Milton Catelin, Chief Executive, WCI

On Sunday, the 21st World Energy Congress will open in Montreal. Held every three years, the Congress brings together the world’s energy leaders to discuss challenges facing the energy sector globally and runs from 12-16 September.

The theme for WEC Montreal 2010 is “Acting now on global challenges – energy in transition for a living planet,” reflecting the sense of urgency that faces the world’s energy sector.

Each day of the Congress will focus on a key challenge facing the global energy sector. The theme of the first day is “accessibility – meeting energy demand: a global challenge requires global solutions”. The second day will focus on the challenge of “availability – what is the right mix for long term stability?” Day three looks at “acceptability – energy solutions for a living planet”. The final day will examine “accountability – policies, regulations and financing”.

I will be in Montreal for the Congress and discussing coal’s important role in the global energy mix and how the industry is working hard to meet the challenges it faces. I am chairing a session on Tuesday 14 September, from 1.15pm-2.45pm looking at the “Challenges of efficient and clean use of fossil fuels”, featuring speakers from American Electric Power, Japan Energy Association and the Polish Ministry of Economy, among others.

I hope to see some of you in Montreal!

Further details on the event can be found on the WEC website.

For any media requests for interviews, please contact Katie Warrick, Communications Director, kwarrick@worldcoal.org

Benjamin Sporton, WCI Policy Manager

There is only one more week of climate negotiations before COP16/CMP6 at the end of November. This week’s talks in Bonn and those due to take place in October are key to laying the groundwork for the UN climate change negotiations in Cancun.

This week has been highly technical and focussed on draft texts developed by the Parties to the climate treaties. One delegate reportedly described a “text explosion” mid-week when one section of draft text grew from three to eleven pages in the course of three hours of discussion! Another delegate admitted to not even understanding a presentation on counting forestry credits made by another delegation. Some delegates have even commented that things seem to be going backwards – draft text that was previously all-but agreed as far back as Copenhagen now seems to be up for grabs. This doesn’t look like progress!

Going into this week, a lot of commentators were hoping to have a better idea of what might be possible come Cancún. Not much will have become clear as a result of this week, which leaves a lot of work to be done in Tianjin in China in October.

A fundamental issue has been what is going to happen when the first commitment period under the Kyoto Protocol ends in 2012. A paper released by the UNFCCC secretariat sought to reassure delegates that a lot of the important machinery of the Protocol would continue following the end of the first commitment period. It also explored legal options for avoiding a gap between the first and subsequent commitment periods. Even if technically there isn’t a legal problem, at the very least the existence of a gap will reduce the confidence of many stakeholders in the process. It’s going to be important to try and avoid this and we’ll be keeping a keen eye on how that progresses.

A big focus for coal has been getting Carbon Capture and Storage included in the Clean Development Mechanism. That hasn’t really been an issue at these talks (it has been referred to the COP/CMP in Cancun) but the form of financing arrangements under any future agreement has been. Beyond the CDM, ensuring that any new financing mechanisms include a role for CCS is critical to making sure climate goals can be achieved.  WCI is going to be focussing on this as we get closer to Cancun.

On financing, a special briefing was held at the talks by the Secretary-General’s High-Level Advisory Group on Climate Change Financing. They are exploring ways to raise the $100 billion a year for climate financing committed to under the Copenhagen Accord. At the briefing, prominent British economist Lord Nicholas Stern said potential revenue sources include auctioning the right to pollute, taxes on carbon production, an international travel tax, and a tax on international financial transactions, as well as government grants and loans. He also said private capital will be crucial, and governments need to adopt policies that reduce the risk to investors. This is a key point for CCS, where risks to investors are a key stumbling block that governments must resolve.

It’s good to see there is constructive work being done by the Secretary-General’s group. Their report is due out shortly before Parties convene in Cancun so it can make an important contribution to discussions about financing. If serious progress can be made on financing, it might give Parties the energy and confidence they need to resolve other issues as we look towards a future agreement.

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.

Inside the Bella Centre there is tightened security, with more police patrolling around the halls. With many ministers arriving this weekend, organisers have been working on ramping up security precautions all week – security blocks have been created inside the Bella Centre itself, in addition to the normal airport-like metal detectors and scrupulous bag and identity checks.

Outside the Centre, preparations are being put in place for the thousands of protestors expected to mark the “Global Day of Action on Climate Change”. It is noticeable that many of the environmental NGOs are not inside the Centre today but at camps around the city.

Stocktaking

Today is considered a day of stocktaking as many of the formal and informal negotiation groups report back. The suspension earlier in the week meant that the process had slowed considerably; but it resumed slowly this morning as different Parties are focusing on the two new draft texts introduced yesterday.

CCS Developments

The process on CCS in the CDM is becoming more and more complicated, even as the result is looking bleaker by the hour.

There are currently three different texts being considered, while the contact group addressing the recommendations made by the CDM Executive Board is still in consultations and still closed to non-government stakeholders. Another contact group created on Tuesday in SBSTA (Subsidiary Body for Scientific and Technological Advice) reported back on their negotiations. The SBSTA has agreed with that group’s recommendations – this means that the SBSTA will next week recommend to the CMP (Conference of the Meeting of the Parties to the Kyoto Protocol) that the matter should again be deferred to the SBSTA meeting scheduled for June 2010! Comments of disappointment were made by both Australia and Saudi Arabia after the gavel fell.

Yet another delay in this area is a strong loss for the environment which needs, according to both the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC), all the mitigation options available to ensure the planet avoids harmful global warming. CDM may not be the best delivery mechanism for CCS but it is, at this point in time, the only mechanism to finance the deployment of low carbon technologies to the developing world.

Miss of the day

The obfuscation of the SBSTA to agree a final decision on the eligibility of CCS projects under the CDM is a disappointing blow to our industry; but it is a tragic outcome both for the environment and for developing countries attempting to balance economic development (and poverty alleviation) with effective action on climate change.

Another busy day at the Bella Centre