‘BP Submission to HM Treasury Consultation on Carbon Capture and Storage’, BP, London. British Coal Corporation (BCC) (1987), Clean Use of Coal – Environmental Work at the Coal Research Establishment, Cheltenham: BCC. Committee on Climate Change (CCC) (2008), Building a Low-carbon Economy, Norwich: The Stationery Office. de Coninck, H. (2008), ‘Trojan horse or horn of plenty? Reflections on allowing CCS in the CDM’, Energy Policy, 36: 929–36. Department for Business, Enterprise and Regulatory Reform (BERR) (2007), ‘Competition for a Carbon Dioxide Capture and Storage Demonstration Project. Project Information Memorandum’, London: BERR. Department for Business, Enterprise and Regulatory Reform (BERR) (2008), Digest of UK Energy Statistics 2008, London: The Stationery Office. Department for Energy and Climate Change (DECC) (2009), Press Release: No

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new coal without CSS – Miliband, Accessed, 9 June, 2009 at http://www.decc. gov.uk/en/content/cms/news/pn050/pn050.aspx. Department for Environment, Food and Rural Affairs (Defra) (2006), Climate Change: The UK Programme, London: The Stationery Office. Department of Trade and Industry (DTI) (1993), The Prospects for Coal: Conclusions of the Government’s Coal Review, London: HMSO. Department of Trade and Industry (DTI) (1994), Clean Coal Technologies. A Strategy for the Coal R&D Programme, Energy Paper 63, London: HMSO. Department of Trade and Industry (DTI) (1999), Cleaner Coal Technologies. Future Plans for Research and Development, Technology Transfer and Export Promotion, London: HMSO. Department of Trade and Industry (DTI) (2001), Review of the Case for Government Support for Cleaner Coal Technology Demonstration Plant, London: DTI. Department of Trade and Industry (DTI) (2003a), Energy White Paper: Our Energy Future – Creating a Low Carbon Economy, London: HMSO. Department of Trade and Industry (DTI) (2003b), Review of the Feasibility of Carbon Dioxide Capture and Storage in the UK, London: DTI. Department of Trade and Industry (DTI) (2004a), ‘A Carbon Abatement Technologies Strategy for Fossil Fuel Power Generation. Consultation Document’, London: DTI. Department of Trade and Industry (DTI) (2004b), Implementing a Demonstration of Enhanced Oil Recovery Using CO2, London: DTI. Department of Trade and Industry (DTI) (2006a), Energy Trends: September 2006, London: DTI. Department of Trade and Industry (DTI) (2006b), The Energy Challenge – Energy Review Report, London: The Stationery Office. Department of Trade and Industry (DTI) (2007), Meeting the Energy Challenge – A White Paper on Energy, London: The Stationery Office. E.ON UK (2008), ‘E.ON enters UK government’s carbon capture and storage competition’, Press Release. Environment Agency (2008), ‘Response to the Department for Business Enterprise and Regulatory Reform: Towards Carbon Capture and Storage’, London: Environment Agency. Flyvbjerg, B., N. Bruzelius and W. Rothengatter (2003), Megaprojects and Risk: An Anatomy of Ambition, Cambridge: Cambridge University Press. Friends of the Earth (2005), ‘Carbon Capture and Storage’, Briefing Note, London: Friends of the Earth. Gallagher, K.S., J.P. Holdren and A.D. Sagar (2006), ‘Energy-technology innovation’, Annual Review of Environmental Resources, 31: 193–237. Greenpeace (2007), Letter objecting to the proposal to build a new coal-fired power station at Kingsnorth, Greenpeace, London. Greenpeace (2008), ‘The Case Against Coal-Fired Power Generation ’, Greenpeace Briefing, London: Greenpeace. Helm, D. (2006), ‘Energy policy: politics v economics’, New Statesman, 15 May, Heat and Light Supplement, pp. viii–ix. Accessed: 9 June 2009 at http://www. newstatesman.com/pdf/Energy%20supp%202006.pdf. Helm, D. (2007), The New Energy Paradigm, Oxford: Oxford University Press. HM Treasury (2006), Carbon Capture and Storage: A Consultation on Barriers to Commercial Deployment, London: HM Treasury. House of Commons Environmental Audit Committee (2008a), The 2007 Pre-

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Budget Report and Comprehensive Spending Review: An Environmental Analysis, HC 149 II, London: The Stationery Office. House of Commons Environmental Audit Committee (2008b), Carbon Capture and Storage, HC 654, London: The Stationery Office. House of Commons Science and Technology Committee (2006), UK Energy and Climate Needs: The Role of Carbon Capture and Storage, London: The Stationery Office. International Emissions Trading Association (2008), ‘Options for Financing CCS’, IETA memo, IETA, Geneva. Jaffe, A.B., R.G. Newell and R.N. Stavins (2005), ‘A tale of two market failures: technology and environmental policy’, Ecological Economics, 54: 164–74. Lean, G. (2008), ‘Hutton’s move to MoD will clear way for greener agenda’, Independent on Sunday, 5 October, accessed 9 June 2009 at http://www.indepen dent.co.uk / news / uk / politics / huttons-move-to-mod-will-clear-way-for-greeneragenda-951814.html. Macalister, T. (2007), ‘BP scraps £500 million Scottish carbon capture scheme’, The Guardian, 25 May, Financial Section, p. 30. MacKerron, G. (2004), ‘Nuclear power and the characteristics of “ordinariness” – the case of UK energy policy’, Energy Policy, 32 (17): 1957–65. Markusson N. and S. Haszeldine (2008), How Ready is ‘Capture Ready’?, Scottish Centre for Carbon Storage, University of Edinburgh. Marsh, G., P. Taylor, D. Anderson, M. Leach and R. Gross (2003), ‘Options for a Low Carbon Future – Phase 2’, A report produced for the Department of Trade and Industry, DTI Economics Paper No. 4, June 2003, London: DTI, pp. 50–151. Mitsui Babcock (2006), ‘Mitsui Babcock Response to Treasury Consultation on CCS’, Mitsui Babcock. Monbiot, G. (2008), ‘Carbon capture is turning out to be just another great green scam’, The Guardian, 18 March, Comment and Debate Section, p. 37. Mortished, C. (2008), ‘Shell issues stark challenge to politicians’, The Times, 15 February, accessed 9 June 2009 at http://www.business.timesonline.co.UK/tol/ business/industry_sectors/natural_resources/article33371862.ece. NERA (2004), ‘Evaluation of the Cleaner Coal Technologies Programme’, Report to the DTI, London: National Economic Research Associates. Oxera (2007), ‘An Assessment of the Potential Measures to Improve Gas Security of Supply’, Report to the DTI, Oxford: Oxera. Pagnamenta, R. (2009), ‘Government to set clear targets for UK energy mix’, The Times, 1 June 2009. Accessed 9 June, 2009 at http://business.timesonline.co.uk/ tol/business/industry_sectors/utilities/article6401711.ec. Progressive Energy (2006), ‘Response to the 2006 Energy Review’, Progressive Energy. Reiner, D., T. Curry, M.D. Figueiredo, H. Herzog, S. Ansolabehere, K. Itaoka, M. Akai, F. Johnson and M. Odenberger (2006), ‘An international comparison of public attitudes towards carbon capture and storage technologies’, paper for the 8th Greenhouse Gas Control Technologies Conference, 19–22 June, 2006, Trondheim, available at http://sequestration.mit.edu/pdf/GHGT8_Reiner.pdf, accessed 9 June, 2009. Scott, A. and G. Steyn (2001), ‘The Economic Returns to Basic Research and the Benefits of University–Industry Relationships: A literature review and update of findings’, Report to the Office of Science and Technology, Brighton: SPRU.

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Shackley, S., C. McLachlan and C. Gough (2004), ‘The Public Perceptions of Carbon Capture and Storage’, Tyndall Centre Working Paper No. 44, Tyndall Centre for Climate Change Research, Manchester. TUC Clean Coal Task Group (2008), Clean Coal in the UK and European Electricity Mix, London: Trades Union Congress. Unruh, G.C. (2000), ‘Understanding carbon lock-in’, Energy Policy, 28: 817–30. Unruh, G.C. (2002), ‘Escaping carbon lock-in’, Energy Policy, 30: 317–25. Watson, J. (2006), ‘UK Policy for carbon capture and sequestration: strategies for innovation and deployment’, paper presented at the 26th Annual North American Conference of the USAEE/IAEE, Ann Arbor, MI, 24–27 September. Watson, J. (2009), ‘Technology assessment and innovation policy’, in G. MacKerron and I. Scrase (eds), Energy for The Future, London: PalgraveMacmillan, pp. 123–46. Way, D. (2008), ‘The Technology Strategy Board’, Presentation to the Advanced Power Generation Technologies Forum workshop on Carbon Abatement Technologies, BERR, London, 27 February, 2008. WWF UK (2006), ‘WWF-UK’s response to HM Treasury’s consultation on the barriers to the commercial deployment of Carbon Capture and Storage’, Godalming, Surrey: WWF UK.

8.

CCS in the Netherlands: glass half empty or half full? Philip J. Vergragt

This chapter discusses the history, current situation, and future of CCS in the Netherlands. Section 1 will sketch the context of Dutch environmental, energy, and climate policies, including current policies on CCS. Section 2 will examine some regional developments (especially in the port of Rotterdam), which are important for Dutch CCS developments. CCS in the Netherlands cannot be separated from the discussion on new coal power plants (Section 3): three or four such plants are presently planned but are heavily criticized by Greenpeace. The development of CCS has been greatly stimulated by the CATO research programme (Section 4). After a section on the current situation and the future of CCS (Section 5), Section 6 will concentrate on public perception and acceptance, both theoretically and empirically. Section 7 will reflect on these developments from a technology dynamics point of view, asking to what extent CCS represents a lock-in for fossil fuels.1 Section 8 concludes. The Netherlands is a country of 16.4 million inhabitants (2007), and is a founding member of the European Union. Its GDP is about €500 billion (2006) and it ranked ninth on the 2005 Human Development Index (0.953). The economy is mainly a service economy (73 per cent). The other main economic sectors are agriculture (including horticulture), metal and machine building, electrical appliances, the chemical industry, oil refining, construction, micro-electronics and fisheries. The main sources of energy are: domestic and imported natural gas for heating; imported oil for transportation and for the chemical industry; imported coal, natural gas, (mostly imported and some domestic) and nuclear energy for electricity generation; and some biomass and other renewables. Since the 1960s a huge natural gas field has been exploited (the ‘Slochteren’ field in the north-east of the country), and the Netherlands acquired its first major domestic source of energy since the closing of the Limburg coal mines. Because of this former coal mining and recently discovered gas fields, the Netherlands, and especially Delft University of Technology and the Royal Dutch Shell Company, have 186

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considerable knowledge about geology and mining. The Dutch Slochteren gas is exploited by NAM (Nederlandse Aardolie Maatschappij, the Dutch Fossil Oil Company), a 50–50 joint venture between Shell and ExxonMobil. Each year NAM produces about 55 billion cubic meters (m3) of gas; about 35 billion m3 comes from the Slochteren field. NAM provides about 75 per cent of Dutch gas production, and more than 50 per cent is exported (NAM 2008). Most Dutch gas is sold by GasTerra, and transportation of gas is provided by the Gasunie. Natural gas provides for about one-third of Dutch energy requirements, mainly for heating homes and cooking, for electricity production and for industrial use. The total energy consumption increased from 2,964 peta-joules (PJ) in 1995 to 3,348 PJ in 2007, an increase of 13 per cent, or on average more than 1 per cent per year (CBS 2008). Of this, oil accounts for 1,351 PJ, mainly for transportation, gas for 1,394 PJ, mainly for heating buildings and electricity production, and coal for 353 PJ, mainly for electricity production. Between 1980 and 2006, electricity consumption increased from 60 billion kWh to 110 billion kWh, an average yearly increase of 5 per cent. In 2005 natural gas use per household was 1,850 m3, and electricity use was 3,500 kWh. CO2 emissions from fossil fuel use soared from 206 Mt in 1990 (the Kyoto Protocol reference year) to 269 Mt in 2005 (EIA 2008). This amounts to 8.7 tons per capita (UNDP 2008). These figures are at first sight not consistent with the figures claimed by the Dutch government (see section 1, below). The differences should be attributed to application of the Clean Development Mechanism (CDM) and Joint Implementation (JI).

1

ENVIRONMENT AND CLIMATE POLICIES

The Netherlands has earned the reputation of a frontrunner in environmental and climate government policies. After the Second World War, during the reconstruction effort, and through a period of massive industrialization, environmental problems of air, water and soil pollution became significant. Especially in areas like Rijnmond, the harbour west of Rotterdam, industrial emissions created abysmal smog and smell; surface waters became so polluted that the quality of drinking water was threatened, and the level of ground water fell; there were famous cases of land contamination, not only in remote waste dumps, but also under new residential building projects. In the early 1970s a new Ministry of

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Public Health and Environment was created, and environmental issues were mainly framed in terms of ‘environmental hygiene’. In this period the principal policy instruments were strong direct regulation and inspection, and economic instruments such as fees on pollutants and subsidies for end-of-pipe technologies. In the 1980s the Directorate-General of the Environment was transferred from the Ministry of Public Health to the Ministry of Housing and Spatial Planning; and a new ministry was created: Ministry of Housing, Spatial Planning, and the Environment (VROM), reflecting the newly perceived linkages between buildings, spatial planning and the environment. Two major shifts in policy took place in the 1980s: a shift towards more comprehensive approaches to environmental policy, and away from ‘compartmentalized’ policies for air, water, and soil – for instance, towards product policy, technology policy, extended producer responsibility and so on. The second shift was away from ‘command and control’ and towards voluntary and negotiated agreements, especially with industry but also with other ‘target groups’. In such agreements emission reduction targets were negotiated, but the ways in which these targets were to be attained was left to the target groups. Both shifts were consolidated in the first National Environmental Policy Plan (1989). At the same time the influence of the European Union on national environmental policies became more significant, and the Netherlands also played an important role in framing these European policies. A third shift took place in the 1990s, when through the ‘Sustainable Technological Development’ (STD) programme, which involved five ministries and was led by VROM, a long-term perspective (50 years) was introduced into environmental and sustainability policy making. Through long-term visions of sustainable housing, transportation, agriculture and consumption, and through back-casting from these visions towards present actions, policies and innovations, the STD programme introduced a novel way of thinking about the systemic changes necessary for reaching environmental sustainability (Vergragt and van Grootveld 1994; Weaver et al. 2000). Such systemic changes were later framed as ‘transitions’, and ‘transition management’ became part of the national sustainability policy in the early 2000s (KSI Network 2008). During this whole period energy policy remained the responsibility of the Ministry of Economic Affairs (EZ), the ministry that was most directly linked with Dutch business interests. EZ supervised the transition in the 1960s from coal through oil to gas for heating houses, based on the enormous natural gas resources discovered in the north-east of the Netherlands (Slochteren). At the same time, the government decided to close the last remaining coal mines in the south of Limburg, generating not


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only unemployment but also new industrial activity through the Dutch State Mines (now Royal DSM), which transformed itself from a coalmining company into a successful bulk and specialties chemical producer for the international market. In the 1990s the international trend to deregulation, initiated by Ronald Reagan in the US and Margaret Thatcher in the UK, reached the Netherlands under the centre-right governments of Prime Minister Ruud Lubbers. Utilities became independent commercial business companies, and a wave of mergers followed resulting in the consolidation of five major utilities. Of these, three are domestic and two large ones are Belgian/ French and German. The Dutch government and the local governments largely lost their control over investment and fuel choice, with problematic consequences for decisions in sustainable energy, as we shall see below. Climate policy became prominent after the ratification of the Kyoto Protocol of 1997. The Netherlands had already played important roles in the creation of the UNFCCC, the work of the IPCC, and the drafting of the Kyoto Protocol. In 1999 a major Dutch policy document was issued (Uitvoeringsnota Klimaatbeleid) dealing with greenhouse gas (GHG) emission reduction. Under the Kyoto Protocol, the Netherlands is supposed to reduce GHG emissions by 6 per cent from 1990 levels. This was to come partially through the Kyoto mechanisms of JI and the CDM, and partially by domestic reductions, mainly through energy conservation and renewable energy. In an evaluation in 2005 it appeared that while non-CO2 GHG emissions had fallen, an increase in CO2 emissions compensated for that. A supplemental package of policy measures to achieve the Kyoto reduction targets in 2008–12 was announced in 2007 (Milieu en Natuurcompendium 2008). CCS and ‘clean fossil fuels’ were first mentioned in the Fourth National Environmental Policy Plan (2000), and in the subsequent Energy Evaluation report (2005) and the Energienota (2005). Before that, it was mentioned in an ‘options document’ written by ECN and RIVM (ECN 1998). Since the new centre-left government Balkenende IV was formed in early 2007, climate policy and CO2 reduction have become even more prominent. As to the energy mix, decisions on new nuclear power plants were excluded during the lifetime of this government (until 2011). However, recently nuclear energy is back in the political discussion, especially stimulated by the Christian-Democratic Appeal (CDA), a government party. The other government parties remain against it. The CDA called upon utilities to come forward with proposals for new nuclear power plants (Volkskrant 2008). These policies are endorsed by recent reports by the Energy Council and the Social-Economic Council, important advisory bodies for the government.

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In its constituent accord the Dutch cabinet looked beyond Kyoto to 2020. It agreed to reduce GHG emissions by 30 per cent from 1990 levels by 2020: from 215 Mt a year CO2-equivalent to 150 Mt a year (as compared to 246 Mt with unchanged policy in 2020). This would be a reduction of 65 Mt, or 94 Mt as compared to the extrapolated trend, and in accordance with the most ambitious version of the EU reduction goals (−20 per cent or −30 per cent in the case of an international agreement). The main reductions would come from industry and electricity production, dropping from 101 Mt in 2007 to 75 Mt in 2020. In addition the contribution from renewable energy was to be increased from 2 per cent in 2007 to 20 per cent in 2020; and energy conservation was projected to increase from 1 per cent a year to 2 per cent a year over the same period (VROM 2008). The Minister of the Environment became the Coordinating Minister for Climate Policy, and thus obtained a stronger position, at least on paper. Since the formation of the cabinet several important policy papers have been adopted or presented to implement these ambitious goals: the most important are ‘Schoon en Zuinig’ (VROM 2008) (Clean and Frugal), the ‘Energierapport’ (2008) (Energy Report), and the ‘Innovatieagenda’ (2008) (Innovation Agenda). ‘Schoon en Zuinig’ was adopted by parliament at the end of 2007. It is a ‘working programme’ elaborating short-term policies for the current fouryear cabinet period. The main strategies for reaching the Kyoto objectives and beyond remain energy conservation and renewable energy, but ‘clean fossil’ is now explicitly mentioned as a main option for CO2 reduction. The principal instruments are voluntary agreements with target groups; but after an interim evaluation in 2010 more stringent policy measures are possible. Other instruments include research policy, innovation policy, and transition management for the long-term systemic transition to sustainability. Many policies such as the EU Emissions Trading Scheme (ETS) for CO2 emissions will be developed within the context of EU climate policies. As to CCS, the cabinet aims at two large-scale demonstration projects (out of the 12 proposed by the EU) by 2015, or earlier if possible. CCS should be ‘market driven’, with the help of the ETS: CO2 emission reductions should generate ‘credits’ and so funding for CCS investment. For the present cabinet period, €90 million are available: €60 million for two storage demonstration projects, and €30 million for three capture projects (see Sections 6 and 7, below). The budget for ‘Schoon en Zuinig’ is roughly €300 million a year for energy conservation, €1 billion a year for renewable energy, €150–250 million a year for innovation, and €200 million a year for international activities, a total of about €1.5–1.9 billion per annum. The ‘Energierapport’ appeared in mid-2008 and has recently been adop-


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ted by parliament. It addresses the question of how to provide for a reliable, affordable, and clean energy supply for the short and long terms. It calls for ‘fundamental systemic change’ in order to achieve a sustainable energy system. It takes an international perspective. Interestingly, it sketches three future visions without choosing one: the Netherlands as a European ‘power house’, with lots of coal and CCS; the Netherlands as ‘energy flex-working’ with a lot of offshore wind and natural gas; and the Netherlands as a ‘smart energy city’, with local decentralized power and a very smart grid. Although the report’s perspective is somewhat different from that of ‘Schoon en Zuinig’, it elaborates the same policy objectives and instruments. Interestingly, a direct coupling is made between the deployment of new coal power plants and the necessity for CCS. However, it also stresses the importance of gas as a ‘flexible backbone’ of electricity provision. In this it follows the recommendations of the ‘Regieorgaan Energie-transitie’, a new independent advisory body that deals with long-term strategies and transitions. It further emphasizes the importance of offshore and onshore wind power. It sketches a vision of the ‘North Sea as a source of energy’, including a ‘gas-roundabout’ (a metaphor), energy storage and CCS. In this report a description is presented of a Dutch CCS project, which is being developed through the Task Force CCS. A third policy document is the ‘Innovatieagenda’, which sums up which innovations are necessary, and what government policies will help implement them. It is an elaboration of the innovation budget in ‘Schoon en Zuinig’. It also mentions CCS under the theme ‘new gas’. In the assessment of the ‘Schoon en Zuinig’ programme by the Energy Research Centre of the Netherlands (ECN), the Dutch goals are called ambitious and probably not achievable because too much is dependent on developments elsewhere in Europe and the evolution of the CO2 price on the market (ECN 2007). In the ‘low’ EU scenario, with moderate EU policies and a modest CO2 price of 20 €/ton, it is remarkable that there will be hardly any contribution from CCS to emissions abatement in the Netherlands by 2020. Although VROM is now the coordinating ministry, the role of other ministries remains important. EZ in particular retains an important voice in energy and climate policies, especially because they are now the lead ministry of Energy Transition Management. The CCS programme directorate is a joint directorate of VROM and EZ, but is physically located at EZ. The Ministry of Agriculture also plays an important role in moving agriculture towards a more sustainable form. In conclusion we should note that CCS is a newcomer to Dutch energy, environmental and climate policy. Before 2007 it was not much more than a bottom-up research programme (see Section 5, below).

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REGIONAL CCS DEVELOPMENTS: ROTTERDAM AND NORTH NETHERLANDS2

The first project that could be labelled as a proto-CCS project is the K12B project by Gaz de France: a project in which CO2 is separated from natural gas and reinjected in the gas field to test enhanced gas recovery (Gaz de France 2009). Strictly speaking, however, this is not a CO2 storage project as meant by the concept CCS. Although it separates and reinjects CO2, its main aim is enhanced gas recovery. In the Netherlands two regions are emerging as the main players in the CCS implementation debate: the Port of Rotterdam (also called Rijnmond) and the north-eastern provinces of Groningen, Drenthe and Friesland (recently dubbed ‘Energy Valley’). The latter is important for three reasons: a large potential onshore storage capacity in smaller natural gas fields and eventually in the major Slochteren natural gas field; the presence of a harbour (Eemshaven) with industrial complexes and power plants; and the long-stated wish for economic development of this somewhat remote and underdeveloped region. The first region is the Rotterdam port area, mainly west of the city of Rotterdam and including the ‘Maasvlakte’, an area of land created in the North Sea for industrial purposes. It includes the largest harbour in Europe, together with petrochemical and chemical industries and power plants. In 2007 the Rotterdam Climate Initiative (RCI) was formed, under the chairmanship of former Prime Minister Ruud Lubbers, which is a collaboration between the City of Rotterdam, the Port of Rotterdam, the Environmental Protection Agency Rijnmond (DCMR), and the industry organization Deltalinqs. This was encouraged by a report of the City of Rotterdam’s International Advisory Board, and by subsequent contacts with the Clinton Foundation. Rotterdam became an associate member of the C40, the Large Cities Climate Leadership Group, consisting of representatives from 40 large cities in the world who want to reduce their GHG emissions substantially. Although Rotterdam is relatively small, its CO2 emissions are comparable to those of New York City because of its major industrial and harbour operations. RCI’s stated aim is a 50 per cent CO2 reduction by 2025 as compared to 1990 (from 24 Mt to 12 Mt, as compared to a projected 46 Mt in a businessas-usual scenario). This is considerably more ambitious than the national reduction goal of 30 per cent by 2020. This reduction will be realized by energy saving (7 Mt) and sustainable energy (7 Mt), but mainly through CCS in industry (20 Mt). This is of course an enormous challenge. Apart from climate change arguments, the large CO2 emission reduction goals are also justified by economic arguments: the Port of Rotterdam is


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highly dependent on fossil fuels (coal-fired power plants and refineries), and wants to keep its leading position during the energy transition to sustainable energy; the geographical position of Rotterdam with a large concentration of CO2 emitters and nearby storage capacity, as well as the availability of residual heat, makes CCS less expensive as compared to other locations, and thus attractive for business; moreover Rotterdam could export technology and knowledge if it could develop as a frontrunner in CCS deployment. In a recent report, RCI and DCMR suggest how 20 MtCO2 reduction through CCS is to be achieved (RCI 2008). In the first phase, until 2015, a CCS capacity of 5 MtCO2 per year will be reached; in the second phase until 2020 this will grow to 15 MtCO2 a year. A 20 MtCO2 reduction capacity per year will be reached in 2025. The comparative advantages of Rijnmond include: availability of streams of highly concentrated CO2; an existing pipeline infrastructure; a relatively short distance to both on- and offshore storage; a high concentration of energy-intensive industries; the availability of residual heat; and a favourable location compared to other high-CO2 emission areas like Antwerp and the German Ruhr region. Rijnmond has a large number of ‘pure’ CO2 point emissions in existing industrial installations, mainly from the production of hydrogen and biofuels. From these installations, and by post-combustion technologies, it would be comparatively less expensive to capture and compress CO2; this may amount to 2.9 Mt out of the total of 5.0 MtCO2 abatement in 2015. Post-combustion technologies are still in the demonstration phase: recently TNO and E.ON opened a demonstration plant in Rijnmond. Post-combustion technology is still expensive (40 €/ton); if the present technology based on amines could be replaced by ammonia technology this might be reduced to 13 €/ton. Also there is a lot of heat of good quality available in the Botlek area which could lower the costs by perhaps 4 €/ ton CO2. For the transportation of CO2 there is an existing pipeline that would have to be expanded to a network; for the first 5 MtCO2 this would cost €270 million; this would lead to transport costs of 20–22 €/ton for the first phase. Storage of CO2 for RCI is mainly foreseen offshore (estimated capacity 1,144 Mt) and onshore (1,616 Mt). The best location is under the North Sea, and many smaller locations are foreseen onshore. The onshore location of Barendrecht (17 kilometres from Shell-Pernis), however, is considered crucial to acquire expertise in the management of CO2 storage, and also for the development of a regulatory framework. Requests for a permit and a subsidy for CO2 storage on this location, a former natural gas field, have been submitted by Shell, and this has already led to concerns

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by the local authorities and demonstrations by the population (see Section 7, below). The costs of storage are estimated at 4.5–6.5 €/ton CO2. It is unknown whether long-term costs of monitoring are included. The total costs for capture, transport and storage are thus calculated in the range of 25–57 €/ton, with the largest uncertainty in the capture. This is in the same range as estimates by the European Commission, which anticipates that the price of emission rights from the ETS should be in the order of 39–45 €/ton in order to jumpstart CCS. For the first phase (until 2015) investment costs are calculated at nearly €300 million for infrastructure development and €400 million for demonstrating capture. In addition, the pre-investment costs for phase 2 (2015–20), which should be made in phase 1, are estimated at about €165 million. According to RCI, both the national government and the EU will have to play important roles in financing these developments. In 2007 the Mayor of Rotterdam signed a Letter of Intent with the Minister of the Environment in which the minister pledged to create governance conditions to facilitate CCS, including inclusion of CCS in the ETS, and removing regulatory barriers to implementation. No provisions have yet been made for extra financing by the government. Developments in ‘Energy Valley’, in the north-east of the country, are more tentative and smaller in scale. In a speech in April 2008 Max van den Berg, the governor of the Province of Groningen, stated that the four northern provinces and the central government have agreed to reduce regional CO2 emissions by 4.5 Mt by 2011. He elaborated the strong position of the North with respect to CCS: extensive storage capacity, a strong knowledge base, and the building of four new power plants, two of them just across the border in Germany, three of which are coal fired. He proudly announced that RWE and Gasunie are collaborating to build a CCS demonstration at RWE’s new 1,600 MW coal power plant. This is to cost €100 million, and to be finished in 2015, with a storage capacity of 0.1 MtCO2 (van den Berg 2008). This seems to be a high investment for a relatively low capacity of capture and storage (0.1 as compared to 8.3–9.3 MtCO2 emissions). And it is not clear how this investment capital will be raised or how much the government will contribute. It appears that the regional initiatives, and especially the RCI, are playing a major role in stimulating policy development on the national level. The regional initiatives are more ‘hands-on’, and the problems encountered there are driving the national scene. The regional initiatives require national support by legislation and also through funding. There are strong, and personal, links between the RCI, the Energy Valley Initiative, and the national CCS Task Force. And among the various regional initiatives there is ‘friendly competition’ combined with a lot of mutual support.


3

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CCS AND NEW COAL POWER PLANTS3

An important complication for the discussion of CCS are current plans for the construction of new coal power plants. At the end of 2007 no less than five new coal plants were proposed. Under a 2002 coal covenant between the government and the electrical utilities, these plants should have the same CO2 and other emissions as natural gas power plants (with an intended CO2 reduction of 3 Mt by 2012). The main mechanism to reduce CO2 emissions is by mixing in biomass as a feedstock. However, there is a limit to how much biomass can be included, and biomass does not help to reduce other pollutant emissions from burning or gasifying coal. Moreover, it appears far from sure whether the CO2 from this biomass can be counted in the ETS, and it is far from clear in mid 2009 that the covenant is being implemented. Three companies, the German RWE and E.ON, and the Belgian/French Electrabel, have concrete investment plans. RWE plans to build a 1,600 MW power plant in the Eemshaven in 2011–12; and Electrabel plans an 800 MW plant in the Maasvlakte in 2012, and possibly another 800 MW plant in the Eemshaven the same year. E.ON has already started constructing its new 1,070 MW coal power plant in the Maasvlakte. All these power plants will be built ‘capture ready’, although it is not yet known what that actually means, except for making reservations for space. Two other Dutch companies cancelled or postponed their plans. Essent has cancelled its plans, partly because of increasing costs, and partly because of public opposition, led by Greenpeace. Nuon, a major Dutch electricity utility which is building a ‘multi-fuel’ Magnum power plant (largely coal gasification) in the Eemshaven, has decided to postpone the building of their coal gasification unit; they are now building natural gas power units. They claim that they will only build a coal power plant if the CO2 can be captured. For this they are experimenting at another coal gasification plant in Buggenum with pre-combustion technology, which they are developing themselves (subsidized by the government) and which is according to them very promising. They claim that the energy penalty for this pre-combustion capture process is negligible, while for postcombustion capture it may be as high as 30 per cent. According to Nuon their main driver is environmental stewardship. Greenpeace is leading the public opposition against coal power plants. They have two main arguments. First, coal is a dirty technology across the entire chain – from mining to combustion – and alternatives (conservation and renewables) are available. The second argument is specifically about climate change: coal combustion emits more CO2 than any other fuel, and it seems counterproductive from a climate change perspective to switch towards coal. In

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Greenpeace’s perspective CCS is used as the main argument to justify new coal power plants, and serves merely as a fig-leaf. It is true that there are many questions and issues around these coal power plants, which relate directly to CCS. The first is, why build so much new electricity capacity in the first place, in a period when the cabinet aims to achieve demand reduction by energy conservation, and aims to increase renewables from 2 to 20 per cent in 2020? A recent report claims that the Netherlands may even change from an electricity importer to an electricity exporter (Seebregts and Daniels 2008). The main reason seems to be that large multinational utilities make their investment decisions at the European scale rather than on a country-by-country basis. And the Netherlands has obvious comparative advantages (deep harbour access, availability of space, favourable government policies). The second question is: why coal? Obviously coal power plants have lower direct investment costs than gas power plants or other alternatives. However, many studies have established the high indirect costs, the high emissions, and the accidents and environmental burdens of coal mining. Recent studies confirm that when the external costs (especially CO2 emissions) are included, natural gas has the lowest costs, while coal power plants have the highest (Sevenster et al. 2007). The societal costs of a 1,000 MW coal power plant are calculated as 130 million €/year. A study by SOMO (the research centre for multinational corporations in Amsterdam), commissioned by Greenpeace, gives a clear picture of how profitable coal power plants are for the main electricity utilities in the Netherlands (Wilde-Ramsing and Steinweg 2007). All utilities show steeply increasing profits from 2002–06, with rising dividends for the shareholders. For the Dutch companies these are mainly provinces and municipalities. All companies had a high percentage of coal (and gas), and a very low percentage of renewables; some of the foreign companies also had a high percentage of nuclear. RWE for instance generates electricity from 40 per cent lignite, 27 per cent coal, and 26 per cent nuclear, with 5 per cent natural gas and 2 per cent renewables. Their profits rose from €1.7 billion to €2.7 billion in three years. This suggests that profit making, and not climate change, is the main driving force behind the large investment in new coal power plants. That is not surprising after liberalization and privatization of power utilities. A third question is: how would these coal power plants influence the level of CO2 emissions in the Netherlands? If all these power plants were to be built, the effect would be a large increase (and not a decrease) in CO2 emissions (Table 8.1). According to Seebregts and Daniels (2008) the E.ON/Maasvlakte installation will emit 5.3 MtCO2, Electrabel/Maasvlakte 4.2 MtCO2, and RWE/Eemshaven 9.3 MtCO2.


