A draft communication, seen by EurActiv, spells out plans to raise between €300 and €550 million of public financing, depending on the used combustion technology, to build a near zero-emissions coal plant.
The Commission says it has earmarked €60 million from the EU's Environment and Natural Resources Thematic Programme for clean coal cooperation between 2009 and 2013 to finance the Chinese project. A small proportion of this, around €3 million this year, will be used for cooperation with other emerging economies.
The draft document states that up to an additional €50 million could be made available for the design and construction of a carbon capture and storage (CCS) demonstration plant in China, if there is "continued political support from China and satisfactory progress with the NZEC project".
The Commission is proposing to establish a public-private partnership in the form of a "special purpose vehicle". This mechanism would enable public and private funding to be combined, while ensuring that public donors can set out policy objectives, the EU executive argues.
Focus on China
The Commission explained that it was targeting China for clean coal technology development due to the country's heavy reliance on coal and the advanced stage of existing cooperation.
The Commission argues that there is an urgent need for technologies like CCS in China, which gets 70% of its energy from coal. In 2007 alone, China built the equivalent of one 500MW coal-fired power plant every two-and-a-half days, according to the International Energy Agency (IEA).
Moreover, the EU and China made a political commitment back in 2005 to develop and demonstrate near-zero emissions coal technology in both regions by 2020.
Cooperation is set to enter a second phase next year, moving from initial research to determining the site's location and the combustion and capture technologies to be used, as well as the transport and storage concepts. For the next two years, the Commission plans to develop a financing model in consultation with the European Investment Bank (IEB) in order to have the plant up and running well before the 2020 deadline.
CCS in the global climate agreement
The EU intends to push CCS in international negotiations due to culminate in December with the adoption of a global climate treaty. It wants to see the technology eligible for financing both during the remainder of the Kyoto Protocol, which expires in 2012, and beyond that date under the new regime.
The Commission paper suggests putting in place a sectoral mechanism as an alternative to the UN Clean Development Mechanism (CDM), which provides carbon credits for companies undertaking emission-reduction projects abroad.
The scheme would only generate credits once the sector performs better than an agreed benchmark, giving companies an incentive to go the extra mile to finance CCS, the Commission believes.
The EU executive sees the CCS demonstration project in China as a model for other technology collaboration between industrialised and developing countries in the framework of a post-2012 climate change agreement.
However, environmentalists in particular have raised the alarm over funding clean coal, saying it could jeopardise sustainable development in emerging economies in the longer term.
"We believe that instead of supporting China further in the development of real solutions, which would be renewables and efficiency, the Commission is now putting EU taxpayers' money into technologies that promote the further use of coal, which is not only the most polluting energy source, but is also conserving the outdated energy model," said Frauke Thies, Greenpeace's renewables policy campaigner.
She argued that the EU would have a hard time convincing the Chinese government to take up CCS on a large scale because it is difficult to control and comes with a high price tag and efficiency losses.
"It seems a more reasonable and convincing strategy to support China's investment in renewables, most of which are already cheaper than CCS," Thies stated.
