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The latest energy bill is designed to help the UK move towards a low-carbon economy. It includes a £9.5bn levy on electricity suppliers to fund four demonstration carbon capture and storage (CCS) coal power plants. The “CCS Incentive”, as the levy is known, was announced last week by energy secretary Ed Miliband as he outlined plans to fast-track major energy infrastructure projects such as coal plants, nuclear power stations and windfarms.
Currently only two of the four demonstration projects, those from Scottish Power and E.ON, are proceeding to the next stage of the CCS competition. Professor Stuart Hazeldine, a geologist at the University of Edinburgh and CCS expert, recently claimed the government’s competition to build to such demonstration plants was “dead on its feet.”
Shadow energy secretary Greg Clark last week said he supported Miliband’s energy plans, but criticised the government for delays on energy policy that had led to a “last minute scramble.” He also said industry figures had suggested the CCS competition was likely to be delayed from its 2014 deadline for active demonstration plants.
The bill also includes provisions to establish a mandatory social price support scheme to help more of the most vulnerable households with their energy bills, and strengthen the powers of regulator Ofgem to refer market abuse to the competition commission.
Ed Miliband, the climate change secretary, said the bill would ensure consumers could “be confident that British energy is sustainable and secure.”"Carbon capture and storage is a key technology to tackle climate change, and 18 days ahead of the crucial talks in Copenhagen, this bill sets up a new CCS Incentive to support the development of up to four commercial-scale CCS projects in the UK,” he said.
Simon Hughes, the Liberal Democrat shadow energy secretary, said he was disappointed that measures on energy efficiency were not in the bill. “If you insulated every home properly in Britain it would be equivalent of taking all the cars of Britain off the roads. What the country needs is a united policy to deliver a warm home for every household,” Hughes said.
Green groups called for a legally-binding limit on greenhouse gas emissions from future coal power plants. David Norman, Director of Campaigns at WWF-UK, said: “Our main concern with this bill is that it does nothing to prevent new large coal plants being built with only a small fraction of their emissions being captured. Without a guarantee of a legally-binding policy which limits CO2 emissions, the bill gives the energy companies too much carrot and no stick.”
Greenpeace’s Jim Footner added: “It will be easier for the Government to sell public funding for carbon capture and storage to cash-strapped British consumers if it goes hand-in-hand with a legal limit on emissions from power stations. And this legal limit would make sure that the coal utilities can’t simply get paid to carry on causing climate change.”
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Demonstration is not enough, legal limits on new plant would be too late and legal limits on existing plants would make the lights go out.
There is a better way
We should oblige fossil fuel producers and importers to contract for the capture and sequestration of a quantity of carbon dioxide equal to a proportion of that produced from the fuel they supply. The proportion could start at a few percent and build up. This would provide full, immediate funding for carbon capture and storage and increase fuel price, encouraging energy saving, nuclear, renewables, electric cars etc.
The latter are only ways of filling the energy gap that cutting carbon dioxide emissions will create and mankind has been very effectively filling energy gaps for centuries without the aid of agreed national or global strategies, taxes or caps. Carbon capture is different. It is a way of stopping pollution and will always add cost. You can legislate to stop pollution (which is economically inefficient) or you can use market forces by giving credits in a cap and trade system, credits against a carbon tax or by paying directly in fuel prices as I propose. If we drive carbon capture in any of these ways all the other things will happen too.
The contract might permit capture to be delayed for a year if the quantity captured were increased by 10%, and for another year for another 10% etc. This would not only help with plant problems, but would also allow contracts to be placed today, providing a huge incentive to get carbon capture and storage up and running as soon as possible. It is not lack of know-how that is holding back carbon capture but the lack of an incentive to apply it.
We must soon stop carbon emissions from power generation, cement manufacture etc. and substitute electricity for fuel use in many domestic, industrial and transport applications. Taxing carbon, capping emissions or contracting for carbon capture when fuel is produced could all provide the economic incentive, but unless the rest of the world joins in they will not solve the problem.
Contracting for carbon capture is certain to reduce carbon dioxide emissions to whatever annual target is set and is easy for everyone to agree to because:
It will appeal to rapidly growing and mature countries alike. There are no national caps to restrict relative growth.
It will allow all industries in all countries to compete on a level playing field. There are no carbon tax or carbon credit differentials.
Because there is only one number to agree, the global annual target, extensive international negotiations will be unnecessary. There will be no national targets to haggle over and perhaps never meet. There will be no issue about who gets the revenue from a carbon tax or what the rate should be or who gets free allowances (or the revenue from an auction) with cap and trade.
Enforcement is straightforward and does not rely on the co-operation of every country. The contracts would be traded and recorded centrally, mostly placed and paid for by the international energy companies. If countries were uncooperative and used their own fuel internally without contracting for carbon capture, a central monitoring organisation could impose an increased capture proportion on imports or exports of fuel for that country to compensate.
So what will it cost? The simple answer is that carbon capture and storage could cost 50 euros per tonne of carbon dioxide emission avoided. This is equivalent to $32/barrel of oil but the contract would only cost a proportion of that.
The complicated answer is that it is only practical to capture carbon dioxide from large point sources like power stations. Forcing 75% capture on the global market through my proposal would drive fuel price up and electricity price down until we switched from fuel to electricity for many industrial, domestic and transport applications. Once nearly all power stations etc. had captured their emissions there would be an incentive to build new power plants simply to create more carbon to capture and to dump the electricity they generated onto the market at any price. Fossil fuel power generation with carbon capture would collect payment for all the captured carbon but only pay back 75% in their fuel price, giving it an unfair advantage over nuclear and renewables. It would be perverse to tax carbon capture while we were trying to encourage it but as we approached the endgame national governments could tax away the 25% of the capture contract price that was not being paid in the fuel price. The revenue could then be paid out per kilowatt-hour to subsidise power from all clean generators.
The simple cost is modest compared to recent price changes so why are we waiting? Perhaps within as little as twenty-five years we could be defining the proportion of carbon to be captured, based on fossil fuel production at the time, such that global emissions were contained at the level that the oceans absorb annually. That is about 2.2 billion tonnes of carbon per year (25% of current emissions). Atmospheric carbon dioxide concentration would then stop rising.