Carbon Capture Viable By 2030 But Needs £8bn to Begin Now

One of Gordon Brown's pet energy projects - to build up to a dozen pilot plants to capture and store carbon dioxide as power stations burn coal to generate electricity - would require EU subsidies of as much as €10bn (£7.9bn) over the next few years, it emerged yesterday.

A study by the consultancy McKinsey into carbon capture and storage (CCS) showed that such plants could be economically viable by 2030 at the latest. But it would require substantial public subsidies to get 10-12 plants running by the EU target date of 2015.

They cost twice or three times as much as conventional coal plants: about €2bn for the 300 megawatt plants planned by the industry, which is refusing to go ahead without public subsidies.

CCS is highly controversial, with green campaigners split down the middle over the issue. It involves capturing and compressing the CO2, transporting it to sites such as disused oil and gas fields or deep saline aquifers, and permanently storing it there.

But McKinsey said that, with coal still likely to make up 60% of EU power generation by 2030, CCS could be a vital solution to ensuring security of energy supply and reducing greenhouse gas emissions.

It could reduce emissions by 400m tonnes a year by 2030, or a fifth of planned European savings. The consultants' report, published yesterday, showed that with an aggressive commercial push from the middle of the next decade, CCS costs could come down from as much as €90 for a tonne of CO2 initially, to about €30-45 in 2030 - or in line with expected carbon prices then.

At the report's launch, Chris Davies, a Liberal Democrat MEP and the European parliament's rapporteur on CCS, said a deal could be struck soon to supply the public subsidies needed to kickstart the demonstration plants.

His solution is to take the billions from a strategic reserve - worth up to €18bn - set aside under the EU's emissions trading scheme for the creation of new, "green" plants. He claimed a majority of MEPs on the environment committee would endorse his scheme early next month.

Davies said: "We need to put this financing mechanism in place very quickly, deliver it to developers, and do it at a European level. If we leave it to national capitals, I'm not confident the projects will go ahead, and time is already running out."

But he said the subsidies would have to be monitored; through the European Investment Bank, for example, which would run tenders for the pilot plants and ensure that the public was not being "fleeced".

Andris Piebalgs, EU energy commissioner, said he personally favored the Davies scheme, but could not commit the entire European commission. "The technology could compete with nuclear, solar, wind and gas, and help combat climate change not only in Europe but China, India and the US," he said.

Senior French officials said the EU council of ministers, which so far has opposed Davies's scheme, was considering alternative funding, such as revenues from the auctioning of pollution permits under the emissions trading scheme or from national or EU budgets.

Lars Josefsson, the chief executive of the Swedish power producer Vattenfall - which is promoting a small pilot plant with the German gases group Linde - said a swift financing solution was vital: "The boards of companies are not allowed to use shareholders' money recklessly and rack up billions of losses. We will invest in CCS if the funding gap is bridged."