Shell: CCS can only happen with emissions trading

How much would you pay for a tonne of carbon? The cost of diamonds aside, Jeroen van der Veer, Shell’s CEO has stated that CCS can only work if the market for the greenhouse gas becomes global.

Speaking to the World Petroleum Congress in Madrid Van der Veer suggested CCS can only materialise with the CO2 price that is delivered by cap-and trade mechanisms and urged governments to devise funding mechanisms for capture and storage as part of the climate conference in Copenhagen next year.

The full speech is available here, with highlights below:

“Vision without action is a daydream. Action without vision is a nightmare. When it comes to the European Union’s 2020 goals, the vision is clear. It’s a good vision for the future. But, as always, the devil is in the detail. Deeds, not words, will determine the outcome.”Roughly half of that reduction has to be achieved by the power and industrial sectors through the European Union’s Greenhouse Gas Emission Trading Scheme, or ETS.”

Emissions trading is one of two crucial pillars supporting Europe’s sustainable energy framework. The other pillar is CO2 Capture and Storage . . . Cap-and-trade mechanisms cannot be successful without the only technology that can drive down emissions drastically. Likewise, that technology will not mature without the price on carbon dioxide that is delivered by international cap-and-trade mechanisms.”

“EU governments have recognised this and called for a flagship programme of 10 to 12 large-scale CCS demonstration projects across Europe by 2015.

“Storing carbon dioxide underground in empty gas and oil fields or aquifers would allow us to make fossil fuels greener. If the same level of emission reductions is sought without capture and storage, it is hard to see how coal, and the expected growth of coal, can be accommodated in the energy mix.

“Shell’s scenario team studied the potential contribution that capture and storage could make to reducing emissions worldwide. They reckon that by 2050, if 90% of the coal-and gas-fired power stations in OECD countries and half in developing countries have become zero-emission plants, overall CO2 emissions will be 30% lower than in a world without capture and storage. The obvious question is: if capture and storage is such a good technology, then why isn’t it already happening at a large scale? As many of you know perfectly well, the main hurdle is that capture and storage is “investment and running costs, but no revenue”.

“Without the price on greenhouse gas emissions that is delivered by cap-and-trade mechanisms, CO2 capture and storage will remain a daydream. So there’s a close connection between capping and capturing, and between trading and storing. Whether this connection will develop into a happy marriage depends on technology and policy.”

“Greenhouse gas certificates should be fully convertible across countries, across cap-and-trade zones, and across industries.”Fortunately, there is scope for optimism about international cooperation: In the United States, there are several emissions trading schemes at state-level, and it is only a matter of time before federal legislation will introduce a nation-wide cap-and-trade system. China and India, for their part, are keenly aware of the need to increase energy efficiency and reduce CO2 emissions per unit of energy. They have been important beneficiaries of the Clean Development Mechanism. Meanwhile, in the Gulf region, countries are increasingly enthusiastic about capture and storage. They want to use the carbon dioxide that is currently released into the atmosphere for enhanced oil recovery, freeing up the natural gas that is used for this purpose at present. The natural gas could then be used for domestic consumption.”

“My conclusion is that there are a number of interdependent relationships at work that will make or break our efforts to reduce emissions, in Europe and elsewhere.

“The first concerns the relationship between CO2 capture and storage and cap-and-trade: Capture and storage cannot succeed without the price on CO2 that is delivered by cap and trade mechanisms. Likewise, cap and trade cannot succeed without the only technology that can reduce emissions drastically.

“Secondly, government and industry each have their part to play: while industry must work hard at maturing the technology and developing projects, governments need to deliver effective emissions reduction mechanisms. The oil & gas industry for its part will be called upon to demonstrate that we can store CO2 in the ground as safely and responsibly as we extract oil and gas from it.

“Third, there is a connection between efforts made in Europe and efforts made elsewhere. It would be enormously helpful if North America and other key markets were to buy in to the concept of cap-and-trade and fully convertible emission certificates. But the most important relationship is the one I started off with: the one between vision and action. When it comes to mitigating climate risk, we need both.