Cleaner coal
With world energy consumption set to rise by at least 60% by 2050, according to Shell's blueprints scenario, public authorities should make an ambitious push to finance the development of carbon capture and storage (CCS) technologies, said Bentham.
"Currently, EU policy is in a situation where it is saying 'We need to have [CCS demonstration projects], we want to have these demonstration projects, we don't have the funding mechanism'. That doesn't work. You need these mechanisms that bring together private and public finance to make these demonstrations happen," said Bentham.
By the end of the year, the Commission is expected to publish its recommendations on CCS financing as part of a wider communication on financing its proposed Strategic Energy Technology Plan (SET Plan).
But the EU budget is 'locked down' until 2013, and public authorities are reluctant to put up the huge sums necessary to drive CCS development. The situation has given rise to concerns that the technology will not be ready in time to help keep CO2 emissions from driving global average temperatures to dangerous levels, particularly given the strong reliance on coal-fired power plants in India and China.
In the European context, Fries argues there are several financing options. "Either you can find space on the budget, which seems to be ruled out; you can make future budgets which is what the British have done; you can move off budget […] or the alternative way is you increase costs to consumers and so you allow CCS to be used to fill your renewable obligation, considered a low carbon obligation rather than a renewable obligation," he said.
Among the 'off budget' options championed by Shell is assigning a higher market value to CO2 stored (or sequestered) using CCS technology. If, under the EU Emissions Trading Scheme (EU ETS), energy companies are given multiple credits for CO2 that is not emitted using CCS, the private sector would have the incentive to finance CCS installations out of their own pockets, argue Shell.
But the EU has so far rejected this option.
So long Shell?
In addition to pushing for CCS financing, Shell has warned that it may slash future European investments if the EU does not adopt sufficient safeguards to protect energy intensive industries from outside competition once the revised EU ETS comes into force in 2013.
The company has expressed concern that if all emission permits need to be bought by power companies at auction, with no further free allowances handed out, the company will see all of its European profits slashed, forcing it to take its business elsewhere.
"It's impossible. So there will be no more investments by Shell in Europe," Christian Balme, the director of Shell France, told the Parliament on 8 April.
The Commission has promised to provide sufficient safeguards to protect EU industries in the event that international climate change negotiations fail to produce a global regime to slash greenhouse gas emissions. But many industries say the promises are insufficient and the current uncertainty about the extent of future climate change-related laws are undermining investor certainty and long-term investment decisions.
To read the full transcript of the interview with Bentham and Fries, please click here.
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