Chris Davies, the British MEP steering the file through Parliament, is proposing to use 10 billion euro of allowances, earmarked under the EU's CO2 emissions trading scheme, to finance large-scale demonstration projects.
The allowances would be taken from the EU ETS's New Entrant Reserve, a special pool of emission rights earmarked for new installations joining the scheme.
"You're talking about around 10 billion euro worth of subsidy," Davies said on Monday (22 September), during a conference at which consultants McKinsey presented a new study on the economics of carbon capture and storage (CCS). The emissions rights would be made available for coal-fired power plants above "300 Megawatt or more," he said.
The proposal, which concerns amendments to article 32 of the draft directive, will be voted on in Environment Committee on 7 October.
One of the advantages of the system would be that the overall cap on CO2 emissions, which is set in advance for 27 EU member states, "is not breached," Davies explained, ensuring that total emissions are not exceeded.
But he warned the funds generated would be available only when the CO2 is actually buried underground. "It wouldn’t be just to support the technology; it would be paid for the actual avoidance of CO2 emissions," Davies said, meaning that there would be no European blank cheque to put the money upfront.
"These allowances would probably be channelled through the European Investment Bank," Davies said, to ensure "proper investment from the private sector" and that "no-one is making windfall profits" out of the scheme.
Commission 'openness' to state aid for CCS
Speaking at the McKinsey conference, Andris Piebalgs, the EU energy commissioner, said start-up funding for specific CCS demonstration projects should be provided by the member states because the European Union had no extra budget to allocate. He indicated the Commission's "openness" to member states using state aid to fund CCS plants.
In 2007, the EU committed to building up to 12 large-scale demonstration power plants that use CCS technology to produce electricity from coal or natural gas. Since then, the debate has focused on how to finance the technology, which is still under development and highly expensive.
Support in Parliament likely, strong opposition in Council
The focus is now turning to the Parliament, where a vote is expected in the Environment Committee on 7 October. "The debate has swung in the European Parliament from the original scepticism," Davies said, adding he was "fairly confident of getting a majority in the Committee". Within the Commission, the environment directorate, which had been sceptical, is now warming up to the idea, he added.
However, Davies said "within the Council, there is currently strong opposition to the proposal," expressing his hope that views would converge later on. "I think that's because they are looking at the emissions trading scheme rather than financing CCS," Davies explained.
"The united Kingdom and the Dutch are supporting it,” Davies told EurActiv. "I hope the Italians, the Spanish and the Czech will support it. Germany it seems can’t decide yet, it depends who I talk to."