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

Question from the floor: Eivind Hoff, I'm working for the Belona Foundation which is headquartered in Oslo and is an environmental foundation which has been working on CCS since 1992. So we've been trying to get the Norwegian oil companies to get into this business for a very long time, and I just wanted to say that we basically agree on most things here, and in the end, I guess what everybody who would… the thing is that the outcome which is a 450 ppm scenario in 2050, that is pretty much impossible to imagine if we are to build any new fossil fuel power plants in meeting C02 in a very few number of years. That is just impossible - so that points to what Chris Davies was saying, mandatory is the only way if we are to be serious about the 450 ppm scenario. So that is the bottom line which is important. Now there's no doubt that we can get there, we have to get there. There are other examples where technologies which have not been really deployed on a large scale, for instance, when it comes to vehicle technology, the European Union is saying that by this and this year, the emissions per average car will have to decrease by so-and-so much. So a similar scheme should clearly be applicable to the largest C02 emitter of the whole economy, the power generation industry.

Now where the additional dimension that I wanted to get into the debate is the national, the southern perspective here because it is okay, in Europe we should be able to deal with the climate change commitments perhaps without CCS, but the reason that really makes CCS quintessential is China, it is India, it is South Africa, it is Mexico. So I would like to ask the question to Mr Delbeke and Mr Davies in particular perhaps, how can we make sure that the first demonstration plants of CCS, large scale demonstration plants, that they actually are built in those countries where they will be essential, in China and India? The ENSEC project whereby the EU has committed to helping China to build one of these plants doesn't seem to be progressing at a great speed and that is only one project.

Jennifer Rankin: We'll take a couple more questions.

Question from the floor: I'm Jason Anderson from the Institute for European Environmental Policy here in Brussels, an independent non-profit thinktank. The problem as I see it is that although the Commission has put forward a very good start, there is a certain element to wanting things both ways or, as we say, not really deciding whether to fish or to cut bait. That is to say that the pressing problem in front of us is quite clear but we're leaving the problem to too diffuse an instrument to make sure that it's solved. At the moment, the instrument that we're talking about commercialising the technology is emissions trading and if you look at the analyses that show the price levels you would have to sustain to have CCS commercialised, you're essentially depending on this market instrument to deliver the signal that you need for commercialisation, and all of the other elements that are going to want to be reducing costs as much as possible and all of the decisions that are made within emissions trading systems to see that costs are reduced - flexibility through the introduction of external credits and so forth, all of the myriad rules around there tend in the wrong direction for the promotion of innovation. So there's going to be a constant fight between those who want to keep costs down and those who want to keep it up enough to promote innovation. And the people who are doing both of those fights are the same people because it's the energy industry who, on the one side, are trying to keep costs down but, on the other side, are being asked to innovate.

And the same problem is here between now and then, which is that the energy industry and associated industries are in close cooperation with the European Commission and others to develop these demonstration plants and what Jos Delbeke said is, if these demonstrations prove to be successful, then maybe we'll say that they'll become mandatory in the future. In other words, the fox is being put in charge of the henhouse. If you can prove to us that your technologies work, we'll force you to use them later. And I think that's a risky strategy because not only do we rely therefore on the companies to develop them, then we rely on the market to commercialise them. We're in a vague sort of situation where we're not sure what the outcome will be and I think that's dangerous, whether or not you approve of CCS.

Jennifer Rankin: There's one more question on this side here.

Question from the floor: [??? 5:42] from EURACOAL, the European Coal and Lignite Association. I certainly would like to mention some facts about the energy triangle. We should not only talk about climate change but also on security of supply and competitiveness, and I cannot really understand those who are saying new coal fired power plants are a bad thing. They may be a bad thing but they are not as such, because they may also replace older ones which are often ineffective, and we will need coal fired, gas fired, nuclear, other power plants for a number of decades to ensure a security of supply; also coal fired power plants for some, let's say, simply 40 or 50 years - 40 years is usually considered the lifetime of such a plant. And if you plan such a plant today, you should of course have it carbon capture ready in the sense of having the space and also the technological, on-site the technological precautions to once really employ CCS there.

And we must also not have CCS mandatory - I very much agree with the Commission there because you never can as a state call the private to do something which is not possible to do. As an administration law it's simply not possible. It is like Mr Delbeke said of course possible to later, after this thing has been demonstrated, hopefully as soon as possible, say 2014, 2015 the first not only pilot but demonstration plants are planned to operate by then, and earlier is not possible (by the way I would say a few words on that later). And then demonstrate them for two or three years which is probably necessary, which I understand from the engineers, and then make the further decisions once again; but now saying mandatory is premature. I think those are the major points I want to make now. It wouldn't be a step back, as you said Mr Davies, to build new coal fired power plants and we must, of course, understand capture readiness in the right way.