Table 8.1

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CO2 emissions from planned coal power plants

Company

Location

E.ON Electrabel RWE Nuon

Maasvlakte Maasvlakte Eemshaven Eemshaven

Capacity (MW)

CO2 emissions (Mt)

CO2 with biomass (Mt)

1070 800 1600 1200–1400

6.2 4.2 9.3 6.1

5.3 1.6 8.3 3.0

The cabinet states that the new coal power plants can only be built if they comply with emission standards; they also hope (but cannot yet enforce) that they will be capture ready. The Minister of the Environment was originally not very happy with these new coal power plants, but stated that she does not have the means to stop them if they comply with existing standards; this is a consequence of the deregulation and privatization of the 1990s. Recently she changed her mind and now invokes CCS-equipped coal power plants as an argument not to build nuclear generating units. It is hard to see how building new coal power capacity which will emit 20–26 MtCO2 extra into the atmosphere will help to achieve the stated 60–65 MtCO2 reduction goal in the Netherlands – even if these power plants replace older and less efficient installations. One argument is that ETS will take care of achieving the 20–30 per cent CO2 reduction goals for 2020, by means of the CO2 emissions cap. This may not be realistic: the effect of a stringent cap might be such a spike in the CO2 price that it cannot be accommodated by the companies, and thus political pressure will grow to soften the cap. It appears that Dutch CO2 emissions from electricity generation have become subject to European rather than Dutch policy. Building modern new coal power plants in the Netherlands might enable the closing of much more polluting old German lignite plants. It is strange therefore that the ambitious and formally adopted Dutch climate policy plan nominally includes emission from electricity power plants, which it does not appear able to influence. Next there are questions about the fuel mix of electricity production with respect to variability and peak use. In a scenario with such a large increase in coal power plants, there will be less room for the (also planned) 2 MW offshore wind plants. In order to balance the variability in such a large amount of wind power, a highly variable backup is necessary, which needs to be provided by gas turbines and other variable sources, and which cannot be provided by coal (or nuclear). Thus, the planned coal power plants may push the offshore wind plans towards the sidelines.

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Finally, CCS is used in the public debate to justify the coal power plants. CCS is mentioned in all investment plans as a technology that will eventually mitigate the CO2 emissions. However, it is far from sure that CCS will ever be available on a large scale, or what the time frame will be. It is not mentioned that even in the most optimistic scenario CCS will not be available for commercial deployment before 2020. But most coal power plants are planned for about 2012, with probably more to come between 2012 and 2020. This means that for many years the plants will emit CO2 without capture. It is also not mentioned that the post-emission capture (intended by all except Nuon) carries a huge energy penalty, meaning that 20–40 per cent of the new power will go into capturing and storing CO2, while causing more other emissions.

4

THE ROLE OF BOTTOM-UP CCS RESEARCH IN THE NETHERLANDS4

The emergence of CCS in the Netherlands was at first very slow, and recently surprisingly rapid. Back in the 1990s, there was just one person in the Ministry of the Environment (Jip Lenstra) who pleaded for CCS. For nearly everybody else, CCS was a ‘dirty end-of-pipe solution’. The University of Utrecht had a first study and PhD dissertation around 1990, and in 1992 they organized the first international conference on CCS in Amsterdam. In 1998 the Utrecht University Centre for Energy Research was founded, with a programme based on what they called the ‘trias energetica’: energy conservation, renewable energy, and ‘clean fossil’ fuel. But as late as 2003 money became available (from a competitive bid for ‘research infrastructure funds’ from Dutch natural gas remits) to finance CCS research on a somewhat larger scale, and in 2004 the 5-year CATO programme (the Dutch acronym for CCS) was launched with a budget of about €25 million, about half of which was provided by the government. This was therefore a truly bottom-up initiative led by academic scientists. CATO consists of seven work packages: System Analysis and Transition, Capture of CO2, Storage of CO2, Mineralization, Monitoring, Safety and Regulations, Communications, and Management and Knowledge Transfer (CATO 2008). It is novel in the sense that many different research groups from very different fields of expertise are working together on a common objective. Several of the work packages are specifically focused on integration. Some issues that emerged from this work were: the criteria for sustainability of CCS systems; which of the many technological options are most promising or desirable; questions about storage potential, safety, and ecological risks; as well as the accessibility of storage sites for injection.


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CATO was led by a consortium which included major Dutch universities, Shell Netherlands, other energy and gas companies, the government, Energy Centre Netherlands, TNO, and NGOs like Greenpeace Netherlands, Netherlands Foundation for Nature and Environment, and WWF (Netherlands). In the beginning the Dutch government was barely interested, but that changed quite quickly. At the end of 2005 a Clean Fossil Working Group was formed which reported very quickly, by mid-2006. By early 2007, the newly formed Balkenende IV government endorsed the CCS policy including the intention to build one or two of the 12 European large demonstration plants in the Netherlands. In 2007 the Ministry of Economic Affairs also funded three small scale CO2-capture demonstration projects with total project costs of €140 million. The CATO programme quickly became seen internationally as the Dutch ‘National research programme’ on CCS. However, it was not designed as a national research programme, and was not equipped to advise the government on all issues that were raised, like accountability, liability, insurance, long-term governance of storage sites and so on. Thus soon after the favourable mid-term evaluation of the programme a plea for a follow-up ‘CATO-2’ programme was heard. In 2007 the CATO programme got a new chairman (Stan Dessens, a former Director-General Energy at EZ) who also chairs the new government Task Force established in 2008, thus strongly increasing both the profile of CATO and its interaction with the Task Force.

5

RECENT DEVELOPMENTS AND THE FUTURE OF CCS5

On 3 April 2008, the newly formed CCS Task Force was announced by the Minister of the Environment, at a national meeting on CCS. The occasion was the gala opening of a pilot CO2 capture plant by TNO and CATO, together with E.ON. The CCS Task Force consists of important persons from industry and government, including a former prime minister, a provincial governor, the chairman of Shell Netherlands, a director of Gasunie, and many others, including the director of the Netherlands Foundation for Nature and Environment (SenterNovem 2008). Greenpeace, which participated in the CATO project, chose not to be part of the Task Force. The main responsibility of the Task Force is to create conditions for the deployment of large-scale CCS in Rijnmond and North Netherlands. These conditions are: a market-ready technology, organization of the infrastructure, policy and juridical facilitation, financial arrangements and societal endorsement. There are four phases of work: by 2012 establishing

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at least four capture and two storage projects; from 2012 to 2015 the building of two large demo projects; from 2015 to 2020 storage of CO2 from these large demonstration projects; and from 2020 large-scale industrial implementation of CO2 storage. In addition there will be CATO-2 for innovation and research in phase one; the choice of storage sites, and the development of infrastructure in phase two; and financial arrangements for the short and longer terms. As to societal endorsement, the aim is a positive public image of CCS. The political context is to help realize the policy objective of a 30 per cent CO2 emissions reduction in 2020. A crucial issue is the capture technology, which needs to be further developed and to become more cost effective. Another crucial issue is societal acceptance, which is clearly identified by the Task Force as a major issue which is difficult to manage. CATO-2 will be much larger than CATO-1, about €100 million, and will be managed by TNO (Organization for Applied Technological Research) rather than by Utrecht University, to enable closer collaboration with industry. TNO itself has a strong knowledge base in soil technology. Former Prime Minister Lubbers, now the chairman of the RCI and a member of the newly installed CCS Task Force, elaborated the plans both for CCS in Rotterdam and for the Netherlands (Lubbers 2008). He presented the plans of the CCS Task Force, stressing two additional points: that the Netherlands has the best conditions in the world to realize CO2 capture, because of its knowledge base and the strong concentration of industries in Rijnmond; in addition there is the availability of residual heat which will be used for capture. He called for a thorough analysis of the onand offshore storage capacity. Even with the ‘polluter pays principle’ and the ETS system, ‘transitional’ government money will be needed to facilitate pilot projects, transport infrastructure, and storage investments. This is at odds with the position of the environmental movement as we shall see below (in Section 7). The total investment for this will be €270 million, to be co-financed by the government as co-investor or as contributor to transport and storage costs. In addition, three to four demonstration projects will be developed, each with an investment of €100 million in the 2009–11 period; one-third of the costs will have to be financed by the government. In addition, Jan van den Heuvel of the Rijnmond Environmental Authority sketched the plans to develop the Rotterdam Port area (‘Rijnmond’) into a major hub for CCS (van den Heuvel 2008). Around Rotterdam there is a high concentration of CO2 point sources, the proximity of storage sites both on- and offshore, there is already an existing CO2 infrastructure which might be in the future connected to the Antwerp harbour in Belgium and the German Ruhrgebiet. In addition, local greenhouses could also be connected.


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Also on 3 April, Bert Stuij from SenterNovem, an energy development company linked with the Ministry of Economic Affairs, elaborated the above-mentioned plans for a €90 million subsidy for three capture projects and two storage projects (Stuij 2008). The subsidy funding comes from the ‘Borssele deal’: a deal between the government and the operators of the only Dutch nuclear power plant to prolong the lifetime of that plant in exchange for funding for GHG emission reduction projects. The first is a post-combustion cryogenic CO2 capture project at an existing E.ON gas-fired combined heat and power (CHP) plant at the Maasvlakte, where 50 per cent of the ‘cold’ is provided by a nearby LNG terminal. This technology would act as a pilot for the large-scale capture (2 MtCO2) to be realized in the Eneco 850 MW gas-fired power plant to be built in the Maasvlakte in 2011. The second is a pre-combustion capture unit at the Nuon combined IGCC–coal and biomass gasifier at Buggenum. This technology is a pilot for the intended multi-fuel power plant to be built by Nuon in the Eemshaven. The third is an oxyfuel plant which uses pure oxygen for combustion, to be realized in the North of the Netherlands. The first two projects are going more or less as planned, with some delay; the first technology is key for adding CCS to existing power plants; the second is key for CCS in combination with the next generation integrated gasification combined cycle (IGCC) plants. The third project is another important technology with potential global significance, but just out of the development stage with many remaining uncertainties.

6

SOCIETAL ACCEPTANCE OF CCS6

Societal acceptance of CCS is widely seen as crucial for its eventual implementation. The CCS Task Force understands this as one of its most important tasks, but as yet little has been done to make this a reality. CCS remains relatively unknown to the wider public, and is mainly known in policy circles, in the related business, and in some academic circles. This is remarkable because there might be wide societal resistance, ranging from ‘NUMBY’ (not under my backyard) to opposition to large-scale infrastructure works like CO2 pipelines, as well as concerns about long-term liabilities. Back in the 1990s, CCS was not viewed favourably. An important element in creating a more positive attitude for CCS internationally and in the Netherlands has been the IPCC Special Report on CCS of 2005 (IPCC 2005). In this report, CCS was presented as a viable mitigation option for CO2 emissions.

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Caching the carbon

Societal acceptance has been recognized by the CCS Task Force as a crucial issue for the successful implementation of CCS. Other conditions for success are economic viability, enabled by integration of CCS in the EU ETS by 2012, and lowering of capture costs and energy use by technological innovations. A study by the Utrecht University Copernicus Institute, also part of the CATO programme, investigated the conditions for implementation of CCS technologies (van Alphen et al. 2007). This study focuses on CCS stakeholders who, as they put it, have a double influence on the development of CCS technology: a professional influence, and an indirect influence – by helping shape public opinion. The main conditions for implementation emerging from this study are safety, temporality (meaning that it should be a temporary solution, only for a few decades) and partiality (meaning that it should be part of a portfolio of solutions), costs, simplicity, and cooperation and commitment. Work by Dutch researchers at the Technical University Eindhoven links social acceptance of a new technology to trust in the implicated actors (Huijts et al. 2007). They did a survey (2003) in two cities that are potential storage sites. CCS was largely unknown. Overall, the attitude was slightly positive, but with respect to storage under one’s own residential neighbourhood, slightly negative. Trust in industry was lowest, in NGOs highest, with government in-between. The emotions expressed by respondents included anxiety, powerlessness and annoyance, not stress. Citizens seemed to rely on feelings related to the technology, and trust in the actors. More information could help to stabilize opinions, but research elsewhere shows different outcomes: in Japan more information led to more support for CCS, while American researchers reported more opposition. The conclusion is that it is not clear whether people will accept CCS in the end. Research within the CATO programme by the University of Leiden has confirmed that trust in institutions is more important than information or participation in decision making (de Best-Waldhober et al. 2006). People trust environmental organizations more than business, and, in contrast to the Eindhoven study, trust in the government is lowest. For information to be credible it should thus come from NGOs and not from government. Thus it is crucial for the success of CCS that environmental organizations endorse it; conversely criticism by NGOs could easily upset public trust. From this research it appeared that 70 per cent of the population had not heard about CCS; their opinion thus should be considered a pseudoopinion because it could quickly change in the light of new information. The researchers claim that people do not understand the causal chain of electricity production by coal power plants causing CO2 emissions, which causes global warming. If people are informed on all aspects of the


203

technology, there is a lukewarm endorsement of about 60–65 per cent; however, this has not yet been measured in the context of considering other mitigation options such as conservation or renewables. The Rathenau Institute, an independent body that advises the Dutch parliament on technological innovations and potential controversies, conducted a study on public attitudes through four focus groups. A first observation was that the connection between CO2 emissions and climate change was very blurred; some saw CCS as waste disposal while others worried about throwing away a valuable commodity. After considering information provided by an expert and the views of an advocate and an opponent, three out of four groups remained divided, and only one group endorsed CCS. Participants were baffled by the high energy penalty (25 per cent) cited for CCS. They tended to argue that CCS could be considered a transitional technology, but only for a very short time. There is anxiety about safety, and about long-term management of storage sites. There was distrust towards its commercial proponents. And the NIMBY (not in my backyard) factor appears to be at work. The author conducted his own focus group study in April 2008 with an ecoteam of which he is a member.7 This ecoteam was formed in 2000 and convenes irregularly. It is a neighbourhood group; all its members are environmentalists and very motivated to reduce energy consumption in their own households; so this was not a representative sample of the population. Surprisingly, in this group of six highly educated and environmentally motivated people, three had never heard of CCS at the beginning of the evening. Before any information was given, two out of these three were undecided, and one was in favour of CCS; of the other three participants, one was against (and informed) and the other two were favourably inclined. After providing information most people were surprised about the scale and speed of these developments. At the end of the evening, one of the previously uninformed persons, who was in favour at the beginning of the evening, was now against CCS, illustrating the unstable character of opinions of uninformed people. The two somewhat informed and favourably inclined changed their position towards being more sceptical. Two people maintained that this was ‘too technical’ for them to form an opinion, and the informed adversary remained against. Problems with public acceptance have already surfaced around the CCS storage project in Barendrecht. Shell applied for a €30 million subsidy for injection and storage of very pure CO2 from its Pernis oil refineries. The population is not happy with storage ‘under their backyard’, and the local political parties are against it. DCMR and EZ will issue a permit after a safety and environmental assessment, and VROM needs to determine the subsidy; both decisions have been postponed. In the meantime, the EU

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summit of March 2009 awarded the Netherlands €150 million for CCS; this was immediately followed by demonstrations by concerned citizens and local politicians. The RCI sees this project as crucial for its roadmap to develop CCS in the Rotterdam harbour (NRC 2008). Apparently the decision to start a first CO2 storage project under a residential neighbourhood was made by the RCI very consciously, weighing up the pro (communicating confidence in safety of storage) and con (risk of public resistance) factors. In the opinion of this author it does not seem to be a very good idea, given the research cited above, to start the first CCS project in a residential location, even if it is proven to be safe. Clearly an overarching communication strategy is missing. The big environmental NGOs in the Netherlands have different positions on CCS. The Foundation for Nature and Environment (SNM) is cautiously in favour (‘yes, if’); they are also part of the CCS Task Force. Greenpeace Netherlands and Greenpeace International, however, moved recently from ‘no, except’ towards ‘no, because’. Greenpeace sees CCS very much in the context of Dutch coal policy. In 2002 the government negotiated the coal covenant with industry. In return, a tax on coal was terminated in 2002. Greenpeace would like CCS to be a condition for planning consents for new coal power plants, but in the Dutch political context it seems to be impossible to grant a permit on the basis of an as yet unproven technology.8 Nevertheless, former Prime Minister Lubbers states that the government really does have a significant influence on the investment decisions of companies; as an example he notes the (near) absence of nuclear power plants in the Netherlands. So the government would be able to object to new coal power plants if it really wanted to do so.9

7

REFLECTIONS: SPEED OF DEVELOPMENT AND CARBON LOCK-IN

In this section we reflect on two major questions. The first is how to explain the rapid emergence of CCS as a major technological and policy tool for CO2 reduction, as compared to other options like energy conservation and renewables. The second issue is whether large-scale CCS would lead to a continuation and a reinforcement of fossil fuel lock-in and could slow the emergence of renewable energy sources. CCS has moved from a rather obscure technology choice and research object to a major policy option since about 2007. In contrast, wind, solar photovoltaics (PV), and other renewables have been around as technological and policy options for decades, but never really took off. There are many reasons to explain the latter, ranging from high research and


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investment costs, to resistance by the population (wind turbines!) and lack of interest by the public and by major actors in, for instance, the housing industry. Lack of consistent government policy over a prolonged period of time explains much of it; in addition no big business interests have pushed for solar PV and wind. Sure enough, electricity utilities have invested in renewables, but in the Netherlands the percentages remain low. Another argument could be a complacency fuelled by a large availability and use of natural gas for residential heating, and its relatively low carbon content as compared to oil and coal. Certainly neither government nor business has been pushing very hard for renewables. In contrast, the emergence of CCS seems to be driven by three major factors. First there is the growing awareness of climate change, and the broad realization (contested by Greenpeace) that renewables and conservation are too slow and too costly to mitigate CO2 emissions in due time. Second is the interest of the major electricity utilities in CCS, which they see as a major opportunity to enable them to invest in cheap coal rather than in expensive gas power plants. Third is the influence of regional lobbies like the RCI, which combine the wish to be a frontrunner in CO2 reduction with the desire to position their regions favourably for energyintensive investments, because of the closeness of CO2 storage capacity and, in the case of Rotterdam, the lower costs because of the availability of residual heat. These three factors are pushing the drive for CCS. However, it is far from clear that CCS will succeed as envisaged. The high costs and the high energy penalty, as well as the absence of a regulatory framework make it questionable whether it will roll out as fast as envisaged by its proponents. The main obstacle at this moment seems to be funding. There is a lot of pressure on the government to finance capture research, big demonstration projects and infrastructure, either directly or through ETS. In the Dutch multiyear budgets there are not yet any big provisions for funding CCS projects. In December 2008 the EU Council decided under pressure from the European Parliament to allocate €6–7 billion from ETS to fund the planned large demonstration plants. This of course is contrary to the earlier idea that each country would pay for its own plants, and also against the notion that the development and deployment would be market driven. A necessary condition for continued advance would be a stable and high (perhaps €45) CO2 price. There are rumours that the European Investment Bank would be willing to guarantee a minimum price in exchange for stringent EU policies on CO2 reduction (that is, lowering the number of certificates significantly). A second caution is public opinion. At present the public knows very little about CCS, and it is not easy to change that. The proposal for relatively small-scale storage of CO2 under a residential area in Barendrecht, and the

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concern it generated among residents and local politicians, brought the issue to public attention in a negative way. If public opinion turns against CCS, which might happen in the not too distant future, the proponents have a problem. An unlikely coalition has already been formed between the (green) opponents of CCS and the right-wing proponents of nuclear energy: both assume (probably rightly so) that if CCS is delayed, nuclear energy will get a better chance. As to the second question, about CO2 lock-in, it is clear that CCS is being driven by business actors who have a vested interest in the fossil fuel industry, especially in coal, less so in oil. A complete transition to conservation and renewables as envisaged by Greenpeace does not have a lot of support from those business interests. Utilities have been investing marginally in solar and wind, and somewhat more in biomass, but it is still only on the margins. The presence of a large amount of natural gas has given rise to some complacency about space heating, because gas has relatively low CO2 emissions. Oil companies like Shell have been slow in investing in renewables, in contrast to their public relations messages. Each of those companies sees CCS as an opportunity to continue business as usual, while mitigating CO2 through storage, and financed by the ETS. One could call this an ‘enhanced lock-in’ of fossil fuels, especially of coal. Because of the fossil fuel industries, the interests of the Rotterdam harbour and other main players, the economic interests of the Netherlands in oil and gas, and the possible revenues coming from new business opportunities, CCS is now seen as a possibly lucrative investment. CCS does many things: it ‘buys time’ before the necessary switch to renewables and conservation; for some it delays nuclear energy; it brings to the table powerful actors, and last but not least it facilitates coal power plants, the most pollutant form of electricity generation. The concepts ‘lock-in’ and ‘path-dependency’ have been developed by Brian Arthur and Paul David to describe how technologies and sociotechnical systems could eventually become suboptimal solutions in the face of new societal challenges, because of the vested institutional interests and the sunk costs of investments in infrastructure and knowledge (Arthur 1989, 1994; David 1985). Gregory Unruh has applied this concept to carbon-intensive technologies; he dubs this a ‘techno-institutional complex’ (Unruh 2000), and he calls for a new techno-institutional complex to address the current climate crisis (Unruh 2002). Fossil fuel lock-in would mean that ultimately it would become even more difficult to move away from fossil fuels to renewables and conservation. And indeed, it is hard to see how investment of billions of euros in capture, infrastructure for transportation, storage, monitoring and long-term management in the future would not be used as an argument


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to continue CCS rather than move to renewables. All institutions which are now investing in CCS (whether financially or by creating regimes for regulation and monitoring) will have vested interests in seeing this system continue into the far future. Even in the best-case scenario, when investments in CCS would only be made in the 2020–40 period, coal would then be used on a massive scale until at least 2080 (assuming a 40-year depreciation time). Beyond that date, monitoring and safeguarding of CO2 storage would remain necessary for an unforeseeable time, even if business and politics moved away from CCS between 2040 and 2080. The ‘bridge’ technology would constitute a very long bridge indeed! Perhaps all this would not be so much of a problem if CCS were not so costly, energy intensive, and in essence an end-of pipe solution with few collateral benefits next to GHG abatement; and were storage capacity unlimited, which it is not.

8

CONCLUSIONS

The development of CCS in the Netherlands is apparently not so very different from other countries in the EU and the USA. Until just a few years ago, CCS was not taken very seriously in policy circles and in research institutions. Of course, oil companies have a long history of using CO2 injection for oil and gas recovery. Indeed, CCS is very much in line with their usual operations, which are large scale and centralized, and so it does not constitute a threat to their business models. On the contrary, it appears that CCS creates new economic and business opportunities for the incumbent oil, gas and coal industries. In a very brief period, under the influence of the climate debate and the EU and Dutch CO2 reduction policies, CCS has become an important issue in Dutch climate policy. This happened also under the influence of the CATO research programme, which quickly became seen as the Dutch national research programme on CCS. Because of its governance structure, which included not only the protagonists but also strong environmental NGOs, a powerful network quickly developed on which the government could build its CCS Task Force for implementation of the next steps. Notwithstanding this optimism there is also caution, because CCS is costly, energy intensive, and needs to be carefully developed and implemented. A necessary condition is that CCS will become part of the ETS carbon trading system in 2012, with a stable (and possibly guaranteed) price for CO2 of about €45 on the market. The Dutch policy on CCS is quickly becoming part of EU policy, which coordinates 12 large-scale demonstration projects; the Dutch want at least one or two of these to be built in the Netherlands by around 2015.

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Nearly all interviewees stated that public endorsement is a crucial prerequisite for the success of CCS; most of them were cautiously optimistic, but much needs to be done in the form of information dissemination and communication. The environmental movement is divided, with Greenpeace recently moving to an ‘against, because’ position. It is not probable, but also not unthinkable, that public opinion may turn against CCS, especially if the public is not well-informed and if some accident occurs. Already a first experiment of CO2 injection under the soil of the town of Barendrecht has led to resistance among inhabitants and negative press reports in the newspapers. In conclusion, CCS is a large-scale infrastructural technology jointly driven by climate change policies and economic motives, which cannot be decoupled from the larger energy provision system, especially coal and nuclear energy. In a deregulated world it is much harder for the national government to orchestrate developments; business, NGOs, the regional initiatives, and the public have become main stakeholders in this process. However, national government funding and regulation, and EU policies (ETS) are crucial for take-off, while public acceptance might easily become a major bottleneck. According to former Prime Minister Ruud Lubbers, ‘the glass is thus half-empty or half full’.10 But ultimately the question needs to be answered whether CCS is a truly sustainable option or represents just another technical fix which does not solve the underlying challenge of unsustainable development.

NOTES 1.

2. 3. 4. 5. 6.

This chapter is based on literature study and on interviews with 11 main players in the Dutch CCS world: the coordinator of the Research Network CATO; the secretary of the Energy Transition; the co-author of the IPCC report on CCS; a researcher on public acceptance; Greenpeace Netherlands; the Chairman of the CCS Task Force; a head of department of SenterNovem, the Dutch energy agency; the director of Alstom Power, a director of Nuon utility company, the director of the Environment Protection Agency Rijnmond Rotterdam, and a former prime minister and chairman of the Rotterdam Climate Initiative. In addition, I conducted a focus group discussion with the Ecoteam Adegeest in Voorschoten, and I used the results of a focus group research project by the Rathenau Institute. The opinions and interpretations are entirely my own. I wish to thank the interviewees for their time and interest. This section benefited from the interviews with Mr Ruud Lubbers of RCI, and Mr Van den Heuvel of DCMR; the last part also from the interview with Mr Robert de Kler of Nuon. This section benefited from two discussions with Hans Altevogt, Greenpeace, and the interview with Mr De Kler, Nuon. This section is mainly based on interviews with Mr Eric Lysen and Mr Sander van Egmond of CATO. This section benefited from an interview with Mr Stan Dessens. This section benefited from interviews with Dr Leo Meyer of MNP and the IPCC, Mr


7. 8. 9. 10.

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Dancker Daamen of Leiden University and the CATO project, the Rathenau Institute, Mr Hans Altevogt of Greenpeace, and Mr Ruud Lubbers of the RCI. Ecoteam Adegeest Voorschoten. Mr Hans Altevogt, Greenpeace, personal communication, 9 April 2008. Mr Ruud Lubbers, interview, 16 September 2008. Ibid.

REFERENCES Arthur, W.B. (1989), ‘Competing technologies and lock-in by historical small events’, Economic Journal, 99 (March): 116–31. Arthur, W.B. (1994), Increasing Returns and Path Dependence in the Economy, Ann Arbor, MI: University of Michigan Press. CATO project (2008), available at http://www.co2-cato.nl, last accessed 10 June, 2009. Central Bureau voor de Statistiek (CBS) (2008), available at http://statline.cbs.nl/ StatWeb/publication/?VW=T&DM=SLNL&PA=70846ned&D1=0-4,16,26,3033&D2=0&D3=5,13&D4=a&HD=080909-1950&HDR=T&STB=G3 (accessed 9 September 2008). David, P. (1985), ‘Clio and the economics of QWERTY’, American Economic Review, 75 (2), May: 332–7. de Best-Waldhober, M., D. Daamen and A. Faaij (2006), ‘Informed and uninformed public opinions on CO2 capture and storage technologies in the Netherlands’, International Journal of Greenhouse Gas Control, 3 (3): 322–32. ECN (2007), available at http://www.ecn.nl/docs/library/report/2007/e07032.pdf (accessed 1 September 2008). Energy Information Administration (EIA) (2008), available at http://tonto.eia. doe. gov/country/country_energy_data.cfm?fips=NL (accessed 9 September 2008). Gaz de France (2009), ‘K12B-CO2 injection project’, GDF Suez TNO, available at http://www.K12-b.nl/ (accessed 23 June 2009). Huijts, N., C. Midden and A. Meijnders (2007), ‘Social acceptance of carbon dioxide storage’, Energy Policy, 35, 2780–89. Intergovernmental Panel on Climate Change (IPCC) (2005), IPCC Special Report on Carbon Dioxide Capture and Storage, edited by Bert Metz, Ogunlade Davidson, Heleen de Coninck, Manuela Loos and Leo Meyer, Cambridge: Cambridge University Press available at http://www.ipcc.ch/pdf/special-reports/ srccs/srccs_wholereport.pdf. KSI Network (2008), available at http://www.ksinetwork.org/downs/output/publi cations/CHAP008.pdf, last accessed 10 June, 2009. Lubbers, R. (2008), Speech on CATO day, 3 April, available at http://www. co2-cato.nl/modules.php?name=CATO&page=77&symposium=true (accessed 9 April 2008). Milieu en Natuurcompendium (2008), available at http://www.milieuennatu urcompendium.nl/indicatoren/nl0164-Klimaatbeleid.html?i=9-53 (accessed 3 September 2008). NAM (2008), available at http://www.nam.nl/home/Framework?siteId= nam-en&FC2=/nam-en/html/iwgen/algemeen/zzz_lhn.html&FC3=/nam-en/html/ iwgen/algemeen/over_de_nam.html (accessed 7 April 2008). Nieuwe Rotterdamse Courant (NRC) (2008), available at http://www.nrc.nl/

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economie/article1934465.ece/Zonder_CO2_-opslag_kunnen_we_het_schudden (accessed 4 September 2008). Rotterdam Climate Initiative (RCI) (2008), available at http://www.rotterdamclimateinitiative.nl/documents/Documenten/RCI-CO2-afvang_-transport_en_opslag_in_Rijnmond_2008.pdf; http://www.rotterdamclimateinitiative.nl/docu ments/Documenten/RCI-English-CCS-Report_Summary.pdf, last accessed 10 June, 2009. Seebregts, A.J. and B.W. Daniels (2008), ‘Nederland exportland electriciteit?’ (Netherlands export country of electricity?), ECN-E, 08-026, downloaded 28 August 2008. SenterNovem (2008), http://www.senternovem.nl / taskforceccs / taskforce _ ccs / in dex.asp. Sevenster, M.N., H.J. Croezen, M. Blom and F. Rooijers (2007), ‘Nieuwe electriciteitscentrales in Nederland: de vergeten kosten in beeld’, Centrum voor Energiebesparing Delft, April. Stuij, B. (2008), Speech on CATO day, 3 April, available at http://www.co2-cato.nl/ modules.php?name=CATO&page=77&symposium=true (accessed 8 April 2008). United Nations Development Programme (UNDP) (2008), http://hdrstats.undp. org/countries/data_sheets/cty_ds_NLD.html, (accessed 2 October 2008). Unruh, G.C. (2000), ‘Understanding carbon lock-in’, Energy Policy, 28, 817–30. Unruh, G.C. (2002), ‘Escaping carbon lock-in’, Energy Policy, 30, 317–25. van Alphen, K., Q. tot Voorst, M. Hekkert and R. Smits (2007), ‘Societal acceptance of carbon capture and storage technologies’, Energy Policy, 35: 4368–80. van den Berg, M. (2008), available at http://www.co2-cato.nl/modules.php?name =CATO&page=77&symposium=true (accessed 1 September 2008). van den Heuvel, Jan (2008), Speech on CATO day, 3 April, available at http:// www.co2-cato.nl/modules.php?name=CATO&page=77&symposium=true (accessed 8 April 2008). Vergragt, P. and G. van Grootveld (1994), ‘Sustainable technology development in the Netherlands: the first phase of the Dutch STD program’, Journal of Cleaner Production, 2 (3-4): 133-9. Volkskrant (2008), available at http://www.volkskrant.nl/binnenland/ article1063411.ece/Den_Haag_neigt_naar_nieuwe_discussie_kernenergie (accessed 3 September 2008). VROM (2008), ‘Schoon en Zuinig’ (Clean and Frugal), available at http:// www.vrom.nl / pagina.html?id=32950&ref=http://www5.google.com / search?clie nt=firefox-a&rls=org.mozilla per cent3Aen-US per cent3Aofficial&channel=s& hl=en&q=schoon+en+zuinig&btnG=Google+Search&ei=k3T6R7rBJJXKeo7 CjJIB&redir_esc=www5#1 (accessed 8 April 2008). Weaver, P., L. Jansen, G. van Grootveld, E. van Spiegel and P. Vergragt (2000), Sustainable Technology Development, Sheffield: Greenleaf. Wilde-Ramsing, J. and T. Steinweg (2007), ‘Powering profits: profits, investments and fuel type in the Dutch power sector’, SOMO, Centre for Research on Multinational Companies, June, Amsterdam.

