Energy industry warns EU climate plans reduce Europe's energy security
LEIGH PHILLIPS
07.02.2008 @ 09:22 CET
The European Commission's climate strategy is increasing Europe's energy vulnerability, with emissions restrictions leading to power companies scrapping plans to build plants, according to the world's major energy companies.
"A lot of investment projects have been cancelled in the last couple of months," said Johannes Teyssen, the vice-chairman of the World Energy Council, counting off four coal-fired power plant projects in Germany that had been cancelled in recent weeks.
Companies say they are afraid of making the necessary infrastructure improvements and investing in new plants because of regulatory uncertainty (Photo: European Commission)
Mr Teyssen, who is also CEO of German energy firm E.on, made the comments at a press conference launching a report from the council, an industry association representing energy producers in 96 countries, on how Europe should plan to deal with future energy crises.
Companies are afraid of making the necessary infrastructure improvements and investing in new plants because of regulatory uncertainty and the commission's "rigid and tough" attitude towards carbon emissions.
Under Europe's current emissions trading scheme (ETS) – the European Union's market for trading in greenhouse gas emissions – permits to emit carbon, methane and other gases are currently allocated to polluters for free.
Contrary to its aims, the existing scheme, which also saw member states issue the emission credits, has resulted in an increase in carbon emissions. Thus, as part of its comprehensive climate and energy package proposed in January, the commission will tighten up the ETS, centralising the allocation of emissions permits and gradually ending their free allocation.
From 2013, power companies will have to bid for the emissions quotas at auction, with other industrial sectors having to pay for permits at a later point.
Full auctioning would compound European vulnerability to energy crises, said Mr Teyssen, whether interruption of oil or gas supplies, price shocks or other energy emergencies resulting from international tensions.
Instead, recommends the council's report, "European policy makers and market players should act together to secure energy supply and mitigate current and future vulnerabilities."
Green groups scoff at the idea that the ETS is already forcing energy companies to choose between investments and paying for emissions permits.
Greenpeace called the first phase of the ETS - which resulted in an over-allocation of permits, permits which nonetheless had some value - "a licence to print money" for the energy companies.
The international environmental group points out that in 2006, the German environment minister, Sigmar Gabriel, denounced the four biggest European power producers – Eon, RWE, Vattenfall and EnBW – for profiteering from the ETS at the expense of consumers and boosting their earnings by between €6bn and €8bn.
The council report, entitled: "Europe's Vulnerability to Energy Crises," also calls nuclear power a "promising alternative", and recommends Europe consider the nuclear option, as it reduces carbon emissions and reduces dependency on fossil fuel imports.
The Green group in the European Parliament, which is opposed to the use of nuclear energy, warns that such a strategy does nothing to reduce import dependency.
It argues that in order to maintain Europe's current number of reactors running at their existing level of output, there will be a shortage of uranium by 2030, so energy security is still undermined by the need for uranium imports.
Meanwhile, Alstom, the world's leading coal-fired power plant manufacturer has warned that EU plans for carbon capture and storage (CCS) would require as much as €12 billion in funding, Bloomberg is reporting
CCS is a controversial and as yet under-developed technology that would see carbon 'captured' from power plants and other carbon-intensive industries before being emitted, and then stored deep underground or under the ocean. The commission plans envisage 12 CCS demonstration plants up and running by 2015.
However, Alstrom advisors reckon each plant would cost anywhere from several hundred million euros to €1 billion - a price too high for individual companies or member states to be the first to showcase the technology.