EU energy firms are dropping projects over CO2 issue

Feb 15, 2008 01:00 AM

European energy companies have dropped investment projects worth billions of euros because of European Commission plans to make them buy greenhouse gas emissions permits from 2013, a senior energy executive said. Presenting a World Energy Council report on Europe's energy vulnerabilities, Johannes Teyssen, chief operating officer of German utility E.ON, said the EU executive should be more flexible in reforming its Emissions Trading System.
"A lot of investment projects have been cancelled in the last couple of months... You can't count fast enough how many of them get cancelled now," he told.

Industry had been promised a transition period phasing in the auctioning of carbon dioxide emissions permits but was now being told it would have to buy 100 % of allowances at auction from 2013, he said.
Teyssen said he knew of at least four power station projects in Germany alone that had been cancelled in recent weeks, with the cost of buying auctioned CO2 permits cited as one reason. He acknowledged that other factors, including increased investment costs, played a role in those decisions. The biggest obstacle to modernising and connecting Europe's energy infrastructure was the slowness of obtaining planning permission to build gas pipelines and high-voltage electricity transmission networks, he said.

The World Energy Council, representing energy industries, governments and other stakeholders from 96 countries, gave broad support to the Commission's ambitious energy and climate change proposals announced in January. It endorsed Commission plans for more cross-border integration and inter-connection of the EU energy market.
However, it said the European Union should seriously consider using more nuclear energy to reduce its dependency on imported oil and gas and meet its climate change objectives.

The report on "Europe's Vulnerability to Energy Crises" found that the EU was more dependent on energy imports and more vulnerable to crises than at any time since the 1970s.
"Nuclear power is a promising alternative for both reducing dependency on imports and fulfilling the commitment of all European countries to the Kyoto Protocol (on climate change)," the study said. "The EU and neighbouring European countries should seriously consider including the nuclear option in their public debate and energy policies," it said.

Brussels has taken a strictly neutral stance on nuclear energy because of the political sensitivity of the issue in key states such as Germany, Austria, Italy and Belgium. Germany and Italy have both decided to phase out nuclear power, as has Belgium, while Austria has never had any and is fiercely opposed to atomic energy.
On the other hand, France already gets some two-thirds of its electricity from nuclear plants, and countries such as Britain and Finland plan to expand their nuclear sector.

The report found that investment in gas pipelines and electricity grids had declined between 1998 and 2005.
Teyssen said this was less the fault of incumbent energy giants than a result of the lack of a permissive regulatory environment and of building licences for infrastructure.

Source: Planet Ark
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