1. OCTOBER 07 The European Perspective on Power Generation and Carbon Capture and Storage Derek M. Taylor, Energy Adviser, European Commission 1 1. The views expressed here are those of the author and may not necessarily reflect those of the European Commission

2. OCTOBER 07 Outline The three challenges for an energy policy Security of supply Competitiveness Sustainability The role of coal and other fossil fuels Shares in energy consumption Prices of fossil fuels Environmental impacts of fuels Key issues that must be urgently addressed Reduction of carbon emissions Demonstration of Carbon capture and storage (CCS) Deployment of CCS technologies in EU and globally International Research Co-operation

3. OCTOBER 07 The three challenges Security of Supply Competitiveness Sustainability

4. OCTOBER 07 Security of Supply – Import dependence

5. OCTOBER 07 Security of Supply - Sources of imports of fossil fuels Main suppliers of oil Russia(31%) Norway(20%) Saudi Arabia*(13%) Libya(10%) Iran*( 7%)  (* Total Middle East ~22%) Main suppliers of gas Russia(33%) Norway(29%) Algeria(21%) Mainly LNG(12%) Main suppliers of coal South Africa (26%) Russia(16%) Australia(15%) Colombia(12%)

6. OCTOBER 07 Competitiveness - Border prices for oil and gas X (today!)

7. OCTOBER 07 Sustainability – carbon dioxide emissions CO2 from energy production and use makes up 80% of EU Greenhouse gas emissions

8. OCTOBER 07 Sustainability – quantities of carbon dioxide from energy

9. OCTOBER 07 The role of coal and other fossil fuels Shares in energy consumption Prices of fossil fuels Environmental impacts of fuels

10. OCTOBER 07 Gross inland consumption – 2004 (Mtoe)

11. OCTOBER 07 Role of different fuels in electricity production (BAU)

12. OCTOBER 07 Reserves of coal - global Coal is an abundant energy resource: Global reserves:900 billion tonnes Annual production:4.5 billion tonnes Lifeline:200 years Coal is a reliable energy source: Fairly even reserve distribution, on almost all continents -Accessible at reasonable costs -Low risks in transport, handling & storage

13. OCTOBER 07 Indigenous resources of solid fuels in the EU The total solid fuel resources in the EU amount to around 438 billion tonnes Of which 309 Bt are hard coal The total solid fuel reserves in the EU amount to close to 88 billion tonnes Of which 36 Bt are hard coal Production in 2004 was 187 Mt of hard coal and 392 Mt of lignite (total 579 Mt) Source: Euracoal

14. OCTOBER 07 Solid fuel – benefits for security of supply for EU So indigenous reserves of hard coal are equivalent to close to 200 years of production at its present level. Reserves of lignite are equivalent to around 130 years of production at its present level. Resources of both are significantly greater – especially those for hard coal

15. OCTOBER 07 Oil price - $/bbl Spot Brent Crude – Source BP

16. OCTOBER 07 Gas price - $/billion BTU – cif Europe – Source: BP

17. OCTOBER 07 Coal price – $/t - coal marker price (NW Europe) – Source: BP

18. OCTOBER 07 Fossil fuel price evolution – 1988 – present - Summary Oil and gas prices have quadrupled in the last 20 years Coal prices have (only) doubled

19. OCTOBER 07 Key issues that must be urgently addressed Reduction of carbon emissions Demonstration of Carbon capture and storage (CCS) Deployment of CCS technologies in EU and globally

20. OCTOBER 07 An Energy Policy for Europe Adopted by the European Commission in January 2007 Endorsed by the European Council in March 2007 One strategic objective: Reduction in CO 2 emissions by 20 or even 30% - by 2020

21. OCTOBER 07 CO 2 emissions from energy in EU-25 – million tonnes

22. OCTOBER 07 Sustainability – future emission trend ….. (BAU)

23. OCTOBER 07 Carbon dioxide emissions during electricity generation

24. OCTOBER 07 The key issue for coal – view of the European Commission Coal is a key contributor to the EU's security of energy supply and will remain so. However, coal can continue to make its valuable contribution to the security of energy supply and the economy of both the EU and the world as a whole only with technologies allowing for drastic reduction of the carbon footprint of its combustion.