9.

CCS and the European Union: magic bullet or pure magic? Dag Harald Claes and Paal Frisvold

Europe’s energy situation is precarious. It remains highly dependent on imported fossil fuels and energy consumption continues to increase. Yet the European Union (EU) is committed to reducing CO2 emissions by 60–80 per cent by 2050. This conundrum represents a real threat to Europe’s economic and political viability. Carbon capture and storage (CCS) represents an opportunity to remedy this situation. Indeed it has the potential to reduce CO2 emissions in the EU by over 50 per cent by 2050 (Stangeland 2007). Introducing CCS could also alter the position of coal – turning it into the most abundant, reliable and inexpensive energy source in Europe. While undertaking huge efforts to increase production and consumption of renewable energy, CCS can be Europe’s bridge to a truly sustainable energy chain. In fact, Europe cannot meet its long-term greenhouse gas (GHG) reduction targets without deploying CCS. This was formally recognized by EU heads of state in March 2006. Three years later, the EU has adopted a comprehensive legal framework for the geological storage of CO2 and established two major funding schemes to support a demonstration programme of up to 12 large-scale CCS projects. It has not been an easy road – the path trodden by any new technology is always strewn with obstacles – and, in truth, the journey has just begun. This chapter explains the background to the EU’s climate and energy policies; and the twists and turns that finally led it to put its weight behind CCS as the only solution that could marry the two – within a comprehensive portfolio of solutions for combating climate change.

1

THE DEVELOPMENT OF EU ENERGY POLICY

The EU has no comprehensive energy policy. The most coherent policy framework relevant to the energy sector – the Internal Energy Market (IEM) legislation, represents the application of EU competition policy to 211

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electricity and natural gas markets. But a comprehensive energy policy requires more than this. It would, for example, include a policy approach on the use of various energy sources, and strategies to develop preferred supply options. Yet EU member states have very different and contradictory policies on such issues. Various national energy strategies also have different economic implications for energy security: take for instance, a possible French strategy for the increased use of nuclear power and a German strategy for increased energy cooperation with Russia. The nexus between energy and climate change complicates the matter still further. CCS plays directly into the heart of this complicated mix of energy, economic, political, security and environmental concerns – all currently high on the EU agenda. The EU is constituted of 27 member states, with 493 million inhabitants. Although the EU constitutes only 7 per cent of the world’s population, its trade with the rest of the world accounts for approximately 20 per cent of global exports and imports. With economic activity comes energy consumption. EU countries are responsible for 18 per cent of world oil consumption, 16 per cent of world natural gas consumption and 10 per cent of world coal consumption. The energy intensity of the EU, that is, the relationship between energy consumption and economic growth, has been falling, implying that increased economic activity is being achieved with less energy. Still, total energy consumption in the EU has increased at an average annual rate of 2.4 per cent over the last decade. Energy was high on the agenda in the early days of European integration – most notably with the establishment of the European Coal and Steel Community in 1951 and Euratom in the Rome Treaty of 1957. Common rules and governance of the coal sector was a major step in energy integration, as coal was the dominant energy source in Europe in the 1950s. The idea behind Euratom was for a common European policy for the governance of nuclear power. This ambition was soon abandoned and Euratom was reduced to an institution for research and investment in the nuclear sector. Indeed, member states eager to develop their nuclear industries more or less ignored Euratom. Cooperation in the energy sector was then almost non-existent until the project to create the Internal Market emerged in the mid-1980s. The Internal Energy Market In 1988, the Commission of the European Communities presented a Communication advocating the establishment of an Internal Energy Market (European Commission 1988). In the following decade, integration

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in the energy arena focused on the preparation, negotiation, decision and implementation of a series of directives and legislative packages. With the 1988 Communication, the Commission established a deep commitment to integration and liberalization of the energy sector. The member states, however, have had very different views about how vigorously this agenda should be pursued. Historically, the gas and electricity sectors in Europe have been characterized by oligopolistic market structures. National monopolies, whether state owned or private (integrated both horizontally and vertically), have dominated markets in both electricity and gas. Since gas and electricity networks were regarded as natural monopolies, competition would not appear spontaneously, but had to be created through regulation. The Commission therefore drafted two directives simultaneously in order to establish competitive trade in electricity and gas. Because it regarded the obstacles and resistance among member states to the gas directive to be stronger than on the electricity directive, the decision-making process was divided. However, both processes came to a halt in 1992 as almost all countries opposed the proposed directives. In both sectors, the discussion centred on models for third-party access. In such a system, the owners of the network are obliged to allow producers and consumers to engage in electricity (or gas) trade. The electricity directive was eventually agreed upon in the July 1996 Council meeting (Directive 96/92/EC of the European Parliament and of the Council). The electricity directive specified the extent of the market opening, which was defined as the percentage share of the electricity market that should be opened to competition immediately, and the expansion of this opening over a period of time. The gas directive was adopted in 1998 (Directive 98/30/EC of the European Parliament and of the Council). Both directives established common rules for transmission, distribution, supply and storage, which implied a system of third-party access in the gas sector. Member states were obliged to open up 20 per cent of the gas market for competition by 2000, and 28 per cent by 2003. The main problem in implementing the gas directive was the position of statutory or de facto monopolies in gas transmission. Simply privatizing national transmission companies would not promote competition, since a single pipeline will usually be more economically efficient than two parallel and competing pipelines. The challenge is therefore to develop legislation to create competition within the single pipeline. This, in turn, demands a regulatory body with the power to arbitrate in commercial negotiations between sellers and buyers, and the ability to prohibit price discrimination.

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External Relations Crude oil is not traded exclusively through physical networks like electricity and gas (wires and pipelines) and so is not subject to the same potential for monopolies in transport and transmission. However, the Commission noted that oil-producing countries, both inside and outside the EU, had developed strong national or state control over the exploration of hydrocarbon resources (Johnson and McCann 1997: 65). To open up the downstream segments of the product chain to competition, while simultaneously leaving the upstream production in the hands of national (state) monopolies, would contradict the objectives of the Internal Market. Thus in 1992 the Commission proposed a directive ensuring nondiscriminatory and transparent procedures for granting licences for prospecting, exploring and extracting hydrocarbons (Directive 94/22/EC of the European Parliament and of the Council). Jurisdictional control over natural resources remained in the hands of the states, which retained the sole right to decide if an area was to be opened for exploration. However, once the governments had decided to open up an area, common rules should apply concerning the granting of licences. The opening of the former Eastern European countries and the break-up of the Soviet Union changed the world and also the politics of European energy economics. Political instability in exporting countries has negative effects on the EU, as it raises questions about security of supply. European gas consumers wanted to support the economic and political changes in the Soviet Union, but at the same time they were concerned about the reliability of energy supplies. In this context, the idea of creating a European Energy Community that would include Russia and Eastern Europe, came to the fore. In 1989, the former Dutch Prime Minister, Ruud Lubbers, launched an initiative to establish an energy community that could promote the development of reserves, efficiency of transmission and distribution, and security of supplies. The Energy Charter Treaty was signed in 1994, and entered into force in 1998. There are 51 members of the Energy Charter Conference, a few of whom have still not ratified the Treaty; notable among these are Russia and Norway. A strong and systematically enforced energy treaty – that included Russia – could have provided a reliable regulatory framework and attracted foreign investment into the Russian energy sector. Yet the lack of Russian ratification and the re-nationalization strategy established by the former Russian president, Vladimir Putin, suggests that this ambition is not to be realized.


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Security of Supply Although the EU has not yet achieved full energy liberalization, it has certainly increased competition and made free market logic the guiding principle of these sectors. This is a major achievement. However, the EU is not self-sufficient with regard to energy – not by a long way. Import dependency of the EU is more than 80 per cent for oil and almost 60 per cent for natural gas. While EU energy policy of the 1990s was dominated by the IEM, the year 2000 introduced a renewed focus on security of supply. That year the Commission published the Green Paper: ‘Towards a European strategy for the security of energy supply’ (European Commission 2000). Efforts to liberalize downstream gas and electricity markets continued, but in the upstream segments, the market perspective was supplemented by a more politically oriented approach. Since 2000, the import dependency of oil and natural gas has further increased. If no action is taken, dependency on foreign oil is estimated to rise from 82 per cent today to 93 per cent in 2030. For natural gas, it is expected to rise from 57 to 84 per cent. Total energy import dependence will rise from 50 to 65 per cent. Although substantial efforts invested in reducing energy consumption in the EU can reduce these figures, the EU will most likely have to rely on external actors for a substantial part of its energy supply for the foreseeable future. Furthermore, this energy supply will continue to be dominated by fossil fuels. European countries are dependent on imports to satisfy demand for various sorts of commodities. The point about oil and gas is their critical role in underpinning economic activity and their direct effect on the welfare of the citizens of the EU. The supply of sufficient quantities of energy at affordable prices is a high priority for any government. Had the energy resources on which Europe was drawing been located in countries that were a part of a liberalized free trade area, which included energy exporters and importers alike, the increased dependency could have been seen simply as an economic issue. But the fact that a substantial part of the world’s energy resources are located in countries outside the liberal free trade areas makes the increased dependency on energy imports a sensitive political issue. The EU’s energy trading partners differ widely with respect to their position on free trade. The one energy supplier that is, in fact, part of the IEM is Norway. Norway seems to be of minor importance if one reads the energy strategy documents of the Commission, but this is probably more the result of the perceived economic and political proximity between the EU and Norway. In fact, in 2005 Norway was the second largest supplier of oil (16.4 per cent) and gas (24.5 per cent) imported to the EU.

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By far the most important supplier of energy to the EU is Russia. Former Soviet Union countries provided 36 per cent of oil imports to the EU in 2005 and Russia provided the same share of gas imports. Russia is actually somewhat hard to categorize with respect to free trade logic. It has obviously changed from an extreme low score on free trade during the Soviet era, when it was the prominent advocate for the planned economy. In the first decade after the break-up of the Soviet Union, it seemed as if Russia would rapidly join the club of market economies. However, experience over the last few years calls this assumption in to question. When it comes to other regions such as the Caucasus, the Middle East and North Africa, it seems that the market approach will not become possible for several decades, if ever. Thus strategies towards these areas must focus on political instruments. In 1989 the Gulf Cooperation Council (GCC) and the EU signed a Cooperation Agreement, which mandated future negotiations on a Free Trade Agreement (FTA) between the EU and the GCC. FTA negotiations started in 1990, but soon reached a deadlock. Negotiations resumed in March 2002 and have continued since. At the present oil price level, large quantities of oil could be supplied to Europe from the Gulf region for a long period of time. The problem is not technology or the economics of such projects; the obstacles are political. The situation in Iraq, and the tense relationship with Iran, is at best postponing the development of energy cooperation between the GCC and the EU. Although politics becomes more prominent, it does not mean that all the economic aspects disappear. The point is that the EU needs to handle the complexity of its external energy relations, including both economic and political conditions for policy formulation and performance. The question that therefore comes to the fore is, ‘What can the EU do to reduce reliance on external oil and gas sources?’. Both nuclear power and coal are available to the EU. The nuclear option does not, of course, require access to resources, either domestic or foreign, except for the uranium itself that is imported. The technology is well known and the European nuclear industry is at the forefront of technology and safety developments. The environmental price tag is not so obvious for most energy experts, but public political support for nuclear energy has still not recovered from the Three Mile Island (1979) and Chernobyl (1986) accidents. There are still substantial coal reserves in Europe, and imported coal can be obtained from sources other than the oil and gas exporters. The increased use of coal does, however, come with an environmental price tag (especially CO2 emissions). On the other hand, recent volatity in oil prices seems to have triggered a renewed interest in coal reserves. Total world coal consumption grew by more than 5 per cent annually in the 2003–07 period. Worldwide, the total volume of proven coal reserves added up to


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847 billion tonnes in 2008.1 At the present level of coal consumption, these reserves will last more than 130 years. In addition, as this chapter will demonstrate, introducing CCS can alter the position of coal – and turn it into a more abundant, reliable and inexpensive energy source.

2

THE POLICY CONTEXT FOR CCS: ENERGY SECURITY, CLIMATE CHANGE AND COMPETITIVENESS

Over the past 15 years the EU has established itself as an international climate change leader. It played an important role in the negotiation of the Kyoto Protocol and was instrumental in ensuring its entry into force: firstly by ensuring rapid ratification by all its member states, and second by putting pressure on Russia to ratify the agreement. The EU has also pushed for a more stringent and inclusive international climate agreement in the post-Kyoto period. But the EU as a whole faces difficult choices in ensuring emission reductions, energy security and international competitiveness. The scale of the European ambition is outlined in the introduction to the ‘Action Plan’ in the Commission’s ‘Energy policy for Europe’ (European Commission 2007c): To achieve the strategic energy objective set out above means transforming Europe into a highly energy efficient and low CO2 energy economy, catalysing a new industrial revolution, accelerating the change to low carbon growth and, over a period of years, dramatically increasing the amount of local, low emission energy that we produce and use. The challenge is to do this in a way that maximises the potential competitiveness gains for Europe, and limits the potential costs.

CCS first appeared as a plausible technology option in the Commission’s White Paper from 2005, ‘Winning the battle against climate change’ (European Commission 2005). Furthermore, the Commission’s Green Paper on Energy in March 2006 listed CCS as a tool for combating climate change while securing future energy supply (European Commission 2006). This came after the sudden Russian halt to exports of natural gas to Ukraine, and thus further on to Central Europe, having sent a shockwave throughout Europe. It was a ‘wake-up call’ for European governments and policy makers – exposing how dependent they were on importing energy from Russia. It sparked new terminology in Brussels: with talk of ‘energy security’. Russia’s recent conflict with Georgia has now intensified this situation even further.

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In its Green Paper, the Commission outlined the EU’s commitment to limiting the rise in average global temperature to 2°C, which meant reducing GHG emissions by as much as 50–80 per cent by 2050. In simple terms, the challenge was: how can Europe get more energy, while emitting less CO2? This ‘Catch 22’ situation was joined by the clearly articulated ambition of President José Manuel Barroso’s Commission to fulfil the goals of the Lisbon strategy and make Europe ‘the most competitive and dynamic, knowledgedriven economy in the world by 2010’. In 2005, a mid-term assessment of this strategy revealed little hope of reaching the objectives set out by the heads of state at their meeting in Lisbon in March 1999. The Green Paper’s introduction of CCS alongside measures to increase energy efficiency and the production of renewables, revealed the Commission’s new view on CCS; it could contribute to achieving both energy and climate security. As if the challenges of climate versus energy security and a failing Lisbon strategy were not enough, 2005 also saw the EU constitutional treaty rejected in the French and Dutch referenda. Brussels was politically humiliated and for months, politically paralysed. The Climate and Energy Package: 20-20-20 in 2020 Under these circumstances President Barroso was left with little choice but to take the ‘bull by the horns’ and turn these challenging problems into opportunities; and in January 2007, the Commission launched the largest ever collection of ‘Communications’ (or white papers) – 16 in all – outlining how Europe should face the challenges of escalating climate change and energy demand (Box 9.1). Along with three commissioners (Andris Piebalgs, Stavros Dimas and Günter Verheugen), President Barroso announced the EU’s ambition to reduce its GHG emissions by 20 per cent by 2020 (or by 30 per cent if other OECD (Organization for Economic Cooperation and Development) countries agreed to a global agreement in 2009). While the focus was on increasing the production and consumption of renewable energy and on energy efficiency, for the first time, the Commission also presented CCS as a key solution for tackling climate change. In its paper, ‘Sustainable power generation from fossil fuels: aiming for near-zero emissions from coal after 2020’ (European Commission 2007a) it outlined the numerous hurdles facing the implementation of CCS, but also its potential to ensure continued access to fossil fuel energy – while reducing CO2 emissions. The European Council’s Spring meeting in March 2007 turned out to be everything Commission President Barroso could have hoped for – and more. In her role as leader of the German Presidency of the EU, Chancellor Angela Merkel engineered unanimous backing for the


BOX 9.1

1. 2. 3. 4.

5. 6. 7.

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THE CLIMATE AND ENERGY PACKAGE FROM 23 JANUARY 2008

Proposal for a directive of the European Parliament and of the Council on the promotion of the use of energy from renewable sources. Communication from the Commission on a first assessment of national energy efficiency action plans: Moving forward together on energy efficiency. Proposal for a directive of the European Parliament and of the Council on the improvement and extension of the emissions trading system of the Community. Proposal for a decision of the European Parliament and of the Council on the effort of Member States to reduce their greenhouse gas emissions to meet the Community’s greenhouse gas emission reduction commitments up to 2020. Proposal for a directive of the European Parliament and of the Council on the geological storage of carbon dioxide. Community guidelines on State aid for environmental protection. Communication from the Commission: Supporting early demonstration of sustainable power generation from fossil fuels.

Commission’s comprehensive Climate and Energy Package – by all 27 heads of state. Overnight, the EU established itself as a world leader in the fight against climate change. Its member states signed up to a commitment of historic dimensions – sparking an avalanche of separate commitments to further reductions, for example by Denmark, Germany and Holland, all of whom announced even more aggressive reduction targets in the ensuing months. More importantly, climate policies had achieved what the EU so badly lacked in foreign policy, defence or other key areas in international politics: unity and world leadership. The ‘Merkel Miracle’ – or rather the Communiqué from the European Council meeting on 8–9 March 2007 – engaged with CCS on three levels. First, it asked the Commission to establish a legal framework for CCS to allow CO2 to be safely stored, deep underground. Second, it endorsed the Commission’s suggestion to draw up a policy to ‘stimulate construction and operation by 2015 of up to 12 demonstration plants’.2 Third, it called for a Strategic Energy Technology Plan (SET-Plan) for Europe and asked the Commission to prepare a road map for developing ‘European Industrial Initiatives’ for key ‘low carbon emitting technologies’, which placed CCS top of a list of six.3 Before going into the specific issues facing CCS, it is worth dwelling

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briefly on the Commission’s Energy and Climate Package of January 2007. For the first time ever, the Commission suggested making consumption targets for renewable energy sources legally binding, that is, member states could be brought before the EC Court of Justice if they do not reach specific targets for 2020 to which they have committed. The European Parliament had proposed legally binding targets in the directive on electricity production from renewable energy sources (RESDirective) in 2001, but was opposed by the Commission and later voted down by the Council of Ministers. This time, the Commission stated that legally binding targets were vital if Europe was to reach such an ambitious level of CO2 reductions. The Commission also drew attention to the potential role of energy efficiency, with a 20 per cent reduction target by 2020 and a plan to develop ‘low carbon technologies’ within the framework of the SET-Plan – which included CCS. The European Council was asked to endorse these strategy and policy initiatives, even before they had viewed the draft legislation. This can be seen as an effort by the Commission to prepare as much as possible for discussions and negotiations within the Council and Parliament. Experience has shown that a clear, strong signal from the Commission increases the chances of smooth and rapid adoption by EU decision-making bodies. But EU member state governments often express scepticism, as they see it as an attempt to reduce their role and influence. The Commission drew up comprehensive policy strategies for each area of the 2007 package, but left out the concrete legislative proposals that were usually part of such white papers. Instead, it signalled that it would return to the Council and Parliament – as well as the Economic and Social Council (ECOSOC) and Committee of the Regions by the end of the year. This was significant for two reasons. First, it indicated that the Commission wanted a clear political commitment by the heads of state on policy goals before getting bogged down in nitty-gritty law-making, which could dilute and confuse the signal to the public. Second, it gave the Commission a larger degree of control in working out the details – such as setting country-specific targets for the consumption of renewable energy – leaving less influence to the Council and Parliament. In short, it could steer the process faster and according to its own wishes. The Commission’s goal was to publish the follow-up to the January 2007 Communications by early December 2007 in order to send a strong signal to the UNFCCC (United Nations Framework Convention on Climate Change) negotiations in Bali. But intense lobbying from the member states – particularly on the concrete goals for increasing the use of renewable energy – led to a delay. Nevertheless, on 23 January 2008, the Commission published a further nine white papers, which this time


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included specific legislative proposals for each area: renewable energy, energy efficiency, emissions trading and CCS. The Importance of Speed The EU Climate and Energy Package was intended, first and foremost, to establish legislation that will ensure GHG reductions in Europe. However, it also represented an important contribution to the UNFCCC, whose negotiations for a follow-up to the Kyoto Protocol were expected to culminate in Copenhagen in December 2009. EU leaders, and indeed the Commission, have always expressed the need for the EU to play a leadership role in climate negotiations by bringing concrete initiatives to the table. Only by being able to refer to such legally binding reduction commitments could it hope to put pressure on the US – with its new President and Congress – to support clear and umambitious GHG reduction goals and a new global agreement in Copenhagen. With the EU and the US speaking jointly, the chances of getting China, India and other emerging economies to join such an agreement would also increase. In order to ensure the adoption of the EU Climate and Energy Package before the Copenhagen summit, it was therefore important that the EU adopted the entire package (that is, the four directives) by the end of the French presidency in December 2008. Otherwise, it would mean moving into the second phase of the decision-making procedures (that is, a second reading), which would probably not conclude before the European Parliament dissolved prior to parliamentary elections in June 2009. Moreover, the Commission itself was to be replaced in the autumn of 2009, making it very difficult to finalize any decision-making process in time for Copenhagen.

3

THE CASE FOR CCS IN EUROPE

It is important to understand the Commission’s thinking in making the case for CCS. The arguments put forward in its first policy document devoted to CCS (European Commission 2007a) build on the basic assumption that, even in a future carbon-constrained world, fossil fuels will continue to be an important part of Europe’s energy mix. The fact is that the world will need to employ all available energy sources and abatement technologies if it is to succeed in providing more energy – and less CO2. This includes energy efficiency, a whole range of technologies based on renewable energy sources, nuclear – and fossil fuels with CCS. Not

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insignificantly, the Commission estimated that it would cost Europe 40 per cent more to reach its CO2 emission reduction targets without CCS (European Commission 2008b). A key question was how much CO2 could potentially be reduced through CCS. While making a limited impact before 2030, the Commission estimated that it could represent a reduction of 13 per cent, increasing from 7 million tonnes (Mt) of CO2 captured in 2020 to 160 Mt by 2030 (European Commission 2007b). Other studies point to a reduction potential of as much as 50 per cent by 2050 (Stangeland 2007). The Commission also stressed the international dimension – acknowledging that emerging economies such as India, China and Brazil have abundant access to coal. The top priority of these countries is to lift their people out of poverty, and they are not likely to refrain from burning coal in order to curb climate change – a problem caused by the developed world. The Commission therefore argued that the EU, along with other OECD countries, must develop CCS technology in order to create economies of scale and bring down costs. CCS must become affordable – even commercially viable – for developing countries. While this argument has an element of altruism, the idea is that EU technology providers will improve Europe’s competitiveness and export CCS to the rest of the world. Here again, the Commission emphasizes the Lisbon strategy – that developing CCS will contribute to European industry becoming more competitive and successful in world markets. The Commission also stressed the value of deploying CCS in heavy industries such as steel, cement, paper and refining. These are all energyintensive industries that emit large quantities of CO2 during industrial processes. They will therefore enable even larger flows of CO2, helping to create economies of scale for the purpose of financing pipelines for storage, or allowing enhanced oil or gas recovery activities in the petroleum sector.

4

CCS RESEARCH AND THE ROLE OF THE ZEP TECHNOLOGY PLATFORM

As with many technology and policy developments, EU activities on CCS were initiated at an early stage under the Framework Programmes for Research and Development. The first research initiative on CCS can be found as far back as the EU 3rd Framework Programme, 1990–1994, with the JOULE project. This aimed at identifying the potential for storing CO2 in a variety of European basins. The 4th Framework Programme saw the


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start of the SACS project, building advanced monitoring and modelling methodologies for Statoil’s Sleipner project on the Norwegian continental shelf. Subsequent programmes – which in 2006 became seven-year programmes – have seen a wide range of CCS-related R&D projects. These have looked at all aspects of the value chain – from reducing the costs of capture technologies and linking CO2 ‘sources and sinks’, to developing new monitoring methods for CO2 storage and using CCS for combined hydrogen and electricity production. Activities aimed at monitoring public perception of CCS were also included. From the early 1990s up to the 7th Framework Programme (ending 2013), the EU budget for R&D for CCS has increased from €35 million to approximately €360 million. A particularly important development has been the establishment of the European Technology Platform (ETP) for Zero Emission Fossil Fuel Power Plants (ZEP), initiated by the Directorate-General for Research Technology and Development of the European Commission in the spring of 2005. This includes various branches of industry (utilities, oil and gas, equipment suppliers), science and research communities, and environmental NGOs (non-governmental organizations). As with around 30 other existing ETPs in the field of energy and industry, the Commission requires a transparent and fair selection process in order to ensure a balanced representation of all relevant stakeholders. The Commission finances half the costs of the ZEP Secretariat, the other half being met by industrial members. The purpose of the ETPs is to provide direct input to the Commission’s work in specific technology fields – primarily the yearly work programmes of the 7th Framework Programme. In the case of CCS, ZEP’s mandate was much broader, as EU activities were limited to a few research projects. This included drafting a Mission Statement and two comprehensive policy documents – the Strategic Research Agenda (SRA) and Strategic Deployment Document (SDD) – subsequently summarized in a Strategic Overview. The ETP-ZEP consists of an Advisory Council (AC), which originally had 26 members, recently increased to 39.4 Under the AC, there are a number of working groups. Over the last two years, there have been around 150–200 experts involved in the Working Groups and Task Forces – on Technology, Demonstration and Implementation, Policy and Regulation, and Public Communication. All are from companies, research organizations and NGOs – no representatives from industry organizations or other umbrella organizations are accepted as members of ZEP, although some exceptionally attend meetings of the working groups and task forces. An Executive Committee, consisting of the chair and five vice-chairs (one from each constituency), together with the co-chairs of each task force, are responsible for the daily management of the Platform, supported

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by a Secretariat. ZEP also has a Government Group (formerly the Mirror Group), where representatives of national administrations from most EU member states follow ZEP activities and provide valuable input as well as channelling information back to national administrations. Representatives from the Commission often attend ZEP meetings as observers, but also contribute to the discussion. The ZEP Mission Statement turned out to be critical as it set out the level of ambition with regard to the timing of the commercialization of CCS. In other words, when it would become more economically beneficial for the power industry to deploy CCS than emit CO2 into the atmosphere. After extensive discussion, this date was set as 2020. This sent a powerful signal to the Commission and the member states of the willingness of European industry to develop and deploy CCS as a matter of urgency: while the SRA identified the research gaps, the SDD outlined the policies that needed to be implemented in order to achieve this goal. The conclusion: an EU demonstration programme of 10–12 CCS projects was vital in order to scale up the technology, drive down costs, build public confidence – and ensure that CCS was commercially viable by 2020. This meant projects needed to be up and running by 2015 at the latest. In 2008, under the chairmanship of Dr Graeme Sweeney, ZEP then drew up a detailed proposal describing how such a programme could work in practice. This included identifying technology gaps that needed to be filled, the optimal portfolio of projects, the selection criteria, and how it could be funded. This exercise was facilitated by McKinsey & Company and included input from a comprehensive range of stakeholders – not only within ZEP, but also the wider CCS community and governments. It was not a simple task: ZEP stakeholders often held different views on a number of issues – from the time needed to upscale technology, to the CO2 sources to be covered, the geographical spread and funding gaps – all were subject to intense discussion. Nevertheless, on 10 November 2008, the report, ‘EU Demonstration Programme for CO2 Capture and Storage (CCS): ZEP’s Proposal’ (ZEP 2008) was launched at the ZEP General Assembly. It was an accomplishment of unity, giving confidence and credibility in CCS from the combined perspective of industry, geologists, scientists and NGOs. It was also a key turning point, as it demonstrated not only the advanced stage of current CCS technologies, but also that industry was prepared and eager to deploy them – if the immediate cost gap could be met. Like all major new technology initiatives, the cost of a demonstration programme will be high, but experience, technology development and economies of scale should drive the costs of CCS down. Industry declared


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its willingness to take on the base costs of the power plant (€10–12 billion) in a letter presented to Commissioner Piebalgs on 21 February 2008, thereby making significant investment itself. In line with the precedent set by other new low-carbon technologies, ZEP therefore asked that the economic gap of €7–12 billion (from building and running the additional CCS installations) be covered by public funding. This will also secure a high level of knowledge sharing which will accelerate the deployment of CCS – not only in Europe, but also beyond. Indeed, without a demonstration programme, the commercialization of CCS will be severely delayed – until at least 2030 in Europe. This will lead to unnecessary CO2 emissions and costs, as instead of applying CCS to new coal plants already in the pipeline, a retrofit would be required, increasing the cost of achieving the same emissions reduction. After much discussion, ZEP therefore endorsed a proposal to fund the demonstration programme drawn up the UK investment bank, Climate Change Capital. In essence, this entailed granting extra Emission Unit Allowances (EUAs) within the ETS to cover the additional costs of introducing capture, transport and storage on the demonstration projects.

5

HOW AND WHEN TO DEPLOY CCS?

