Draft Commission Communication sets out, inter alia, the long-awaited particulars for the regulatory State aid scheme for the construction of CCS-ready installations, and significantly modifies the definition of the notion ‘CCS-ready’ itself. The said modifications may be assessed as the ‘qualitative easing’ of the regulatory burden – in the face of relatively slow deployment of the new technology.
The modification of the definition of the ‘CCS-ready’ installation for the purposes of State aid scheme consists in that, pursuant to draft Commission Communication Guidelines on Certain State Aid Measures in the Context of the Greenhouse Gas Emission Allowance Trading Scheme Post 2012 (draft Commission Communication) it means that ‘an installation has demonstrated that suitable storage sites are available, that transport facilities are technically and economically feasible and that it is technically and economically feasible to retrofit for CO2 capture, as soon as sufficient market incentives in the form of a CO2 price threshold are reached.’
This article relates to: draft Communication from the Commission on Guidelines on Certain State Aid Measures in the Context of the Greenhouse Gas Emission Allowance Trading Scheme Post 2012 (draft Guidelines).
The draft Guidelines present conditions under which the aid granted in the period from 1 January 2013 to 31 December 2019 will be considered compatible with the internal market within the meaning of Article 107(3)(c) of the TFEU.
The application of State aid rules to free allocations of emission permits is also analysed in the following articles:
Risk assessment report - State aid rules regarding carbon leakage sectors
Notably noteworthy is the phrase: ‘as soon as sufficient market incentives in the form of a CO2 price threshold are reached’.
The phrase seem to show that the Commission recognizes the fact that the current price for CO2 allowances does not ensure sufficient incentives for the deployment of CCS technology.
So far also Recital 47 to the CCS Directive referred to the anticipated costs of CO2 allowances as a pivotal factor for assessing the economic feasibility of the CCS (see: ‘The economic feasibility of the transport and retrofitting should be assessed taking into account the anticipated costs of avoided CO2 for the particular local conditions in the case of retrofitting and the anticipated costs of CO2 allowances in the Community’) but in the currently published draft Commission Communication accents appear to be placed in different way.
In my opinion the pre-existing formulations meant that in the situation where projections were skeptical about satisfactory levels of CO2 allowances prices, the conclusions as regards ‘CO2-ready’ assessment should be negative. Taking into account, however, the propositions addressed in the draft Commission Communication, for the purposes of the State aid scheme there shouldn’t be so. It appears that under the draft Commission Communication in the described hypothetical situation the conclusion would amount to the statement that ‘the installation is CCS-ready under the presumption that the CO2 allowances price reach the level of EUR .....’.
The said interpretation is supported by the subsequent stipulations of the draft Commission Communication regarding CCS-ready definition. Pursuant to the document in question CCS-ready in particular requires ‘the demonstration of the economic feasibility of retrofitting an integrated CCS system to the full capacity of the facility, based on an economic assessment. The assessment should provide evidence of reasonable scenarios, taking into account CO2 prices forecasts, the costs of the technologies and storage options identified in the technical studies, their margins of error and the projected operating revenues. The assessment will indicate the circumstances under which CCS would be economically feasible during the lifetime of the proposed installation;’
The existing regulatory requirements for “CCS-ready installation’ have been stipulated in Article 9a of the LCP (Large Combustion Plants) Directive, which have been, in turn, added by Article 33 of the CCS Directive (the Directive 2009/31/EC of the European Parliament and of the Council of 23 April 2009 on the geological storage of carbon dioxide and amending Council Directive 85/337/EEC, European Parliament and Council Directives 2000/60/EC, 2001/80/EC, 2004/35/EC, 2006/12/EC, 2008/1/EC and Regulation (EC) No 1013/2006 (OJ L 140, 5.6.2009, p. 114)) and is repeated by the Article 36 of the new Directive of the European Parliament and of the Council on industrial emissions (the IED Directive).
For other particulars see: ‘CCR (Carbon Capture Readiness) – the economic feasibility to retrofit for CO2 capture’.
So, the CCS-ready assessment should only ‘indicate the circumstances under which CCS would be economically feasible during the lifetime of the proposed installation’ – without the necessity to determine whether the circumstances at issue are highly probable or not (the condition that scenarios must be ‘reasonable’ notwithstanding).
However, those interested in the issue should refer to the entire wording of the ‘CCS-ready’ definition stipulated by the draft Commission Communication.
Another interesting feature of the draft Commission Communication is that the Commission specified the required CO2 capture rate in the CCS-ready installations at a level of 85 % or higher as part of the demonstration of the technical feasibility of retrofitting for CO2 capture (the exact wording: ‘A site-specific technical study should be produced showing in sufficient engineering detail that the facility is technically capable of being fully retrofitted for CO2 capture at a capture rate or 85 % or higher’).
For further specifications for the details of the eligible costs and maximum aid intensities refer to the point 3.2 of the draft Commission Communication ‘Investment aid to highly efficient power plants, including new power plants which are CCS-ready’.