Clean coal funding is ‘withering on vine’ after £4bn EU shortfall

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Yorkshire’s flagship “clean coal” project has warned that European funding is “withering on the vine” after a £4bn black hole emerged in the Brussels funding pot for carbon capture projects.

2CO Energy, the company behind a scheme to build the world’s largest “clean coal” power station at Hatfield, near Doncaster, confirmed the view of MEP Chris Davies that a collapse in the price of carbon permits means only a fraction of the expected money will be made available by the EU for carbon capture and storage (CCS) schemes this year.

The Hatfield scheme is one of three “clean coal” projects in Yorkshire bidding for funds, along with Drax’s proposed “clean coal” power station at its site in Selby and C:Gen’s plant at Killingholme.

Hatfield is the most advanced of the three, having already received £180m from the EU in 2009.

2CO director Jane Paxman said: “It is a great shame that the drop in the price (of permits) has caused the value of this funding pot to wither on the vine.

“We share Mr Davies’s view that the size of the funding has shrunk, and quite understand that the EU will probably concentrate the funding that is left on a smaller number of projects.”

The European Investment Bank will reveal its recommendations as to which schemes should be funded next month. A final decision is expected later in the year.

Ms Paxman said it is hoped the successful bidders will find it easier to attract private investment.

But Yorkshire MEP Linda McAvan warned that slow progress is putting off potential investors.

“This funding was announced in 2008,” she said. “We still haven’t moved forward. And the UK has still made no decision about its own commitments.

“For the business community, this uncertainty is making these big investments very difficult.

“This is not just about meeting CO2 targets. The idea was that the UK would become a world-leader on this new technology, and put itself in a position to export it to other countries.

“Yorkshire was supposed to be ahead of the world – but you can’t be an early mover if you never even get up and running.”

Nonetheless, planners remain hopeful Yorkshire can still attract the billions of pounds required.

Dr Stephen Brown, director at Yorkshire’s low-carbon consultancy CO2Sense, said: “We share Mr Davies’ concerns, but believe there are reasons to be optimistic.

“The EU intends to raise the 2020 carbon reduction target to 30 per cent... This is likely to cause an increase in the carbon price.

“Also, the EU is just one of the sources of funding, which include £1bn from the Department for Energy and Climate Change (DECC) and incentives from the electricity market reform proposals.”

Details have still not been announced of when the UK Government will run its own competition to part-fund four CCS projects.

Up to £1bn has been pledged by DECC, despite suggestions from the Treasury that the money could be spent elsewhere.

“Things are very dangerously out of sync,” Mr Davies said. “I don’t think DECC and the Treasury are singing from the same hymn sheet, and DECC seems totally isolated from the EU picture.

“The Commission will require guarantees from winning countries to provide support funding. But DECC hasn’t made its mind up. It potentially is going to turn down the offer of EU funds.”

DECC rubbished the suggestion, however, insisting its competition will work in tandem with the EU.

“The Government is firmly committed to the development of CCS,” a spokesman said. “We will be looking to make use of any available European funding, and are working to ensure our work to bring forward CCS synchronises with the European timetable.”