Jennifer Rankin: There's some very crunchy questions and comments for our speakers to consider. I'd like to go back to them now for some responses, and I've noted there are a number of people who are waiting to ask a question and we will come to you in the next round. Jos Delbeke would you like to start?

Jos Delbeke: Well, perhaps a few comments on what has been said. I would strongly agree that coal is there and coal is cheap and coal is available from many different suppliers, so security of supply in its economic translation it's a fact in terms of security of supply because economically, you can buy it anywhere. And in that sense, coal is the issue we have to deal with, here but also in China and elsewhere, and the higher the price of oil, the higher the price also of gas and the cheaper in relative terms coal is. So I think we are condemned to deal with the coal issue - that's why basically we support carbon capture and storage.

The second comment would be that, yes, it depends and it should depend very much on the price on the ETS, but like every market price, a market price has a double notion. The one who has to pay it hates it and the one who can cash in the revenue likes it. It's the same as we as individuals, we can say well, the high petrol price and the high price of oil at the pump it's a good thing. Intellectually that's what we need to drive energy efficiency, but when we have to pay it, well, of course, it's less pleasant. But there are two sides on the equation but that's what the market price is and that's why I think a horizontal instrument is the way we should go. That's why I think one of the questions we will have to sort out in Europe is how to combine a relatively high carbon price, and I mean by that higher than today in order to allow carbon capture and storage to be driven to the market, how to have that and, at the same time, not threaten too much our industrial base that we still have in Europe. I think that's a basic issue we will have to sort out and that's why the international negotiations subtle[? 10:52] approach etc are so important.

But there is a more fundamental question I would like to ask to those pleading for mandatory carbon capture and storage, and I'm not an engineer but I'm told carbon capture and storage has many different technological appearances. You can capture the carbon before you use the fuel and after you have used the fuel. It's very different in oil, in power generation and in cement and in steel smelting etc. So not knowing much how to pick and choose which technology and what is right or what is mature, then if we speculate on the market forces and on an ETS market price, why then should we make it mandatory? Of course, we can do it both. We speculate on the market and the market price has a horizontal incentive and we make it mandatory. But in terms of better regulation we have to come to grips with the issue that it's basically one or the other, you cannot have it in a good regulatory set-up both ways, otherwise you may start over-regulating and that's why we fully recognise that the market price on the carbon market is not high enough today, and hence the need for additional incentives. But, at the same time, it should be the carbon market that is driving the technology into the market and to a generalised use and not the other way round. If it doesn't work and if carbon capture and storage remains a promising technology, then we may have to reassess and recognise that the carbon market is not doing the trick. But I think that we have to give the benefit of the doubt to the build-up of the carbon market which we were choosing as a horizontal instrument, not only for one of the other sectors but roughly for half of the carbon emissions or C02 emissions in Europe.

Now where to put the demonstration plants? Well, I would be very pragmatic and I would call on all those who are eager to invest in this new technology, to listen to them where and how to develop it in the best way. 12 / 15 demonstration plants is not much for Europe, but when we start counting the heads and when it is clear that an investment in an unsure technology has still to be done, then the counting becomes easier. I think that the many power or other companies, engineering companies that were volunteering originally are not in the end that numerous. So I would listen very much to their wishes, where to put it but I would put a high count of importance that we go into it, wherever. If it is in member state X or Y, we have to do this. If we are serious about climate leadership in the world, we have also to help develop this technology. And I was involved in the ENSEC[? 14:12], in the initiative to put carbon capture and storage facilities up in China, and it doesn't indeed not advance as quick as we would have liked, but the Chinese turned around and said, but wait a minute, we agree we should do it but why are you not doing it first? That's the way it normally goes. You as rich industrial nations, you boost a lot with your hi-tech, you are good at making the technologies, why on earth would it have to be this time round different? So can you do it first and then we will learn from your experience and invest in it. So, of course, this is part of Chinese negotiation tactics I know but, at the same time, I think we should go into that and we have technology, we have to use that technology, we have to be willing to be leaders in the low carbon technology, i.e. I would like to listen very much to those willing to invest how to overcome their hesitations, and I would very much like to go into a debate that is much more operational than yes, we need 12 /15 demonstration plants, it's now time to know where, who and how instead of talking about it.

And then a last comment on the type of regulation. It was said you regulate in a mandatory way for cars and fridges and other things and not for installations, but that's the basic build-up of our regulatory framework in Europe. When it comes to product standards we regulate, but when it comes to installations we regulate them differently because installations are always different wherever they are. They have a different context and that's why our environmental legislation related to installations is always so different from the one that we have related to products, because products in an internal market, you have to set standards that are applicable everywhere in Europe. But that's a side comment but inevitably is one I wanted to bring up because what we do on carbon is really playing on market forces. We have a carbon market, we need higher prices, we do not want industry to go out of Europe massively - let's square that circle - and then we will have a good market incentive to build up this kind of technology.

Jennifer Rankin: We'll go round the panel in order for responses so I'll go to Chris Davies next.