The Need for a Legal Framework On 10 January 2007, the Commission announced its intention to present a comprehensive legal framework for the geological storage of CO2 by the end of the year. By December, the draft directive was ready, but its publication was withheld until the other elements of the Energy and Climate Package were ready on 23 January 2008. It shows the incredible speed with which the Commission services worked. The proposed directive (European Commission 2008a) seeks to ensure that CO2 is stored in a safe and environmentally responsible way, and broadly addresses five main areas: ●

A clear risk management framework – particularly for the early phase of storing CO2 – and the administrative implications of awarding storage permits. The Commission wished to ensure a harmonized and reliable regime for the selection of storage sites. The directive suggests that final authorization of the storage permit should be the responsibility of the competent authority in each member state. However, it also includes a review clause for the Commission itself. This means that a Scientific Panel will review the permits, assessing information provided to the national authorities such as site

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characterization, risk assessment and risk management plans. It will also provide a substantiated opinion showing that all requirements for obtaining a permit to store CO2 are fulfilled. Responsibility and liability in case of leakage In particular, financial security to cover the costs of addressing leakages (or, indeed, obligations in case of the insolvency of operators), as well as measures for surrendering EUAs under the EU ETS. The directive also includes rules for handing over responsibility and liability for the storage site from the operator to the host government. Technical issues such as CO2 purity, that is, composition of the CO2 stream and access to pipeline networks for transporting CO2 from its source to storage sites. Regulating capture technology under the existing directive on Integrated Pollution Prevention and Control (IPPC) – which is also undergoing revision – (including a name change to ‘Directive on Industrial Emissions’. A strategy for ensuring the wide implementation of CCS in Europe After internal deliberation, the Commission came to the conclusion that all new plants should be required to be ‘capture ready’ (that is, ready to deploy CCS) by setting aside space for capture technology, and assessing transport and storage locations. The Commission did not propose to make CCS mandatory from a certain date, but did included a clause stipulating a review by 2015 to look at the need to mandate CCS. It is worth taking a closer look at how the Commission came to this conclusion. Four options were considered: ● ●

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Allow CCS to develop on its own merits – which also meant excluding it from the EU ETS. Use the EU ETS as the economic incentive for deploying CCS, that is, leave it up to market operators to decide when it becomes more profitable to pay for CCS than for EUAs. CCS would then be fully integrated as a recognized CO2 mitigation option under the EU ETS. (The approach that was finally chosen.) In addition to including CCS in the EU ETS, make it a legal requirement for all fossil (coal and gas) power production to apply CCS from a certain date to new or existing plants (built between 2015 and 2020). In addition to including CCS in the EU ETS, provide a subsidy for the additional costs of introducing the capture part of a power plant, with no legal obligation to introduce CCS.


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Funding CCS Demonstration Projects In addition to implementing a legal framework for CCS, the Commission recognized the need to provide economic incentives for building the first 12 full-scale CCS demonstration projects, with a minimum size of 300 MW. The declared goal was to have them operational by 2015, as announced in the January 2007 package. This was subsequently endorsed by the EU heads of state at their European Council meeting in March 2007 and reiterated at their meeting the following year. The Commission then drew up a white paper with a view to discussing how these demonstration projects could be financed and built. This Communication focused on three areas: ●

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The rationale for building 10–12 demonstration projects: this took note of the lack of industrial-scale maturity of capture technologies and the need to test a variety of combinations of CO2 capture technologies, transport modes and storage techniques in both depleted oil and gas fields, and deep saline aquifers. The importance of a balanced geographical spread of projects was also underlined. The need to show civil society, and indeed policy makers, that CCS is a viable technology option that can deliver. Building demonstration projects would not only bring down costs and pave the way for wider deployment in Europe, but also accelerate technology transfer to emerging economies in Asia and Latin America. The need for public financial support that will incentivise industrial investment by funding the additional costs of applying CCS at the time when the cost of an EUA is far below that of capturing a tonne of CO2, that is, it is insufficient to trigger investment. For funding sources, it referred to a separate Communication from the Commission on the funding of low carbon-emitting technologies (expected during the first half of 2009). However, the Commission made no specific proposal for funding CCS demonstration projects.

The Issue of State Aid The Communication also addressed the need to allow large-scale public funding of demonstration projects, with an aid intensity higher than previously allowed under the Commission’s State Aid Guidelines for R&D and the Environment. In fact, it went as far as to state that large-scale demonstration projects would probably not be realized without considerable public support. In its Guidelines on Environmental Projects, published as a part of

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the Energy and Climate Package on 23 January 2008, the Commission announced that funding for CCS demonstration projects would be assessed according to Article 87 of the EU Treaty. This article allows much higher aid intensity for projects that qualify as ‘Common European interest’ than those specifically described in the Guidelines. The European Free Trade Association (EFTA) Surveillance Authority5 confirmed this in its decision to approve state aid for the Kaarstoe project in Norway, stating that ‘the state investment is aimed at a well-defined objective of common interest (of the EU)’.6 The Commission said it would develop specific guidelines for granting state aid to CCS once member states have notified specific projects.

6

POLITICS AND OPPOSITION TO CCS

At first sight, CCS can easily be seen as an ‘end-of-pipe’ solution. The very idea of storing underground something that is emitted into the air is understandably a cause for scepticism. CCS is also an extremely complex industrial process, which offers ample opportunity to highlight risks and uncertainties. Yet the Intergovernmental Panel on Climate Change (IPCC) confirms it is ‘very likely that the fraction of CO2 retained will be more than 99 per cent over the first 100 years and likely [to] be more than 99 per cent over the first 1,000 years’ (IPCC 2005). After all, CO2 storage uses the same natural trapping mechanisms which have already kept huge volumes of oil, gas and CO2 underground for millions of years. Nor is the technology new: it is almost identical to that used by the oil and gas industry for decades – to store natural gas deep underground or for enhanced oil recovery. There are already hundreds of natural gas storage sites worldwide, many found in the most densely populated areas in Europe. Nevertheless, industry groups such as the nuclear industry – who see CCS as a threat to their own revival – argued that CO2 storage was dangerous and that capture plants would take too long to build. Greenpeace also came out strongly in opposition to the public funding of CCS. Their arguments were backed by a number of members of the European Parliament, particularly among the Greens and UK independents. Within the EU policy debate, the anti-CCS lobby focused on three main arguments. First, that all efforts should be directed towards reaching the overall goal of increasing production and consumption of renewable energy. In this context, CCS is seen as a counterproductive side track on the road to achieving a fully sustainable energy chain based only on renewables. Second, there is the sheer fact that CCS will turn former


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‘enemies’ into ‘friends’. With CCS, coal will re-emerge as a key energy source of the future. This can be compared to two distinctly different political parties suddenly finding themselves embracing the same ideology or political arguments. Turning ‘foes into friends’ always takes time and a lot of soul-searching. Third, there is the argument that funding for CCS would compete with that for renewables. The last is still a key issue in the ongoing deliberations on funding the CCS demonstration programme and the use of income from selling EUAs in each member state. During the Autumn of 2008 the Environment Committee of the European Parliament held a series of discussions on the proposed Directive on Geological storage of CO2 – or the ‘CCS Directive’, as it is often called. At the same time, detailed scrutiny of the proposed legal text was undertaken by the Council of Ministers’ Working Group on Environment. Many MEPs and national delegates in the Council – especially from Germany, Greece, Italy, Finland, Sweden and Denmark – questioned specific paragraphs in the directive. Issues related to risk management, leakage rates, CO2 purity, transfer of responsibility for storage sites from industry to governments, and capture readiness were of particular concern.

7

NEGOTIATIONS IN THE EUROPEAN PARLIAMENT AND COUNCIL OF MINISTERS

The French government led the EU Presidency in the second half of 2008. Enormous pressure was put on the Presidency due to the unprecedented need to finalize negotiations between Parliament, Council and the Commission in one round, by the end of 2008. Few EU observers will disagree that the successful outcome of the Climate and Energy Package was due to the cooperative spirit of the European Parliament and its willingness to sidestep formal procedures in the name of expedience – as well as the extremely efficient leadership exercised by the French Presidency. The Environment Committee of the European Parliament proposed a large number of amendments to the Commission’s proposed directives within the EU Climate and Energy Package – particularly for the revised and enlarged EU ETS and on Geological Storage of CO2. The MEP responsible for the EU ETS Directive, Avril Doyle from Ireland, supported by Chris Davies and Linda McAven from the UK, put forward a proposal for funding up to 12 large-scale CCS demonstration projects, as called for by the EU heads of state. This suggested setting aside 500 million EUAs from the New Entrance Reserve (NER) – that is, EUAs set aside for new industries established in the EU from 2012 to 2020 – a total of around 800 million. EUAs would only be awarded to consortia once

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they had built the demonstration projects and stored the CO2 successfully underground. On 7 October 2008, in a crowded room in the European Parliament, the Environment Committee voted on amendments to both directives – on the EU ETS and on Geological Storage of CO2 – over a thousand in total. In a dramatic moment, after a consolidated amendment7 to set aside 500 million EUAs to fund CCS demonstration was voted down due to a tie, the original Doyle/McAven/Davies proposal was up for voting. The only difference between the consolidated amendment and the original proposal was that the latter also suggested that one of the 12 demonstration projects should be built in an emerging economy, having ratified a post-Kyoto agreement. As the committee chair called for members to indicate their votes, MEP Chris Davies asked for the floor on a point of order. Davies noted the lack of a paper copy of the consolidated version and said that – while he had the floor – this was the only chance Europe had of finding a way to fund CCS demonstration projects and thereby ensure the deployment of this key technology for combating climate change. He added that the EUAs from the NER would not be taken from Central and Eastern European countries, as some had claimed. The chair noted that Davies’s comments were not entirely in accordance with parliamentary rules, but let it pass. He then took the amendment to a vote by asking for a show of hands. To everyone’s surprise, there was such an overwhelming majority in favour that an electronic vote was deemed unnecessary. ‘Carried’ said the chair. A huge sigh of relief went through the room and a clapping of hands could be heard from the back. Next day, the Financial Times ran a major article with the heading, ‘Europe backs carbon capture with €10 billion’ (Financial Times, 8 October 2008). In response to the Parliament’s proposed amendment, the French Presidency suggested setting aside 100–200 EUAs for this purpose. It also proposed that the remaining funding should be split between the host country government – by using revenues from the auctioning of EUAs – and industry itself. Intense lobbying to secure adoption of the 500 million EUAs by the Council of Ministers was immediately set in motion. This was spear-headed by a group called the ‘CCS Leadership Coalition’ consisting mainly of the Brussels representatives of Climate Change Capital, Shell, Vattenfall, Alstom, E3G and the Bellona Foundation. The coalition drew up letters to ministers of finance, environment and energy within all 27 EU member states, as well as heads of state, in advance of the December summit, which ultimately were signed by a much broader group of CCS stakeholders. The


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Leadership Coalition also met with ministers, vice-ministers or cabinets in the capitals of practically every member state. But the larger member states faced a range of other more pressing issues. Poland and the other highly coal-dependent new member states, were first and foremost concerned with obtaining a derogation from having to auction EUAs to its power and industry sectors, fearing it would result in large price increases for electricity and an erosion of their competitive situation. Poland argued that CCS should be funded by the regular EU budget and that the EUAs should be set aside to support the EUA market, should the price climb too high. It was not clear that Germany ever publicly supported the proposal, while the Commission made it clear that any specific funding scheme under the ETS had to be ‘technology neutral’. Securing funding for a CCS demonstration programme was one of the most controversial issues at the European Council meeting on 12 December 2008. It was therefore one of the last issues to be addressed. Apparently, President Nicolas Sarkozy had already begun his press conference when the last details were ironed out. The UK government was clearly arguing in favour of increasing the 150–200 million EUAs put forward by the Presidency, up to 300 million, a proposal which the Netherlands also backed. In the end, Germany and Italy also put their weight behind this, giving it the necessary political backing. The result: 300 million EUAs were to be earmarked from the total number set aside in the NER to fund CCS demonstration and, to the surprise of many, also innovative renewable energy projects. A proposal to make CCS mandatory for all new coal-fired power plants in Europe from 2015 (and retrofitting existing plants with CCS by 2025) was also proposed by the Parliament’s Environment Committee. This proposal was in the form of an Emission Performance Standard (EPS) which sets a limit on the amount of CO2 emitted per kilowatt hour of electricity produced (gram CO2/kWh). Depending on the number of grams (g) permitted per kWh, this regulation would ban conventional coal (and even gas if set below 300g) without CCS. The Environment Committee subsequently voted on several EPS limits, ranging from 250g in 2010 to 500g by 2015. While a limit of 250 g/kWh received 32 votes from both ‘yes’ and ‘no’ (and therefore failed), the last proposal on 500 g/kWh for new plants built after 2015 received a large majority in the Committee and was therefore carried. Two remarks should be made here. First, it is worth noting that the EPS proposal was supported by all major European environmental NGOs – including Greenpeace, who had previously voiced strong opposition to CCS. Major environmental groups such as WWF, CAN (Climate Action

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Network) and Greenpeace even placed a half-page advertisement in the Financial Times calling for ‘No more unabated coal’ – clearly referring to the need to make CCS mandatory for coal-fired power plants. Second, the EPS limit adopted by the Environment Committee would not make CCS mandatory for modern gas-fired power plants, particularly those with combined heat and power installations, as these emit approximately 300–350g CO2/kWh. It would therefore have had the perverse effect of shifting investment from coal to natural gas, which is not a desired policy – either from a geo-political point of view, or that of energy supply/ security. It soon became clear that the Parliament’s amendment introducing an EPS would meet strong resistance from the EU member states, as well as the European Commission. Apparently, only the Dutch government spoke in favour of introducing an EPS during the Council meeting. However, it is important to note that the EPS provided an important bargaining chip: and by rejecting it the Council had to cede something to the Parliament in return (that is, 300 million EUAs for CCS demonstration). Several meetings of the Trilogue (leaders of the Commission, Council and Parliament) were scheduled during the meeting of the European Council, with a view to arriving at a mutually acceptable text. But Chris Davies’s resistance even to sit down and discuss the text of the directive before he was guaranteed adequate funding for a CCS demonstration programme probably had a significant impact. In fact, without the strong commitment and perseverance of MEPs (Davies and Doyle), it is very unlikely that a funding mechanism could have been adopted.

8

CONCLUSION: FROM DEMONSTRATION TO DEPLOYMENT

Advancing the development and deployment of CCS in Europe is critical to achieving CO2 reduction targets and depends on the implementation of the following: 1.

2.

A robust legal framework for the transport and safe geological storage of CO2 The Directive on Geological Storage of CO2 has now been adopted by the EU and is currently being transposed into law in the 27 member states, as well as in Norway. A funding scheme to close the cost gap in building and operating an EU CCS demonstration programme Two funding schemes to support an EU CCS demonstration programme are also now being put into place.


3.

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First, the disbursement of the 300 million EUAs under the EU ETS – an innovative and, for many, unexpected funding stream – which should ensure funding of €9–15 billion. However, some critics say that the current EUA value (around €10 early 2009), will only ensure some €3 billion. It is important to note that the next phase of the EU ETS (starting 2013) will be substantially different from the current phase. The total quantity of EUAs – the cap – has now been tightened; while allowances will no longer be handed out free – in particular to the power sector – and this will also apply gradually to other industries. Conservative estimates from 2008 by recognized financial institutions, such as Point Carbon and Climate Change Capital, refer to an EUA price range of €30–45 in 2013. This is, of course, highly dependent on overcoming the current economic crisis which has had an impact on the demand of EUAs. It is expected that the Commission will adopt the modalities for distributing the 300 million EUAs to CCS and innovative renewable energy projects by the end of 2009. It will also establish criteria for the selection of CCS demonstration projects and set clear rules on how they will share their knowledge and experience with the rest of the world. Second, the Commission has also put forward a proposal to re-direct underspent budgets towards an EU Economic Recovery Plan. Out of the €3.5 billion designated for the energy sector, €1.05 billion has been set aside for CCS demonstration projects in Poland, Germany, Holland, Spain, France, Italy and the UK. This proposal will have to be adopted by the Council of Ministers and the European Parliament, probably before the summer of 2009. A limited call for tender in the seven designated countries will be published in September and each project awarded €150–180 million by the end of 2009. Yet critics claim that both EU funding schemes are insufficient to cover the estimated €7–12 billion cost gap for a demonstration programme of 10–12 projects. At best, there is no guarantee that sufficient funding is available. This implies the need for member state governments and industry (where the project will be built) to contribute to closing the remaining funding gap. Member states can also use EU structural funds, as well as the financial instrument from the EFTA states, to cover part of their contribution. A mechanism to allow for wide deployment of CCS once the demonstration programme has been built and completed With the legal framework and funding streams to cover the incremental costs of an EU CCS demonstration programme well advanced, the remaining challenge is to ensure the broader deployment of CCS. So far, the EU is counting

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on the price of emitting CO2 being high enough for the power sector and industry to invest in CCS from 2020. This is doubtful at best. An EPS of, say, 150 gr/CO2 per KWh would ensure that CCS is applied to power generation from all fossil fuel sources from, for example, 2020. The merits of such a regulatory measure are currently being discussed in the European Parliament and have received support from leading MEPs from many political groups. It is also strongly supported by all environmental NGOs. The debate will intensify towards the end of 2009 when the second reading of the new Directive on Industrial Emissions is expected. So far, most industry actors – utilities in particular – are firmly opposed to setting an EPS. But there are increasing doubts as to the ability of the EU ETS to drive decarbonization of the power sector. There are already signs that by 2010, industry will have intensified its efforts to prepare for building the demonstration projects and may change its attitude. One reason for this is that CCS will move from their R&D departments into core business activities, as they see that public funding is being made available. An open and transparent dialogue with civil society that will allow the wide deployment of CCS Public perception and support remains a serious hurdle. There will be many ready to make loud, and biased statements against CCS. That is a good thing, because it is a technological, economic and societal challenge that requires many questions to be aired and answered. However, those willing to engage in in-depth discussions with geologists, scientists, industry and NGOs will understand that while CCS is a huge and challenging endeavour, it is one that is totally feasible and similar to what humankind has accomplished before. It is one we cannot afford to ignore if we are to combat climate change – and allow the large majority of the world’s population to grow out of poverty.

NOTES 1. Proven reserves are generally taken to be those quantities that geological and engineering information indicates with reasonable certainty can be recovered in the future from known deposits under existing economic and operating conditions. 2. European Council Spring meeting 2007, Final Communiqué. 3. The SET-Plan consists of CCS, solar, offshore wind, second-generation biofuels, gas grid and fusion. 4. Twelve new members of the ZEP Advisory Committee were admitted on 15 June 2008. 5. The EFTA Surveillance Authority ensures homogenous application of EU law in the EEA EFTA countries of Norway, Iceland and Liechtenstein, in the same way the European Commission does for the EU member states.


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6. EFTA Surveillance Authority Decision of 29 January 2009 on the CCS project at Kaarstoe. 7. A consolidated amendment is one agreed upon by several political groups beforehand.

REFERENCES European Commission (1988), The Internal Energy Market, COM/808/238, working document. European Commission (2000), Green Paper: ‘Towards a European strategy for the security of energy supply’, COM/2000/0769. European Commission (2005), White Paper: ‘Winning the battle against global climate change’, Communication from the Commission to the Council, the European Parliament, the European Economic and Social Committee and the Committee of the Regions, COM/2005/0035. European Commission (2006), Green Paper: ‘A European strategy for sustainable, competitive and secure energy’, COM/2006/0105. European Commission (2007a), ‘Sustainable power generation from fossil fuels: aiming for near-zero emissions from coal after 2020’, COM/2006)843 Final [SEC (2006)1722, SEC(2006)1723, SEC(2007)12], European Commission, Brussels. European Commission (2007b), ‘Impact Assessment, Commission Staff Working Document: Sustainable Power Generation from Fossil Fuels: Aiming for Near-Zero Emissions from Coal after 2020’, Commission COM/2006/846 Final [SEC(2006)1723, SEC(2007)12], European Commission, Brussels. European Commission (2007c), ‘An energy policy for Europe’, Communication from the Commission to the European Council and the European Parliament, 10 January, Brussels, COM/2007/1 final. European Commission (2008a), ‘Proposal for a Directive of the European Parliament and of the Council on the Geological Storage of Carbon Dioxide and Amending Council Directives’, 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 [COM/2008/30 Final, SEC(2008)54, SEC(2008)55], European Commission, Brussels. European Commission (2008b), ‘Impact Assessment, Commission Staff Working Document. Accompanying Document to the Proposal for a Directive of the European Parliament and of the Council on the Geological Storage of Carbon Dioxide’, COM/2008/30 Final, European Commission, Brussels. Financial Times (2008), ‘Europe backs carbon capture with €10 billion’, Financial Times, 8 October 2008, p. 8. IPCC (2005), IPCC Special Report on Carbon Dioxide Capture and Storage, IPCC Working Group III, Cambridge: Cambridge University Press. Johnson, D. and K. McCann (1997), EU Energy Policy – An Evolving Agenda, London: Financial Times Energy/Pearson Professional Ltd. Stangeland, A. (2007), ‘A model for the CO2 capture potential’, International Journal of Greenhouse Gas Control, 1 (4), 418–29. ZEP (2008), ‘EU Demonstration Programme for CO2 Capture and Storage (CCS): 2EP’s Proposal’, available at http://www.zero-emissionplatform.eu/website/ library/ (accessed 2 April 2009).

10.

CCS in comparative perspective Oluf Langhelle and James Meadowcroft

The studies in the preceding chapters have traced the manner in which CCS emerged into the political and policy arena in different national contexts and in the EU. That in each case CCS now occupies an increasingly significant place in debates and initiatives related to climate change is hardly a surprise. After all, as the discussion in Chapter 1 made clear, the units included in this study were chosen because of their apparent interest in CCS, because they were major fossil fuel exporters, producers and consumers which, as developed states under the terms of the UNFCCC, were supposed to take the lead internationally in reducing greenhouse gas (GHG) emissions. Indeed, all of these jurisdictions are cited as loci of ‘major CCS activity’ in the 2008 IEA CCS status report on CCS programmes around the world (IEA 2008a: 137). They are also all members of the Carbon Sequestration Leadership Forum (CSLF), which was launched by President Bush in 2003. And three (Australia, Canada and the US) participate in the Asia-Pacific Partnership on Clean Development and Climate (APP), a public/private partnership which was formally established in 2006 and which includes CCS in its key ‘Cleaner Fossil Energy’ task force. And yet there are also important differences between these jurisdictions – in the way CCS has been integrated into climate change policies and long-term energy strategies, in the importance accorded to CCS in relation to ‘energy security’, in the timing and character of engagement with CCS, and in the strength of support for, and opposition to, this emerging mitigation option. This chapter brings together the material from the country and EU studies in a comparative context. It is divided into two parts: the first draws out key elements from the jurisdictional narratives, while the second establishes parallels and contrasts among the various cases.

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1

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THE TURN TOWARDS CCS IN EIGHT POLITICAL JURISDICTIONS

The United States: A Technological Bullet and a Contested Problem The US was already funding CCS research in the early 1990s, but CCS acquired increased political salience a decade later in the context of dissatisfaction in Washington with the climate mitigation approach represented by the Kyoto Protocol. Under the Republican administration of George Bush, CCS became a key element of a technologically focused approach that presented cooperation to drive innovation and develop clearer energy systems (for example in the APP) as an alternative to government regulation, emissions pricing and mandatory emission reductions. In March 2001, President Bush officially announced US withdrawal from the Kyoto framework, citing the lack of commitments by developing countries, potential damage to the US economy, and the lack of a firm scientific basis on which to establish emission reduction targets (UNFCCC 2004; Paterson 2009). Although the news caused considerable international consternation it was already clear during the Clinton years that the Protocol would not be ratified by Congress in the foreseeable future. Indeed, the Byrd–Hagel Resolution made this evident in 1997 (Roberts 2000; Paterson 2009).1 Acknowledgement of anthropogenic climate change emerged slowly during the Bush presidency. In 2002 the President announced a US GHG intensity reduction target of 18 per cent for 2012. By 2005 climate change was moving up the political agenda, and in the 2007 State of the Union Address the President provided his strongest acknowledgement that climate change required action. In April 2008 Bush proposed a new target ‘to stop the growth of U.S. greenhouse gas emissions by 2025’.2 The administration’s flagship CCS programme was the FutureGen project launched in 2002. FutureGen was a public–private partnership to build ‘a first-of-its-kind coal-fueled, near-zero emissions power plant’ using CCS. The plant was also to produce hydrogen and byproducts for use by other industries. The integration of these technologies is what made ‘FutureGen unique’.3 But the programme was ‘restructured’ by the Bush administration in 2008, and by mid-2009 substantial uncertainties still remained over whether and in what form it would go forward. Even during the Bush years climate policy made some advances, especially at the state and local levels. With the election of Barack Obama in 2008 there was widespread confidence that the US would move to control domestic emissions (probably with a cap-and-trade system) in the next few years and would participate more constructively in international

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negotiations to establish a framework for post-Kyoto international cooperation. The new administration has linked energy security and climate change, emphasized renewable energies alongside CCS, and incorporated environmental technologies in its emergency stimulus package. Australia: Can CCS Keep Coal King? There are a number of parallels between the development of the politics of CCS in Australia and the US. Talk about CCS was for a long time a central element in the climate policy of the conservative Howard government which first assumed office in 1996. Under Howard, Australia declined to ratify the Kyoto Protocol, and policy was strongly influenced by elements of the mining, resource processing, petroleum and energy industries which opposed measures to reduce domestic GHG emissions or which might pose any impediment to expanding coal exports. Over the past decade Australian emissions have continued to rise rapidly because of strong population growth, a booming resource economy, and dependence on coal for electricity generation. In 2007 a new federal Labor government came to power, and soon announced Australia’s ratification of the Kyoto Protocol. In December 2008 the new government launched a White Paper which proposed a three-pillar climate change policy focused on: ‘reducing Australia’s carbon pollution emissions, adapting to climate change that we cannot avoid, and helping to shape a global solution’. The White Paper set a medium-term national emissions reduction target of between 5 and 15 per cent of 2000 levels by 2020, and confirmed the long-term target of a 60 per cent reduction by 2050. Much is expected from CCS in the longer term: ‘coal-fired generation will be able to play a major role in Australian and global energy markets provided its emissions intensity can be dramatically reduced. Carbon capture and storage (CCS) is one key technology that could allow coal to continue to play a major role in the world’s energy supplies in a carbon constrained environment’ (Australian Government 2008: xl). Both major political parties/groupings in Australia – the Australian Labor Party and the Liberal/National coalition – are strong supporters of CCS. Environmental parties and NGOs, however, have been more cautious, partly due to the enthusiastic endorsement of CCS by the Howard government. Nevertheless there is an evolving perspective that CCS has the potential to act as a transitional technology until renewables and energy efficiency become mainstream.


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Canada: CCS Saving the Oil Sands and Maybe the Federation Although Canada has long been an active participant in international processes around climate change, it has had great difficulty translating publicly proclaimed emission reduction goals into meaningful policy. Canada’s close economic integration with the US has led the country’s business and political leaders to be wary of moving more quickly on imposing mandatory GHG emission controls than their US trading partner. So, despite ratifying the Kyoto Protocol in 2002, and years of discussion and planning, the national government has yet to introduce either a GHG cap-and-trade system or an emissions tax. Moreover Canada is a decentralized federation, with substantial powers vested in provincial governments, and a history of tension between the centre and the regions over the exploitation of fossil fuel resources. There are also major variations in industrial structure and energy provision, with some provinces heavily dependent on coal for electricity production while others have abundant hydro resources. So climate policy has become a contentious issue which neither of the major political parties (Liberals and Conservatives) has wished to push too far. The province of Alberta lies at the heart of the oil and gas industry, and increasing production from the oil sands (largely for export to the US) is pushing up GHG emissions which have in any case risen rapidly because of population and economic growth. By 2006 when a new Conservative government, sceptical about the need for policy action on climate change, came to power it was becoming clear that Canada would overshoot its Kyoto target by 30 per cent. The following year the environment minister, John Baird, officially announced that Canada was abandoning its Kyoto target because meeting it would require the government to ‘manufacture a recession’.4 In Canada, CCS has been discussed in relation to oil sands development (extraction is energy and emissions intensive), and coal-fired electricity generation. There is considerable experience with enhanced oil recovery (EOR) in Alberta and geological conditions for storage are judged to be good. The Federal and Alberta governments have been pumping money into CCS R&D over the past decade (and more recently are funding demonstration projects), but the failure to introduce serious climate policy measures – that place a price on carbon emissions – has meant that incentives have not been there to prompt a more vigorous response from industry. Indeed, some businesses have expressed frustration with the continuing uncertainty around climate change policy. Some things now look set to change. With the US moving towards binding GHG emissions caps, Canada will have little choice but to follow

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suit. In this context CCS remains an important strategic technology for emissions control in the oil sands and coal-fired power plants. Norway: CCS Bringing Fossil Fuels to a Renewable-based Electricity System Norway engaged early with CCS, and the policy dilemma which led to this interest is already visible in the 1988 government report to Parliament, ‘Environment and Development: Norway’s Follow-up of the Report of the World Commission’. The report did not mention CCS explicitly but noted that ‘Today, there exist no suitable technologies which can clean these [CO2] emissions. To reduce these emissions, the use of fossil fuels has to be reduced and the composition of fuels must be changed to fuels with less emission’ (Ministry of Environment, 1988–89: 84).5 For an oil and gas exporting country this is a bleak future, and without the option of CCS the conclusion was bound to be that climate change policy would limit the domestic use of natural gas in Norway (ibid.: 90). When CCS emerged as a recurring theme in Norwegian political debate from 1997 onwards, it was precisely the collision between the plans to introduce domestic gas-fired power plants (fuelled with natural gas from the Norwegian continental shelf) and ambitious climate change reduction targets which created the political tensions. The introduction of natural gas in an almost 100 per cent hydropower electric power supply system would inevitably drive up Norwegian GHG emissions. The goal of the energy companies and political leaders to introduce domestic gas-fired power plants was based on a growing demand for electricity in Norway (both from households and from energy-intensive industries) and a wish to utilize more natural gas domestically for industrial development. The entrenched political conflict over gas-fired power has been the main driver of Norwegian CCS policy. A clear majority in parliament, including the Labour, the Conservative and the Progress parties, were in favour of building gas-fired power plants without CCS, but this led to the collapse of the Bondevik I government in 2000. The energy political cleavage cuts across the traditional left–right division in Norwegian politics. And between 1997 and 2005, CCS increasingly looked like the only strategy that could overcome this conflict to unite a majority coalition. In 2005 CCS was formally integrated into the election manifesto of the Labour, Socialist Left and Centre parties, which promised full financial support for large-scale deployment of CCS (Tjernshaugen, 2007). As a consequence, Norwegian political life converged on CCS as maybe the solution to the country’s climate policy dilemma. Within this political context other factors have also been important.


