From: Reuters
Published November 28, 2007 01:17 PM

EU eyes CO2 capture in trade scheme

By Jeff Mason

BRUSSELS (Reuters) - Companies should get credit under the European Union's emissions trading scheme for capturing and storing carbon dioxide (CO2) instead of releasing it into the atmosphere, the European Commission will propose.

The draft legislation, part of a wider package of climate change rules, aims to integrate trapping and holding CO2 into the EU's trading scheme, giving firms another way to meet limits set on their output of the main gas blamed for global warming.

"CO2 captured and stored will be credited as not emitted under the emissions trading scheme," the draft document, obtained by Reuters on Wednesday, said.

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The EU emissions trading scheme is the 27-nation bloc's key tool to fight climate change. It sets limits on the amount of CO2 that factories can emit.

Companies that come in beneath their target can sell the permits, while those that overshoot their limits must buy additional credits.

The proposal lays out rules to govern the process of trapping carbon, transporting it and injecting it into a geological space where it will not enter the atmosphere.

Critics say the technology is untested, but the Commission said it already exists. "The challenge is to facilitate widespread deployment, particularly in fossil fuel power generation," the document said.

A spokeswoman for Environment Commissioner Stavros Dimas declined to comment.

Emmanuel Fages, an analyst at French bank Societe Generale, said the plans would be good for the environment but "bearish" for the third phase of the emissions trading scheme.

"Once we are sure it's a secure technology and we've identified appropriate storage cavities, this will be the only way the coal industry continues existing," he said.

NO MANDATORY REQUIRMENT

The Commission document said Brussels would not propose that power companies be forced to take part in carbon capture and storage (CCS), but big combustion plants should be required to have space for the equipment necessary to trap and compress CO2.

"The Commission addressed the economic, social and environmental implications of mandatory CCS ... and concluded that at this time a mandatory requirement should not be imposed," the document said.

"If the carbon market is used, CCS will be deployed if and when it is cost-effective."

The document said companies should be required to have permits to explore for such storage sites and to engage in storage itself. Sites would only be acceptable if the danger of CO2 leaking out was not significant and if putting CO2 in the selected areas did not create environmental or health risks.

Companies would be required to monitor the storage site and EU governments would establish inspections to ensure all rules were being followed. Penalties would be developed for non-compliance.

The draft document is part of a package of upcoming climate change legislation that the Commission plans to release in January and that includes a review of the trading scheme.

The CCS draft also allows for EU governmental authorities to take over responsibility for the geological storage of the CO2 under certain circumstances.

(Additional reporting by Michael Szabo in London, Editing by Dale Hudson and Anthony Barker)

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