Chris Davies: Just a couple of points. I think the energy security argument is a very strong one. I'm thinking back to when I was 12 which is 1966 and I'm in my classroom at school at a geography lesson filling in a map of the United Kingdom showing all the coalfields in the United Kingdom - lots and lots, whole counties covered in coalfields - and almost all the coalmines are closed now but we still get 33% of our electricity from coal; we bring it in from other countries. Coal's still there and if someone in another part of Eastern Europe turns off the lights, we might want to dig up the coal again. So a very good argument to put. And that's just the United Kingdom - Poland, what is it, more than 90% of its electricity coming from coal and Germany more than the United Kingdom. It needs to be pursued.

I think Jos' argument that mandatory, well, we're not there yet, there's different technologies, at least three different forms of CCS and therefore we can't think about a mandatory target, I think it's a bit weak. I'll come back to my railway analogy. The railways of Europe were based on steam locomotives and however primitive we may think them now, they got us from A to B in a revolutionary manner. And okay, we move onto diesel locomotives and then we move onto electric locomotives but the steam locomotives did the job. And if the fight against climate change is the imperative, then let's start doing the job.

And finally, where's the money going to come from? How are we going to get the schemes up and running? Well, we really need to have a separate session on this and some of the presentations need to be made because I know that Shell have got ideas on this, I know that Bellona have got ideas on this. I hope that lots of Governments are working on ideas on this, and perhaps a mandatory requirement would also help concentrate minds if they knew that date was coming. But the commitment to build these 10 to 12 demonstration projects was made at the European Council meeting of spring last year, almost exactly a year ago, and then they had eight years in which to build these plants in order to meet that deadline. Now they've got seven years in which to do it and time is passing. It would be nice to think that in two weeks time at the spring Council we would get some firm announcements being made from Governments. Because, apart from anything else, the rest of the world is looking at this, CCS is going to gather pace and there is huge potential export markets and it would be nice to be at the front, rather than to be left behind.

Mahi Sideridou: CCS should it be mandatory? I would argue not because there are too many concerns right now about this technology, and even if we ignore the environmental concerns, there's also it doesn't exist. How can we make mandatory something that doesn't exist? It's like making nuclear fusion mandatory. We can oblige countries to do something but if it's not there, it's not there.

Chris Davies: It does exist. There are a number of projects.

Mahi Sideridou: That's a good idea. Emission performance standards is another question but that's a very good idea. But we have to go back and say, what are we actually trying to achieve? And as a climate person, I'll talk about climate change and say, okay, this is how much we want to be reducing emissions and these are the tools we want to put in place in order to achieve that; binding efficiency targets across the board, transport policies, emissions trading, having a very tight cap, a good allocation - all these things - renewable energy promotion. So all these issues we have to use everything that's in the armoury of our potential solutions and an emission performance standard is one that could actually also solve this problem what do we do with new fossil fuel build in Europe?

On the southern countries, I would also argue that we still have too many concerns about carbon capture and storage in order to advocate that this should be going in different regions in the world, especially in regions where we have concerns about sustainable development, about different kind of priorities than trying to put an end of [??? 21:10] technology on coal production.

And whether coal is better than other technologies - well, it depends what the other technologies are. But I would make the argument that renewable energy sources are not only the answer because of climate change, but even if we take issues of competitiveness and security of supply, they provide a lot of co-benefits. They don't have a fuel, they have a fuel that's actually free, we don't import it, it doesn't have price fluctuations, it reduces air pollution and has all sorts of other co-benefits. So if we're going to be ranking power production technologies, coal would be way, way down there and other technologies would be way, way up there.

Martin Brough: I also agree that we shouldn't make CCS mandatory, but I don't think I'd say that the conclusion is that we should just be making renewables mandatory instead. I think that if Governments genuinely want people to start going and building CCS and they're not at the moment, I think the problem of just doing mandatory CCS is it avoids the Government asking the really difficult questions, which is why wouldn't people do it otherwise? Is there a security of supply benefit? And my feeling is there probably is. My feeling is if the market just decided to build some renewables plus a whole load of gas generation, that Governments would feel uncomfortable about that. And I'm not sure that the private sector at the moment would capture the full benefits to society of choosing to build something which enhances security of supply. So if that's the case, you shouldn't just mandate CCS, you should look at the mechanisms out there in the market for rewarding the private sector for helping on security of supply.

