The burning question: Can carbon capture and storage help the world deal with climate change?

Closing comments from Hans van der Loo, Head European Union Liaison, Shell

And some people are saying that this would not be a hot topic, notably the next rapporteur. Well, I think the policy debate is a very hot issue indeed as the debate this evening has shown. I will bore you for a few minutes before we get to drinks perhaps with slightly more mundane things because policy, of course, is put in place to actually direct physical things that happen in the world, in Europe, in industry etc. And I'm, of course, a man of that lower world, if you wish, not the policy world.

And I will actually make four points. One has got to do with the future, I'll get back a bit to current reality and end up with future again. I will do them in rather mixed steps because I've only got ten or so minutes for that. One has got to do with the global energy supply and demand perspective, and you can look at that from a European point of view and it would look in a certain way, and you can look at it from a world point of view and it would look in a different way. But since the debate for CCS is very much driven by climate and climate is a global issue, I will take the view on supply and demand from a global perspective. Now I would like to share with you three hard truths. The first hard truth is that whether we use coal or not, whether it's driven by CCS or whether we use CCS or whether it's driven by coal, the hard fact is that energy demand is driven by the number of people. And in the next 40 years, the world population will increase by 50% and virtually all of those people will be born in the poorer parts of the world, whose GDP per capita is very low and those people all aspire to live like you and I do. And that means that whilst population increase may only be 50%, energy demand increase we've calculated to be closer to 100% and it includes the offsets for increases in energy efficiency. That's the first hard truth.

The second hard truth is that particularly the conventional oil and gas industry will be having a very difficult time ahead, because every month we have to produce more than we did last month, and that will be true for every month. And at one point in time, and we think that that may be sometime towards the end of the next decade, that conventional oil and gas supply will simply begin to struggle with every month they're delivering more. And so there will be a point where that will lead to high price peaks and it will lead to power cuts, and don't say that that cannot happen in Europe because California has it and that's a sophisticated part of the world as well. And then there will be two reactions by Governments. The first one is a knee jerk reaction because we can't have these price spikes and power cuts, it's the last thing that you want to have. So there may be draconian measures on no Sunday driving or draconian speed limits. Well, you just imagine what that could be. But Governments will understand that that will not solve the problem. So they will look for a more structured solution.

And several people on the panel have actually touched on the issue of security of supply, and that will bring me to the third hard truth. That will mean that there will be a global flight for coal because coal is not only there in vastly bigger quantities, it also uniquely is in everyone's backyard which is not the case for oil and gas. And so that is when the stress that we have between supply and demand will then get translated in a stress to the climate.

And it is in that perspective indeed that CCS comes in, but before I talk about that I'd like to say a few words about renewables. And by the way, for those of you interested in formulas, the formula on what drives C02 emissions I've put on your table. It's basically the number of people times the GDP per capita times energy per unit of GDP and then times the amount of C02 per unit of energy. And it's the last two things that policy makers can really focus on because what are we going to do about the number of people in the world? Well, you can if you have better social support programmes, and people feel more secure about their pensions, perhaps they have less the number of children but in the short term of time, the first two factors, that's why I've put a cross through it, we cannot manage, certainly not as industry but even policy makers would have difficulty in doing so.

The role of renewables. This is interesting - it depends a bit with whom I'm in the room, whether I'm either extremely conservative or a lunatic, it depends who I talk to. I suppose if I would be with Mahi, she would say you're ultra-conservative if you say that only 30% or a third of world energy demand in 2050 could be renewables. If I'm with my fellow industry people, they say you better keep your mouth shut, you know that it's not going to happen. So you notice a big extreme. Well, whether it's going to be a third or 25% or half, that's neither here nor there. Can I just take you through a small mathematical exercise? If in 2050 energy demand will have doubled, then 30% of what has doubled equals 60% of today. Are you still with me? At this moment in time, the share of renewables in global energy supply is only 1%. So if we are right and it will be one third in 2050, it has to be 60% of today's global demand, or 66% if you take exactly one third being 33%. And that means that over the next 40 years, the renewables industry will have to grow a factor of 60 or 6,000%. Now aside of the fact whether that is physically possible and whether the capacity is there, the reason why it hasn't happened yet Chris - and that's perhaps a question to your answer, why the UK has not made much progress and Germany did, because it was the state who was paying for it - is that renewable energy, up until recently, simply was too expensive. And people will not voluntarily pay more for their kilowatt hours just because they happen to be made by renewables, unless there was some framework that allows them to do that. But this is particularly true for all those new people that will get born because they will be poorer than we are, and they certainly do not want to pay a lot of money for energy. So renewables will have a hard time to grow by 6,000%.

Now I come to CCS, and I would like to begin by saying it is not a silver bullet, I agree with that. It is certainly not a silver bullet. It's part of the bouquet of solutions. In actual fact, the three hard truths that I just mentioned to you, they came under a lady's name called TINA in the old scenarios, and TINA was There Is No Alternative to globalisation and demographic growth; those things will happen. And TINA has actually got a daughter and we will put her daughter up for baptism on 7th April here in Brussels and I can give you a scoop. The daughter's name is TANIA and TANIA stands for There Are No Ideal Answers. So I'm happy to admit that CCS is not an ideal answer, just like renewables is not an ideal answer but really it's not either / or, it's and, and, and. On CCS I would just like to say a few things. First of all, it actually naturally occurs in the earth's crust and there's two small stories - very, very small stories. One is that we sometimes do use it deliberately, that we drill it to take it out of one well and inject it in another well to get more gas and oil out. And one extremely shameful story amongst geologists in Shell is that if they make a lot of razzamatazz about the new finds they get, gas finds, and then do a test drilling and then the gas is coming out and you can see the pressure and you can hear it coming out and then we try to ignite it by shooting a flare into it. And it's really a very shameful story as an exploration engineer that after trying to flare it three or four times, it doesn't ignite because you drilled a well of C02. So it is something that sits there naturally.

