The Norwegian government’s decision to fund the scale-up of carbon-capture-storage (CCS) technology with more than €2 billion got the green light from a state aid regulator on Friday (17 July). It is the largest tranche of funding ever approved by the European Free Trade Association (EFTA) body.
Norway has been cleared to pay 80% of the costs on a large-scale CCS project by the state aid regulator of the EFTA, which hailed the plan as a “groundbreaking step towards tackling climate change”.
EFTA’s Surveillance Authority (ESA) ensures that Norway, Iceland and Liechtenstein all stick to the rules of the European Economic Area, including state aid awards, so that their access to the EU’s single market is not revoked.
The government notified the funding on 2 July and the ESA announced today that it “is in line with EEA state aid rules. set out in Article 61(3)(c) of the EEA Agreement”. It is the largest single award approved by the regulator in its history.
“Protecting the environment is at the heart of the European agenda, and ESA is pleased to work with Norway and the European Commission to find ways to support this important goal,” said ESA President Bente Angell-Hansen.
The Norwegian government’s €2.1bn will be used to build CCS facilities at two sites: one at a cement factory and one at a waste-to-energy power plant, where emissions will be captured before they escape into the atmosphere.
Captured emissions will then be transported in liquified form to the coast and piped offshore, where they will be stored under the seabed. This latter part of the process will be carried out by the Northern Lights project, a joint venture of fossil fuel firms Equinor, Shell and Total.
The total project’s price-tag of €2.57bn will cover construction costs and a full decade of operation.
Energy majors see CCS as a way of protecting a chunk of their existing extraction and refining business, because if the technology is proven to work at scale, fossil-reliant industries such as steel could choose to use CCS rather than invest in options like hydrogen.
CCS will be needed to deploy so-called ‘blue hydrogen’ as that involves using natural gas coupled with an emissions-capturing facility. ‘Grey hydrogen’ has no CCS attached, while ‘green hydrogen’ is produced using renewable energy instead of gas.
The European Commission’s recently published hydrogen strategy acknowledges that blue will be needed as a stepping stone towards green, before hydrogen can be touted as a truly zero-emission option.
“Norway is a positive driving force but must do even more. Both legal, political and business initiatives point in the direction of a much-needed escalation for CCS in Europe,” said Olav Yngvason, a climate adviser at environmental group Bellona.
Norway is well-placed to muster the significant investment needed to kickstart CCS at scale – given its immense sovereign wealth fund, largely built on the back of the fossil fuel industry – and can call on clean energy reserves to power areas like transport.
Bu the rest of Europe faces significant challenges in mirroring Norway’s energy policies, in the same way that the Scandinavian country’s huge leaps forward in e-mobility are not necessarily feasible elsewhere.
Current CCS technology is geared towards using offshore storage points like emptied gas shelves, so landlocked countries are at a disadvantage given that there is no CO2 transport infrastructure in place yet.
The costs are also significant. Capturing a tonne of carbon varies depending on which technology is being deployed. Estimates range from $100 to $600 if using direct-air capture, which literally sucks the carbon out of the atmosphere.
By contrast, the EU’s Emissions Trading Scheme is currently hovering around €30 per tonne, meaning that without significant subsidies or reform to the carbon market, companies will choose to pay to pollute rather than abate.
The EU has dedicated funding in recent years to CCS demonstrators and prototypes, although a Court of Auditors report in late 2018 concluded that a number of projects had failed to achieve the goals set by the Commission.
According to the EU watchdog, a lack of coordination and long-term planning had almost totally failed to attract any significant investment. The Commission insists that lessons have been learned and that a new round of funding, worth €10bn will be more effective.
The European Investment Bank – currently in the process of metamorphosing into the bloc’s ‘Climate Bank’ – might also tap projects if the institution feels that they are a safe bet. EIB energy chief Andrew McDowell has said that “CCS is going to be a big part of our business”.
However, the EU banker has also warned that projects still have to take into account long-term liability insurance, as the risk of carbon leaking from storage sites is a factor that many still do not know how to appraise or manage.