If you think there's an R&D benefit to them going and selling this technology to China, you should address the R&D, you shouldn't just force people to build stuff in Europe as a means of getting technologies to sell to China. Every time you come up with specific mechanisms or mandatory targets, I think you're just undermining the general carbon market. And if we're saying, yes, we want CCS but the carbon price would be too high and people aren't willing to pay a higher carbon price, then the real problem is that people are seeing a carbon price as a carbon cost. A high marginal carbon price does not mean that every single unit that's being consumed is costing society that much - it just means that the marginal technologies need a price that high to deliver things. So every time we say we can't fund renewables through a carbon price because it would be an unacceptable price to consumers, you're basically saying that the consumers are not realising at the moment the difference between paying the price and society as a whole funding the cost of delivery. They don't see any of the money in carbon prices coming back to them through dividends or through reduced taxes elsewhere. And unless the consumers actually see that money being recycled back to them, then you're never going to be able to have a carbon price which is high enough to be credible to get all of the new technologies that we need to get the carbon abatement. So I think we should be focusing on those things rather than just mandating it.

Jennifer Rankin: Now we've got lots of people waiting to come in.

Question from the floor: My name is John Hontelez, I'm Head of the European Environmental Bureau. We are not categorically against a CCS, but like Greenpeace we have particular concerns about political and financial distraction, but we also have some more specific environmental questions around CCS. One thing that hasn't been mentioned is that a lot of research about CCS shows that it actually reduces the efficiency of a coal fired power plant by some 20%. If you turn it around, you need to exploit 25% more coal to have the same kilowatt hours production. That means, of course, much more mining, transport, waste and so on. So that's something I think we have to take into account. And that underlines I think very much that if it is at all a technology to be used, it should be an interim technology to be used. And besides that, we also have some specific concerns about the Directive that has been proposed, and I hope that Mr Davies will tighten that up in any case.

But I think the most important thing is that it's often been presented as an interim solution and then, of course, you should not start supporting in such a way that you are at least postponing what is in the end the final solution. This is what I think Mahi is speaking about. In particular when you start talking about sponsoring it with revenues from auctioning, I think that is really a wrong signal. First of all, I think that if the ETS, the carbon price now is 20 Euros a tonne, it doesn't say anything about how it will be in ten years from now. That will depend very much about how successful climate policy we have, how tough we have set our own 2020 target. But besides that, if you really get this new resource from auctioning, use it then for what is in the end the most essential thing to do, which is energy efficiency. Then it also goes back I think much more directly to the public - you can use it for loans, for energy investments in housing and so on. And then you have a long term solution and then let carbon capture and storage just be produced as part of the competition between the different traditional sources through the ETS market, and the only way you deal with it as authorities is to make sure that your environmental rules are really safe and tough and that you also, for example, prevent it as it's now in the Directive, that on the longer term, the liability falls back to the competent authorities, falls back to the state and that you make sure that the companies that apply CCS have also a longer term responsibility for that, so that that's really a commercial enterprise.

Question from the floor: My name is Sanjeev Kumar, I'm from the WWF European Policy office, I've just got a couple of quick questions. Firstly, on the use of market instruments - the EU ETS is actually slightly different from a general market in the sense that it's a policy market, so you have fundamental control over what the price is, and that point's been made over and over again but I want to make it again because it's really important. What's really interesting is that, given the timescales and given the science where there is a strong driver and a need for CCS to be developed within a timeframe, that we're leaving the development of this technology to the uncertainty of the market, and at the same time we're allowing conventional coal plants to be built, not just in India, not just in China but in America and in Europe. So it is a global crisis that we're facing.

The easiest and simplest way to allow a market solution to be developed is to set a ceiling on the C02 emissions from any source of power generation in Europe, and that then allows the flexibility of different types of technologies, of different types of solutions to be developed, effectively at a bespoke level. With respect to the issue of finance and the issue of energy efficiency, the real big winner we're going to have is with energy efficiency, and I fully support the comments of the person who asked the question just before me. You have an example where we have wastage in the system because of the way in which our generation infrastructure is built up. We also have wastage in the transmission process. We then also produce waste in the form of capturing the C02, of then storing the C02 and then effectively losing it in our transmission grid. So we're effectively looking at a waste solution whether we like it or not and that simply can't be effective. So we need to find a simple way in which we can make sure that the technology's developed as quickly as possible and is applied as quickly as possible, and it's not just in Europe.

Question from the floor: [??? 30:00] from Hart Energies International Sustainable Energy Exchange. I think there are some very good comments here and I would just like to add a few things and also maybe ask a question, in particular to the NGOs in the room. I'm confronted with the issue of energy security versus climate change and I think we all are, whether we be policy makers, NGOs or working in the industry. If you take that and you look at our solutions for either / or, we then are really looking at a variety of contradictions. If we look at nuclear, clearly nuclear gives us a value in the area of C02 but is considered an issue with regard to waste on the environmental side, but is also going to help us in terms of energy security. And we've seen that a variety of different decommissioning possibilities in many of the European countries have been stopped because of the climate change issue before us and the energy security issue before us. If we look at CCS, we're now in a similar type of situation where we don't want to promote it too far, at least from what I hear from Greenpeace and what I hear from some of the other NGOs but, on the other hand, it could give us value in terms of energy security, not only with what we've heard today in terms of coal but also unconventional gas, tar sands etc which have other environmental effects, I fully agree but still is a potential in the area of both energy security and again, with CCS, climate change. And I'm trying to find a solution - I think many of us are here trying to find solutions.

