Projects fall victim to low CO2 price
By Marie-Martine Buckens | Friday 20 July 2012
Against the backdrop of a gloomy climate on the stock exchange, the European Investment Bank (EIB) has decided to auction off a second batch of emissions allowances to raise funds for projects under the NER 300 initiative, which is the world’s largest funding programme for carbon capture and storage demonstration projects and innovative renewable energy technologies (see box). The Commission will thus soon be forced to abandon several of its projects - but one hope remains: the plan to reinforce the Emission Trading Scheme (ETS) that the EU executive is due to adopt on 25 July should send a positive signal to the markets.
The EIB entrusted the first sales of quotas, carried out from June to mid-July, to the European Energy Exchange (EEX) in Leipzig, Germany. During this period, says Eileen Hieke, communications manager for EEX, the average price of an emissions allowance (which allows for the emission of a tonne of CO
2) rose to €7.92. This is far from the €20 or even €30 per tonne of CO
2 foreseen by bankers when the projects were put together in 2010.
AFP, the French programme ULCOS will be the first victim of this low carbon price. ULCOS (Ultra–Low Carbon dioxide Steelmaking) is a pilot project for harnessing and storing CO
2, run by a consortium of 48 European companies. It captures and stores CO
2 from the blast furnaces of ArcelorMittal in Florange, North-East France, which are currently out of operation.
Meanwhile, 2Co Energy Ltd, a British company specialising in CCS, announced, on 13 July, that its Don Valley Power Project would be at the top of a list of CCS projects retained by the Commission under the RNE 300 Initiative. Don Valley harnesses CO
2 emitted by a thermal coal power plant and stores it in former oil wells in the North Sea.
The Commission will announce the list of candidates in the autumn. The Director of 2Co Energy, Lewis Gilles, highlighted that the funds the successful candidates will share are limited: between €1.3 billion and €1.5 billion.
While the first series of emissions allowance auctions was entrusted to the EEX, the EIB has decided to award the second series to two exchanges: EEX and ICE Futures Europe (ICE) in London. During this sale, which should end in September, 200 million allowances - compared with the 300 million initially planned - have been monetised. Regarding the calendar for the sale of the next 100 million allowances, the EIB and the Commission - which are coordinating the initiative - will decide this based on experience from the sale of the first 200 million.
RNE 300 initiative
According to the EIB, this initiative is “the largest investment programme in the world,” promoting projects based on the harnessing and storing of carbon, as well as innovative technologies linked to renewable energies. Its funding is assured by the monetisation of 300 million emissions allowances from the New Entrants Reserve (NER). The initiative is implemented by the Commission, with the help of the EIB. The EIB is responsible for evaluating the projects submitted by member states, and for monetising 300 million emissions allowances from the reserve. The initiative finances projects at a level of 50%, with the rest of the funding coming by private investors or member states.
The EIB has finished the evaluation of projects submitted by EU member states in response to the first call for proposals, launched on 9 November 2010, and transmitted the results to the Commission on 9 February. The bank has refused to comment further on this, given that the selection procedure is underway, while decisions by the Commission concerning the call for proposals are expected in the second half of 2012.