The assessment is based on projects that have been presented to the Commission so far.
Speaking at a stakeholder meeting in Brussels, a Commission official stressed, however, that there would be no upfront earmarking of money between CCS and renewables when the 300 million allowances, set aside in a so-called 'new entrants reserve', are allocated. Instead, funds will go to viable projects only.
The new entrants reserve is intended to pay for the incremental investments that utilities make in CO2 capture facilities, or for setting up renewable energy projects that are not yet commercially viable. As the ETS puts a price on CO2, the free allowances thus become direct subsidies to industries, provided that they share their knowledge with new businesses to get pioneering technologies off the ground on a commercial scale.
The issue at stake now is ensuring that the reserve generates the maximum amount of money, and that criteria are set for determining where it is allocated.
As one observer pointed out yesterday after the meeting, it is still early days in the debate, with different interest groups lobbying for as much money as they can. While the electricity industry called for clear priorities on CCS, environmentalists in particular have pointed out that only a clear shift to renewable energy can halt dangerous global warming.
Setting the 'right' criteria
The Commission is facing a difficult task in presenting fair criteria for allocating the allowances, as the scale of CCS and renewables differs widely. For each group of low-carbon technologies, the EU executive plans to introduce different criteria, which are not directly comparable.
A Commission paper issued earlier this month (EurActiv 10/06/09) points out that of 27 different categories of innovative renewables, the largest project provides 50MW of power, while CCS on the other hand offers up to 250MW.
According to participants in yesterday's meeting, the Commission is now planning to introduce both minimum and maximum requirements for eligible projects. This could then potentially exclude some smaller renewables projects upfront.
A call-back clause may also be introduced to ensure that the funded projects really deliver CO2 cuts. The Commission is reportedly in favour of such a provision, which would require utilities to start returning the funding should they prove to be unable to demonstrate that they are achieving their key objective.
Timing issues
The funding will most likely be distributed through two calls for tender, as supported by member states. At first, the EU would only allocate some of the allowances, leaving room for assessment before the second call is issued.
The revised ETS directive states that the 300 allowances from the new entrants' reserve will only be available until the end of 2015. Some observers noted, however, that there is pressure from some member states to extend it to projects that might not begin operating before 2015.
Both environmentalists and the CCS lobby, however, point out that the EU's ambitious 2020 climate targets require urgent action, and any project that delivers after 2015 cannot be used as a model for further commercialisation. On CCS, the EU's target is to have 10-12 demonstration plants up and running by 2015, which means that construction "should have started yesterday," one stakeholder argued.
Final word with member states
Ultimately it is EU governments that will decide the course of action, as the eligibility criteria are set by the 'comitology' procedure in Council working groups. The Commission wants a quick decision and is seeking a Council committee vote on full criteria in the autumn, in order to publish a shortlist of projects by mid-2010.
Germany and the UK are already showing signs of a "typical big member state point of view," according to one party to the talks. They have indicated that the allowances should be allocated to each country based on population or size of emissions, for example, which would favour larger countries.
This differs wildly from the Commission's proposal, which suggests that a project-to-project basis will achieve the best value for money.
Moreover, member states are likely to take very different stances on CCS, because awareness of the technology among government officials and the general public is often very low.