Now if we stop now and say CCS is bad or nuclear is bad or other technologies are not going to give us that value that we actually need, we then do not move forward in trying to find the solutions that are before us, or new innovative technologies. I therefore fully agree that the goal should be emissions reductions and not necessarily particular technology solutions. Someone made the point about renewables, I wholeheartedly agree with you. Let's not start talking about certain biofuels that are going to get us there, but take a technology neutral approach and look at greenhouse gas reductions from the Fuel Quality Directive. And we all know that, for the moment, that is a complete shambles at the level of the policy makers because we are confronted again with this issue of promoting one particular technology over a possible solution. So I don't know how we get there. I would however call upon NGOs to try to work with the policy makers and work with the industry to find solutions.

I am worried about China, India and other countries in the developing world that are the ones that are creating some of our C02 issues, even though we know that we are part of the problem as well. But I'm also worried because that's where the demand is. We know that's the demand for energy, that's where it will continue to grow. Therefore, we need to work with those countries to bring forward solutions as well, and how can we do that? So I personally believe that the Commission's Directive is moving in the right direction. We need to have a package of solutions, a package of instruments - not only CCS but maybe something else. We also however need to build the infrastructure from a research perspective to continue to look for other solutions. When I look at the United States, I think the research budget at the Federal level is much higher than it is in Europe, and I do not believe that we will get where we need to go unless we look at research as well.

Jennifer Rankin: I'd like to go back to the panel now and as that last question was directed to NGOs, Mahi, would you like to respond?

Mahi Sideridou: I think I can make the point again that I don't think necessarily that energy security and climate change are contradictory forces. They could actually be pointing us to the same direction if we're brave enough to see it. And I think that the challenge that we're faced with, as long as we accept that climate change is a big issue and we want to do something about it, it's whether we take the road that we're on and tweak a bit and readjust because of climate change, or if we try and figure out what is the real path that will bring us where we went to be? And, in that case, we can't be technology neutral. We can't say, okay, let's accept nuclear. Even if we disregard the environmental issues, nuclear is going to actually deliver too little too late for the climate crisis, at too high a cost I would add as an environmentalist. Carbon capture and storage has all these concerns but I've talked - you mentioned biofuels very correctly. There are big issues with biofuels, so that we don't actually go and say, okay, biofuels, that's the way forward - we have to make sure that they're sustainably produced. So I think we can actually make the call now and say, okay, this is where we want to be, this is the technology that can get us there, and these are the solutions that shouldn't be part of that basket because they're not really the answer to climate change because they create another problem from the frying pan into the fire kind of situation. But I appreciate your input and your comments and I think you're right, we do have to have a debate with policy makers and industry about this.

Jennifer Rankin: Martin, would you like to come back on any of those points?

Martin Brough: I agree with some of those points in terms of, if you're an investor and you're thinking of putting some capital into carbon abatement and, in particular, CCS or another technology, I'm just worried that at the moment you're going to be focusing on the wrong things. You should be looking around you to see what are the other competing technologies out there for reducing C02, or for delivering security of supply benefits? What's the overall demand for C02 abatement or security of supply going to be? And how do I think my technology is going to stack up in that competitive marketplace? And am I going to make a lot of money or lose a lot of money by investing? And I'm not really thinking about those things at the moment. I'm thinking is there a particular policy mechanism, a targeted one which I can apply for? Is this thing going to be mandated? Can I get a special subsidy? Can I get specific R&D targeted instruments? I'm not really thinking about oh, what's the total amount of security of supply or carbon abatement that's going to be needed? Am I going to be delivering something which is going to be stranded by other technologies or not? And I think that's the real concern.

So I think the good thing is to try and keep as far as possible things competing in the same markets and against each other, and not to try and say this is the technology mix which we'll need in 30 or 40 years time; we're bound to get it wrong. But at least to try and say well, if you think security of supply is going to be important, as an investor here's a way you can make some money out of it and put some of your capital in. If security of supply is important, you're going to make a lot of money. If you get it wrong, you're going to lose some money. And at the moment, Governments care about security of supply, but they're not willing to tell investors how much they care or to give investors the feeling that they're going to be rewarded for delivering some benefits; and some of the same problems on choosing a successful technology.

Jos Delbeke: I also would agree that we have to start from emission reductions, and I have a pragmatic view what we can do and the carbon market helps us a lot in that. But I think where we have a little bit of a mixed or a confused debate is that the carbon market cannot do everything. When it comes to deployment of existing technologies, the carbon market is very powerful. When it comes to research and research and development, I don't think the carbon market is the right instrument. Now CCS falls halfway - it's demonstration. We are close to deployment but we are not yet fully there. It has left the research and development stage because it's already a well known technology. Now on demonstration, it's half the market and half a specific instrument I think where we have to go.

