Power emissions limits to save most carbon at least cost

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Strasbourg, France – The least cost way to reduce power related carbon emissions in Europe would be to supplement the EU’s Emissions Trading System (ETS) with the introduction of Emissions Performance Standards for energy, according to a new study.

Such a system, successfully used in some US States where it has helped put renewable energy on a more equal footing with traditional energy sources, could cut the EU power sector’s greenhouse gas emissions in 2020 by more than two-thirds – more than 800 million tonnes per year.

‘Scenarios on the Introduction of CO2 Emission Performance Standards for the EU Power Sector’, carried out by the consultancy Ecofys for environmental groups WWF, Bellona Europa, ClientEarth, E3G and Green Alliance, says such an outcome could be achieved if binding emissions limits are introduced for all large power stations in the EU on a staged basis between 2010 to 2020.

The study also shows that an early phase-in of Emissions Performance Standards (EPS) would be more cost-effective and have greater impacts than a delayed introduction. It would overcome some weaknesses of the ETS, which has been criticised for providing some of Europe’s heaviest polluters with windfall profits as a result of governments giving away rather than auctioning carbon emission permits.

“The current EU Emissions Trading Scheme unfortunately does not prevent high polluting coal-fired power stations from being built,” said Stephan Singer, Director of WWF’s Global Energy Programme.

“We need new emissions limits to ensure Europe invests only in renewable energy, energy efficiency, and CO2 capture and storage facilities for coal-fired power stations. Otherwise, Europe will fail to deliver its contribution to keeping global warming below 2 degrees Celsius.”

A CO2 Emissions Performance Standard is a limit on emissions per unit of energy output. EPS in the power sector has been in place in California, US since 2007 and has subsequently been introduced by Oregon, Washington State and Montana.

All of these states are part of the Western Climate Initiative, formed with the aim of cooperating on the introduction and operation of cap and trade-systems, and the report stated there was a clear indication that the fruitful co-existence of EPS and ETS (Emissions Trading System) schemes was considered feasible.

In general it was found that EPS schemes were implemented successfully, especially if the right framework conditions were created, by helping operators to bear the costs of EPS compliance through incentivizing legislation (taxation related). In the EU this could also be supported by a more stringent EU-ETS with higher certificate prices.

With such a limit, new power plants that cannot meet the standard would not be built and existing power plants that do not plan to upgrade pollution controls or implement equivalent measures would close down.

Utilities will have clear incentives to invest in energy efficiency measures, equip their new plants or retrofit the existing ones with CO2 capture and storage, or switch to renewable sources of energy.

The study clearly shows that an Emission Performance Standard needs to be phased in through stages for both new and existing plants. Imposing a very demanding limit of 150g CO2 / kWh just on new plants from 2010 would deliver reductions of 10 per cent of power sector greenhouse gas emissions by 2020, while a staged introduction of a less stringent 350g standard for new plants from 2010, extended to existing plants by 2015, could save up to 46 per cent of power sector emissions by 2020.

In contrast to continuing to allow construction of new conventional fossil fuel power stations under the guise of ‘capture readiness’, an Emissions Performance Standard is an effective means of providing the real regulatory certainty needed to shift investment decisions in the power sector, and avoid dangerous lock-in to high carbon power infrastructure.

It will also be key to move Europe’s commitments to reduce greenhouse gas emissions from 20 per cent to 30 per cent as soon as a new international agreement is in place.

WWF, Bellona Europa, ClientEarth, E3G and Green Alliance say that, despite recent agreement on new climate and energy legislation, more action to limit greenhouse gas emissions is essential in order to re-establish Europe’s credibility and build greater international confidence ahead of the crucial Copenhagen climate summit in December.