EU competition finds no carbon storage winner

BRUSSELS Tue Dec 18, 2012 8:59am EST

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BRUSSELS (Reuters) - The first round of a European Commission contest to fund carbon capture and storage (CCS) projects failed to find a winner, the EU's executive said on Tuesday, deepening doubts the technology can emerge soon to help cut emissions.

CCS developers will be able to re-submit bids for a second round, which Environment Commissioner Connie Hedegaard said should be concluded within a year.

"Within 12 months we will be able to award the second round. We would like to make a very fast second call, as fast as possible," she told a news conference.

None of the short-listed projects for CCS, which entails trapping and burying carbon emissions from fossil fuel plants, made it to the final selection because of funding gaps or because projects did not advance enough to meet Commission criteria.

EU member governments had to confirm to the Commission they could fund 50 percent of the proposed projects.

Steelmaker ArcelorMittal withdrew its application for a French project, citing technical problems.

"This is a slap in the face for EU climate policy," Stuart Haszeldine, professor of CCS at Edinburgh University, said.

The Commission has sold 200 million carbon allowances for 1.5 billion euros, of which it set aside 275 million euros for CCS projects. This sum which will be carried over to the next bidding round, when some revenues from the sale of a further 100 million allowances will be assigned.

The allowances, which trade on the EU Emissions Trading Scheme, each provide the right to emit 1 metric ton of carbon dioxide.

Hedegaard said on Tuesday she would not speculate on a date for auctioning remaining allowances, saying it would be a technical decision.

CCS is commercially unproven and expensive to build, but governments that seek to curb emissions from the carbon-intensive power industry want it to make a contribution in future.

The International Energy Agency expects coal to come close to surpassing oil as the world's top energy source by 2017, it said on Tuesday, painting a gloomy picture for the fight against climate change.

"Without progress in CCS, and if other countries cannot replicate the U.S. experience and reduce coal demand, coal faces the risk of a potential climate policy backlash," said Maria van der Hoeven, the IEA's executive director, adding she did not expect CCS to play a role by 2017.

The Commission announcement had been expected after reports that there would be no EU funding for CCS projects in any country, including Britain, which had four projects on the Commission's shortlist published in July.

RENEWABLE ENERGY PROJECTS

The Commission allocated 1.2 billion euros to 23 renewable energy projects on Tuesday, with a Dutch biomass refinery project pocketing the largest amount of nearly 200 million euros.

Other successful projects included solar power, wind and ocean energy. In total, the projects are expected to create around 1,000 permanent jobs for 15 to 20 years.

Two years ago the Commission's planned sale of 300 million 2013-vintage EUAs, dubbed the NER 300, was expected to raise around 4.5 billion euros, but a steep drop in the price of carbon significantly reduced proceeds from the first tranche of 200 EUAs to 1.5 billion euros.

Funds allocated to renewables under the program are meant to cover additional costs incurred by new technologies in comparison with proven projects, while private sector and national funding will help finance the remainder.

The Commission expects the funding to generate about 2 billion euros of private investments on the selected projects. ($1 = 0.7598 euros)

(Editing by Adrian Croft and Jane Baird)

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