Carbon capture cash-in

16 June 2009

UK energy and climate secretary Ed Miliband responded to controversy over the construction of coal-fired units at the Kingsnorth power station by saying that there would be no new coal power generation without technology to capture the carbon dioxide thus emitted. But he didn't tell climate activists and other concerned citizens that they would be paying for it via a scheme cooked up in Brussels, writes Stephen Gardner. Although the European Union has a 'polluter pays' policy, it has evidently decided this should not apply to Europe's energy giants. The European Commission announced May 18 a £160 million bung from unspent agricultural funds for carbon capture in the UK, including at Kingsnorth, which is run by E.On (first quarter 2009 profits: up 18 percent to £2.2 billion). And it is not just E.On that will benefit from the taxpayers' largesse. EU money will also go to schemes at Hatfield, Longannet and Tilbury, the last of these being owned by German giant RWE, which made UK profits of £543 million in 2007, a level it called merely "acceptable." The European Commission justifies the subsidies as an economic stimulus. But as green-minded members of the European Parliament have pointed out, the cash could have been spent on improving the building stock or public transport, which would have offered more equally-shared, environmentally-sound and immediate economic benefits. Instead a few big firms will have money to burn as they test out an as yet unproven technology. But the bung-fest doesn't stop there. Already at the end of 2008, the EU agreed, as an incentive to investment, to give energy firms capturing their carbon up to 300 million free carbon allowances, that can be sold on the cap-and-trade market. The value of these at current prices is a not inconsiderable £4 billion – but who needs an incentive for investment when the taxpayer can be made to pay in the end? A version of this article originally appeared in Private Eye.