Personally I would say I would hope very much that entrepreneurship and companies are going to come forward. I sometimes feel that our companies are a bit shy to innovate and to jump to new technological solutions. Last week at a European business summit, there was a study that was ordered by the [??? 38:35] school, and what came up was that the market for these technologies was wide in Europe but venture capital is not being used as a way to develop these technologies, unlike the United States where venture capital for the development of these technologies is very frequently used. So perhaps there is something with our innovation policy in Europe that is not just limited to the environment but is a wide issue that we have to address, because we seem to be a bit too bureaucratic when it comes to making innovations and give them real life. And that's not the job of a bureaucrat, that's the job of the private sector - that's why I believe that a carbon market could do part of the trick.

Now on the carbon market and the review of the ETS we have been putting forward, I think one element is of capital importance in this, and that is that as of 2013, two thirds of the allowances in the proposal of the Commission would be auctioned. So once a power station has to make an investment decision and when the expectation is there that a carbon price may grow from 20 to 30 Euros and even beyond, then a real decision will have to be made how to avoid carbon. And that will, in our view, strongly benefit the deployment of renewable technology and also I would hope the deployment of carbon capture and storage technology, and our companies have been historically very good. The engineering companies of the world in the power sector have been European to a large extent. So why would we miss this time round this opportunity, and I think that this innovation policy and innovation activity has to come from our companies. I would hope that the expectation they have on the carbon prices in the future is going to give them a real good argument for that.

Jennifer Rankin: And can I ask you to comment on the point about the efficiency of coal plants being reduced by 20% as well?

Chris Davies: I don't know about 20% but it's certainly 10%, I think we can argue this and actually it reduces the efficiency. I think the point about research is well made but, of course, it could be well made about so many other subjects too and I still don't see European Governments, as they approach the next round of EU budget making, parting with more money despite the sentiments.

I'm sorry to part company with friends in the NGOs - I joined my political party in 1974. I cannot remember a time when my political party has not been advocating the use of renewables and the development of renewables. In my country 98% of our energy doesn't come from renewables now 34 years later, so you can see why I'm a Liberal and on the side of the underdogs because it's a perpetual thing. The reality is that in Britain and in most European countries, and certainly across the world, we use coal and we need coal and we're going to carry on building coal fired power stations because we want the lights to keep operating. And, of course, we need renewables too and, of course, we need as much energy conservation but we're still going to have to have coal and the only question is, do we have coal with lots of carbon dioxide or do we have coal with less carbon dioxide?

Jennifer Rankin: Another round of questions. At this stage, there are many people who want to come in. If you could keep your comments and questions fairly brief.

Question from the floor: My name is Marcus [??? 42:30] I'm the Director General of [??? 42: 34] We are the European Federation of Logistics and Transport Enterprises. We dealt with the subject at the International Transport Forum in Paris and this is in preparation of Leipzig and we gave them a document which I introduced as being a long series of small measures. In principle, any new technology is fine that would mitigate the problems. I'll try to build my question which I find a little bit difficult to explain in a way. I'll start with the [??? 43:10] perhaps if sunlight and wind were for a price and somebody benefited from it, 98% would be from it today but that comes too cheap and that's not the way that it's been done.

The question is actually mainly for the Commission and, doesn't it sound like a case of market failure in a way that the proportion of allocation of resources, and the proportion of allocation of business investigation is not the same for all sorts of available or foreseeable technologies? For instance, just to give you an example, if you talk of [??? 44:00] I'll quote my example, I'm Italian and in Italy there are 7sqm of commercial surfaces available per inhabitant - that means about 350sqm of commercial surfaces, not touching any houses, that could be converted into [??? 44:15] Even at 18% efficiency that's still a business case in our opinion. But this business case hasn't emerged, so with all the good for this technology, I mean there are technologies that can be business cases that, in our opinion, do not get a chance or do not get exploited to its full potential; and can we also do something to put them all on the table?

Question from the floor: My name is Udo Kremer, EU Turbines, the European Association of Gas and Steam Turbine Manufacturers. It has been mentioned by several speakers that this is largely a case for equipment manufacturing and that Europe takes a lead there. And I would just like to make a few comments and also ask a question to the MEP who will be steering the policy debate to a great extent in the coming months. First of all, I think there has been a question about the availability of technology and we've also looked into this, and maybe also to mention that there has been for a couple of years now a large exercise, industry led, with all stakeholders called European Technology Platform on zero emissions fossil fuel power plants, in short ZEP. And what our conclusion is at this stage, it is generally seen as all the different elements have been used and proven somehow in different industries; for instance, the chemical industry capturing C02 but it's really a matter of scale and it's a matter of integration of all the technologies, because as such you can also say it is not there, because there is no real plant. There are a couple of pilot plants at this stage but nothing at real scale. And if you look at all the different parts of the chain that need to be involved, like transportation and storage, it's in the end a matter of cost also. So to prove something also needs to be proven somehow economically.

