EU announces €1.75bn low carbon stimulus

The European Commission yesterday announced proposals for a huge investment in
energy infrastructure over the next two years, including ring-fencing €1.25bn (£1.15bn) for investment in carbon capture and storage (CCS) and €500m for offshore wind development.

The package, which is funded through an EU budget surplus, will see CCS projects at four power stations in the UK at Kingsnorth in Kent, Longannet in Fife, Tilbury in Essex and Hatfield in Yorkshire receiving €250m each.

There is also €40m proposed for an 0.25GW wind farm near Aberdeen, and €150m set aside to develop an offshore wind grid in the North Sea that will provide wind power to Britain, Holland, Germany, Ireland and Denmark – both projects are already under development.

Commission president José Manuel Barroso said the spending package would help lift EU countries out of recession.

"We need to learn the lessons of the recent gas crisis and invest heavily in energy," he said. "The Commission is committed to working together with member states, all of which will benefit from our proposed measures, in revitalising the EU economy through investment in these key areas."

Jeff Chapman of the Carbon Capture and Storage Association welcomed the announcement and said he hoped it would be backed up by further government support.

"This is great news, but €250m isn't enough to fund CCS on one plant. There needs to be additional funding from government and also perhaps contributions from developers," he said.

The UK government has already committed to funding one CCS demonstration plant in the UK, to be operational by 2014, but has not chosen which plant yet.

Chapman said it would make sense for the government to award its competition funding to one of the projects likely to receive EU funding.

All of the plants that are lined up for EU funding are still in the running for the UK CCS competition apart from Hatfield.

While the UK CCS projects will focus on post-combustion capture, the EU will also provide €250m to an oxyfuel combustion plant at Compostella in Spain.

The wider EU package also includes €1.75bn to improve gas and electricity interconnections between EU countries, including €100m for electricity links between Ireland and Wales.

In addition, €1bn is being made available to improve rural broadband connections across Europe.

The measures still needs to be passed by the European Parliament before becoming law.

The package came as a statement of intention after the European Commission set out its proposals for a new global agreement to tackle climate change and how it could be financed.

The goal is to limit temperature rises to below 2°C, requiring a global cut of emissions to less than 50 per cent of 1990 levels by 2050, with developed countries taking the lead and cutting their collective emissions by 30 per cent of 1990 levels by 2020.

To reduce emissions, global net additional investment may need to rise to about €175bn per year in 2020, with more than half of this being needed in developing countries.

EU officials also called for the US and other developed countries to join its emissions trading scheme.