Insights and Commentaries

Insights and Commentaries

Why is the State of the Energy Union 2015 relevant for CCS in Europe?

15th November 2015

Topic(s): Carbon capture, law and regulation, Policy, use and storage (CCUS)

This Insight is part of a series published on carbon capture and storage (CCS) policy developments in Europe. For further background see previous Insights in this series. In this Insight, Silvia Vaghi, Global CCS Institute Principal Manager, Policy and Regulatory, highlights the most important building blocks of the Energy Union for the emergence of a strong policy framework for CCS deployment across Europe.

The State of the Energy Union

The year 2015 marks a key turning point in European energy and climate policy for CCS: energy security and geopolitical events keep energy high on the agenda, and at the COP21 climate talks in Paris policy makers from around the world will be asked to take urgent action to address climate concerns. A number of initiatives published in 2015 by the European Commission have clearly identified the enablers of a transition to a low carbon economy, which include the carbon market reform post 2020, and the agreed 2030 climate targets.

The State of the Energy Union published last week is a boost to the post-2015 period: it looks at how Europe contributes at the climate change negotiations and describes the implementation mechanism to achieve its intended nationally determined contribution (INDC). The content of the State of the Energy Union lays down the framework for more stable and durable policies, which are critical to provide confidence for investments in CCS deployment. The following section looks specifically at three elements included in the communication that have an impact on the future uptake of the technology.

What is in it for CCS?

1. It is not now time to open the CCS Directive for revision

This is the central message of the European Commission’s report of Directive 2009/31/EC on the geological storage of carbon dioxide, which was released on 18 November 2015 as an Annex to the State of the Energy Union. Its key conclusion reflects what the CCS community in Europe has clearly voiced during the extensive review process of the Directive undertaken in 2014: it is not now time to open the Directive for revision, and the next review of the Directive will be carried out when more experience is available on CCS in Europe.

Even allowing for the UK government’s recent funding announcement, the next review is likely to happen after at least one of the most advanced large scale CCS projects in Europe is over the finish line. Projects that are currently moving towards final investment decisions (FID) in 2016 are, if committed to, expected to commence operations capturing and storing CO2 in the years 2019-2020.

Instead of putting in effort now to revise the Directive, the Commission has driven attention towards a set of integrated enabling policies to bring about the transition to a low carbon, secure and competitive economy. This is a very welcome emerging approach for CCS in Europe: speed of CCS uptake is going to depend very substantially on a supportive environment for making FID and widespread deployment of the technology. The framework provided by the Energy Union is very important to actually create this environment.

2. Member States to develop National Energy and Climate Plans

Twenty-eight EU leaders have committed to a binding domestic economy-wide emissions reduction target of at least 40% (compared to 1990) by 2030. To ensure that the EU meets this target, they agreed that a reliable and transparent governance system will be developed. The purpose is to build on a clearly defined, long term policy planning and monitoring process in order to effectively implement the Energy Union with a forward-looking climate policy. The core components of such a governance system are the national energy and climate plans, which Member States are expected to finalise by 2018 and update biannually.

Those plans, if developed by each country along the guidelines provided by the Commission, represent a very significant tool to drive deployment of the post-2020 CCS project portfolio. First, they lay down concrete steps to provide certainty and predictability to project developers and investors in a rapidly changing environment up to 2030, and including a perspective up to 2050. Secondly, they embrace a holistic approach, where not just climate targets, but also security of national energy supply and the energy mix of the country, competitiveness and impact on growth and jobs in subsectors of the energy system are integrated. Finally, they provide the basis for enhanced regional and cross-border cooperation which is key to enable the establishment of a CCS Hub and Cluster network in Europe.

As at date of publication it is yet to be seen what Member States concluded on the Energy Union governance in the meeting of the Energy Council of Ministers undertaken on 26 November 2015.

3. Great interest in cooperation with the North Sea Region

One of the building blocks of the Energy Union is the establishment of a fully integrated internal energy market. In 2016, investment will be boosted to establish trans-European networks for energy infrastructure (TEN-E) and Projects of Common Interest (PCI). These are expected to receive a political push. Member States and stakeholders have shown great interest in cooperating with the Northern Sea Region, and almost half of the capital expenditure for all electricity PCI will be invested in this area.

There are two principal elements of interest for CCS in this context: the Central and Southern North Sea area is Europe’s prime CO2 store, and the Commission has very recently started to consult with the CCS community in Europe to discuss the interpretation of the TEN-E Regulation selection criteria for carbon dioxide transport projects of common interest. In a CCS hub and cluster development, CO2 emitters located in close proximity to each other are linked together to form a ‘CO2 capture cluster’, and to large-scale CO2 storage using strategically sized infrastructure.

The Project of Common Interest is emerging as a driving tool to establish cross regional CO2 transport infrastructure connecting industrial high energy intensive areas located in different countries (such Teesside, Rotterdam, Antwerp, and Humberside), thus reducing costs and securing the delivery of those initiatives. In parallel, the impact of the reform of the EU emission trading system should also provide a better long term investment signal for low carbon investments.

The way forward - 2016 and beyond

The below table summarises the timeline for Member States to develop national energy and climate plans:

 
Member States
2016
2017
2018
  • Start to develop an overarching strategy, main objectives and overview of policies of national energy and climate plans

  • Develop a methodological tool to prepare a reference and policy scenario as an analytical basis of national plans

  • Start national stakeholder consultation on national plans

  • Start discussion with other Member States on preparation of national plans

  • Finalise stakeholder and regional consultation on national plans

  • Engage in national political process on national plans

  • Provide integrated projections to the Commission covering both reference and policy scenarios

  • Submit draft national plans to the Commission based on the Commission’s guidance template

  • Finalise national plans taking into account peer review and Commission’s recommendations

  • Submit final national energy and climate plans

 

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