Milton Catelin, Chief Executive, WCI
The new UK government has pledged to introduce an Emissions Performance Standard (EPS) for CO2 emissions from new power stations. On the surface, introducing standards for CO2 emissions seems like a positive step – who could possibly have a problem with governments setting targets to limit CO2 emissions? Dig a little deeper and the complexities and pitfalls of using an EPS to tackle the long-term challenge of climate change become clearer.
Emissions performance standards have long been used by governments to limit the release of pollutants. The successful use of an EPS to limit sulphur emissions from power stations in the USA in the 1970s and 1980s is often held up as a positive example. However, in terms of drawing parallels between the reduction of sulphur emissions and CO2 emissions, you’re really comparing apples and oranges. The two issues are on a completely different scale. Retrofitting a coal-fired power plant to reduce some tens of tonnes of sulphur dioxide per day is not comparable with retrofitting a plant to control the release of 20,000 tonnes of CO2 per day. It is a more difficult, more complicated challenge and one that will not simply be solved by slapping standards onto power plants!
Technology is available to make significant reductions in CO2 emissions. Carbon capture and storage (CCS) is the only currently available technology that allows very deep cuts to be made in CO2 emissions to the atmosphere from fossil fuels at the scale needed. Yet, an EPS will not encourage power plant operators to invest in technologies such as CCS. Rather it will lead operators to simply switch to the cheapest, short-term option to meet energy demand and the standards set by an EPS…and that is unabated gas.
This switch will reduce energy security by weakening the energy mix, driving up gas (and therefore electricity) prices and will only deliver modest, short-term emissions reductions – natural gas is not a low emission energy source, it needs CCS as well.
It is now generally accepted by groups including the G8 that governments and the private sector must work together to deploy CCS to all fossil fuels and other industrial sectors and that this will involve policies that reduce the commercial risk of CCS, enabling the private sector to make the massive investments that are required. An EPS does not reduce commercial risk – it does the opposite. To a CCS developer, an EPS is simply another regulatory risk, which increases the challenge of investing in first-of-a-kind plants.
What’s the alternative? In Europe a mechanism already exists which is supposed to encourage power plant operators to invest in low CO2 emitting technologies – the Emissions Trading Scheme. The World Coal Institute has been supportive of an effective carbon pricing system to support the deployment of CCS and other low carbon options. But current CO2 prices are below the level necessary to drive early investment and there are no signs that this is likely to change. In the face of a low carbon price, further public financing incentives are needed to help bridge the investment gap. ‘Feed-in tariffs’ have been effective in incentivising other new energy technologies – such as renewables – and could do the same for early CCS deployment. The levy on electricity proposed by the UK to directly support CCS deployment is also an option that could help to successfully bridge the gap. In addition, the inclusion of CCS in the Clean Development Mechanism would act as a means of driving down early costs via large scale deployment in developing countries.
Implementing a combination of these incentives domestically and internationally should see CCS costs driven down to a level where deployment can be successfully supported by an effective cap-and-trade system.
If the aim of setting a CO2 EPS on power stations in the UK is to push the UK once again down the path of a dash for gas, then this is the perfect step to take. If the aim is to tackle CO2 emissions and the long-term challenge of climate change, then a rethink is needed.
