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Shell Says Carbon Capture Could Cut EU Emissions 3.7% by 2015

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Shell Says Carbon Capture Could Cut EU Emissions 3.7% by 2015 

By Mathew Carr

July 18 (Bloomberg) — Royal Dutch Shell Plc, Europe’s largest oil company, said financial incentives for carbon dioxide capture would cut the region’s emissions from factories and power stations by 3.7 percent as early as 2015.

A European Parliament plan backed by Shell to offer 500 million carbon dioxide allowances worth about 16.2 billion euros ($26 billion) for so-called carbon-capture and storage projects could help create plants that curb emissions by 80 million metric tons a year in the six years through 2020, said David Hone, group climate-change adviser for Shell.

That’s almost 4 percent of the expected emissions in 2015 subject to the region’s carbon dioxide trading program, the world’s largest, according to forecasts from Mark Lewis, an analyst at Deutsche Bank AG in Paris. It’s also about half the cuts needed that year after emitters import United Nations greenhouse-gas credits to help meet an emissions cap, he said.

The incentive’s “hugely optimistic” scenario would push down carbon and power prices, other things being equal, Lewis said July 15 by telephone. “It might be more realistic to assume half that much.” The EU needs to find an extra 163 million tons a year of cuts on top of UN credit imports to meet a proposed cap in the eight years through 2020, he said.

Governments around the world are seeking to curb atmospheric greenhouse gases as the global population rises and economies in China and India grow. Emissions are blamed by scientists for climate change, which threatens dangerous storms, drought and food shortages. Carbon-capture technology gathers carbon dioxide during power generation and pipes it into underground storage rather than venting it into the air.

Attract Investment

The proposed incentive, which would be paid only after carbon dioxide is stored underground, is needed to quickly attract investment in the technology that’s yet to be proven at scale, Hone said July 7 in an interview at the BrusselsEnvironmental Finance conference.

“It is the key to getting this going,” he said. “It provides the incentive to fill the funding gap” at a time when carbon dioxide prices need to be about double their current levels to get these projects off the ground, he said. EU emission permits for December 2013 closed yesterday at 32.31 euros a ton on the European Climate Exchange in London.

Under the Shell-backed plan, power stations would be granted an extra emission permit as an incentive for each ton of carbon dioxide stored. The allowances would be issued out of those set aside for new-entrant power stations and factories, Hone said.

About 33 million tons a year can be saved in the six years through 2020 from carbon-capture projects, or about 200 million tons over the period, Trevor Sikorski, an analyst at Barclays Capital in London, said today by e-mail.

To contact the reporter on this story: Mathew Carr in London at[email protected]

Last Updated: July 18, 2008 07:25 EDT

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