25. OCTOBER 07 The need for carbon capture and storage (CCS) Future coal (fossil fuel) generation to be low carbon  The Commission would like to see all new fossil fuel generating plant built after 2020 to include CCS The need for commercial scale demonstration of CCS  In order to demonstrate the variety of different option for CCS up to 12 large- scale demonstration plant need to be constructed - by 2015  If demonstration is delayed then deployment will be delayed The need for public funds to support such demonstrations  There will need to be very significant industry and public funding if the necessary demonstration plants are to be built  ……..and very strong political support over a period of time  The European Commission is expected to adopt a Communication on support for CCS tomorrow………

26. OCTOBER 07 The cost of CCS – a critical issue Mobilizing decisive industry commitment will be crucial  Without such funding complementary public funding may not be triggered  The dedication of substantial resources by companies is a precondition for the stimulation of the technologies Paving the way for strong Member States’ involvement  Some MS have identified possible approaches Feed-in tariffs, up front investment grants, guaranteed CO2 prices Use of revenues from ETS auctions might be appropriate Structural funds in new MS (EU-12) Revision of State Aid guidelines for environmental protection Identifying sources of financing at EU level  Financing low-carbon technologies to be addressed European financial institutions could be instrumental Continuing support under the EU’s Research Programme

27. OCTOBER 07 Creating the right conditions for CCS The need for clear regulation for CCS – both in EU and globally  The European Commission is expected to propose framework legislation for CCS tomorrow (23 January) Recognition of CCS in the EU Emission Trading Schemes  The issue of CCS will be addressed in the new Directive on the ETS expected to be adopted by the European Commission tomorrow…… Greater international co-operation on CCS  The European Commission is developing bilateral activities with India, China and South Africa  The EU and many of its Member States are active in the CSLF

28. OCTOBER 07 International Research Co-operation FP7 Energy Theme Concrete opportunities in New Calls

29. OCTOBER 07 oTopics for Collaborative Projects especially designed and devoted to the international cooperation with targeted ICPC – including India oAddress problems, on the basis of mutual benefit, of shared interest and importance e.g. the environment consequences of energy policies, energy supply inter- dependency, technology transfer and capacity building Specific International Cooperation Actions (SICA)

30. OCTOBER 07 SICA Topic 5.2.1: CCS capacity building with the large emerging economies (EE) Content and scope: research aimed at first global estimate of the CO2 storage capacity in large EE, matching sources and sinks and identification of a few potential storage sites for large emission point sources. Capacity building in CCS inc. development of transport infrastructure Funding scheme: Collaborative Project (2 X MS + 2 X ICPC*) Expected impact: allow deployment of zero emission fossil fuel based power plants in large EE with sufficient pre-requisite knowledge (CO2 storage potential) and technical know-how Other information: SICA; balanced partnership between EU and Large EE members of the CSLF; institutions from developed countries also members of CSLF welcomed) * International Co-operation Partnership Country

31. OCTOBER 07 Two stage Evaluation Procedure OUTLINE PROPOSAL Submission deadline: 26 February 2008, 17:00:00 Evaluation: March-April 2008 FULL PROPOSAL Submission deadline will be specified in invitation letter (indicative: 29 May 2008) Evaluation: June 2008 Full proposal should be complete and precise, but as concise as possible

32. OCTOBER 07

35. Some basic conclusion

36. OCTOBER 07 Coal – secure and competitive, but …… The European Union is increasingly dependent on imports to meet its energy needs Coal is a more secure source than other fossil fuels – because of world and European reserves/resources Coal has economic benefits over other fossil fuels – including the price is generally less volatile and is increasing at a slower rate However coal is a major source of carbon dioxide emissions  It is the main source of carbon emission in power production

37. OCTOBER 07 What we MUST do …. The world needs to reduce its carbon dioxide emissions to slow down climate change Removal of carbon dioxide from the waste stream from coal- powered electricity production is a vital part of this reduction Commercial scale carbon capture and storage needs to be demonstrated urgently Demonstration of CCS will require changes to legislation and strong public and political support Full deployment of CCS will require very significant funding by industry and also significant public funding and other forms of support