I would like to also inform really that it is in our view a clear R&D subject still, and on the one hand, industry has done a lot for a couple of years - I'll just mention FP6, FP7 - to bring this technology where it is now. On the other hand, there are still major issues to be solved and it is clearly a matter of financing and legal framework to get the deployment started with demonstration plants but there is still a lot of R&D issues in the backyard.

And finally, that's maybe more a personal view, is that the whole thing will be decided in public acceptance terms, in my view. And I would like to ask the whole panel what you think, how this can be tackled, because these sort of debates will have to take place throughout the European countryside if plants want to be erected.

And finally, I would like to ask maybe a bit of a provocative question to Chris Davies. From a Liberal point of view you seem to argue a case for mandatory, how that does fit?

Chris Davies: That's easy.

Question from the floor: My name is Gus [??? 48:23] I'm working for a couple of days per week for Shell International on the impacts of C02 from new assets. I'd like to build on the comment of the previous speaker because factually you're correct that CCS as such doesn't exist yet, that's why we want to demonstrate it, but about a million tonnes per year are stored by I think Statoil in the Sleipner fields in Norway. I think there's a coal fired power plant in the Netherlands [??? 49:02] that is able to capture the C02, I think it's a 200 megawatt plant. So you can actually see these things and it is what the previous speaker said about putting these elements together, and then demonstrating them at large scale.

For the other rest of the week, I'm chairing the industrial grouping of hydrogen and fuel cells for sustainability. It's called New Energy World and actually every week I'm confronted with the problem that you were sketching, that this might distract us from developing a renewables world. But frankly speaking, the challenge to create a third industrial revolution are huge. And as much as I think that we should spend all our energy and effort on this, I think CCS has a huge potential in the short term to reduce emissions. And for that reason I would like to plead, not only that you reconsider your point of view of actually opposing this, but joining forces with many other NGOs that are critically following this and are trying to help to put this in the right way. Because there are a couple of things that only need to be proven in the short term whether this is technically possible and then we can have the discussion about the mandate. That's not a very long time - these projects take three to five years to implement but currently they're unprofitable. There are huge investments necessary I think for the 10 to 12 demo plants - overall an investment worth far beyond what people actually can imagine, $15 to $20 billion were mentioned with numbers of five years ago, so material prices of five years ago. So for that reason, and that was also your plea about we should have a serious discussion on how to finance this efficiently, and maybe that could be the focus of the discussion for this year.

Question from the floor: [??? 51:37] from Shell. It's actually a question to Jos. Is the Commission thinking of taking concrete steps to help the diffusion of CCS towards the developing world, China and India, perhaps as part of a post 2012 climate change negotiations?

Jennifer Rankin: A very good brief question. Is there anyone else who wants to come in with a short question or comment? I think we will turn back to the panel now, starting with Jos.

Jos Delbeke: On the international negotiations, we indeed are bringing this technology all the time on the table and there is a transfer of technology debate and a change of best practice etc. But as I mentioned earlier on China and India, I think that the early efforts on which we continue to work and I think they will materialise, the debate has cooled off a bit and they're asking but you in Europe, you said you would go so fast, why are you now not going as fast as you were giving the impression you would go? So I think that we have to get cracking in Europe with this.

And while I agree that the finance question is an important question, I'm not going to downplay it, at the same time, I have to express a bit of disappointment that as of the moment that there was an expectation raised by the public authorities that public money would be available, I see that private business has become hesitant. And I can understand that - that's good tactics. So when we were sitting around the table repeatedly with the industry, say, two years ago, it was absolute enthusiasm - Commission please do something, enable this technology, create a framework for action. What we did I think with the energy package, there is a Directive solving the public acceptance problem, I think that is basically what the Directive is doing, you cannot do it everywhere but if you do it A, B, C and D, then it will be okay.

The other thing is the carbon market on which we were thinking ahead and going for auctioning, and this auctioning is in the power sector where real money will otherwise have to be paid in any case for every single allowance. But when I try to dig out what the cost of carbon capture and storage is, over these two years the price has been going up from 30/40 to 50/60 to 70/80 and now I frequently see 100 Euros per tonne of C02 mentioned. Well, I'm not sure if that is a good game we are in. I think that the industry and the power sector are not downplaying the fact that this costs money but at the same time, when the expectation of public money is there, I see the bids going up. And I think that we have to get cracking on really making our mind up about what the commercial case is of this. That will not be enough. Then have a number of demonstration plants but get moving. And I see a little bit of an [??? 55:00]. What is going to land on the table? Yes, there are a few elements. Yes, the FP7, there is the ZEP etc. All good things - I'm not playing that down but, at the same time, I think that our engineering companies who have been excellent performers in the past, this is the moment to demonstrate as well that we can now move ahead. And I look around me, and this is also the case partially for renewable investment and low carbon investment in general, we talk a lot about it but let's not fool ourselves. The China are very active in renewable energy technology. The United States is very active in this and other energy technology. So we should be very wary of the fact that this is going to be the new competition of the next three to five years. So we have to start now and stop hesitating. That would be my conclusion that there is a lot of opportunity here but we have to move ahead.

