Shell favours carbon allowance cancellation
London, 9 February 2012
The cancellation of EU emission trading scheme (ETS) allowances is preferable to a set-aside, Shell's executive vice-president for CO2 Graeme Sweeney told Argus in an interview last week.
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“If a baseline correction gets implemented through a set-aside and if those allowances could be cancelled, that would be the strongest price signal,” Sweeney said. “If we cannot agree to cancel them now, we should certainly have a process where we agree to set them aside.”
But a cancellation of allowances faces significant political hurdles. The European People's Party (EPP), the largest group in the European Parliament, on 31 January voted against a proposal that would enable the cancellation of surplus allowances. “The core problem was that the motion included a proposal for a cancellation of allowances set aside and EPP representatives feel it is premature to agree such a cancellation,” EPP member Peter Liese told Argus. The proposal for a set-aside is still under negotiation and members of the EPP have differing views on it, he added.
Meanwhile, Shell expressed support for the EU ETS. The scheme is the right way to decarbonise the energy system, but given the current position of prices it needs to be strengthened, Sweeney said. If the European Commission, parliament and Council want to progress on the energy efficiency directive, then they need to do so in a way that recognises its impact on existing operations. “If you want to implement the [Energy Efficiency Directive] then you should recognise that that strengthens the case of having a set-aside,” he said. Market-based mechanisms are the most important way of tackling CO2 emissions, he added.
There must also be an adoption of an auction reserve price in phase 4 to strengthen prices, he said. This would be advantageous for carbon capture and storage (CCS) projects because it would manage part of the downside risk to investors.
Shell favours the inclusion of carbon capture and storage (CCS) in the clean development mechanism (CDM) because it is a legitimate approach to reducing emissions, Sweeney said. Shell is currently investing with partners in Australia in CCS and has also been engaged with the Quest programme in Canada that will capture 1mn t/yr.
It was a significant milestone that CCS was included in the climate change talks in Durban, but there is still much work to be done, he said. “There is a good deal of work to be done on the final business case for CCS in the time beyond 2020,” Sweeney said. Supporting the carbon price is very important for CCS projects.”
Shell may also examine actions of individual countries to reduce greenhouse gas emissions. “Many countries are in the process of developing their nationally appropriate mitigation actions (Namas). We may look to those Namas to see how CCS can contribute,” Sweeney said.
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