Government launches clean coal funding bill

The government's plans for four carbon capture and storage (CCS) plants moved a step closer to reality this week with the launch of a new energy bill designed to introduce funding mechanisms for the demonstration plants.

The bill, proposed for the next session of parliament, would give energy and climate change secretary Ed Miliband the power to introduce a mechanism to fund the plants, which are each expected to cost more than £1bn.

The Department of Energy and Climate Change (DECC) said the new bill would keep the UK on track to deliver its first working CCS plant by the middle of the next decade.

"We're moving fast on CCS," said Miliband. "It’s a critical technology in the fight against climate change and I want the UK to lead the world with it."

The government is currently undertaking a £1bn competition to fund the first CCS demonstration plant, but has also decided that a further three plants, each trialling different types of technology, will be required.

The government had originally hoped that pricing carbon emissions would provide energy firms with a financial incentive to install CCS systems, but the price of carbon has fallen in the past year and power companies have proved reluctant to invest in the technology until it has been shown to work on a commercial scale.

As a result, the government has been forced to explore alternative funding options, and while some of the financing for the new plants is to come from the EU, the government set out proposals last month to introduce either a subsidy mechanism similar to the Renewables Obligation or a straight levy on energy firms.

A spokeswoman for DECC said that the funding proposals were currently open for consultation. She said the new bill would provide the government with the power to introduce a funding mechanism once a decision had been reached.

She added that the bill could also be used to pass legislation giving the Environment Agency the power to enforce proposed government targets. These would require any new coal-fired power station to have CCS capabilities on at least 400MW of its output from its first day of operation. It would also need to capture 100 per cent of emissions from 2025.