Setback for carbon-trapping technology in EU talks

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BRUSSELS, Nov 14 (Reuters) - Plans to put billions of euros of public funds behind cutting-edge technology to trap and bury global warming gases suffered at setback in European Union talks on Friday.

France, which holds the rotating EU presidency, said a European Parliament proposal to give around 10 billion euros ($12.7 billion) to power generators to explore the technology should be scaled back by some two thirds.

Carbon capture and storage (CCS) is seen as a potential silver bullet to curb emissions from coal-fired power plants, which are multiplying rapidly worldwide and threaten to heat the atmosphere to dangerous levels.

The cutting-edge technology is also seen as mankind’s last hope to suck CO2 out of the atmosphere if politicians fail to agree ways of keeping temperature rises below the critical 2 degrees Celsius mark.

But while the techniques exist, utilities are reluctant to build CCS power stations without public funding because it adds about 1 billion euros to the cost of each plant.

The EU plans 10-12 demonstration projects by 2015 to kick start the industry, but has not yet agreed who will fund them.

The parliament has suggested funding them with 500 million credits, worth over 10 billion euros, from the European Union’s flagship Emission Trading Scheme (ETS).

But France suggested lowering the number of credits to 100-200 million, worth between 2 billion and 4 billion euros, a document seen by Reuters on Friday showed.

INSUFFICIENT

France is one of Europe’s biggest backers of the technology, alongside Germany, Poland, Britain and the Netherlands, but as the EU presidency it is trying to find a common position among EU member states.

“Many have notably contested the need for such a high amount, pointing out that other sources of funding should be mobilised,” said the French document, adding that public funding must be matched by private investment.

A European Commission document this week gave its backing to parliament’s proposal to fund CCS using credits from the ETS, and noted that the additional costs of the 10-12 pilot projects would be 5 billion to 12 billion euros.

“The French proposal is a useful first step towards negotiations, but it is insufficient to meet the goals set by heads of government,” said British liberal lawmaker Chris Davies, who first suggested the funding mechanism to parliament.

The Commission document noted other sources of funding.

“The Commission has acknowledged the strategic importance of CCS for the community and has expressed a generally positive attitude towards state aid for early demonstration plants,” it said.

Industry sources said France also planned to propose using carbon offsetting schemes to promote CCS schemes in countries like India and China, where highly-polluting coal-fired plants are rapidly multiplying.

(Reporting by Pete Harrison, editing by Dale Hudson)