Shell's support for carbon capture plant raises hopes for emissions cuts

Royal Dutch Shell has agreed to invest in one of the largest carbon capture and storage (CCS) projects in the world.

The oil major's decision yesterday to co-sponsor the final stage of the £80m Weyburn-Midale CO2 Monitoring and Storage Project in Canada comes on the heels of BP's decision to pull out of a major CCS pilot plant in Australia, after last year cancelling another project in Peterhead, Scotland.

Experts hope that Shell's show of support will give a much-needed boost to the development of a technology that has been deemed vital to meet ambitious emissions reductions targets amid rising energy demands.

In a speech last month, Nobuo Tanaka, the executive director of the International Energy Agency, said: "In carbon capture and storage, we would need to build at least 20 demonstration plants by 2020, at a cost of $1.5bn each. Such a construction program should be viewed as a litmus test of our seriousness towards combating climate change."

Lord Stern, the author of the influential Stern Review into the economics of climate change, puts CCS at the centre of his call for zero-carbon electricity globally by 2050. "We need to get better at carbon capture and sequestration very quickly," he said.

The increasingly urgent tones about the need for CCS contrast sharply with the sluggish pace of its development. The European Union pledged last year to have 12 large-scale CCS power plants up and running by 2015. Today, there is none and progress has stalled. The UK launched a competition last November to determine the best technology for so-called post-combustion CCS, which pumps emissions created from burnt fuel – coal, oil – deep underground. That is not expected to complete until late 2009.

Shell and other proponents of CCS argue that the structure of the EU Emission Trading Scheme provide insufficient incentive for companies to build the multibillion dollar plants that promise to convert dirty coal-fired polluters into low-emission generators. "The main challenge is money and the fact that we have never put the various technologies that comprise CCS together in large-scale deployment before," said Ian Temperton, the managing director at Climate Change Capital.

Industry argues that if Europe is to meet its goals, it must enact new regulations under which CCS plant operators would be granted carbon credits based on the emissions they save, which they could then sell on for a profit. Today, they would simply benefit by not having to buy carbon permits. Jeff Chapman, the head of the CCS Association, said: "Unless some formula is found for sponsoring these projects they just won't be built, and that is matter of urgency." China, meanwhile, is building one new coal-fired power plant per week.

The Weyburn-Midale project is the largest enhanced oil recovery project in the world. It is exploring how injecting carbon emissions back into oil reservoirs can increase production by pushing previously unrecoverable oil in the field toward wells. Shell and its partners on the project, the IEA and the Petroleum Technology Research Centre, will gather data on underground CO2 storage and hope to produce a "best practice" manual as a guide for similar projects.

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