From: Reuters
Published October 30, 2007 10:17 AM

Norway Upbeat on Backing for CO2 Storage Aid

OSLO (Reuters) - Norway voiced confidence on Tuesday it would gain European Union support for plans to fund technology to capture carbon dioxide and store it underground, even if such projects breach the bloc's limits on public aid.

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Carbon capture and storage (CCS) is seen as a way to cut emissions of greenhouse gasses blamed for global warming but projects are not economically viable without state aid. Oil-rich Norway is not in the EU but as part of the European Economic Area is obliged to follow its competition rules.

Norway has funneled public money into developing technology for CCS facilities, the first of which in Norway, the Mongstad gas-fired power plant, is due to start early next decade. The CCS unit will capture CO2 emissions from the power plant and supply power to oil and gas group StatoilHydro's Mongstad refinery and to the grid.

The European Union, which has set ambitious plans to curb CO2 emissions, has also set up pilot CCS projects but it limits state aid to 40 percent of investments in line with its rules. "Because the EU itself wants this (CCS technology), the dialogue with them is good," Prime Minister Jens Stoltenberg told reporters after a meeting with his Nordic counterparts.

"We are working in good faith, and we have faith that we will succeed," he said. Norwegian politicians have said EU skepticism towards Norwegian CCS plans could delay the projects by years.

Fellow Nordic state Finland, an EU member, voiced support for Norway's position. "My attitude is quite positive that also in the EU context we can find a solution that will enable this type of technology," Finnish Prime Minister Matti Vanhanen said.

Britain has also signaled its will to allow Norway to develop the technology, which could later be used to lower emissions of the heat-trapping gasses around the world.

Norway has sought, without success, to redefine the Mongstad project as environmental rather than industrial. Full state financing for an operation involving numerous commercial players has raised EU concern that the program may be a veiled form of state subsidies to the energy sector.

To keep its CCS projects on track, Norway needs positive signals from the EU quickly as investment decisions for the Mongstad pilot project are scheduled for early 2008.

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