BRUSSELS (Reuters) - The European Union must craft new financial incentives to "jump start" clean coal technology if it is to achieve ambitious targets to combat climate change, a leading lawmaker said on Monday.
Carbon capture and storage (CCS) is designed to trap carbon dioxide (CO2) emissions from power plants and heavy industry and store it underground. Supporters see it as a potential silver bullet in the fight against global warming.
The geological sequestration process, yet to be proven on an industrial scale, could keep up to a third of global carbon emissions out of the atmosphere, notably in emerging economies such as India and China, as well as EU states like Poland.
The EU aims to have up to 12 such pilot plants running by 2015 but has not yet put in place financial incentives, aside from sparing such plants the expense of buying carbon emissions permits.
Industry has so far been slow to respond, citing high initial building costs.
"There is a risk that the targets the Commission set on renewables and energy savings are not going to be met, so we need to accelerate CCS development," said Chris Davies, the lawmaker responsible for steering CCS legislation through the European Parliament.
"As of this moment, not one single project has been confirmed and time is not on our side," he told Reuters before a meeting with oil majors, power firms and environmentalists on Monday to discuss likely targets.
Giving power generators extra emissions credits for early projects could spur a dash to develop the new technology, while forcing them to equip new plans for CCS could spell the end of dirty coal, Davies added.
RACE TO THE FRONT
"Power generators ... are fearful of the initial costs and are holding back from CCS development, but with the right incentives we could potentially stimulate a race to be at the front."
The European Parliament has co-decision powers with member states on this legislation, making Davies' position influential.
The prize for the first company to deliver commercially viable CCS is potentially huge, since China alone is opening a new coal-fired power plant a week, and global reserves of coal could last hundreds of years.
But the technology is untried on a commercial scale and will initially be very expensive, at around 1 billion euros ($1.57 billion) per power plant, making it unattractive for companies to undertake without support.
Possible sources of support for CCS include the EU budget and national taxpayers' money. Davies said another option was to give power plants extra tradeable carbon emissions permits, called EU allowances (EUAs), for every tonne of CO2 they store.
EUAs currently trade at around 25 euros per tonne of CO2 emitted on Europe's carbon emissions trading scheme.
"We need to explore the idea of a double credit system of carbon allowances through the European Emissions Trading Scheme for a limited period to jump start CCS development," he said.
The EU should also consider forcing power generators to prepare new coal plants for CCS when the technology becomes available.
"We need to discuss the idea of mandatory targets," he said. "If you don't make CCS mandatory, then you are giving a green light to companies to carry on building coal stations that emit vast quantities of CO2. Investors need a clear signal to influence their future direction."
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