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The expertise of the oil and gas industry (combined with an early carbon tax) led energy companies to launch early and ambitious CCS initiatives from the 1990s onwards, with Statoil’s pioneering storage project at the Sleipner field in the North Sea leading the way. CCS has also been promoted by highly visible researchers like Erik Lindeberg at SINTEF, and environmental activists – notably the Bellona Foundation, but also the group ZERO. Although, there are some actors who are more sceptical, CCS has had few direct opponents in Norway. Germany: CCS within a Portfolio of Climate Options Germany has manifested a relatively strong and consistent commitment to climate change mitigation. CCS emerged as a political issue after the publication of the IPCC Special Report in 2005, and has been primarily linked to electricity generation. About 43 per cent of German CO2 emissions stem from electricity production, mostly from large fossil-fired plants. Natural gas, hard coal and especially lignite are major domestic energy resources. In 2000, the German government decided to phase out nuclear power. Although two plants have now closed, in 2006 nuclear still represented more than 25 per cent of the electricity mix. A large number of hard coal and lignite combustion plants, built in the 1970s and 1980s, will also reach the end of their commercial or technical life span within the next decade. Altogether 50 per cent of installed electricity capacity is expected to be decommissioned by 2020, and 75 per cent by 2030. So unless major investments are made in the power sector, Germany faces a potential electricity ‘gap’. The question is: how is this gap to be filled? CCS was included as one of 29 core elements in the Integrated Energy and Climate Programme (IECP) adopted by the German government in 2007. Cogeneration and renewable energy were also identified as key emission reduction strategies. The IECP argued that Germany has so far experienced a ‘sluggish expansion of highly efficient combined heat-andpower generation’ (BMU 2007: 5). And the goal is to increase the share of electricity produced by cogeneration from 12 per cent in 2007 to 25 per cent in 2020. Germany also has ambitious plans for renewables, aiming for their share to rise from 13 per cent of gross electricity consumption in 2007 to 25–30 per cent by 2020, with further growth thereafter (BMU 2007). Even if these targets are met, however, in 2020 at least 45 per cent of electricity generation may remain based on fossil fuels. In Germany the political debates on CCS have been influenced by the fact that other mitigation strategies have already begun to be pursued. In policy terms there is tension between two groups: those who emphasize worries

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about security of supply and those who prioritize climate change. The first group highlights the potential electricity ‘gap’, which they suggest requires a new generation of large-scale combustion plants and the continued use of lignite, with the option of retrofitting CCS. This is seen as vital not only for energy security, but also for keeping energy costs down for energy-intensive industries and securing international competitiveness. The second group questions the seriousness of the electricity ‘gap’, arguing that the priority should go to energy efficiency and expanding renewables. Its more pragmatic adherents accept that CCS-equipped coal plants can be part of the energy mix and recognize that CCS is important internationally. But the more radical elements oppose CCS directly, arguing that other technological and behavioural options can meet energy demand sustainably. The United Kingdom: CCS Costly, but Necessary? In November 2008 the UK adopted the world’s first long-term legally binding framework to tackle climate change. The Climate Change Act introduced a carbon budgeting system which caps emissions over five-year periods, with three budgets set at a time, and a long-term horizon extending to 2050. A new advisory body – the Committee on Climate Change (CCC) – will submit annual reports to parliament on the UK’s progress towards its 2050 goal of reducing GHG emissions by 80 per cent ‘through actions in the UK and abroad’.6 As in Germany, energy security discussions in the UK are focusing on a perceived ‘electricity gap’ which is expected if new generating capacity is not added to the system. There are plans to build gas-fired power plants, but this would make the UK more dependent on gas imports. The government therefore sees coal and nuclear power as essential for maintaining a diversity of supply. Coal use in electricity generation declined rapidly in the 1990s, stabilized over the past decade, and is now rising primarily due to volatile gas prices and an ageing nuclear infrastructure. The UK became a net importer of coal in 1998, of gas in 2004, and of oil in 2005. In 2007 one-third of electricity generation was based on coal. CCS is seen as vital to reconcile increased coal use with ambitious climate change targets. Long dismissed as too costly, CCS began to be considered more seriously from 2003. The 2003 White Paper on Energy linked CCS to EOR in the North Sea, but so far this possibility has not panned out. The conclusion on coal was more hesitant, leaving open whether this would be ‘technically, environmentally and economically feasible’ (DTI 2003a: 18). Yet when linked to the then long-term 60 per cent emission reduction target, CCS was viewed more favourably in comparison to ‘other largescale abatement options’ (DTI 2003b: ii).


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Debate around CCS in the UK has focused on a number of issues. There has been argument over which technical approach to prioritize, with companies such as BP expressing a clear preference for pre-combustion technology while others favour the post-combustion route. Specifications for the large-scale demonstration plant issued by the Department of Business Enterprise and Regulatory Reform in 2007 came down on the side of post-combustion CCS fitted to coal-fired generation, apparently in part because of the possibility of later transferring such technology to large emerging economies. The issues of public funding and of defining the meaning of ‘capture ready’ have also proved contentious. Support from environmental organizations has been lukewarm, although larger ENGOs such as WWF are now becoming more supportive. But the environmental movement is definitely united that there should be no new coal-fired generation without CCS. The Netherlands: A CO2 Hub for Europe and an Opportunity for Regional Development In the Netherlands CCS has been presented not just as an emission reduction strategy but also as a development opportunity. Indeed, there is even talk of the country becoming the CO2 hub of north-west Europe. Two regions have shown particular enthusiasm for CCS, the three northeastern provinces of Groningen, Drenthe and Friesland, and the Port of Rotterdam. CCS was first identified as a potentially cost-effective abatement choice in 1998 in the ‘Option Document for Greenhouse Gas Emission Reduction’ (de Coninck and Huijts 2004). It was also mentioned in the Fourth National Environment Plan in 2001 where it was linked to natural gas and ‘clean fossil fuels’ (Kern and Smith 2008: 4096). From 2004 the government began funding the 5-year CATO research programme. At the Berlin meeting of the CSLF in 2005, Deputy Director-General of Energy, Dr P.A. Boot, declared that ‘CCS is one of ten topics Dutch politics would like to show more leadership on’.7 CCS was presented as a serious mitigation option in the evaluation document ‘Climate Policy 2005. On the way to Kyoto’ prepared by the Ministry of the Environment (VROM); and ‘clean fossil fuels’ were included as a new transition theme in the ‘Energy Report 2005’ issued by the Ministry of Economic Affairs.8 The following year the Energy Transition Task Force, presented its Action Plan, and under the heading of ‘New gas, clean fossil fuel’ it formulated the goal of achieving ‘the most efficient and innovative gas economy in the world by efficient application of natural gas, biogas and hydrogen, and by capturing and storing CO2 where possible’ (Energy Transition Task Force, 2006: 4).

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Since 2007 the Rotterdam Climate Initiative (RCI) has emphasized the regional economic potential of CCS, pointing to favourable local conditions including the concentration of energy-intensive industry, an existing pipeline infrastructure, relatively short distances to potential storage areas, and the possibility of combining CCS with EOR (Lubbers 2008). The Chairman of the Initiative has argued that industrial concentration and the ready supply of residual heat help provide some of the best conditions for CCS in the world: ‘this heat can be used to capture CO2. In other parts of the world, it will be necessary to generate extra energy to obtain the heat that is required to capture CO2. In the Netherlands, this heat is already available’ (ibid.: 3). So as the RCI puts it, CCS represents ‘an environmental problem . . . linked to an economic opportunity’.9 In the Netherlands CCS has also been linked to plans to build a number of new ‘capture ready’ coal-fired power plants. Yet two Dutch companies have recently cancelled or postponed their plans, because of concern over increasing costs and sensitivity to public opposition to an expansion of coal-fired generation. The European Union: CCS Full Steam Ahead? In the comparatively short period of time between 2005 and 2008 the EU introduced a series of important measures to strengthen energy and climate policy and to develop a regulatory framework for CCS. Until relatively recently the EU had little in the way of a common energy policy (George 1985; Andersen 2000). But from the second half of the 1990s significant steps were taken to liberalize European energy markets. A decade later a growing appreciation of the interlinkages between climate policy and energy policy, and a belated recognition of increasing import dependency and Europe’s vulnerability to disruption of foreign energy supplies (such as Russian gas), led the EU to attempt to develop a more active and integrated approach. The EU-funded scientific research on CCS from the early 1990s, but by 2002–04 CCS began to surface in policy discussions at the Commission and Parliament. There was considerable interest in the linkage to the emergence of a hydrogen economy and the potential of hydrogen and fuel cells in the transport sector. The Commission Staff Working Paper, ‘Winning the battle against global climate change’ (2005), presented CCS as an option which ‘would allow considerable CO2 savings and “buy time” if alternative solutions prove to be less effective, or more costly. It could prolong the life time of fossil-fuel-based technologies and smooth the transition to low-carbon technology’ (European Commission 2005: 42). The document also underlined that this would provide ‘a new option for those


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countries, such as China, US, Poland, South Africa, and Australia that view domestic coal as providing strategic energy security or as an important local industrial activity’. And it would ‘widen the low-carbon options for producing hydrogen through pre-combustion processes of fossil fuels’ (ibid.: 42). The European Parliament resolution on the working paper noted that ‘investments in efficiency measures and renewable technologies are the main alternatives for climate change mitigation’, but at the same time underlined that the ‘development of carbon capture and storage techniques is important – not least in regions with ample supplies of coal’ (European Parliament 2005). By the time the European Commission launched the energy and climate change strategy – ‘An Energy Policy for Europe’ – in January 2007, CCS had become an important part of the ‘vision of Europe with a thriving and sustainable energy economy’ (European Commission 2007a: 15). The proposals in the Commission’s 2007 ‘Energy and Climate Package’ were followed by more detailed measures a year later which were in due course adopted by the EU Council of Ministers in April 2009. Key issues addressed in this process included: the establishment of a medium-term GHG emissions reduction target of 20 per cent below 1990 levels by 2020 (30 per cent if other countries agreed to corresponding cuts in a new international agreement); a comprehensive revision of the rules governing the European GHG Emissions Trading System (ETS); introduction of an ‘effort sharing system’ that partitions emission reductions for non-ETS-regulated sectors (such as transport and agriculture) among member states; a directive on renewable energy that sets an EU-wide goal of a 20 per cent renewable share of final energy consumption by 2020; and a regulatory framework for CCS. Agreement was also reached to provide significant funding for 12 large-scale CCS demonstration plants.

2

CCS POLITICS AND POLICIES COMPARED

As these short résumés make clear there are many parallel developments among the units included in this study. And yet the national stories are also quite different. The politics of CCS has evolved differently over time. CCS is embedded in somewhat different approaches to climate change mitigation. It also serves multiple political purposes in distinct ways in different countries, although with the common thread of providing potential solutions to real policy dilemmas. In the following we try to tease out some of the most important differences and similarities, as well as issues and controversies which cut across the units in the study.

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Table 10.1

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Time of political engagement with CCS

Very early engagement with CCS (late 1990s)

Early engagement with CCS (early 2000s)

Somewhat later engagement with CCS (2005–2008)

Norway

Australia Canada US

Germany Netherlands UK EU

Time of Engagement The first thing to note is the rapid surge of interest in CCS within a reasonably short time span, from the late 1990s until 2008. Within this period some countries engaged earlier than others; and in some countries the 2005 IPCC Special Report seems to have contributed to an acceleration of CCS efforts. If we leave aside research activities and define significant ‘engagement’ as a matter of when CCS entered the political arena and made an appearance in policy documents as an important potential strategy for climate change mitigation, it is possible to make a rough differentiation among the countries. Table 10.1 categorizes the countries and the EU according to this criterion. Among the countries we have examined, Norway is no doubt the country where CCS first entered the political arena, followed by Australia, Canada and the US. Germany, the Netherlands, the UK and the EU followed somewhat later. In Norway, the very early engagement was driven by a political conflict between climate change policies on the one hand and a political desire to utilize natural gas domestically for industrial purposes on the other. In Australia, Canada and the US, the early engagement was associated with worries over the costs of mitigation and the deferment of binding emissions controls. In Germany, the Netherlands, the UK and the EU, CCS has emerged as an important mitigation strategy as the countries begin to contemplate more serious emissions efforts in the post-Kyoto period. Climate Change Negotiations and the Kyoto Protocol Climate change policy provides the primary analytical frame from which to approach national engagement with CCS. After all, without worries about human-induced climate change there would be no need for CCS. It is in relation to this issue that differences among groups of countries


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appear largest. And appreciating controversies from earlier rounds of climate negotiations helps us to understand different attitudes to CCS. Except for the US all the jurisdictions have now ratified the Kyoto Protocol. Canada, Norway, the EU (and the EU member states the Netherlands, Germany and the UK) did so in 2002. Australia only joined them in 2007. All governments have been active players in ongoing climate negotiations within (and sometimes outside) the institutions of the UNFCCC. The Kyoto negotiations revealed major fault-lines within the international community concerning the approach to global climate change. The Kyoto Protocol set binding emission targets for the 2008–12 commitment period. The EU negotiated an 8 per cent reduction target for the 15 countries (EU15) that were member states in 1997. The internal burden sharing arrangement was concluded in Luxembourg in 1998 (Grubb et al. 1999; van Muijen 2000). 10 Despite US criticism of the Kyoto Protocol (the US Senate opposed it 95 to 0), US negotiators had a huge impact on its content, especially in terms of ‘flexibility for Annex I commitments’. But the US was not alone. The countries which engaged earliest with CCS, the US, Canada, Australia and Norway, were all part of the loose coalition of non-EU Annex I parties dubbed JUSSCANNZ.11 JUSSCANNZ has been described as ‘a somewhat unnatural alliance’ that emerged as a serious counterweight to the EU, united by a ‘greater difficulty than the EU in reducing emissions below 1990 levels’ (Grubb et al. 1999: 34). This bloc managed to get a comprehensive coverage of GHGs and the ‘flexible mechanisms’ included in the Protocol (ibid.). JUSSCANNZ later morphed into ‘the Umbrella Group’, an informal coalition which still comes together in international negotiations.12 The flexible mechanisms, also referred to as the Kyoto mechanisms, comprise emissions trading, joint implementation (JI), and the Clean Development Mechanism (CDM). These were designed to help Annex I parties cut the cost of meeting their emission targets by taking advantage of opportunities to reduce emissions, or increase GHG removals, that cost less in other countries than at home.13 Although the EU, China and the G77 managed to add the requirement that the parties must provide evidence that their use of the mechanisms is ‘supplemental to domestic action’ (which must constitute ‘a significant element’ of their efforts in meeting their commitments), both the comprehensive coverage of GHGs and the Kyoto mechanisms secured the JUSSCANNZ countries (and others) flexibility in meeting their targets. CCS also made its way into the Kyoto Protocol. Article 2.1(a) (iv) of the

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BOX 10.1

CARBON SEQUESTRATION IN THE KYOTO PROTOCOL

Article 2 1.

Each Party included in Annex I, in achieving its quantified emission limitation and reduction commitments under Article 3, in order to promote sustainable development, shall:

(a) Implement and/or further elaborate policies and measures in accordance with its national circumstances, such as: . . . (iv) Research on, and promotion, development and increased use of, new and renewable forms of energy, of carbon dioxide sequestration technologies and of advanced and innovative environmentally sound technologies; Source: http://unfccc.int/resource/docs/convkp/kpeng.pdf (accessed 11 February 2009).

Protocol included a reference to promoting research and development of ‘carbon dioxide sequestration’, in addition to ‘new and renewable forms of energy’ and ‘environmentally sound technologies’. It was the EU that first included carbon sequestration in a proposal for Kyoto as one of many alternatives that parties could develop to achieve quantified emission limitation and reduction commitments (Box 10.1). Canada made reference to agricultural practices that increase carbon sequestration and Japan called for research and technological development on carbon dioxide ‘separation and fixation’. Carbon sequestration technologies were first included in Conference Room Paper 2 (CRP 2) and entered the Kyoto Protocol unchallenged (Depledge 2000). In relation to CCS, the Kyoto Protocol had some impact in three countries. In Norway, both the proponents and opponents of gas-fired power used the Kyoto Protocol to justify their positions. When CCS became an option and entered the political area, the opponents of gas-fired power plants argued that CCS was necessary for complying with the protocol commitments. In Australia, environmental parties and NGOs were for some time cautious towards CCS, partly because of its warm endorsement by the Howard government with its close ties to the coal industry and its refusal to ratify the Protocol. It can also be argued that the Kyoto Protocol had an impact on US CCS efforts. It made CCS (at least rhetorically) more important as part of the technologically oriented alternative


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climate strategy. For the other countries the Protocol, through Article 2 (iv), opened up CCS as a possible future mitigation strategy.

3

GREENHOUSE GAS EMISSIONS, KYOTO AND POST-KYOTO TARGETS

Before the Kyoto Protocol entered into force in February 2005, many regarded it as essentially dead; indeed others regarded it as moribund even after it entered into force (Kellow 2006; Vogler and Bretherton 2006). There has been a protracted debate about the fairness and effectiveness of the Protocol, and issues such as costs, selection of the 1990 base year, ‘hot air’ and emissions trading, the exclusion of developing countries from commitments (to name just a few) continue to provoke controversy (see especially Jaccard and Sharp, Chapter 4, this volume). In relation to the Kyoto Protocol, three of the countries included here stand out as special: the US because it did not ratify, Australia because it did so only recently, and Canada because it is overshooting its target by perhaps 30 per cent. For Germany, the Netherlands, Norway and the UK, the issue of climate change has so far been less polarized domestically, and arguably this has until recently been the case within the EU as a whole. European climate politics have to a large degree been centred on the UNFCCC negotiations and the Kyoto Protocol commitments. Canada, however, has generally been closer to the European countries in terms of acknowledging anthropogenic climate change. In terms of the actual development of GHG emissions, there are major differences between the Umbrella Group countries (the US, Canada, Australia and Norway), and the others. As shown in Table 10.2, these countries have all seen quite large increases in GHG emissions between 1990 and 2006. Australia and Canada have had the largest increases, followed by the US and Norway. Australia and Canada also have the highest average emissions growth rates, again followed by the US and Norway. Germany has the largest reductions, followed by the UK, the EU as a whole, and the Netherlands. Germany also has the lowest average emissions growth rate, followed by the UK, the EU as a whole and the Netherlands. Yet except for Canada, all the countries (and the EU) that ratified are on track to meet their respective Kyoto commitments. European Environment Agency (EEA) projections suggest that the EU target can be met by a large margin through further implementation of existing and additional measures, use of carbon sinks and the Kyoto mechanisms. In fact, it is predicted that ‘the EU-15 could reach a level of emissions 11.3 per cent lower than

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Table 10.2

Country/EU

Australia Canada Germany Netherlands Norway UK US EU

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Changes in GHG emissions, 1990–2006, average annual growth rates and Kyoto Protocol target Average Changes in annual growth GHG rates in emissions GHG, year (without LULUCF*), 1990–2006 (%) 1990–2006 (%) +28.8 +21.7 −18.2 −2.0 +7.7 −15.1 +14.4 −2.2

+1.6 +1.2 −1.2 −0.1 +0.5 −1.0 0.8 −0.1

Kyoto Protocol target (2010–12)

EU burdensharing target (2010–12)

+8 −6 −21 −6 +1 −12.5 −7 −8

Note: * Land use, land-use change and forestry (LULUCF) is defined as total emissions and removals from activities relating to land use, land-use change and forestry (from the following categories: forest land, cropland, grassland, wetlands, settlements and other land). Source: UNFCCC Secretariat. Data compiled from http://unfccc.int/ghg_data/ghg_data_ unfccc/ ghg_profiles/items/4625.php (accessed 7 April 2009).

base-year emissions, therefore overachieving its 8 per cent reduction target by 3.3 per cent’ (EEA 2008: 4). And this is to say nothing of the impact of the serious economic downturn that got underway in 2008. Germany and the UK anticipate achieving their targets through reduction from existing measures alone (ibid.: 6). The Netherlands will use the Kyoto mechanisms to meet its target. Indeed, 50 per cent of the reductions in the Netherlands will be achieved through the Kyoto mechanisms. Australia and Norway are also on track to meet their respective Kyoto commitments. Australia is ‘likely to’ meet its targets (Australian Government, Department of Climate Change, 2008; UNFCCC, 2009a), and Norway has decided to overfill its Kyoto target by 10 per cent. As in the Netherlands this will be achieved by invoking the Kyoto mechanisms, which will secure about half the reduction. Norway and the Netherlands therefore illustrate the importance of the ‘flexible mechanisms’. They also point to the significance of the multi-gas approach. In Norway, for example, CO2 emissions increased 24.4 per cent between 1990 and 2006. But in the same period other GHGs have fallen, leaving a more modest 7.7 per cent increase overall. For the Netherlands, CO2 emissions rose by


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8.1 per cent between 1990 and 2006, but total GHG emissions fell by 2 per cent. Moreover, both the Netherlands and Norway calculate domestic reductions from a business-as-usual or reference trajectory, which estimates what the emissions would have been without the introduction of policy measures. And the difference between the reference trajectory and the real trajectory is used to indicate the scale of ‘domestic’ reductions. Thus the flexible mechanisms, the multi-gas approach and other accounting rules have enabled countries like Norway and the Netherlands to comply with their Kyoto commitments. Without them, they would have had to introduce more costly policy measures (or contemplated the Canadian approach of simply ignoring their international commitment). The trouble some countries now confront in securing emission reductions is illustrated by data on GHG emission changes in the energy sector and energy industries presented in Table 10.3. For all countries there are notable improvements in the energy and emission intensity of GHGs. However, although these figures are generally falling, they are outweighed by increased output. Energy sector emissions have increased in all countries except Germany and the UK. The same holds true for emissions from energy industries. Norway experienced the largest increase in energy industry emissions, followed by Australia, the US, Canada and the Netherlands. In Norway emissions from energy industries accounted for 32.7 per cent of the sectoral total, and this represented 23.5 per cent of total GHG emissions in 2006. The 1990–2006 increase of 86.9 per cent ‘is attributed primarily to the increased activity in the oil and gas extraction sector’ (Norwegian Pollution Control Authority 2008: 77). In Australia, the greatest changes between 1990 and 2006 were in the energy sector, and GHG emissions increased in all energy subsectors, especially in the categories relating to fuel combustion. GHG emissions from stationary energy increased by 47.3 per cent (92.2 Mt) between 1990 and 2006, including an increase in emissions from coal combustion of 49.1 per cent in the same period. Emissions related to natural gas had the largest relative growth, rising by 58.7 per cent between 1990 and 2006 (Australian Government, Department of Climate Change, 2008). In the US, energy-related activities, especially fossil fuel combustion, accounted for the vast bulk of CO2 emissions for the 1990–2006 period: ‘In 2006, approximately 83 percent of the energy consumed in the United States . . . was produced through the combustion of fossil fuels’ (EPA 2008: 12). About 50 per cent of electricity generation is coal based, and a total of 72 per cent of all electricity was produced from fossil fuels in 2007. The energy sector displayed the highest increase in GHG emissions (19.2 per cent), driven by the energy industries and transport sectors (UNFCCC 2009b: 5).

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Table 10.3

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Energy industries’ share of GHG emissions in the energy sector, 2006 (%), and changes in GHG emissions/removals from the energy sector, 1990–2006 (%), and from energy industries, 1990–2006 (%), all without LULUCF1

Country/EU

Energy industries’ share of GHG emissions in energy sector, 2006


54.8 31.7 45.2 37.3 32.7 38.8 38.8 36.2

Change in GHG emissions from energy sector, 1990–20062 +40 +24.2 −17.1 +8.5 +30 −7.9 +16.8 +2.2

Change in GHG emissions from energy industries, 1990–20063 +53.4 +25.7 −11.8 +18.2 +86.9 −8.4 +29 +3.7

Notes 1. The reporting format agreed upon groups emissions in six sectors: energy; industrial processes, solvent and other product use; agriculture; land use, land-use change and forestry (LULUCF); and Waste. Each of these sectors is further subdivided. 2. The energy sector consists of energy industries; manufacturing industries and construction; transport; fugitive emissions; and others. Others include fuel combustion in agriculture, forestry and fisheries, fuel combustion from residential sources and fuel combustion from commercial/institutional sources. 3. Energy industries include emissions from electricity and heat generation and distribution, extraction of oil and natural gas, coal production, gas terminals and oil refineries. Source: UNFCCC Secretariat. Data compiled from http://unfccc.int/ghg_data/ghg_data_ unfccc/ghg_profiles/items/4625.php (accessed 7 April 2009).

In Canada, the largest GHG growth was in the energy sector: fossil fuel combustion for electricity generation; increased energy for transport; and an unprecedented growth in fossil fuel production, largely for export. The fossil fuel industries registered a net increase of about 43 Mt of GHG emissions from 1990 to 2006 (43 per cent growth). These emissions are related to coal mining and the production, transmission, processing, refining and distribution of oil and gas products. Moreover, easily accessible reserves of conventional crude have been falling. Thus, energy consumption per unit of conventional oil produced has been rising and the energy requirements per barrel of conventional light/medium oil extracted nearly doubled. At the same time, ‘highly energy- and GHG-intensive synthetic oil production (i.e. from oil sands) has become increasingly competitive with conventional oil extraction. These trends contribute significantly to


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the rapidly rising emission increases in the oil and gas industry over the 1990–2006 period’ (Environment Canada, 2008: 11). In the Netherlands, the energy sector is by far the largest contributor to national GHG emissions, contributing 81 per cent of the total in 2006. Some 56 per cent of total fossil fuel use in 2006 was natural gas. The rising demand for electricity has pushed up emissions in the ‘energy industries’ category. Increased use of combined heat and power (CHP), more efficient power plants, co-firing of coal and biomass, increased use of biogas, and at times increased electricity imports (they rose 13 per cent between 2004 and 2005) have slowed emission growth. The use of renewable energy sources increased by approximately 40 per cent in 2005. Yet renewables still provide very little of the total primary energy supply. The two main renewable energy sources are biomass and wind (MNP 2008: 47). In Germany, too, energy-related emissions dominate. Stationary and mobile combustion processes are the main source of emissions, accounting for 87.6 per cent of GHG releases (FEA 2008: 94). Germany experienced a sharp decrease in emissions from 1990 to 1995 mainly due to economic restructuring in the new Länder involving energy-efficiency improvements, the switch to lower emission fuels, and decommissioning obsolete facilities. As of 1995, CO2 emissions began decreasing more slowly, with gains being achieved through further efficiency increases in power stations, changes in the energy mix, including intensified use of low-emission fuels, and growing use of renewables (ibid.: 95). In the UK, the energy sector contributes about 86 per cent of total emissions. Within this category, the largest contributions arise from the energy industries (33 per cent) and transport (24 per cent). The decline in emissions between 1990 and 2006 is primarily attributable to fuel switching (from coal to natural gas), and the reduced energy intensity of the economy. The main fossil fuels used by the UK electricity industry are bituminous coal and natural gas (Defra 2008: 75). This brief review of emission trends illustrates several points. First, that energy-related emissions are increasing in all countries except in Germany and the UK, and even in these two countries the reductions have slowed down. Second, that energy sector emissions are fundamentally linked to increased production and consumption of fossil fuels. Third, that if development continues on the current trajectory, the gap with the long-term targets to which many countries are already committed will grow (see Table 10.4). And this is to say nothing of the gap with the emissions abatement level that might actually be required to avoid dangerous anthropogenic climate change. What the emission trends also illustrate is just how convenient CCS

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Table 10.4

Caching the carbon

Self-proclaimed long-term targets in 2008

Country/EU

Self-proclaimed long-term targets

Australia

5–15% reduction by 2020, 60% reduction by 2050 below 2000 level 20% reduction of GHGs from 2006 by 2020 40% reduction by 2020 from 1990 level 30% reduction by 2020 from 1990 level 30% reduction by 2020 from 1990 level, carbon neutral by 2030 80% reduction by 2050 from 1990 level ‘through actions in the UK and abroad’ Stop the growth of GHG emissions by 2025 20% reduction by 2020, 30% with comparable reductions from others

Canada Germany Netherlands Norway UK US EU

would really be. The emission sources and increases in emissions are related to areas where CCS could make a significant contribution. Thus, it points to the potential importance of CCS as a mitigation option, and it suggests the challenge for climate change policy and/or for the continuation of fossil fuel production and consumption should CCS fail. The Many Roles of CCS: CCS as a Solution to Political Dilemmas As we have seen, GHG emissions abatement challenges vary from country to country. This gives CCS distinct national political functions. So while CCS always relates to climate change, its political importance is closely linked to contextual factors. The scale and nature of fossil fuel dependency in the electricity sector constitutes one of the key national variables. Table 10.5 gives an overview of the sources of electricity production in the seven countries. As the data reveal, a number of countries are heavily reliant on coal for electricity production. The most coal-dependent countries are Australia, the US, Germany, the UK and the Netherlands. In Canada, coal dependency is concentrated in the provinces of Alberta and Saskatchewan. Norway is the exception with hardly any electricity generation from coal. Four countries also rely heavily on nuclear power: Germany, the US, the UK, and Canada. It plays a lesser role in the Netherlands and none at all in Norway. Hydropower is most important in Norway (98.4 per cent of electricity production) but is also important in Canada (58 per cent). The provinces of Quebec, Manitoba, British Columbia and Newfoundland are largely hydropower based.


Table 10.5 Source Coal Oil Gas Nuclear Hydro Wind Geothermal Solar Combustion of Renewables & Waste Total % (TWh)

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Gross electricity production by source, 2006 (%)* Australia

Canada

Germany

Netherlands

Norway

UK

US

79.0 0.9 12.2 – 6.4 0.7 – 0 0.8

17.0 1.6 5.5 16 58 0.4 – 0 1.5

47.5 1.5 12.0 26.3 4.3 4.8 – 0.3 3.3

26.9 2.1 57.6 3.6 0.1 2.9 – 0 6.7

0.1 0 0.3 – 98.4 0.7 – – 0.4

38.1 1.3 35.5 19.0 2.1 1.0 – 0 3.0

49.5 1.9 19.5 19.0 7.4 0.6 0.4 0 1.7

100 251.7

100 612.6

100 636.8

100 98.4

100 121.7

100 398.3

100 4300.1

Note: * Electricity generation from main activity producer power plants and autoproducers. The EU total is excluded on purpose from this table since it would make little sense for the further discussion. An autoproducer is a natural or legal person who consumes and generates electricity in a single premises, where such generation is essentially for its own use. Source:

IEA (2008b).

