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Shell, Total Seek EU Support for Carbon Capture as Price Too Low

Royal Dutch Shell Plc (RDSA) and Total SA (FP) are among a group asking the European Union to boost support for projects to trap and bury carbon as low prices in the region’s emissions trading system deter investment in the technology.

“The Emissions Trading Scheme must remain the backbone of the overall incentive scheme, but it is going to be essential to supplement that with other activity,” Graeme Sweeney, chairman of the Brussels-based Zero Emissions Platform that advises the European Commission on carbon capture and storage technology.

Carbon for December fell to a record 5.99 euros a metric ton April 4 as the euro crisis slows growth leaving the market with an excess of permits awarded for emission cuts. Investors won’t pay for CCS projects, costing about 1 billion euros ($1.2 billion) each, if the value of the permits awarded is too low.

TransAlta Corp. of Canada in April abandoned a venture to trap emissions from an Alberta coal-fired plant on low prices.

Nations including the U.K. have pledged CCS funding and the EC has a program to fund the technology that allows fossil-fuel power without adding pollution. The International Energy Agency says if CCS isn’t widely deployed in the 2020s, the global cost of curbing emissions by half by 2050 would rise by 70 percent.

The Zero Emissions Platform, including BP Plc and General Electric Co. (GE), said in a report today states should act to allow demonstration projects to be built before 2020, with CCS fitted to power plants of more than 300 megawatts. Measures may include competitive bids for CCS contracts, feed-in tariffs, tax-breaks for enhanced oil recovery and public loan guarantees.

Unlikely Goals

“It’s unlikely that decarbonisation goals can be met if we don’t have CCS,” said Sweeney, who is also a senior adviser on CO2 to Shell. “We have no time left to lose. We must deliver the demonstration projects in the remainder of this decade to have a substantial early commercial roll-out in the 2020s.”

The weak carbon price also means there’s less money for the EC’s NER 300 plan to fund CCS from a sale of carbon allowances, according to ZEP. The Commission said on July 12 it had as much as 1.5 billion euros for CCS and renewable energy after selling 2013 permits. It selected eight candidates for project awards.

“It is likely that the number of projects that will emerge in this first phase from the NER 300 process will be fewer than we had previously wished,” Sweeney said. “We must get three or four.” The Emissions Trading Scheme must be “recalibrated” to strengthen the carbon price, he added.

Zero Emissions Platform recommendations include immediately setting aside a proportion of carbon permits and the gradual tightening of a cap on allowances to 2050 to curb supply.

“It is perfectly possible for investors and government to come to an agreement” on how to spur projects, Sweeney said.

To contact the reporter responsible for this story: Sally Bakewell in London at Sbakewell1@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net

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