EU launches race for green technology billions

BRUSSELS (Reuters) - The European Union launched a competition on Tuesday for about 4 billion euros ($5.6 billion) of funding to help companies compete in the green technology race against China, Japan and the United States.

A flexible tube for CO2 is connected to a truck before the first official run of the mini plant "Schwarze Pumpe" in Spremberg, September 9, 2008. Vattenfall's CO2-free power plant is a pilot project for carbon capture and storage (CCS) - the first power plant in the world that will take the toxic emissions from coal and bury them deep in the ground. REUTERS/Hannibal Hanschke

All eligible projects should be up and running by 2015. Big winners are likely to include power generators such as Germany’s E.ON and engineers like Alstom of France.

“These and other green technologies are an increasingly important source of future economic growth and jobs,” EU climate chief Connie Hedegaard said in a statement.

The funding was agreed in 2008 to support Carbon Capture and Storage (CCS) technology -- a method of burying planet-warming gases, which many power producers say is a potential silver bullet to curb climate change.

But infighting among the EU’s 27 member states and its authorities has held back the funding, while opening up the competition equally to companies pioneering new technology in renewable energy.

The funding will go to at least eight CCS projects and at least 34 renewables projects.

The funds will be found from an obscure corner of the EU’s Emissions Trading Scheme (ETS) -- its main tool for curbing CO2 emissions, which forces companies to buy a permit for each tonne of carbon they emit.

A total of 300 million carbon emissions permits from a reserve fund of the ETS will be transferred to the European Investment Bank (EIB), which will convert them to cash before distributing them to the chosen projects.

The value of the credits is about 4.3 billion euros at the current carbon price, but could rise or fall with the market. The Commission estimates that with contributions from EU governments and the companies themselves, this could rise to 9 billion euros of investment.

It is expected that all these credits will be sold before the start of the third trading period of the ETS in January 2013, the Commission said.

At least one demonstration pilot project will be awarded per EU member state, and no more than three will be approved in a single country.

The European Investment Bank (EIB) and the European Commission will assess the proposals, consulting EU governments before making the final decision in 2012.

Reporting by Pete Harrison, editing by Rex Merrifield and Janet Lawrence