For this reason CCS is linked to different energy sources. Norway and the Netherlands are the only countries where CCS has been linked to natural gas. For the Netherlands the explanation is that 57.6 per cent of electricity production comes from natural gas. For Norway, with no coal, the explanation is that 98.4 per cent of electricity comes from hydropower and Norway is a big gas producer. While in many European countries a fuel switch to gas (and away from coal) would be an attractive option to reduce GHG emissions, in Norway the effect would be the opposite as gas-fired power plants would increase emissions (although some claim that it would reduce imports of coal-fired electricity). For other countries – Australia, the US, Germany and the UK – CCS has mainly been linked to coal. And a coal linkage is also present in the Netherlands and Canada. But Canada is also a special case. For here the most important potential application is oil sands production, especially in Alberta. A barrel of oil from the oil sands produces three to five times more GHG emissions in its production stage than a barrel of oil from a conventional well. With huge oil sands reserves, Canada faces the prospect of almost doubling total CO2 emissions by 2050 if development continues at a rapid pace. CCS also serves additional political purposes and interacts with other policy dilemmas in distinct ways in the different countries. In the US, CCS

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Caching the carbon

has been an element in a ‘technologically oriented’ climate approach. It helped the Bush administration address climate change outside of the Kyoto Protocol. But CCS serves multiple purposes. As President Bush stated in his speech of 16 April 2008: We believe we need to protect our environment. We believe we need to strengthen our energy security.We believe we need to grow our economy. And we believe the only way to achieve these goals is through continued advances in technology. So we’ve pursued a series of policies aimed at encouraging the rise of innovative as well as more cost-effective clean energy technologies that can help America and developing nations reduce greenhouse gases, reduce our dependence on oil, and keep our economies vibrant and strong for decades to come.14

So CCS serves the environment, energy security, economic growth, cost-effectiveness and counteracts oil dependency. At the same time, it potentially avoids what some (conservatives) see as the ills of excessive government intervention. As George Bush put it: The wrong way is to raise taxes, duplicate mandates, or demand sudden and drastic emissions cuts that have no chance of being realized and every chance of hurting our economy. The right way is to set realistic goals for reducing emissions consistent with advances in technology, while increasing our energy security and ensuring our economy can continue to prosper and grow.15

For Australia, CCS had similar political functions. With huge coal reserves and major export earnings from coal, CCS makes it possible not only to contemplate addressing emissions from domestic coal-fired power plants, but also to continue with bulk coal exports (provided, of course, that CCS is deployed in China and other key overseas markets). In Canada, CCS potentially does much the same for oil sands exports to the US. Yet in the Canadian context CCS plays another role in relation to the tensions between the Federal government and provinces such as Alberta and Saskatchewan over the control of natural resources. Vigorous Federal support for CCS can sweeten the pill of central government regulation of GHGs that may be seen as undercutting the foundations of provincial prosperity. And so CCS is attractive to Canadian political leaders as a way to moderate future conflicts. In Norway, CCS has served other political purposes. It has functioned as political glue among different parties in government, making it possible to transcend the energy–political cleavage which cuts across the traditional left–right divide in Norwegian politics. CCS has made the formation of government coalitions possible. The idea of CCS – for let us not forget that it is still not a reality – has also made it more politically acceptable


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to utilize the natural gas resources domestically, thus meeting the desires of industry, labour unions and regional interests, without compromising national climate change goals. In Germany, the main issue to which CCS can contribute is the perceived future electricity gap. Since Germany decided in 2000 to phase out its nuclear generating capacity, and a number of hard coal and lignite combustion plants will reach their commercial or technical lifespan within the next decade, the perceived electricity gap represents a dilemma. And this dilemma points to CCS as part of the solution. In the UK, CCS plays a similar role. Energy security concerns have recently become more important, although since the UK became a net importer of coal in 1998 CCS would not entirely resolve issues related to security of supply. In the Netherlands, CCS is not only a mitigation strategy but also a regional development strategy. The Netherlands, and especially the Rotterdam region, sees itself as naturally equipped to become the CO2 hub of Europe. More than other countries, the Netherlands see CCS as linked not just to electricity generation, but also to other industries which can utilize future pipelines and storage capacity. In the EU, CCS also plays multiple political roles. The most important is clearly as a mitigation strategy; but CCS is also important for energy security and reducing import dependency, mostly on Russian natural gas. Such imports also have an economic dimension. Although referring to oil imports, the potential economic significance of fossil fuel imports more generally is illustrated by this quote from the EU Council: The EU is becoming increasingly exposed to the effects of price volatility and price rises on international energy markets and the consequences of the progressive concentration of hydrocarbons reserves in few hands. The potential effects are significant: if, for example, the oil price rose to 100 $/ barrel in 2030, the EU-27 energy total import bill would increase by around €170 billion, an annual increase of €350 for every EU citizen. Very little of this wealth transfer would result in additional jobs in the EU. (European Commission 2007a: 4)

Thus the EU’s energy strategy has three interrelated goals: ‘combating climate change, promoting jobs and growth, and limiting the EU’s external vulnerability to gas and oil imports’ (European Commission, 2007b: 1). And CCS can contribute to all three goals. The multiple purposes identified above, their distribution across the countries and the EU, and the intensity of interest in each function are summarized in Table 10.6. CCS’s role as a climate change mitigation option is omitted from the table since this is the essential reason for turning towards CCS in the first place.

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Table 10.6

Caching the carbon

Multiple political purposes of CCS

Country/EU

Securing the revenues of fossil fuels (production)

Continued fossil-fuelled economic growth (consumption)

Energy security

Regional politics

Foreign policy


XXX XXX X X XX X XX X

XXX XX XX XXX XX XX XXX XX

XX X XX XX – XX XXX XX

X XXX X XX XX – X X

XX X X X X XX XX X

Note: X = somewhat important, XX = important, XXX = very important.

In addition to constituting a climate mitigation strategy, CCS relates to a number of other issues. In the first place, CCS is obviously important for securing future revenues from fossil fuel production. This is the case for Australia and the US (with their large coal reserves), for Canada (especially Alberta and Saskatchewan) with its oil sands, and for Norway with its oil and gas. It is also of some importance for Germany, the Netherlands and the UK which are now net fossil fuel importers, but have substantial remaining domestic resources. As Tjernshaugen (2008: 17) observes, for such fossil fuel-producing countries CCS can help maintain the value of remaining resources and investments in a carbon-constrained future. Second, CCS can be presented as a pathway to ensure that the consumption of fossil fuels can continue to fuel economic growth. Because of existing international dependence on fossil fuels this dimension is potentially significant everywhere. But it acquires particular salience in the context of countries which are heavily dependent on fossil fuels for their electricity supplies such as Australia, the Netherlands and the US. Third, energy security issues play an important political role in relation to CCS, particularly in the US, but also in the EU, and to some degree in Germany, the Netherlands, the UK and Australia. In all these countries, the availability of fossil fuels combined with CCS can be seen as a weapon against long-term energy import dependency. CCS could also contribute to resolving the perceived electricity gaps in Germany and the UK, although in practice CCS may come on line too late. Politically, however,


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CCS plays an important role in these discussions, both for advocates of ‘capture ready’ plants and advocates of ‘no coal without CCS’. For Canada and Norway, long-term energy security issues have been relatively less prominent in relation to CCS. Fourth, regional political dimensions have been particularly important in Canada, but this is true also in the Netherlands and Norway. In Canada, CCS is fundamental for Alberta and Saskatchewan and for resolving Federal/provincial tensions around climate change. In the Netherlands, CCS has played a role as an instrument for regional development, and in Norway the possibility of CCS has been the political key to future domestic use of natural gas for industrial development especially on the west coast. Over time, we expect regional political dimensions of CCS to play a more important role in both the US and the EU – as battles over the funding for demonstration projects and other subsidies heat up, and the need to secure the acquiescence to climate change policy of regions dependent on revenues from fossil fuel exploitation become more acute. Finally, all these countries and the EU perceive important international dimensions to CCS. It is seen as playing a potentially critical role in mitigating GHG emissions from emerging economies. And its potential deployment to coal-fired power plants in China and India has been an important justification for pushing forward with domestic CCS projects in all these countries, and it is often linked with arguments about future export earnings. Australia and the US have particularly pursued this avenue through international CCS initiatives. Political Controversies With such a complex set of policy dimensions it is no wonder that CCS has become an appealing option in mitigation strategies. Yet in every jurisdiction CCS has its critics. Environmental NGOs have been split on the issue, and in some countries the national branches of organizations have taken somewhat different positions from those adopted by their parent organizations. Recently NGOs seem to be gravitating towards a more sympathetic position, although only a handful could be called enthusiastic. The main concern for environmentalists is that CCS will divert resources and attention from what is perceived to be the real solution to climate change – new renewables and energy efficiency. CCS has made it possible for the fossil fuel industry to engage more actively with climate change. But in some cases this has turned out to be a double-edged sword. CCS is now coming to play a critical role for movements opposed to new coal-fired power plants in many of the countries

260

Caching the carbon

included in this study, and there are signs of growing anti-coal resistance. The exception is of course Norway (for obvious reasons), but here CCS helped block the building of new gas-fired power plants for nearly a decade. In Australia and the UK, protests against coal are increasing. In both the US and in Germany, a number of new coal plants have been blocked by local opposition and environmental campaigners. In the short term ‘no new coal without CCS’ really means no new coal. Several US states have made decisions which require CCS for a power plant to be built, among them Florida and California. In Canada, British Columbia mandated the state-owned BC Hydro to acquire virtually all of new electricity supply from non-emitting sources and stipulated that coal-fired power plants would be permitted only if they included CCS. As yet the EU has not made CCS mandatory. This has put the notion of ‘capture ready’ to the forefront of controversy over new coal-fired power plants in a number of countries. ‘Capture ready’ as defined in Article 46 of the EU CCS directive allows new fossil fuel power stations to be built without CCS. To avoid a lock-in of technology, member states have to ensure that operators have assessed whether: (i) suitable storage sites are available; (ii) transport facilities are technically and economically feasible; and (iii) it is technically and economically feasible to retrofit CO2 capture (so-called ‘capture-ready assessment’). Yet as Scrase and Watson (2008) point out, the decision about whether ultimately to retro-fit CCS will have a strong economic component: Even assuming that a plant has been built capture ready and that CCS technology becomes available, there is no guarantee that the technology would be retrofitted. The costs may be too high and/or the incentives too small. In some cases, it may make more sense to demolish the capture ready plant and build a new fully integrated plant with CCS or a power plant using a different technology. Or it may be more financially rational to simply buy credits under the EU emissions trading scheme to cover the plant’s unabated emissions.

The preferred alternative for most environmental NGOs, therefore, is a carbon Emission Performance Standard (EPS) which would limit the level of carbon dioxide that can be emitted by new power stations so that new coal power stations would be required to use CCS from the outset. Yet the fear that CCS will weaken the effort to move beyond fossil fuels to new renewables remains an important cleavage. Arguably, this worry is somewhat reflected in the countries included in this study, and more in some than in others. A look at Table 10.5, showing the sources of electricity production, reveals an uneven share of renewable energy across the countries. Leaving out hydropower (as an ‘old’ renewable), only three countries had a wind contribution above 1 per cent in 2006:


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Germany with 4.8 per cent, the Netherlands with 2.9 per cent and the UK with 1 per cent. The same three countries also have the highest share of combustion of renewables and waste: the Netherlands with 6.7 per cent, Germany with 3.3 per cent and the UK with 3 per cent. With the exception of Germany, the Netherlands and the UK, combustion of renewables and waste generated more electricity than wind in the other countries. Germany also had 0.3 per cent solar. The US has 0.4 per cent geothermal. For other renewable energy sources (such as tide, wave and ocean) there is basically nothing. It can be argued that the political debates about CCS in the countries with the largest share of electricity production from new renewables (Germany, the UK and the Netherlands) are to some extent influenced by the fact that these alternative mitigation strategies have been more vigorously pursued for some time. The way CCS is framed is different because renewable energy has a larger place in the public sphere, and the organizations and stakeholders representing the renewable energy sector are more active. It is no coincidence that the founding conference of the International Renewable Energy Agency (IRENA) in 2008 took place in Germany. Germany, more than any other country in this study, has vigorously pursued renewable energy – especially wind, solar and cogeneration – which to some extent goes against the grain of centralized large-scale energy production systems with which CCS would most easily be coupled. Indeed in Germany the shift towards renewables has continued since 2006, a development that resonates more widely: Wind power net capacity additions over the last ten years (1998–2007) have showed a mean growth rate of 30.4 percent per year, corresponding to a doubling of net additions every 2½ years. In 2007, net capacity additions reached 19,553 Megawatts, a level that most energy pundits failed to anticipate. Net additions, in 2007, were 417 percent bigger than the mean estimate published by the International Energy Agency (IEA), in its World Energy Outlook 1995–2004 editions. (Rechsteiner 2008: 7)

The point is that in these countries, and especially in Germany, there is a perceived competition between renewables and CCS. This is reflected in the Praetorius and von Stechow chapter (Chapter 6, this volume), where the future market potential of CCS mainly depends on how the costs of the process develop compared to those of other CO2 reduction strategies, that is, renewable energy. In the countries with large reserves of coal/oil and gas, and little new renewable energy, the balance of forces is rather different. As Tjernshaugen argues, countries where oil and gas extraction and/ or coal mining are economically important will be particularly interested in CCS technology for several reasons:

262

Caching the carbon

First, governments and others will have an economic stake in the continued use of fossil fuels in a carbon-constrained future. Furthermore, countries that have substantial fossil fuel industries could see CCS as strategically important in terms of security of energy supply. The potential use of CO2 for enhanced oil or gas (including coal bed methane) recovery in conjunction with storage adds another motive for governments or influential economic actors to take an interest in CCS. Finally, a strong fossil fuel industry is likely to possess relevant expertise and international networks, particularly with respect to geological storage. (Tjernshaugen 2008: 9)

Others, like Germany, also have an emerging economic interest based on the renewable energy industry. As argued by Laird and Stefes (2009: 2626), ‘the renewable energy sector in Germany is an economic powerhouse and a major job engine, enjoying widespread political support’. Germany has set up ‘a protected niche for renewable energy technologies’, and as the technologies ‘have become both economically and institutionally more competitive, German policy is slowly withdrawing the subsides’ (ibid.: 2628). As a consequence, CCS may be conceived as an unnecessary diversion or potential tweak to the further expansion and deployment of renewable energy. Put bluntly, the more you have invested in new renewable energy, and the more new renewable energy you have deployed, the more you are inclined to be hesitant about CCS. This is not to say that CCS is not seen as important in Germany, the Netherlands and the UK; it is just that there are more political actors and forces which have a preference for, and interests in, new renewable energy. Of course, these are still early days and it is possible that over time the relationship of forces in many of these countries will continue to evolve. Particularly in large federal states with heterogeneous regional energy profiles (such as Canada and the US) regional renewable champions may emerge (for example, Texas or California in the US). And again this may complicate discussions over the priority to accord to CCS.

4

CONCLUDING REMARKS

In a remarkably short time CCS has moved to the forefront of international discussion as a viable climate change mitigation strategy. As the previous chapters have demonstrated, there are now extensive CCS R&D efforts and a number of demonstration projects are getting underway. The world has yet to see a full-scale CCS power plant, but in a few years’ time, there may be several of them. They will be built on the assumption that although renewable energy and energy efficiency promise much, ‘global


263

greenhouse gas emissions cannot be reduced by at least 50 per cent by 2050, as they need to be, if we do not also use other options such as carbon capture and storage’ (European Commission 2008: 1). But they will also be built in order to secure revenues from fossil fuels as long as possible. This is all part of the politics of CCS.

NOTES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11.

12.

13.

Behind the Byrd–Hagel Resolution, according to Paterson (2009: 143), was the Global Climate Coalition, ‘a powerful industrial lobby that had campaigned hard against Kyoto in particular and action on climate change more generally’. See http://www.america.gov/st/texttrans-english/2008/April/20080416165403eaifas0.146 9843.html (accessed 25 March 2009). See http://www.futuregenalliance.org/about.stm (accessed 23 March 2009). See: http://www.theglobeandmail.com/servlet/story/ RTGAM.20070419.wclimate0419/ BNStory/National/home (accessed 20 April 2007). Our translation. See http://www.defra.gov.uk/environment/climatechange/uk/legislation/provisions.htm (accessed 16 March 2009). See http://www.cslforum.org/publications/documents/NetherlandsCCS.pdf (accessed 23 March 2009). See http://www.co2-cato.nl/modules.php?name=CATO&page=21 (accessed 23 March 2009). See http://www.mop.gov.si/fileadmin/mop.gov.si/pageuploads/predsedovanje/territorial_cohesion/rotterdam_climate_initiative.pdf (accessed 29 March 2009). New EU member states have individual targets except Cyprus and Malta, which have no targets (EEA 2008). JUSSCANNZ is an acronym derived from the following loose members: Japan, US, Switzerland, Canada, Australia, Norway and New Zealand (Depledge 2000). It started out as the JUSCANZ group, and expanded to JUSSCANNZ with the inclusion of Norway and Switzerland, while Switzerland ‘frequently stood apart’ (Grubb et al. 1999: 34). The Umbrella Group is described as follows on the UNFCCC webpage: ‘a loose coalition of non-EU developed countries which formed following the adoption of the Kyoto Protocol. Although there is no formal list, the Group is usually made up of Australia, Canada, Iceland, Japan, New Zealand, Norway, the Russian Federation, Ukraine and the US. The Umbrella Group evolved from the JUSSCANNZ group’, available at http://unfccc.int/parties_and_observers/parties/negotiating_groups/items/2714.php (accessed 4 April 2009). These mechanisms are described as follows by UNFCCC: ‘Under joint implementation, an Annex I Party may implement a project that reduces emissions (e.g. an energy efficiency scheme) or increases removals by sinks (e.g. a reforestation project) in the territory of another Annex I Party, and count the resulting emission reduction units (ERUs) against its own target. While the term “joint implementation” does not appear in Article 6 of the Protocol where this mechanism is defined, it is often used as convenient shorthand. In practice, joint implementation projects are most likely to take place in EITs [economies in transition], where there tends to be more scope for cutting emissions at low cost . . . Under the clean development mechanism (CDM), Annex I Parties may implement projects in non-Annex I Parties that reduce emissions and use the resulting certified emission reductions (CERs) to help meet their own targets. The CDM also aims to

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14. 15.

Caching the carbon help non-Annex I Parties achieve sustainable development and contribute to the ultimate objective of the Convention . . . Under emissions trading, an Annex I Party may transfer some of the emissions under its assigned amount, known as assigned amount units (AAUs), to another Annex I Party that finds it relatively more difficult to meet its emissions target’, see http://unfccc.int/kyoto_protocol/mechanisms/items/1673.php (accessed 11 February 2009). See http://www.america.gov/st/texttrans-english/2008/April/20080416165403eaifas0.14 69843.html (accessed 26 March 2009). See ibid. (accessed 26 March 2009).

REFERENCES Andersen, S.S. (2000), ‘EU Energy Policy: Interest Interaction and Supranational Authority’, ARENA Working Paper WP00/5, Oslo. Australian Government (2008), Carbon Pollution Reduction Scheme. Australia’s Low Pollution Future, White Paper, Vol. 1, December, available at http://www. climatechange.gov.au/whitepaper/report/ (accessed 7 April 2009). Australian Government, Department of Climate Change (2008), ‘Australia’s National Greenhouse Accounts. National Inventory Report 2006 – Volume 1’, Australian Government Submission to the UN Framework Convention on Climate Change, June. BMU (Federal Ministry for the Environment, Nature Conservation and Nuclear Safety) (2007), ‘Key Elements of an Integrated Energy and Climate Programme’, Decision of German Cabinet on 23/24 August 2007 at Meseberg, available at http://www.bmu.de/files/pdfs/allgemein/application/pdf/klimapaket_aug2007_ en.pdf (accessed 7 April 2007). de Coninck, H.C. and N.M.A. Huijts (2004), ‘Carbon Dioxide Capture and Storage: Public Perception, Policy and Regulatory Issues in the Netherlands’, Energy Research Centre of the Netherlands (ECN), available at http://www. ecn.nl/fileadmin/ecn/units/bs/CCS/vancouver-hdc_nh.pdf (accessed 7 April 2009). Defra (Department for Environment, Food and Rural Affairs) (2008), ‘UK Greenhouse Gas Inventory 1990 to 2006: Annual Report for submission under the Framework Convention on Climate Change’, Defra, London, April. Department of Trade and Industry (DTI) (2003a), Energy White Paper: Our Energy Future – Creating a Low Carbon Economy, London: HMSO. Department of Trade and Industry (DTI) (2003b), Review of the Feasibility of Carbon Dioxide Capture and Storage in the UK, London: DTI. Depledge, J. (2000), ‘Tracing the Origins of the Kyoto Protocol: An article-byarticle textual history’, FCCC/TP/2000/2. EEA (2008), ‘Greenhouse Gas Emission Trends in Europe 2008. Tracking Progress towards Kyoto Targets. Executive Summary’, EEA Report. No 5/2008, European Environment Agency, Copenhagen. Energy Transition Task Force (2006), ‘More with energy. Opportunities for the Netherlands’, available at http://www.senternovem.nl/mmfiles/samenvatting per cent20TAP per cent20Engels_tcm24-191697.pdf (accessed 7 April 2009). Environment Canada (2008), ‘National Inventory Report 1990–2006. Greenhouse Gas Sources and Sinks in Canada’, Canadian Government’s Submission to the UN Framework Convention on Climate Change, May.


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EPA (2008), Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990–2006, Washington, DC: Environmental Protection Agency. European Commission (2005), ‘Winning the battle against global climate change’, Commission Staff Working Paper, COM(2005) 35 final, Brussels. European Commission (2007a), ‘An Energy Policy for Europe’, Communication from the Commission to the European Council and the European Parliament, COM(2007) 1 final, Brussels. European Commission (2007b), ‘An energy policy for Europe: Commission steps up to the energy challenges of the 21st Century’, MEMO/07/7, Brussels, 10 January. European Commission (2008), ‘Questions and Answers on the Directive on the Geological Storage of Carbon Dioxide’, MEMO/08/798. European Parliament (2005), ‘European Parliament resolution on, “Winning the Battle Against Global Climate Change”’, (2005/2049(INI)), P6_TAPROV(2005)0433. FEA (2008), ‘Submission under the United Nations Framework Convention on Climate Change 2008. National Inventory Report for the German Greenhouse Gas Inventory 1990–2006’, Federal Environment Agency, Dessau. George, S. (1985), Politics and Policy in the European Community, Oxford: Oxford University Press. Grubb, M., C. Vrolijk and D. Brack (1999), The Kyoto Protocol. A Guide and Assessment, London: Earthscan. IEA (2008a), CO2 Capture and Storage. A Key Abatement Option, Paris: OECD/ IEA. IEA (2008b), IEA Statistics. Electricity Information, Paris: OECD/IEA. Kellow, A. (2006), ‘A new process for negotiating multilateral environmental agreements? The Asia-Pacific climate partnership beyond Kyoto’, Australian Journal of International Affairs, 60 (2), 287–303. Kern, F. and A. Smith (2008), ‘Restructuring energy systems for sustainability? Energy transition policy in the Netherlands’, Energy Policy, 36, 4093–103. Laird, F.N. and C. Stefes (2009), ‘The diverging paths of German and United States policies for renewable energy: sources of difference’, Energy Policy, 37, 2619–29. Lubbers, R. (2008), Outline of speech at CATO/E.ON, 3 April 2008, Rotterdam, available at http://www.rotterdamclimateinitiative.nl/downloads/Speech_ Ruud_Lubbers_bij_CATO.pdf (accessed 7 April 2009). Ministry of Environment (1988-89), ‘Environment and Development: Norway’s Follow-up of the Report of the World Commission’ (Miljø og utvikling. Norges oppfølging av Verdenskommisjonens rapport), White Paper No. 46, Ministry of Environment, Oslo. MNP (2008), ‘Greenhouse Gas Emissions in the Netherlands 1990–2006. National Inventory Report 2008’, Netherlands Environmental Assessment Agency (MNP). Norwegian Pollution Control Authority (SFT) (2008), ‘National Inventory Report. Greenhouse Gas Emissions 1990–2006 Reported According to the UNFCCC Reporting Guidelines’, SFT, Oslo. Paterson, M. (2009), ‘Post-Hegemonic climate politics?’, British Journal of Politics and International Relations, 11 (1), 140–58. Rechsteiner, R. (2008), ‘Wind Power in Context – A clean Revolution in the Energy Sector’, Energy Watch Group/Ludwig-Boelkow-Foundation, Berlin.

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Roberts, T.J. (2000), ‘Global inequality and climate change’, Society and Natural Resources, 14, 501–9. Scrase, I. and J. Watson (2008), ‘Response to BERR Consultation: Towards Carbon Capture and Storage’, Sussex Energy Group, SPRU, University of Sussex 22nd September, available at http://www.sussex.ac.uk/sussexenergy group/documents/berr_ccs_consultation_-_seg_response.pdf (accessed 7 April 2009). Tjernshaugen, A. (2007), Gasskraft. Tjue års klimakamp, Oslo: Pax Forlag A/S. Tjernshaugen, A. (2008), ‘Political commitment to CO2 capture and storage: evidence from government R&D budgets’, Mitigation and Adaptation Strategies for Global Change, 13, 1–21. UNFCCC (2004), United States of America. Report on the in-depth review of the third national communication of the United States of America, FCCC/IDR.3/ USA. UNFCCC (2009a), ‘Report of the in-depth review of the fourth national communication of Australia’, FCCC/IDR.4/AUS. UNFCCC (2009b), ‘Report of the in-depth review of the fourth national communication of the United States of America’, FCCC/IDR.4/USA. van Muijen, M.-L. (2000), ‘The Netherlands: ambitious on goals – ambivalent on action’, in W.M. Lafferty and J. Meadowcroft (eds), Implementing Sustainable Development, Oxford: Oxford University Press, pp. 142–73. Vogler, J. and C. Bretherton (2006), ‘The European Union as a protagonist to the United States on climate change’, International Studies Perspectives, 7, 1–22.

11.

The politics and policy of CCS: the uncertain road ahead James Meadowcroft and Oluf Langhelle

This volume has compared the development of CCS as a policy and political issue in a number of developed country jurisdictions. In this chapter we shall explore several themes which have emerged from this analysis and consider the road ahead. The discussion will be organized around three broad topics: CCS as a focus for political argument; environmental risks and long-term stewardship; and CCS and future technological trajectories.

1

CCS AS A FOCUS FOR POLITICAL ARGUMENT

As an integrated technological system for reducing GHG emissions, CCS has some way to go before it is ready for commercial deployment, and still further to travel before it can make a large-scale contribution to managing carbon dioxide emissions (IEA 2008). But if CCS is not yet there as a proven and cost-effective technological alternative, the idea of CCS has already had a marked influence on political and policy debate around climate and energy futures. And arguments about the potential of CCS, and the implications of its deployment, are beginning to move from the specialist domains of climate and energy into the broader realm of political and policy debate. As noted at the outset, for a long time CCS largely remained the concern of a small group of technical experts connected with the oil and gas industry, national governments with important fossil fuel interests, and the IEA. During the early 2000s it received increasing attention from the mainstream international climate change community, with the 2005 IPCC Special Report signalling its general acceptance as a potentially significant mitigation option (IPCC 2005). This represented the culmination of a discursive rapprochement between international energy and climate policy circles, with the fossil energy sector coming to acknowledge more explicitly the dangers of climate change while the climate community accepted 267

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CCS as a significant abatement option (Hellin 2008). It is interesting to note that even into the early 2000s, IEA reports appeared almost grudging in their references to climate change. But as the decade progressed, with the strengthening scientific case around climate change, the beginnings of a shift of public opinion within the United States, and ultimately the prospect that a new US administration (of whichever political stripe) would introduce binding emission controls, things began to change. Since 2006 CCS has received increased attention in many countries, with a growth in R&D activities, preparation for large demonstration plants, and attention to regulatory issues. Yet well before this point CCS had assumed an important role in some actors’ responses to the climate change issue. A number of national governments with important fossil fuel interests emphasized the future potential of CCS. In the United States, CCS was one pillar of the ‘technologyoriented’ policy response of the Bush administration, which offered R&D as an alternative to direct movement towards carbon pricing (Stephens, Chapter 2 in this volume). In Australia and Canada, both countries which had difficulties with the Kyoto Protocol, the commitment to the long-term development of CCS technology was already clear in the early 2000s. In the oil and gas sector some firms (including Statoil Hydro, Shell and BP) displayed a substantial commitment to CCS, funding experimental storage projects and integrating CCS into their medium-term plans. Interest from the coal/power sector was more muted. On the one hand, CCS underpinned the ‘clean coal’ story told by the coal industry (especially in the United States), which presented coal as the cheap, reliable and environmentally benign fuel of the future. But, on the other hand, the industry appeared in no great hurry to move towards this future in practical terms. As it emerged into political and policy debate, CCS appeared in a variety of lights and sparked a number of controversies. First, it could be presented as a way in which the fossil fuel industries (and societies that wished to continue exploiting fossil reserves) could adapt to the demands of a carbon-constrained world. It opened the way towards a continuation of established business models and energy systems through the capture and storage of emissions. To this extent, it was a ‘reassuring’ or ‘stabilizing’ technology, which might remove the need for a sudden shift away from fossil energy. Of course, CCS presented clear market opportunities for some (oil and gas industry, manufacturers of advanced combustion equipment, researchers), but also worrying complications and intimidating costs for others (coal suppliers, power generators). Second, it was invoked as a justification for postponing immediate policy action to cap emissions and to price carbon. With CCS on the way, it could be argued that it made sense to avoid immediate adjustment costs, to accelerate

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R&D, and to wait until the new technology matured. Third, it was used in the attempt to legitimate the construction of a new generation of coal plants. After all, with CCS on the horizon climate worries no longer presented an insuperable obstacle to developing additional coal-fired power stations. Eventually the notion of ‘capture ready’ plants was developed to bridge the gap between existing construction schedules and the technical maturation of CCS systems. Fourth (and in exactly the opposite way), the imminent arrival of CCS was used to argue against the hasty construction of fossil fuel power installations until they could be equipped with fullyfledged capture and storage systems. Thus the promise of CCS helped forestall construction of gas-fired power plants in Norway for a decade, a controversy that foreshadowed conflicts in the USA and the UK about new coal installations. Fifth, the emergence of CCS has provoked discussion about the relative place it should assume within (regional, national and international) mitigation portfolios. And of critical importance in this context is the scale of state aid for CCS to be applied at different points along the research-to-deployment continuum. And finally, there has been the development of the first local disputes about the realization of specific generation and storage projects – presumably a sign of many more such conflicts to come. In current climate change policy debates, the dominant CCS ‘story line’ points to an emerging mitigation strategy with the potential to make an important contribution to global efforts to address climate change. Key elements emphasized in this story line are: ●

●

●

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society needs to encourage all technological options to reduce GHG emissions, because: (a) the scale of emission cuts ultimately required will be so large that all possible tools will need to be pressed into service; (b) a wider range of options means lower total costs for abatement; and (c) it is not possible to tell which alternatives will prove most effective and most cost efficient, so it is prudent to move forward on multiple fronts; the world remains heavily dependent on fossil fuels, and CCS provides an option that allows continued use of carbon-based fuels even as we expand other energy options; safety and environmental concerns about CCS must be taken seriously, and can be managed by developing appropriate industrial standards, good regulatory frameworks, and continued monitoring and research; governmental support for R&D and demonstrations plants is needed to accelerate CCS development and to prepare for large-scale commercial deployment;

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the rising costs of CO2 emissions (from cap-and-trade systems or carbon taxes) will encourage commercial adoption of CCS technology, but the scale of its final deployment will depend on the extent that it becomes cost efficient as compared to other abatement options.

This broad perspective on CCS provides a common point of reference in current climate policy debates. It presents CCS as one among a portfolio of GHG reduction strategies, and sees the ultimate scale of CCS deployment as largely dependent on the evolution of relative abatement costs. Yet there are also moves to elaborate this shared story line in different directions. On the one hand, there are arguments advanced by what might be termed the ‘enthusiastic proponents’ of CCS, and on the other, those emphasized by what could be called the ‘reluctant advocates’ of CCS. Key additional elements typically found in the arguments of the enthusiastic CCS proponents include claims that: ●

●

●

● ●

fossil fuels will remain the foundation of global energy supplies for much of the coming century. This is especially true for countries with abundant remaining fossil reserves, including large developing countries such as India and China; society has accumulated vast experience with fossil fuels and has sunk hundreds of billions of dollars into fossil-based infrastructure. Moreover fossil fuels have high energy density. So it would be foolish to turn our back on such resources, when CCS will allow effective management of the carbon emissions; new renewables such as wind and solar suffer many disabilities (especially intermittency, low energy density, and high costs) and they are unlikely to supply the bulk of the energy needs of growing economies in the foreseeable future; CCS is a critical (and perhaps the critical) pathway to shift the world economy onto a low carbon emissions pathway; CCS offers an enormous commercial potential for companies and countries that move first to develop capture and storage technologies.

In contrast, the reluctant CCS advocates elaborate the common story line in a more cautious direction, typically noting that: ● ●

CCS is not without major problems and shortcomings; mitigation efforts should clearly prioritize energy efficiency, new renewables, and other low carbon energy options, and only then turn to CCS as part of the solution;

The uncertain road ahead ●

● ●

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care must be taken that governmental financial support for CCS does not starve renewables of capital, unduly favour a further expansion of fossil fuel dependence, and undercut the shift towards new renewables and non-carbon-based energy systems; CCS may be necessary to get some countries or sectors fully engaged with climate change mitigation; CCS should be regarded as a ‘transitional solution’ that will be required only until other carbon-neutral technologies become available at reasonable scale and cost.

