By Alex Morales and Jonathan Stearns
Nov. 18 (Bloomberg) -- A European proposal to spend 11 billion euros ($14 billion) testing how to pump greenhouse gases underground is itself getting buried.
The plan to subsidize 12 pilot plants that capture and store carbon dioxide blamed for global warming won initial approval by a European Parliament committee on Oct. 7. Germany, Spain, Poland and at least three more countries have since decided to oppose the project, officials said in interviews. Chris Davies of the U.K., who sponsored the proposal in parliament, said it needs to be changed to win a final vote that's not yet scheduled.
At stake is the world's most ambitious research project to demonstrate that coal-burning, CO2-spewing power generators can run without releasing gases that warm the planet. Experimental ``carbon-capture'' technology is vital to the United Nation's goal to halve global emissions by 2050, said Kamel Bennaceur of the Paris-based International Energy Agency.
``It's critical that the world commits to 20 demonstration plants by 2010,'' Bennaceur, a senior energy analyst at the policy adviser to the largest oil-importing nations, said in an interview yesterday. ``Of those, 10 to 12 would be from Europe.''
The unproven technology typically aims to compress exhaust from a coal-fired power plant and pump it into an underground cavern where it would be trapped for eons. More tests are needed to determine if it's cost-effective and safe, scientists say.
Beneath the Sea
Several projects have been started outside the EU. The Norwegian oil company StatoilHydro ASA is injecting 1 million tons of carbon annually beneath the North Sea. A U.S. venture called FutureGen was canceled in January by the Energy Department after costs climbed to $1.8 billion from $1 billion.
The EU wants to test capturing and transporting technologies beyond those being used in Norway, and it needs a number of plants running to help make the system commercially viable as quickly as possible, according to the European Commission, the bloc's executive arm.
Spain and Denmark oppose the plan, saying it would invest too much in carbon capture and that proven technologies such as solar power and hybrid cars deserve more incentives.
``We must take care that we are not giving such a high priority to just one technology,'' Danish Climate and Energy Minister Connie Hedegaard said in an interview. Alternatives for funding include renewable energy, ``state of the art'' incinerators and hybrid cars, she said.
The Davies plan calls for funding the carbon-capture projects by awarding them as many as 500 million emission permits. The allowances would come from a reserve set aside for new power plants and factories from 2013 to 2020. They are worth about 11 billion euros at the 21.78-euros-a-ton price for a 2013 emissions contract that traded Nov. 17 on the ICE exchange.
Germany Wants Auctions
German Environment Minister Sigmar Gabriel opposed that, saying cash subsidies are preferable. Germany wants carbon- storage research funded out of revenue from auctioning carbon allowances after 2012.
Spain wants the reserve permits to be auctioned and the cash given to governments for projects including solar-thermal generation, an environment ministry spokeswoman said, declining to be named. No country has come forward with a concrete alternative to the current plan, said the U.K.'s Davies.
``There's lots of resistance to the idea, and there's absolutely nothing being put forward of substance,'' Davies said in an interview, listing Italy as another opponent. ``Lots of member states are opposed; it's easier to look at the ones in favor.'' The Italian Environment Ministry didn't reply to written questions.
Climate Plan
The proposal is part of a larger EU climate and energy bill that has yet to be approved by the entire parliament or by member states. Germany, Spain and other European nations with the largest populations have extra votes, meaning they could force the research plan to be dropped from the overall legislation.
Killing the subsidy plan may delay the pilot projects as developers would find it harder to secure funding from individual governments of the 27-nation EU.
EU Energy Commissioner Andris Piebalgs in March 2007 called for 12 power plants capable of capturing and storing CO2 by 2015.
Poland and Hungary say it's unacceptable to use the emission-permits reserve as a source of funding because that would deprive new utilities, steelmakers or cement plants of pollution licenses they need to meet environmental rules.
Reserve vs. R&D
Because the technology is experimental, it should be funded from the EU's research and development fund, Polish Environment Minister Maciej Nowicki said in an interview. ``The proposal will have to be changed if it's to win our agreement,'' he said.
Hungary opposes using auction revenue or the credits reserve, Hungarian State Secretary for the Environment Lajos Olah said in an e-mail.
Carbon capture, sometimes called ``clean coal'' in the U.S. because of its coal-industry applications, ``is an end-of-pipe technology and moreover it is not properly proved as concerns its environmental soundness,'' Olah said. ``The demonstration projects should be primarily financed by the relevant companies'' that operate them.
Not everyone wants the measure scrapped. U.K. Secretary of State for Climate and Energy Ed Miliband said the EU needs to ``push forward'' on carbon capture to meet emissions reductions goals and improve energy security.
``By using a part of the EU emissions-trading scheme, we can kick start this revolutionary technology that could take up to 90 percent of harmful CO2 out of coal-fired power stations as well as provide opportunities for new green jobs,'' he said in an e- mailed reply to questions from Bloomberg News. ``Britain will be working hard to ensure this is part of the eventual agreement.''
`Utterly, Hopelessly'
Under the emissions-trading system established in 2005, power plants and other polluters are granted a fixed quota of permits and must buy allowances on the market for any excess pollution.
Possible changes by EU lawmakers to keep the plan alive include reducing the number of permits earmarked for the new research and seeking pledges from governments hosting the projects to fund a portion, Davies said.
Not to have clean coal ``as part of the equation means that we will fail utterly, hopelessly and completely to tackle the problem of global-warming emissions,'' Davies said.
To contact the reporter on this story: Alex Morales in London at amorales2@bloomberg.net; Jonathan Stearns in Brussels at jstearns2@bloomberg.net.
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