And by the way, for your information, the C02 level in this room has increased significantly since we began this session and I presume since you're all here you're interested in this subject, just a small party joke. If you could choose to have for one minute but one minute only, your lungs filled with pure CO2 or to have your lungs filled with pure oxygen, what would you prefer? Actually, let's do that here. Who would like to have their lungs filled for one minute only with pure C02? Raise your hands. Okay, and who would prefer to have oxygen? There's a lot of abstentions but those people that raised their hands with oxygen, after one minute, actually before the minute would be over, you would have died, you would have burnt. Those people that will take a C02 in their lungs, that one minute would have been as if you were holding your breath for one minute, so at the end you're gasping for air. But you would not die - with oxygen you would. I'm just saying this because of the demonisation of C02. Yes, too much of a good thing is a bad thing but it is no worse, it's not a waste in the sense that it is a dangerous substance in itself.

The last point I wanted to make has been referred to by some people already about the experience curve, and Sanjeev here made a point that it should not be left to the marketplace to say when should this start or not, and indeed it cannot be left to the marketplace because the marketplace will not begin with it. Because at the beginning of this technology and I think Mr...you said all the individual components are there but it's never been all done together at a large scale.

And the last thing that I want to bore you with is the concept of an experience curve. So the first time you do it is extremely expensive and nobody's going to do that voluntarily and say, well, I'll volunteer, I'll do that. Nobody's going to do that, so you should indeed have a kick start mechanism to help that. And you might say well, why don't you do that? And in a previous audience I once heard the comparison with the iPhone. Does everyone here know what an Apple iPhone is? It's this new super-dooper mobile phone with a lot of other functions on it. The initial retail price in New York in the last quarter, because they launched it before the Christmas shopping season in New York, was $500 and some people were so desperate to get one, that they actually bought them off other customers offering up to triple the price; and we're talking about mobile phones. But what I'm saying is that for some of these products, there are so-called early adopters. People who desperately want to have the new products first. If you could buy the first CCS electricity would you be willing to pay three times more for the electricity? If you would, you would be an exception. Most people won't. So that means that the early adopter for CCS technology is not the consumer because they will not pay for it, like you do for an iPhone. It should actually be the public purse, the ETS system, a special system of...There are many ways that you can think of it, but something needs to help come down that experience curve.

Jos also raised two points that I want to react to. You mentioned about the venture funds - they are indeed a lot less prevalent here in Europe, but there is perhaps a correlation between the general taxation level in the US and the occurrence of venture funds, because there in the US it's venture funds high, tax low, in the EU, it's venture funds low, tax high; and maybe there's a correlation.

I do have perhaps some good news for you and that is that you said that you were a bit disappointed by industry not coming forward, and there's two things that I want to say there. One is that there is something behind those cost rises in the bits and you know that steel has gone up 100% in the last 12 months. I happen to serve on the Board of...Shell and I know that rig rates, that's the rentals that you have to pay for these floating islands have gone up a factor of 500%. And by the way, if you want to do CCS, particularly offshore, you need those rig rentals and they have gone up a factor of five, so there is really some reality. I have not seen all the sums even while it has gone up. So that is one point.

The second point is that over lunch last Thursday, the industry has actually made an offer to Commissioner Piebalgs of a very large sum that I've just been told by my associates that I should not say in public, but I'll whisper the number in your ear over the beer afterwards, but it's a very sizeable sum of money, and running in the many, many billions of Euros that would actually foot a lot of the cost of those initial products that industry have said they would have available if the regulatory framework would be there to ensure that this would not be seen as a donation by just a few companies doing it for their overall good, but that it would be a way of paying back from the common good to the few companies that would do that in order to bring down that experience curve.

So with those words I would just like to say I don't think there's three camps in this room, this is a very overlapping discussion. But I would say to those that are for, please be aware of the urgency, because in the next four to five years, the way the world will go on climate change will actually be determined by the simple fact that China is building one coal fired power plant every six days. So the time is ticking. Whether we talk or don't talk, time is ticking and C02 emissions are rising.

For those that doubt, think about the precautionary principle. I presume that we all pay insurance for our cars and for our homes. Well, you pay the insurance and you hope that you won't get paid out for it because it means that you've had an accident. This is perhaps a little bit like that as well.

And those that have reservations on it or maybe outright against. Think about it this way. I think that CCS is not something that we have to do for the next few centuries. I see it very much as something that is like a big saving because the population growth that we will see in our lifetimes, and the UN is looking at that as well that the population growth will trail off afterwards. As GDP per capita will go up, people will have fewer children but we still have this enormous growth in this century with the economic development growth and hence, the energy demand growth, that that eventually will tail off and through energy efficiency, may even go down. The problem is if the emissions in this century will bring us well above 450 or 500 or 550, what use is it if on a per capita basis, it later on goes down if we've triggered all sorts of mechanisms in nature that will actually put the cataclysmic effects in place that Nicholas Stern spoke about? So is it not worth its while to make sure that whilst the underlying energy demand does this, that C02 emissions into the atmosphere do not do the same thing and that we actually use CCS as a tool to stick it under the ground, but do not make that a habit and certainly not an excuse to not do renewables or energy efficiency but to do that as well, in order to come to a more level and declining energy demand curve for the world, what we're seeing already now in Europe but not for the world; and see that in that perspective. Because a seven year delay, which is about the period between today and the next European round of budgets, a seven year delay in all known CCS plants in the world will cause between 90 and 100 gigatonnes of avoidable C02 going up in the atmosphere between today and 2050. And that is about ten parts per million in Nicholas Stern terms. So it's a high price for early action.