Of course some perspectives fall between these two alternatives, with individual actors combining elements from both narratives. And while each of these currents accepts the supportive perspective of the consensus story line described above, a relatively small number of actors have articulated an explicitly anti-CCS story line. Key elements of this alternative critical CCS story line are: ●

●

●

● ●

CCS is an ‘end-of-pipe’ solution, that potentially extends the fossil fuel era, allowing society to continue to rely on dirty fuels (such as coal and oil) while delaying the inevitable transition towards a renewable energy economy; CCS is a potentially expensive and risky approach to managing climate change because it is not at all clear that the technology will work effectively and at reasonable economic cost; CCS will be too late, because societies need to secure substantial GHG emission reductions before 2020 if dangerous climate change is to be avoided, and CCS is unlikely to achieve large-scale deployment before 2030; government support for CCS draws away funds that could be better applied to expanding new renewables and energy efficiency; there can be no such thing as ‘clean coal’ because the mining, transport and combustion of coal cause numerous environmental liabilities. Moreover, talk of ‘capture ready’ facilities is largely an excuse to keep building coal facilities that have a 30–40 year anticipated lifetime and no certain guarantee that CCS will ever be applied.

As the summary of these story lines makes clear, perspectives on CCS have been closely entwined with arguments about the urgency of the response to climate change on the one hand, and the relative merits of energy supply alternatives on the other. The evolution of the international debate suggests that for certain actors closely identified with fossil fuel interests, acceptance of the seriousness of the climate change problem

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and identification of a fossil fuel-friendly mitigation option have been tied together. In the crudest possible terms, the implicit trade-off seems to have run like this: ‘we will recognize that your problem (climate change) is real – if you recognize that our solution (CCS) is legitimate’. But depending on how urgent mitigation is understood to be, particular perspectives on the orientation of CCS development vary. Another complicating factor is the energy security issue, which can weigh-in for or against continued emphasis on fossil fuels depending on the circumstances. In balance, energy security seems to lend support to CCS: first, because CCS would allow a switch from foreign oil (in the US) or Russian gas (in Europe) to domestic coal (or coal imported from more stable regions); and second, because it keeps open the fossil fuel option (of whichever type) in a carbon-constrained world. The entwining of the CCS debate with energy supply issues is also evident for renewables: especially in relation to starving them of capital. Nuclear power provides another example: to some extent nuclear power and CCS-equipped fossil fuel generation can be seen as alternatives, each providing a large-scale, low carbon emission technology that can meet electricity base loads. Thus, it is noticeable that some environmental organizations that are strongly hostile to nuclear power have tended to be more open to CCS. Assessing these story lines as they have evolved until early 2009, it seems that the dominant perspective is reasonably robust, enjoying widespread support in international climate and energy circles. It appears to broaden the coalition of interests that can support active long-term climate mitigation efforts. It acknowledges the extent of current global dependence on fossil fuels and situates the CCS option within a diversified set of emissions abatement strategies. And it is sufficiently fluid that it can be accepted by actors who hold rather different views about the long-term significance of CCS and the likelihood and desirability of its wide-scale deployment. This is the ‘official’ line of most OECD governments and bodies involved in climate and energy issues. Of course, those with significant fossil fuel interests are likely to develop this consensus story line in the enthusiastic direction, while some others are more cautious in their endorsement of CCS. On the opposite side of the issue, the anti-CCS perspective has also stabilized, and while this is very much a minority sentiment – even among environmental organizations – there are many smaller, more radical, and local groups that are adopting this stance. Thus there is currently one core consensus story line, accepted by the vast majority of important actors in climate change arenas (with subcurrents favouring more or less vigorous development of CCS), and an oppositional story line with very modest support. While this dominant story


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line now largely frames discussion of CCS, the politics and policy of CCS are only beginning to heat up. In the first place, critics of CCS deployment are not about to curl up and go away. Their case against wide-scale CCS deployment is not trivial. And even if one accepts the dominant story line there is still plenty of room for political and policy dispute regarding: (a) the place of CCS within regional, national and international abatement efforts and energy strategies; (b) the character, level and timing of government support for CCS development and deployment; and (c) the shape of regulatory regimes. Lurking in the background are local concerns over siting, and broader issues over how the public will react as this technology begins to find real-world applications. Exploring the Story Lines Although they have won considerable acceptance within the relevant constituencies, these story lines, and the second-tier arguments mobilized to support them, are not without inconsistencies and questionable assumptions. Consider, for example, an argument sometimes found in the specialist literature concerning possible leakages from CCS storage sites. It is sometimes suggested that whatever the leakage rates ultimately turn out to be, CCS is worth pursuing – because the outcome of CCS with some leakage is obviously preferable to the direct release of all that CO2 into the atmosphere. Even very leaky CCS delays the accumulation of GHGs in the atmosphere, slowing the rate of climate change, and lengthening the time for humans and ecosystems to adapt and for societies to develop alternatives. And of course leakage might subsequently be remediated. One problem with this argument is that it juxtaposes fossil fuel combustion with no CCS to fossil fuel combustion with leaky CCS. But there is no reason to narrow choices in this manner. Although substitutes for fossil fuel generation may be limited in the short term, in the medium term (for example, the one or more decades that will be required to deploy commercial CCS systems for coal-fired generation) alternatives may be available. Very leaky CCS is not an obvious winner if energy choices include expanded non-carbon generation sources and energy efficiency gains. Another issue concerns expectations about the continued use of fossil fuels. It is currently more or less assumed by most actors that fossil fuels will remain the foundation of global energy supplies for many decades to come, but this point is particularly prominent in the story line of CCS enthusiasts. IEA energy scenarios continue to predict strong growth for fossil fuels – increasingly coal – through the middle of the current century. Considering (a) the high level of current fossil fuel dependence and (b)

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the societal development trajectory over the past two centuries, the idea that fossil fuels will continue to provide the overwhelming bulk of energy supply appears eminently reasonable. All the more so when we factor in the scale of the existing societal investment in fossil energy (knowledge, personnel, capital stock), the co-evolution with other social subsystems (the transport system, agriculture, urban form, law and regulation), and the large remaining reserves in many countries. And yet precisely because this seems so obvious it should give some pause for thought. Societal practices and systems – even deeply embedded practices and systems – can change relatively rapidly. So one should be wary that the assumption that the future will look more or less like the present (which is then built into scenarios and models) does not obscure the possibility of more radical change. For example, assumptions about the slow turnover of capital stock and the measured pace of the deployment of new technologies must be treated with caution. Note, for example, the IEA’s systematic underestimation of the growth of installed wind capacity over the past decade (Rechsteiner 2008). It is quite possible that if (a) climate change bites hard enough (that is, impacts are perceived to be serious and growing), and/or (b) the costs of fossil fuels (with or without CCS) are high (or volatile) enough, and/or (c) worries about supply disruptions materialize, and/or (d) the attractions of alternative energy options are strong enough, the move to displace fossil fuels could occur quite rapidly (for example, in a few decades rather than a century). If the situation is desperate, change can come quite rapidly: existing capital stock is simply written off, workers are let go or retrained, companies and regions that cannot diversify away from the weakening technological base stagnate. Political struggles over distributing the costs of such rapid adjustments can be significant. But the change may occur even as it creates havoc among those attached to the old technology. Moreover, the attraction of new options (as opposed to dissatisfaction with the old) should not be neglected, because if advocates of renewables turn out to be right – and the cost of renewables keeps falling and many other promised benefits also materialize (reduced overall environmental burdens, convenience, attractiveness of local and decentralized supply, and so on) – the environmental push to develop and diffuse these technologies may be joined by a consumer pull that significantly speeds uptake. It is not entirely far-fetched today to think that a reasonably priced electric car could capture a significant market share, or to imagine that in the space of a generation the internal combustion engine car may come to look as antiquated as a steam train does today. Alternative visions that imagine fossil fuels dethroned are already proliferating – perhaps the most prominent representative today being


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the ‘Energy [R]evolution’ report issued by Greenpeace International and the European Renewable Energy Council (Greenpeace and EREC 2008). The scenario presented in this report emphasizes energy efficiency, the deployment of renewables, and combined heat and power. Decentralized options where electricity and heat ‘are produced close to the point of final use’ are privileged. The scenario assumes robust GDP growth (especially in developing countries) and the extension of electricity to two billion new consumers in the developing world. Global GHG emissions are to be cut in half by 2050 (on a 1990 baseline). Energy efficiency gains mean that final energy demand holds almost steady at 2005 levels. In 2050, 56 per cent of primary energy demand is met by renewable energy, with 77 per cent of the electricity sector and 70 per cent of heat supply coming from renewables. Over time nuclear power has been fazed out, and CCS is not deployed. Another questionable assumption relates to the optimistic assessment of CCS-related export earnings. Enthusiasts present CCS as a major business opportunity – for firms making the equipment and building the infrastructure which CCS will require, as well as for those running injection and storage operations. Naturally business opportunities will abound if societies embark on major CCS programmes in coming decades. But it may be a bit naive to assume that large developing countries such as China and India will merely be eager consumers of CCS systems sold by firms from developed countries (such as the UK, Germany, the US, Australia and Norway). No doubt there will be opportunities, but if these emerging economic powers go in for CCS in a big way they may soon be exporting equipment made in their countries back to CCS operators in Europe and North America. Consider also the claim of CCS critics about timing. This juxtaposes the need for urgent action on climate change with the long lead times required to make CCS a reality (Greenpeace 2008). Significant emission reductions are required by 2020, the argument goes, but CCS will only become commercially available after 2020, with large-scale deployment following in subsequent decades. Thus CCS is a dangerous distraction. This argument tries to exclude CCS as a viable abatement option because the technology is not yet mature. And it assumes that societies will reduce emissions early because they should reduce emissions, and so CCS will not be needed. Granted, significant emission reductions will be required in the coming decade and CCS cannot deliver these. So such reductions must be found elsewhere. But what happens if we arrive at 2020 and find that they have not been made? And even if they have been made, there will be a need for even deeper reductions in subsequent years. And here CCS could contribute, but only if significant investments in RD&D projects begin now. Of course, there will be competition for funds among alternative abatement

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options, but surely that is an issue of balancing options and managing the risk that some of them fail to materialize. The problem with judgements made today suggesting that CCS will be ‘too late’ is the scale of uncertainty that remains about the pace of climate change, the rate of emissions growth, the direction of technological advances, and the shape and timing of the political response to the problem. The image of arriving ‘too late’ – as for a train that is scheduled to leave at a specified hour – just does not make sense in this context. Indeed, we are almost certainly already ‘too late’ to avoid many climate impacts, but it may be decades until we know which impacts those were. On the other hand, there will be other impacts to which the emissions trajectory has not yet decisively committed us, and perhaps CCS will arrive ‘just in time’ to contribute to averting these. From this perspective, it would be irresponsible not to put some effort into developing CCS, because it may not be ‘too late’ to do some good. Of course, timing also relates to the relative costs of abatement options and the point at which different technologies become cost competitive. And this links to a questionable claim integrated into the dominant CCS story line, but also into established climate and energy debates more generally. This is that the primary mechanism that will ensure appropriate societal deployment of CCS technology will be the steadily rising cost of carbon emissions (for example, under the European Emissions Trading System), and that the ultimate scale of the industrial commitment to CCS will be determined by its cost performance relative to other low carbon energy systems. Despite broad expressions of confidence in the effectiveness of carbon pricing there are many practical and political reasons to doubt that it provides an adequate stimulus for timely change. Moreover, in practice, and despite their proffered adherence to this orthodoxy, governments are not themselves behaving as if they really believed this to be true. Why should faith in the efficacy of carbon pricing as the mechanism ultimately driving CCS deployment be moderated? Essentially because there must be some doubts that carbon prices will on their own act as a sufficient stimulus to secure timely investment in this new technology. One problem is the existence of institutional barriers to the development and deployment of novel technologies, and this is the justification for state funding to accelerate CCS RD&D. Another issue, already evident in the first phase of the ETS, and which has become even clearer with the recent economic downturn, is the high volatility of carbon markets. This increases uncertainty, raises the cost of capital for novel energy technologies, and decreases the appeal of such investments. And when subsidies for new technology development are to be funded from the (uncertain) price of permit auctions (as the CCS demonstration plants are to be in Europe) then if the carbon price plummets revenues for public support of CCS would fall just at the point


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that private incentives towards CCS are also undercut. Of course, mechanisms could be implemented to stabilize carbon markets (for example, through a price floor). But even then, the fact remains that carbon prices (whether generated by a tax or cap-and-trade system) are ultimately politically driven prices: without regulatory intervention the price would not exist at all. And there is reason to believe that political factors (operative through the electoral cycle, as consumers and producers organize to resist higher energy prices, for example) will make it hard to ensure an adequate price – that is, a price sufficient to attain the desired environmental objective. By acting through the price mechanism they hit everyone at once: an advantage in economic terms, but not necessarily an advantage in political terms. Thus at some point it may be that more straightforward regulatory measures – such as a ban on the construction of new coal plants without CCS; or a ban on licence extensions for existing coal-fired plants after a certain date; or a fixing of maximum lifecycle carbon emissions per unit of generated energy – will provide a more direct stimulus for change. This has the advantage of isolating the target (for example, coal-fired generators). And, in fact, such measures are already beginning to be adopted in some jurisdictions, for example the UK. Although the price of the technological alternatives will be an important issue in determining the ultimate deployment of CCS, other economic and political factors will play a part. In the long run, uneconomic technologies do decline but: (a) the conditions under which prices are formed are not immune to political interference; and (b) the ‘long run’ can be very long indeed – think of the cases where governments have continued to subsidize inefficient enterprises for decades after they were clearly no longer a leastcost producer! Countries with substantial fossil fuel resources are clearly likely to pursue the CCS option – whether or not it currently appears the cheapest way to reduce carbon emissions. After all, there is the promise (hope?) that the costs of the technology will fall dramatically and thus the possibility of continuing to exploit fossil fuels into the indefinite future. Thus distributional issues – the potential for local actors and specific industrial constituencies (companies, workers, research labs and so on) to gain – will be central to determining the relative scale of investment in one technology as opposed to another. To be blunt, countries with important political constituencies attached to fossil fuel industries will probably go down this route. In the United States, for example, where many states are important fossil fuel producers, and where national political representation accords an important role to states (especially in the Senate), it is easy to see that political bargains rather than just relative costs will determine the scale of investment in, and deployment of, CCS. After all, public authorities may

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act ultimately to socialize costs encountered by private firms (that is, let taxpayers foot the bill) to ensure that a valid business case for CCS investment is present. In any case, the costs that prevail at any point in time are not entirely independent of the level of political support for a technology. This can be seen clearly for nuclear energy where recent emphasis on slimming down planning procedures in many countries (UK, USA) is expected to have a direct bearing on the relative costs of nuclear generation. And with respect to CCS the future evolution of the cost curve is not independent of the scale of government investment that will be sunk into the technology over the coming period. But of course, the same holds true for alternative energy systems. Many factors affect price – including physical, scientific and engineering issues about the possibilities of making processes more efficient, questions about the availability of resources, and so on. Nevertheless, the scale of the available social investment, and political signals about the desirability and social acceptability of certain technological trajectories, all influence the ultimate development path. In other words, unless one believes that whatever technological option triumphs is by definition the ‘best’ option, one must recognize that political (as well as many other contingent events) can affect their development. An often stated corollary of this confidence in the price mechanism to achieve the appropriate portfolio of technology deployment is the suggestion that governments ideally should remain ‘neutral’ with respect to the selection of technologies to secure emission reductions, allowing alternatives to compete, and private investors to assess market opportunities, judge risks, commit capital and so on. Now there is a lot that is appealing about this suggestion. Governments do not have a good record of picking technological ‘winners’, and the ‘selective jungle’ of market and societal competition can winnow out losers and determine the ‘fittest’ technologies. Moreover, there is the obvious political appeal of such a stance where governments appear unbiased between competing firms and business interests. But the quandary is this. On the one hand, the selective ‘environment’ within which the technologies compete is not independent of government – for regulation, politics, tax systems and countless other features already shape that environment. Thus the results of competition are not independent of policy regimes. And on the other, governments may have to pick certain technologies to favour, because they do not possess the resources to support all equally, and without timely support none may come on line rapidly enough to secure needed environmental goals. Finally, something should be said about CCS as a ‘transitional’ technology. This suggestion forms an important part of the storyline of


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the ‘reluctant advocates’, and the idea is that societies are now turning towards CCS because they are not yet in a position that they can rely on non-fossil energy technologies. Something needs to be done about climate change, but fossil fuel dependence is so extensive that societies need CCS during the transitional period required for renewables to mature. Reference to this transitional character is usually accompanied by an acknowledgement of shortcomings of CCS (high energy penalties, additional resource requirements) and of the other environmental impacts of fossil fuel use, an expressed enthusiasm for renewables, and perhaps a reference to ‘peak oil’. Now in one sense all technologies are ‘transitional’, linking what comes before and what comes after. And since fossil fuel resources are finite, a technology to manage CO2 emissions from fossil fuels is bound to be ‘transitional’. But here the idea of a ‘transition’ technology is used in a more specific sense to mean that societies will use CCS as a bridging technology only until better options become available. We are talking of temporary arrangements until the really sustainable options come along: for a few decades or perhaps half a century. Enough to drag emissions down, and give renewables and energy efficiency a chance to work their magic. Thus CCS can help get humanity through a choke point and then move beyond a fossil fuel energy economy. What is interesting about this is that there are other actors who clearly do not understand CCS in quite this way. Many studies only foresee CSS really getting going on a big scale post-2050. And some fossil energy producers talk of harbouring reserves (especially coal) that can last for centuries. The fact that some prominent actors do not perceive CCS as ‘transitional’ (or, alternatively, define this ‘transition’ as lasting for a century or more) already suggests a problem. But more generally one does not find many historical examples of technologies that were developed, embodied in substantial infrastructure, and then just phased out because some people did not like them. On the contrary, the larger the investments and sunk costs, the greater the built infrastructure, the more developed the research and training networks and the co-adaptation with the finance and regulatory systems, the more a specific technological regime tends to persist. Indeed, it is often when a technological regime is most threatened that it makes the most heroic efforts to drive down costs further, continuing to freeze out the competition. Here, then, one is contemplating the possibility of a CCS path dependency, even before the technology is really up and running. Of course, in the long run comparative costs will matter. Thus CCS may have a much longer lifetime than the ‘reluctant advocates’ anticipate. On the other hand, the run might be considerably shorter than its enthusiasts predict.

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ENVIRONMENTAL IMPACTS AND LONG-TERM STEWARDSHIP

One issue only touched upon in earlier chapters is the environmental risks potentially associated with CCS deployment. Setting aside more general strategic arguments about the advisability of pursuing CCS as an approach to climate change mitigation (for example, will CCS be ready in time? Will it work? Will it reduce sufficiently life-cycle CO2 emissions? Will it turn out to be cost effective? Will it encourage undesirable carbon lock-in?), concerns about the specific environmental burdens of CCS have focused on three main issues: risks to the health and safety of workers and communities and to local environments from CCS operations (especially from the unintended release of CO2); additional environmental pressures generated by CCS deployment (‘collateral damage’); and long-term climate risks from large-scale leakage from storage sites. With respect to safety and local environmental risks, most analysts have concluded that these are broadly analogous to those present in many industrial settings (IPCC 2005; Accept 2007). Accidental release of CO2 from capture or transport facilities and during injection operations would present some danger, but practices for managing CO2 in the chemical industry and during EOR (to say nothing of more hazardous materials) suggest that appropriate operating standards and regulatory approaches could be applied. Contamination of ground water, damage to local ecosystems, and increased local seismicity could occur at poorly sited or operated storage facilities (Murphy and Jaccard 2008). Again, experience with oil and gas operations suggest that such risks can be reduced to low levels. The open-ended nature of CO2 storage does make CCS distinctive. Underground disposal of sour gas (Alberta) and chemical wastes (USA) do provide analogues (Reiner and Herzog 2004). But both practices are relatively recent (decades not centuries). It is generally assumed that local risks at storage sites will be highest during the injection phase (and the years immediately after injection), but the indefinite term of storage means that some residual local risks will remain for hundreds and even thousands of years. So, some form of long-term monitoring and inspection will be required. In political terms, however, it remains unclear how communities and the public more generally will view such local environmental risks. To the extent that capture facilities and transport hubs are located in existing industrial zones, and storage is in areas with a history of underground operations, additional perceived risks are likely to be small. Where facilities are to be sited outside established industrial areas, these risks may become bundled with other impacts of the new industrial plant and be


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largely discounted where opinion is generally favourable (because the project brings jobs, investment and so on), or multiplied where opinion is unfavourable (because the project as a whole is seen to bring pollution, destroy property values or landscapes and so on). Experience with locating nuclear plant suggests that where facilities have long played an important part in the local economy (and operated without serious incident) communities will more readily welcome additional nuclear investment. But the siting of large facilities (such as power plants, dams and now increasingly wind turbines) is a complex issue influenced by many factors including perceived societal need for the development, ‘fairness’ of decisions when selecting among alternative sites, confidence in the authorities making decisions and regulating long-term operations at the facility, the character of the local economy and any proposed side-payments, and so on. One concern articulated by analysts is that an early mishap (perhaps resulting in fatalities) that made headlines at a time when the public is still largely unfamiliar with CCS might cause opposition to the technology to coalesce. The suggestion is that particular care should be taken in developing early projects. After all, the fact that risks can be managed successfully (and have been managed successfully in similar types of industrial setting in the past) does not automatically guarantee that they will be managed successfully in the case of CCS projects. With respect to additional environmental burdens imposed by CCS there are two main issues: the need for the construction of new infrastructure (especially pipelines, but also capture and injection facilities) and the additional pressures related to the energy penalty of CCS. This is a largescale technology, and wide deployment would require a significant building programme. On the other hand, compared to the scale of land and resources already associated with the fossil fuel economy, requirements for CCS would not represent a dramatic increase. The energy penalty is potentially much more serious. Based on the current state of the technology, estimates are for a 15–40 per cent energy penalty for coal-fired electricity generation. And (for the same power output) this implies a proportionate increase in the size (or number) of plants, in the throughput of coal, water and other materials (for example, for conventional emissions control), and in pollutant and waste outputs (fly ash, bottom ash). The extra coal must be mined and transported (with attendant environmental impacts) and the additional wastes managed (European Commission 2008). Of course, these burdens are related to high capture costs, and developing more costand energy-efficient capture processes is a major focus of current R&D. Operators have a strong financial interest to drive down capture costs, and there is an expectation that as the scale of CCS deployment rises, the energy penalty can be reduced dramatically. Here cost pressures and

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improved environmental performance are directly aligned. So, given technological progress and a large-scale rollout, the relative collateral burdens per CCS installation will fall, although in absolute terms they will continue to increase as CCS is more widely deployed. In political terms the increased environmental burden associated with CCS figures prominently in the arguments of anti-CCS actors. Although the land-use footprint of the additional infrastructure required for CCS may appear small compared to that already required by the fossil-based energy system, opposition to the construction of new facilities and pipelines may become an obstacle to CCS deployment in particular cases. For example, public opposition to running a new pipeline through a protected area might restrict possibilities for source/sink matching. At the limit such opposition could make a specific project untenable. Thus issues to do with protecting valued landscapes, important habitat and endangered species may be important in the context of local siting battles. Resource and pollution issues related to the energy penalty acquire salience when linked to a general critique of the environmental impacts of fossil fuels – particularly continued reliance on coal. ‘Coal is environmentally destructive’ the argument goes, ‘and even when you try to capture the CO2 you end up needing yet more coal, with all sorts of nasty consequences’. Thus the large energy penalty currently associated with CCS provides two strikes against the technology: in economic terms and in environmental terms. With respect to climate risk, the issue revolves around the extent to which stored carbon remains isolated from the atmosphere over the long term. While leakage could occur at any point along the capture/transport/ injection chain (for example, rupture of a transport pipeline, or an accident at an injection well) the assumption is that such escapes would remain small compared to the overall scale of anthropogenic CO2 emissions. Provided there were no local health and ecosystem impacts, such escapes could be managed for accounting purposes by denying emission reduction credits for CO2 that never made it into the ground. But large-scale releases of stored CO2, either sudden massive releases or slow longer-term leakage, could in principle undermine the effectiveness of the climate mitigation potential of CCS (Shackley and Gough 2006). There has been some debate about acceptable leakage rates, with geologists and other physical scientists generally confident that for well-managed sites these will be extremely small (perhaps less than 0.001 or 0.01 per cent of stored volume per year), and economists broadly satisfied that with a proper accounting and monitoring regime CCS can make economic sense even if there is some leakage (perhaps up to 1 or 2 per cent per year), while environmentalists fret that unexpectedly high rates at some point in the future might ultimately undermine efforts to prevent dangerous climate change.


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The judgement of the IPCC Special Report, that for well-characterized and well-managed sites leakage rates are very likely to be less than 1 per cent in a hundred years and likely to be less than 1 per cent in a thousand years, is now routinely cited. Nevertheless, discussion continues about the viability of CCS with much higher rates; for example, rates of up to 0.5 per cent a year (50 or 500 times greater than implied by the IPCC figures cited above) were considered in a recent EU study (DG ENV 2008).1 Yet so far regulators (for example in the EU) have been wary of specifying an exact maximum rate, preferring to emphasize that storage is assumed to be permanent, while accepting that there can be no absolute guarantee that leakage will not occur. Work by a number of researchers has shown that if over time large quantities of CO2 are stored, and global emission levels are required to fall to a very small fraction of current levels, even low rates of leakage could eat up a significant proportion of future annual carbon budgets (Hawkins 2004; Wilson and Gerard 2007). Under such conditions, were the IPCC to be off by one order of magnitude (a factor of 10) in its higher-end estimation of leakage rates, CCS could have implications for annual carbon budgets by the end of the century. Confidence that large-scale leakage from CCS storage facilities is unlikely ultimately rests on two foundations. On the one hand, there is understanding of the physical properties of the geological formations that will be used for storage and of the behaviour of CO2 underground. And on the other, there is the existence of (or the potential to develop) appropriate techniques – primarily engineering techniques, but also regulatory approaches – that can ensure the integrity of long-term storage. In physical terms, CO2 can only return to the surface through specific pathways, and a variety of ‘trapping mechanisms’ act to keep it confined to the storage strata. In engineering and regulatory terms: sites will be deliberately selected for their potential to retain material indefinitely; careful modelling and monitoring before, during and after injection can confirm that the CO2 is behaving as expected; injection activities can be adjusted, suspended or stopped on the basis of monitoring results; appropriate regulatory frameworks can ensure that operators adhere to accepted procedures; clearly defined liability regimes can assign responsibility in case anything goes wrong, encouraging good practice; and remedial measures in the case of migration out of the storage formation can be planned and implemented if necessary. Experience with other large-scale technological enterprises suggest that accidents and unexpected results are more or less certain to occur at some point. Yet failures would have to be on a very large scale to have an impact on national emission inventories or global climate. Moreover, remedial

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actions are in principle possible: for example, by suspending injection at a site that was still active; by sealing leakage pathways, diverting flows and/or lowering reservoir pressure; by moving CO2 from offending sites to secure reservoirs; or by sequestering additional CO2 elsewhere (say from biomass or air capture) to mitigate the leakage. Notwithstanding this, there are at least three types of interrelated issues that must be considered in relation to the conclusion that substantial leakage is unlikely. First, there is the possibility of a basic knowledge failure. Although we think we understand the long-term behaviour of CO2 in oil and gas formations, saline aquifers and deep coal deposits, it is possible that we do not. Thus at some point in the future, perhaps fifty, one hundred, two hundred or more years from now we discover that some hitherto uncharacterized physical mechanism is allowing largescale leakages. Second, there could be failures of practical knowledge. Although in principle we understand the underground and the basic leakage pathways, in practice it proves much more difficult to correctly characterize sites, and to monitor operations, so greater volumes of CO2 escape than initially anticipated. Third, there may be significant regulatory failure. Even though we understand how it should be done, and it is entirely practical to do it this way, this knowledge may not be applied in some contexts, and we end up with poor selection of reservoirs, sloppy injection and management techniques, and inadequate long-term monitoring. Perhaps the successful early exploitation of the most secure reservoirs convinces societies to try more dodgy ones. Or financial considerations (high transport costs) encourage the exploitation of more convenient but less secure formations. Or the technologies are applied in countries where legal regimes are less secure and abuses and malpractices proliferate. In each case, problems are potentially more serious the longer they go undetected. Indeed there is a parallel here with climate change itself, where the feedback effects from the climate system are delayed by many decades. If difficulties with CCS become evident relatively early – during the first few decades of large-scale CCS operations – the potential damage would be limited, because the total volume of stored CO2 would remain small compared to the total annual anthropogenic flux. If, however, they only became manifest a century or more into a large-scale programme of CCS, they might be more difficult (and costly) to manage. It should be emphasized that the overwhelming majority of those with serious scientific understanding of the underground believe that if CCS is done properly, leakage is not going to be a big problem. Still, knowledge about the behaviour of large volumes of injected CO2 over the long term is necessarily limited. Although quite a lot is known about oil and gas


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formations, less is known about deep saline aquifers, because until recently there has been no direct economic benefit to acquiring such knowledge. So a degree of caution must be exercised when drawing conclusions from a relatively small number of experiments with CO2 injection over limited time spans. And we must recognize that residual risks will remain should we store very large quantities of CO2, especially cumulative amounts that represent tens or hundreds of times anticipated annual emissions under possible stabilization scenarios. What does recognizing this leakage risk imply? First, that there is a need to ensure that if CCS is done, it really is done right: as the IPCC Special Report insists, sites must be carefully chosen and well managed. Appropriate technological and regulatory options must be deployed and provision must be made for long-term monitoring and aftercare. This will minimize leakage risks, and provide prompt feedback should problems be detected. And on this basis it will be possible to deal with the specific impacts and draw lessons for other sites. Second, it means that CCS cannot be considered a ‘bury and forget’ technology. Societies cannot simply inject CO2 into the ground and walk away. Instead, there will be a need over the long term to keep track of storage sites, monitor developments underground, identify any movement of CO2 outside storage formations, and perhaps to institute mitigation measures. In other words, by undertaking CCS, society assumes a longterm responsibility for managing the stored carbon. Such management might imply site-specific action, ongoing biomass sequestration or air capture, and adjustments of continuing emissions. The real significance of that burden (in terms of monitoring and mitigation requirements) may be very small or very large, and its ultimate parameters (including where in time the costs fall) may not be clear for a very long time. Of course, after 200 years of economic development based on fossil fuels we are already committed to long-term climate management: to deliberately changing patterns of human activity to influence future climate development. But storing large quantities of carbon adds an additional dimension to this task. Thus CCS necessarily entails some intergenerational transfer of risk. There is a risk that human beings (and ecosystems) will be harmed in the distant future (in hundreds or perhaps even thousands of years) because of decisions taken today about CCS. The effect of current actions on futurity is a staple of political debates around climate change, biodiversity loss and other environmental issues. Arguments about the long-term management of high-level nuclear waste have posed some of these dilemmas particularly clearly: there are worries about causing harm in the distant future, about the kinds of institutions that can manage environmental burdens

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that will last longer than modern civilization has endured, and of means of communicating danger to people in the far distant future. Despite the significant differences between the substance being sent for underground storage (CO2 and nuclear waste) and the very different sorts of long-term risks they entail, there are some parallels here. Of course, the risk transferred to the future with CCS should be far less than the direct emission of the corresponding quantity of CO2 into the atmosphere. But it will be more than never having created the fossil fuel-derived CO2 in the first place. This suggests that society should not be entirely neutral as between (a) the non-creation and (b) the non-emission of a given volume of CO2. Since any stored CO2 poses some residual climate risk, and more stored CO2 poses a greater risk, it is somewhat better never to have created that fossil fuel-derived CO2 in the first place. In political terms, issues of liability and long-term stewardship are likely to remain entangled with arguments over other dimensions of CCS. At the moment, regulatory efforts are concentrated on establishing a basic framework for liability, especially the sharing of responsibility among private and public actors. The dilemma is that a regime that imposes too harsh terms on private firms will discourage the commercial development of CCS, while one that is too lax will encourage operators to run too many risks, leaving governments and taxpayers to pay for the resulting problems. It is generally accepted that governments will ultimately assume responsibility for storage sites – but the time frame and terms under which liability will be transferred remain to be determined. Detailed arrangements for long-term stewardship (monitoring and possible remediation) are not a current priority: after all storage sites are expected to remain active for decades and CCS has not even really got underway. We know from the example of nuclear power that it is possible to fudge such arrangements for quite a while. Nevertheless, the experience with nuclear power – particularly the way in which the unresolved waste issue contributed to a quarter of a century of paralysis in the expansion of nuclear generation in the developed world – suggests that establishing some basic framework on this issue may be important to winning broad public acceptability for CCS, and preparing the way for any rapid roll-out. Critical here will be arrangements for long-term monitoring and financial mechanisms to provide resources should they be needed for remediation in the future. Although the broad lines of approaches to manage the risks associated with CCS have been sketched out in major studies by international groups, and elaborated more concretely in draft regulations that are being promulgated by an increasing number of jurisdictions (European Council 2009),2 there are still many details concerning the governance of CCS, physical


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and intellectual property rights, and liability that remain to be hammered out in coming years.