Jennifer Rankin: Strong conclusion. Can I turn to Martin for any questions you'd like to pick up on in concluding remarks.

Martin Brough: I think the key issue here is still security of supply. There was a question asked about public perception and was public perception in favour of CCS or not? Clearly, I think public perception is against new coal development without anything else to address the carbon problem, and I think that puts politicians in a very difficult position because I think they really want and need new coal stations because they really are worried about security of supply. Now the response seems to be potentially well, if we can get CCS going, then hopefully people will still build coal but with CCS and we'll avoid the carbon issues. The danger is that if you try and prevent coal stations from being built without CCS but you haven't got the carrot there on security of supply, then people won't build coal with CCS - they'll just build more and more gas stations. And the politicians will get even more of the outcome they don't want which is even more gas import dependence. So I think it's really important that we don't just avoid the issue of admitting that we value security of supply and that we're willing to price it. And if we don't have that carrot there for people to really try and diversify the energy mix, then I think there's a real danger of trying to force people away from dirty coal stations and hope that they end up with clean coal stations; and the reality is they'd probably end up with more gas.

Mahi Sideridou: Very, very shortly to pick up on that point. I think another issue that we've all touched upon is the issue that maybe carbon capture and storage becomes a self-fulfilling prophecy in a way, or encourages a self-fulfilling prophecy that more coal will be built, therefore we need CCS. CCS exists or will exist, therefore new coal should be built. And then this is one thing that we have to break out of I think and examine the energy sector for itself, and what needs to be promoted there and CCS as a potential part of that equation as a different discussion. And then on the second thing, I have to pick up on something you said Chris on the UK and how the UK for how many years has not delivered enough on renewables.

Chris Davies: Forever.

Mahi Sideridou: Forever. The UK is one of those examples where you've got a vast potential and very, very little happening. But just because they've failed miserably so far doesn't mean that the whole of Europe will fail miserably on renewable energy sources, and even maybe the UK can change over the next few years and actually do something and pick the winners that we actually need for the climate problem.

Chris Davies: Three points. First of all on the public acceptance of CCS. I think a good set of politicians could probably whip up a campaign and close virtually any chemical plant in the country in Europe, if you really were to exaggerate the dangers and ignore the safety considerations that have been built in. I think by comparison selling CCS is a fairly easy deal. Obviously there are safety considerations that have to be addressed but I think you can get very strong public support for this.

Secondly, on the costs of developing technology, look at Germany where Photovoltaic has been promoted in recent years to an extraordinary degree some might say, and also the huge advance in wind power there, way above Spain now and Denmark but at very great cost - huge great big subsidies being put into it. Look at the European financing of energy and it seems complete chaos. Just a Parliamentary answer I've just had from the Energy Commissioner just reminding me just how much subsidy we're putting into conventional coal production. I think it's 9 billion Euros at the moment over the current cycle, not annually but it's over the current budget, into conventional coal production which seems a massive distortion of our climate change priorities. So I think the whole economics of this need to be looked at.

Let's therefore deal with the final question which is all this has to be proven economically. Well, does it? The United Nations is saying that over the next 20 years up to 1.8 billion people, I think it said, are going to be suffering acute water scarcity or acute potential food shortage as a result of water scarcity brought about by growing population and by climate change. I think actually that starts to change the rules of economics. It creates a new imperative. And anyway, Stern in his review pointed out that climate change is the biggest single example of market failure to address an issue. So coming from a Liberal point of view as I do, yes, I'm in favour of market economics and solutions which involve those wherever possible, but I'm also conscious that this is a huge imperative which perhaps overrides some of those considerations.

And as for the mandatory element and whether that contradicts my general philosophical approach to market economics, well, you wouldn't think that Jos is such a sensitive soul and I'm not used to him being sensitive. Here he is, keeping one step removed from a mandatory element being introduced at an early date, and yet this is the man whose department is constantly introducing mandatory requirements to ban things of one kind or another. I mean if you want to improve the environment, you don't tell Governments, you don't set Governments targets because they invariably fail to meet the targets and you have to go to the European Court of Justice and threaten them and all sorts of letters have to be written to try and get them to comply with European legislation. Much better to tell industry that we're introducing a new regulatory requirement and you cannot do this. You cannot make money out of any activity within the European single market if you don't keep to this Commission requirement not to use this particular chemical or this particular refrigerant or if your product produces more emissions than Jos has required you to do. I see no reason why the same principle should not be applied in this instance.

Jennifer Rankin: I'm sure you'll all agree it's been a rich and fascinating discussion.