3

CCS AND FUTURE TECHNOLOGICAL TRAJECTORIES

It is now fairly common to point to the uncertainties which confront business and policy makers contemplating decisions related to the development and deployment of CCS. Elements on this list include the structure of the regulatory environment, the lack of information on costs, and concerns over public acceptability. Uncertainties on the regulatory side are being addressed by developing rules for the conduct of CCS operations, clarifying property rights, establishing transparent liability regimes, and so on. Uncertainties over costs are to be tackled by building demonstration plants that will prove the technology at scale, provide data on the operation of integrated facilities, and initiate learning by doing. Additional publicly financed R&D and government support for CO2 transport infrastructure can further reduce cost uncertainties. Meanwhile public acceptability is to be tackled by education on the nature of CCS technology, organized discussion over the opportunities and risks presented by CCS, and the design of appropriate regulatory frameworks. But the doubts that swirl around CCS must be understood in the broader context of uncertainties about the societal response to climate change and the long-term evolution of major socio-technical systems. In the first place, there are core uncertainties associated with the unfolding policy response to climate change. These are influenced by many factors, including how rapidly and significantly climate change impacts on societies, the further deepening of scientific understanding about climate change, and the progress of international negotiations on mitigation and adaptation. As we have argued throughout this volume, CCS makes sense as a response to a very particular societal dilemma: a coupling of the realization that GHG emissions pose grave risks to the global climate system with a need (or a desire) to continue exploiting fossil fuels. In this context it is worth noting that as compared to other energyrelated climate mitigation technologies, CCS is distinctive. The sole function of CCS – as a complex and costly technological system – is to prevent CO2 emissions from combustion and other industrial processes reaching the atmosphere (or perhaps one day also to take CO2 that has already been released out of the atmosphere, through biomass emissions sequestration or direct air capture). In other words, CCS is a pollution control technology (and perhaps one day an environmental remediation technology): one

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that is intended to fix (what we now appreciate to be) a critical flaw in established production systems. Were we suddenly to learn that CO2 emissions were not a problem, and that there is no human-induced climate risk, there would be no reason whatsoever to deploy CCS. But if (a) climate change is a worry, and (b) you want to go on using fossil fuels, then (c) CCS makes sense. In contrast, other energy-related mitigation alternatives provide their abatement potential as a byproduct of a (non-climate-focused) primary functionality. For example, nuclear generation facilities provide electricity as a primary good. Conveniently, nuclear power produces no (direct) CO2 emissions. But nuclear plants were commissioned for decades before their ‘climate-friendly’ credentials came to the fore. The same is true for wind energy and photovoltaic power systems: they had been developed and deployed as renewable power generation technologies (with their own distinctive advantages and disadvantages) for decades before their low carbon profile attracted further attention. Even in the case of energy efficiency improvements, CO2 emission abatement is a byproduct of innovations that increase the potential for useful work from a given resource input. So energy efficiency improvements have long been advocated for reasons other than carbon abatement: particularly cost and resource savings and energy security. Thus CCS is essentially an adjunct technology: an emissions abatement option that only makes sense in the context of primary production facilities with which CCS is coupled. In other words, CCS is most appropriately considered as part (a pollution control component) of a larger system, say one with the purpose of generating electricity. Thus we can compare the benefits and costs of a CCS-equipped fossil fuel power plant with a conventional fossil fuel plant, or with alternative generation technologies such as nuclear or wind. Then the social advantages and disadvantages of these systems can be contrasted, including economic issues (costs, job creation, regional development and so on), environmental dimensions (CO2 emissions, additional environmental loadings), and other factors (security, reliability and so on). And as soon as CCS enters practical political and policy debate this is exactly what happens: it becomes part of broader reflection about the desirability of building new coal-fired generation capacity in the UK, or gas-fired power stations in Norway, or accelerating oil sands development in Canada. One consequence of the particularity of CCS as a pollution control technology is that many of those who might be closely associated with the new technology face split incentives. For example, companies operating coal-fired power plants, and those supplying the coal (as well as other economic interests dependent on these industries) would ultimately stand to


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gain if CCS technology is available when the legal (and/or cost) constraints on carbon emissions are significant. Assuming that climate change policy tightens, at some point in the future it will be impossible to continue with traditional coal-fired electricity generation. And at this point, perfected CCS systems with reduced costs and risk profiles, established regulatory frameworks and an accepting public, would benefit these interests. On the other hand, from the standpoint of the present, CCS represents a major net cost and complicating factor for power generators, adding risks and uncertainties to their businesses. It increases capital and operating costs; it introduces new risks that must be managed – dangers of leakage, securing long-term access to storage, and so on. In a situation where the carbon constraint is rigid, CCS would be appealing; in a situation where the carbon constraint is soft, it makes sense to defer deployment of CCS as long as possible. In other words, the motto for these interests seems to be: ‘CCS when absolutely necessary; but surely it is not necessary quite yet’. And this means that while groups associated with alternative generation technologies (wind, solar, geothermal, nuclear and so on) are unabashed advocates of their own technological options, many of the interests that might ultimately benefit from CCS are not yet vigorous advocates of practical steps to accelerate the arrival of the technology. For although they may want this technology to be available in the future, and are happy to use this future potential to justify expanding operations today (‘capture ready’ with current technologies), they are in no hurry to see CCS become the technological baseline for their industry. Thus the stringency of climate policy is critical for the development of CCS, and uncertainties about the politics behind this policy cast a pall over CCS. Without a hard emissions constraint, CCS is not going to pass from an RD&D curiosity into full-scale commercial deployment. In policy terms, a hard constraint means either a firm regulatory mandate or a significant and progressively increasing carbon price. The strength and timing of that regulatory/price constraint will influence the timing of initial CCS deployment (as will the scale and timing of focused government support for demonstration plants). Developments over the past decade suggest that international climate policy will be hardening. There is some indication that the science community is prepared to play a more active role in communicating climate risks to the general population. The current US administration is committed to a domestic cap-and-trade system. And recent studies suggest that, if anything, IPCC reports may have understated the pace of warming and the risks faced in the coming century. Arctic sea ice is being lost more quickly than anticipated, and figures for possible sea-level rise are being revised upward. Evidence of ecosystem stress is accumulating, as is concern of

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massive species loss due to rapid warming. And recent modelling from the UK suggests that even if global emissions peak by 2015, and fall at 3 per cent a year thereafter, there is only an even chance of avoiding a temperature rise of more than 2°C by the end of the century. Meanwhile there is some evidence that the costs of mitigation may be somewhat less than initially assumed. All this suggests that over time, climate regulations will get stronger. But countervailing tendencies remain: powerful interests still deny the urgency of action; obstacles to successful international agreements are substantial; and the extent to which the 2008/09 economic crisis will linger (drawing attention to other societal priorities) remains unclear. Even within the context of a vigorous international climate mitigation effort, and strong political support for CCS (from key economic sectors, governments and international organizations), it remains far from certain how CCS will develop. This is in part about the technological potential of CCS itself. For example, how rapidly can the technology advance? Which capture approaches will prove most successful? How quickly and how far can costs come down? How reliable are installations? How low are full life-cycle emission reductions? But it relates also to the development of competing energy/climate-mitigation technologies including renewables, energy efficiency and nuclear power. And these are linked also to the evolution of energy transmission and storage systems, and to the future of the transport sector. In each case there are possible technological limitations and opportunities. But social, political and regulatory factors will influence which of many alternatives for energy supply and climate mitigation actually materialize. Choices made by governments and businesses, and by individuals as consumers and as voters, will influence the evolution of the socio-technical systems for energy provision. Thus the social reception of such technologies really matters: how CCS is viewed by decision makers and the public, how successfully it is incorporated in business models, and how CCS (coupled with coal, oil, gas or biomass) is seen to stack up against alternative energy/climate-mitigation approaches. In Chapter 1 we pointed to four strategic pathways through which CCS could contribute to climate change mitigation: (i) reducing emissions from large point sources in power generation and other industrial sectors; (ii) controlling emissions from the transport sector through the electrification of transport (or the use of hydrogen as an energy carrier); (iii) capturing emissions from biomass to draw down CO2 from the atmosphere; and (iv) direct air capture. The discussion of CCS in this volume, as in most political (as opposed to technical) contexts to this point, has focused on the first of these pathways. From a technical perspective, CCS deployment in the transport sector would not differ substantially: emissions would be trapped at fossil power


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plants or hydrogen production facilities, and transported and stored with CO2 from other sources. Such an application would be of considerable strategic significance considering the almost total dependence of transport on fossil energy. But it would demand a fundamental transformation in the automotive sector – with a move to hybrid electric, electric or hydrogen vehicles – and the timing and orientation of such a change remains hard to anticipate. Nevertheless, for the first time in nearly a century an opportunity fundamentally to change power systems in the automotive sector appears to be emerging. Climate concerns, high fuel costs, a major economic downturn, and emerging automotive producers with less invested in the previous technological paradigm, have opened the possibility of a significant shift away from current fuel/engine combinations. But there are many contenders and it is unclear whether the medium-term future lies with plug-in hybrids, all-electric or hydrogen vehicles, biofuels, or with more-efficient internal combustion engines. Advances in battery technology, compatibility with existing infrastructure, and the possibility of incremental progress from existing designs suggest that plug-in hybrids and/or electric vehicles have real potential. But established technologies are typically hard to dislodge, so several more decades of petroleum-driven automobiles (perhaps blended with biofuels) remain possible. A shift to electric vehicles might be a boon for CCS as coal-fired power generation might expand (even as demand for oil as an end-use transportation fuel fell). But changes to the electric system (for example, using electric vehicles as a storage device) might also ease the way for renewables. The application of CCS to biomass co-fired with fossil fuels could improve emissions abatement, but CCS with dedicated biomass facilities is of particular strategic interest because CO2 would in effect be drawn down from the atmosphere. Such a technological trajectory provides a backstop against emissions overshoot, allowing societies to partially reverse the accumulation of historic emissions. It might also be useful to mitigate ongoing leakage from problematic CCS storage sites. Nevertheless, current data suggest that largely because of the smaller scale of biomass facilities, such approaches might be twice as costly as CCS on coal-fired plants (IEA 2008, p. 45). Finally, direct air capture would break the link between the sites where emissions are generated and captured, removing the need for transport infrastructure. Today costs seem prohibitive, but it remains a prospect for the future. Scenario work on CCS has explored widely differing deployment trajectories. Two scenarios are included in a recent IEA report on CCS (2008). In the ACT Map scenario – which by 2050 returns global emissions only to 2005 levels – the carbon price rises to $50 a ton by 2030, and CCS accounts

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for 14 per cent of the total abatement effort by 2050, with 5.1 GtCO2 a year sent to storage by this point. The more ambitious BLUE scenario assumes a 50 per cent reduction in energy-related CO2 emissions from 2005 levels by 2050. Here the carbon price rises to $50 a ton by 2030 and $200 a ton by 2040. CCS would then account for 19 per cent of the total global abatement effort in 2050 with 10.4 GtCO2 stored annually. By this date the bulk of CCS would be occurring outside OECD states. Most coal plants and half of the gas-fired power plants would incorporate CCS. It would also be employed in other industrial operations, and applied to some biomass. Note that by 2050 the quantity of CO2 sent to storage each year would be equivalent to more than 70 per cent of the CO2 actually emitted to the atmosphere. In discussing these scenarios, IEA authors emphasize the serious obstacles to deploying CCS at such a pace, and suggest that even the modest ACTMAP scenario would be difficult to achieve. Yet there have been much more ambitious projections for the CCS potential. For example, using variants of IEA scenarios and modelling a 50 per cent reduction in emissions by 2050 (from 2005), Bellona has suggested that 37 per cent of the global emissions reduction could be carried by CCS, resulting in 16 Gt stored annually by 2050 (Stangeland 2006). Interestingly, at this point the CO2 sent to storage each year would surpass energy-related releases to the atmosphere. In complete contrast to this perspective, the Greenpeace/European Renewable Energy Council report discussed earlier assumes a similar scale of emission reductions (although vastly different energy consumption) without any CCS component at all. Discussion of CCS often comes back to balancing costs. On the one hand, there are the financial incentives provided for carbon abatement: what will be the price of emissions avoided at a particular point in time? And this relates in part to the political uncertainties discussed above. On the other hand, there is the cost of carrying out CCS. Although there has been a lot of analysis on cost issues, much remains unclear. The IPCC Special Report summed up the state of knowledge at the time it was issued – but its estimates bracketed a substantial range. Since this time the energy sector has passed through a boom and then a crash. Moreover, companies negotiating with government for support of CCS projects have an interest in keeping cost data somewhat obscure. So for now the cost situation remains relatively opaque. That said, however, the suspicion must be that initial CCS development and deployment costs will be high. Indeed, a number of recent projects have been cancelled or put on hold because of cost concerns. Escalating costs are relatively common for new technologies, as various incentives encourage promoters to underestimate final costs. And yet, over time, with learning and scale effects costs can come down. Absolute costs are


293

important, because they indicate the level of resources (from companies, investors, governments or society as a whole) that may be required to achieve a given climate mitigation impact. But relative costs – costs in comparison to other mitigation alternatives – matter even more. Current estimates suggest that CCS is viewed to be among the more expensive abatement options (requiring a relatively high carbon price to become attractive) (IEA 2008; McKinsey & Company 2009). But as cheaper alternatives exhaust their abatement potential, CCS appears more attractive. And emission reduction strategies that allow it to be part of the mix appear to be lower in overall costs than those that exclude CCS a priori. One recent German study offers an integrated comparison of CCS and renewable energy technologies, concluding that if renewables continue to develop at the rapid pace seen in recent years, a renewables portfolio should be able to match the CCS price per ton avoided by the time commercial CCS-equipped coal-generating plants are coming on-stream (post-2020). And some renewable technologies (such as offshore wind) may at that point already be able to offer electricity at cheaper rates. Looking forward to 2050, renewables would be expected to be competitive with CCS unless ‘fuel price rises were to be very small or cost reductions in the CCS process were to surpass foreseeable effects’ (Wuppertal Institute 2009). On the other hand, in the area of hydrogen production, fossil fuels (with CCS) would be expected to maintain a price advantage for several decades. Thus even in the context of an active climate policy and a rising cost of carbon emissions, the prospect for CCS remains unclear. Consider three possible alternatives for the fate of CCS half a century into the future (2060) in a world which has reduced emissions by perhaps half from current levels: 1.

CCS as a core technology in a fossil-based global energy system Here the maxim ‘fossil fuels will continue to provide the bulk of the world’s energy supply for many decades to come’ turns out to be spot on. Fifty years from now CCS is deployed widely in the energy sector and beyond. In some ways this future most closely resembles an extension of the current energy system. It rests on the continued large-scale use of, and international trade in, fossil fuels including oil (increasingly from unconventional sources, such as oil sands and shales, the deep offshore, and the ice-free Arctic), coal, and perhaps other resources (such as methane hydrates). Although renewables have continued to develop, issues such as high costs, intermittency and scalability have slowed market penetration. On the other hand, CCS costs have come down significantly as learning effects have played out and more

294

2.

3.

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advanced capture technologies have become available. Centralized energy provision remains the norm, and while the road transport sector may have shifted towards electric vehicles or hydrogen, much of the energy continues to come from fossil sources. Although a portfolio of GHG mitigation approaches have been applied, CCS is at the strategic core of the effort to control emissions because it allows the continued large-scale use of fossil fuels in a carbon-constrained world. CCS as a nationally or regionally significant technology in a mixed energy world Here CCS is of critical importance for certain regions and countries, which continue to rely on fossil fuels for significant energy supplies and/or income flows. But the world energy system as a whole has diversified, with an increasing number of countries or regions largely decoupled from fossil energy systems. Alternative technologies including the full array of renewables are moving towards centre stage. CCS prices have come down, but not enough to provide a decisive advantage except in regions with substantial fossil resources. Large-scale renewable technologies (such as solar thermal, massed photovoltaic arrays and offshore wind with storage, or deep geothermal) can provide centralized electricity generation capacity. Major investments in grid technology allow the movement of power over large areas. Alternatively, in some regions, more decentralized generation models many have taken root with cogeneration, biomass, wind and photovoltaics playing an important role. So while CCS is central in regions which have remained on a fossil fuel-based industrial trajectory, elsewhere it has less traction. CCS as a niche technology in a world turning towards non-carbon energy systems Here CCS develops as a more specialized and focused technology that is used in contexts where fossil fuels cannot be avoided, and in industrial processes where technological innovation has not yet found ways to avoid producing CO2. In this future large-scale application of CCS to fossil-fired power plants never really took off. It may be that CCS costs proved more stubborn than currently anticipated. Opposition to new coal plants and/or resistance to CCS itself (perhaps resulting from an accident) may have held back development. Or delays in early commitments by governments and businesses may have allowed other technologies (renewables or nuclear power) to advance more rapidly. Yet even in a world where CCS has not extended the absolute dominance of fossil fuels, it may be looking forward to a promising career as a long-term climate mitigation technology when combined with biomass as part of an effort to draw down CO2 from the atmosphere.


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Each of these options presents a plausible future for CCS where the interaction of various factors helps determine its fate. As we have seen, the precondition for CCS development and deployment is a serious mitigation effort. But even then, without specific support from governments, and the timely resolution of issues related to regulation, cost uncertainties and public acceptance, it may remain for some time little more than a curiosity – with ongoing research, impressive demonstration facilities, but little commercial deployment.

NOTES 1. For example, 0.5 per cent per year rather than the IPCC’s 0.01 per cent or 0.001 per cent. 2. For an inventory of recent regulatory initiatives see the UCL Carbon Capture Legal Programme at http://www.ucl.ac.uk/cclp/ccsover.php

REFERENCES Accept (2007), ‘Regulatory issues: managing environmental risks of carbon dioxide storage’, Deliverable 3.3. DG ENV (2008), ‘Carbon capture and storage: how much leakage is acceptable?’, Science for Environment Policy: DG Environment News Alert Service, 105, May 2008. European Commission (2008), ‘Impact assessment accompanying the proposal for a directive of the European Parliament and of the Council on the geological storage of carbon dioxide’, official Document. European Council (2009), On the Geological Storage of Carbon Dioxide, Directive 2009/31/EC, Brussels. Greenpeace (2008), False Hope: Why Carbon Capture and Storage Won’t Save the Climate, Amsterdam: Greenpeace International. Greenpeace and EREC (2008), ‘Energy [R]evolution: A Sustainable Global Energy Outlook’, report issued by Greenpeace International and the European Renewable Energy Council. Hawkins, D. (2004), ‘No exit: thinking about leakage from geological carbon storage sites’, Energy, 29: 1571–8. Hellin, M. (2008), ‘Carbon capture and storage: technology, discourse and politics, unpublished Master’s Research Essay, Carleton University, Ottawa. IEA (2008), CO2 Capture and Storage: A Key Carbon Abatement Option, Paris: OECD/IEA. IPCC (2005), IPCC Special Report on Carbon Dioxide Capture and Storage, IPCC Working Group III, Cambridge: Cambridge University Press. McKinsey & Company (2009), ‘Pathways to a Low Carbon Economy’, available at http://www.mckinsey.com/clientservice/ccsi/pathways_low_carbon_economy.asp (accessed 14 September 2009). Murphy, R. and M. Jaccard (2008), ‘Geological carbon storage: the roles of government and industry in risk management’, in Glen Toner (ed.), Innovation,

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Science and Environment: Canadian Policies and Performance 2008–9, Montreal: McGill-Queen’s University Press, pp. 151–67. Rechsteiner, R. (2008), ‘Wind Power in Context – A Clean Revolution in the Energy Sector’, Energy Watch Group/Ludwig-Boelkow-Foundation. Reiner, D. and H. Herzog (2004), ‘Developing a set of regulatory analogs for carbon sequestration, Energy, 29: 1561–70. Shackley, Simon and Clair Gough (2006), Carbon Capture and its Storage, Aldershot, UK: Ashgate. Stangeland, A. (2006), ‘A model for the CO2 capture potential’, International Journal of Greenhouse Gas Control, 1 (4), 418–29. Wilson, Elizabeth and David Gerard (2007), Carbon Capture and Sequestration: Integrating Technology, Monitoring, Regulation, New York: Wiley-Blackwell. Wuppertal Institute (2009), ‘Ecological, economic and structural comparison of renewable energy technologies with carbon capture and storage: an integrated approach’, Wuppertal Institute for Climate, Environment and Energy.

Index business see individual jurisdictions Business Council of Australia (BCA) 57‒8, 64

acceptability of CCS see public acceptability air capture 10, 284, 285, 290, 291 Alberta 76, 77, 78, 79, 83‒5, 86‒90, 92‒5, 239, 254, 255, 256, 258, 259, 280 anti-coal movements 37‒8, 41, 45, 126‒7, 149, 178‒80, 260, 271 Asia Pacific Partnership on Clean Development and Climate 42, 56, 236, 237 Australia 50‒74, 79‒80, 238, 245‒62 business 54‒6, 57‒8, 63‒5 climate policy 52‒7 environmental organizations 59, 67‒9, 70‒71 parties 60‒62 states 62‒3 Australian Business Roundtable on Climate Change 58, 64, 68 Australian Conservation Foundation 58, 68, 71 Australian Industry Greenhouse Network (AIGN) 54‒7, 58, 59 Australian Labor Party (ALP) 58, 59, 60 Australian Petroleum Production & Exploration Association 65 Bellona Foundation 13, 99, 107‒9, 110, 112, 114, 115, 116, 119, 230, 241, 292 biomass and CCS 10, 43, 167, 170, 201, 284, 285, 290, 291, 292, 294 Bondevik government (Norway) 111‒15, 240 British Columbia 76, 77, 91, 254, 260 Bush administration 30, 31, 32, 39, 42, 56, 60, 85, 94, 236, 237, 256, 268

California 28‒9, 34, 35, 40, 43, 86, 87, 91, 92, 260, 262 Canada 75‒97, 239‒40, 245‒62 business 87, 89 climate policy 79‒85, 91‒3 energy policy 76‒8 environmental organizations 90‒91 provinces 83‒4, 85‒7, 94 capture ready 14, 41‒2, 110, 162, 164, 170, 173, 174, 178‒80, 195, 197, 226, 243, 244, 259, 260, 269, 271, 289, Carbon Capture and Storage Taskforce (Australia) 70 Carbon Capture and Storage Task Force (Canada) 88 Carbon Capture and Storage Task Force (Netherlands) 191, 194, 199, 200, 201, 202, 204, 207 carbon ‘lock in’ 150, 174, 186, 204‒7, 260, 280 Carbon Sequestration Leadership Forum (CSLF) 6, 42, 66, 236 Carbon Sequestration Regional Partnerships 31 CATO programme (Netherlands) 186, 198‒9, 200, 202, 207 Chrétien government (Canada) 80, 85 ‘clean coal’ 30, 31, 33, 41, 56, 61, 65, 68, 87, 131, 141, 146, 163, 167‒71, 268, 271 Clean Development Mechanism (CDM) 14, 145, 187, 189, 247 climate and energy package (EU) 218‒21 climate policy 246‒54 see also specific jurisdictions

297

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climate risks see environmental impacts and risks of CCS CO2CRC see Cooperative Research Centre for Greenhouse Gas Technology coal-fired power stations 40‒42, 126, 133‒8, 160‒61, 175‒7 Coal Research Establishment (UK) 167 Committee on Climate Change (UK) 163 Cooperative Research Center for Greenhouse Gas Technology (CO2CRC) (Australia) 65‒6, 70 Department for Business, Enterprise and Regulatory Reform (BERR) (UK) 164, 165, 167, 171, 172, 176, 178 Department of Energy (DoE) (USA) 31‒3, 34, 38 Department for Environment, Food and Rural Affairs (Defra) (UK) 164, 165, 167, 171 Department of Primary Industries and Energy (DPIE) (Australia) 54 Department of Trade and Industry (DTI) (UK) 165, 167, 168, 169, 170 Emissions Trading System (ETS) (EU) 162, 177, 178 181, 190, 194, 195, 197, 200, 202, 205, 206, 226, 229, 230, 230, 233, 234, 245, 276 energy policy see separate jurisdictions energy security 8, 17, 25, 33, 41, 87, 126, 127, 133, 139‒41, 142, 148, 149, 150, 151, 158, 159, 161, 162‒3, 165, 166, 169, 212, 214, 215‒18, 226, 232, 236, 238, 242, 245, 256, 257‒9, 262, 272, 288 enhanced oil recovery (EOR) 104, 106, 115‒20, 143, 169‒70 environmental impacts and risks of CCS 3‒4, 280‒87 environmental organizations 13‒14 see also separate jurisdictions and organizations Environmental Protection Agency (EPA) (USA) 34

European Parliament 205, 213, 214, 220, 221, 228‒32, 233, 234, 244, 245 European Union 211‒36, 244, 245‒62 CCS directive 225‒6 climate change policy 217‒21 energy policy 211‒17 environmental groups 223, 231‒2 Foreign and Commonwealth Office (FCO) (UK) 164, 171, Free Democratic Party (FDP) (Germany) 140, 148 FutureGen project (USA) 30, 31, 56, 66, 237 gas-fired power stations and CCS 106‒11 Germany 125‒57, 241‒2, 245‒62 business 143‒6 climate policy, 130‒33, 149 electricity ‘gap’ 139, 142, 149 energy policy 127‒30, 149‒51 environmental organizations 141, 142‒3, 148, 151 federal ministries 146‒9 parties 140, 148‒9 greenhouse gas emissions 26‒9, 52‒3, 81‒3, 246‒54 see also climate policy Greenpeace 13‒14, 38, 67, 71, 91, 110, 116, 142, 148, 171, 174, 179, 181, 186, 195‒6, 199, 204, 205, 206, 208, 228, 231, 275, 292 Harper government (Canada) 87, Howard government (Australia) 50, 53‒7, 58, 60, 68, 238, 248 industrial actors 36‒7, 63‒5, 87, 89, 105, 111‒12, 115, 119, 143‒6 Integrated Energy and Climate Programme (IECP) (Germany) 131, 132, 133, 136, 142, 150, 241 Intergovernmental Panel on Climate Change Special Report on CCS 5‒7, 8, 9, 38, 42, 139, 201, 241, 246, 267, 283, 285, 292

Index internal energy market (EU) 212‒14, 215 IPCC see Intergovernmental Panel on Climate Change Jagland government (Norway) 109‒10, 111 Kansas 35, 40 Kyoto Protocol 27, 29, 52, 53, 55‒9, 60, 79‒85, 102‒3, 104, 109, 112, 131, 139, 167, 168, 187, 189, 246‒54, 268 leakage, CCS see environmental impacts and risks of CCS lock in see carbon ‘lock in’ Members of the European Parliament (MEPs) (EU) 229, 230, 232, 234 Ministry of Economic Affairs (EZ) (Netherlands) 188, 191, 199, 203 Ministry for the Economy (BMWi) (Germany) 146‒8, 151 Ministry for Education and Research (BMBF) (Germany) 146, 147 Ministry for Environment, Nature Conservation and Nuclear Energy (BMU)(Germany) 146‒9 Ministry of Housing, Spatial Planning (VROM, Netherlands) 188, 191, 204, 243 Montana 35 National Energy Technology Laboratory (NETL) (USA) 31, 38 Netherlands 186‒210, 243‒4, 245‒62 climate policy 187‒91 coal power plants 195‒98 environmental organizations 204 regional development and CCS 192‒4, 200‒201 research 198‒9 Norway 98‒124, 240‒41, 245‒62 business 105, 111‒12, 115, 119 climate policy 101‒4, energy policy 99‒101 environmental organizations 107‒9, 112, 116, 119

299

gas fired power plants and CCS 106‒11 offshore oil and gas and CCS 104‒6 parties 103, 111‒17 Norwegian Confederation of Trade Unions (LO) 110, 113, 119 Norwegian Pollution Control Authority (SFT) 104, 106, 109, 110, 112 Obama administration 27, 28, 32, 39, 43, 44, 45, 94, 237 oil sands (Canada) 76, 77‒9, 84, 86, 87, 92, 94, 95, 239, 240, 252, 255, 256, 258, 288, 293 opposition to CCS 38, 45, 126, 151, 173, 174, 180, 181, 195, 228‒9, 231, 260, 271‒2 political parties see individual jurisdictions provinces see Canada public acceptability 5, 12‒14, 16, 43‒4, 91, 93, 162, 173‒5, 201‒4, 278, 286, 287 Regional Greenhouse Gas Initiative 28 regulatory issues and frameworks 11‒13, 33‒5, 61‒3, 87‒9, 91‒3, 110, 147‒8, 225‒6, 227‒8, 231‒4 research, development and demonstration (RD&D) 23‒4, 30, 31‒4, 65‒7, 69‒70, 88‒9, 94, 146‒7, 164‒71, 175‒7, 198‒9, 222‒5, 227 research organizations 65‒7, 89, 198‒9, 222‒5 risks see environmental impacts and risks of CCS Rotterdam Climate Initiative (RCI) 192‒5, 200, 204, 205, 244 Rudd government (Australia) 58, 60, 61, 68 Saskatchewan 6, 86, 87, 89, 94, 95, 254, 256, 258, 259 security of supply see energy security Sleipner (Norway) 5, 66, 98, 105‒6, 170, 223, 241

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societal acceptance of CCS see public acceptability states see individual jurisdictions Stoltenberg government (Norway) 103, 113, 116, 118 story lines 269‒80 Supreme Court (USA) 41 sustainable energy policy 17‒18 technological innovation 23‒4 technological trajectories, future 287‒95 technological ‘winners’ 166, 278 ‘transitional’ technology, CCS as 68, 69, 72, 150‒51, 203, 238, 271, 278‒9 United Kingdom 158‒85, 242‒3, 245‒62 business 172, 175 climate policy 163‒4 energy policy 159‒64 environmental organizations 174‒5 innovation policy 165‒71

United States 22‒49, 237‒8, 245‒62 climate policy 26‒29 coal and politics 40‒42 energy policy 24‒6, 33‒4 environmental groups 37‒8 federal CCS initiatives 30‒34 public perception and communication 43‒4 state CCS initiatives 35 Weyburn project (Canada) 6, 89 World Commission on Environment and Development 101, 240 Worldwide Fund for Nature (WWF) 68, 70, 71, 141, 142, 148, 199, 231, 243 Zero Emission Fossil Fuel Power Plants (ZEP) (EU) 144, 222‒5 Zero Emissions Resource Organization (ZERO) (Norway) 116, 119, 241

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