Speech at the CSLF in Beijing

Speech by Minister of Petroleum and Energy mr. Ola Borten Moe at the CSLF-meeting in Beijing, China on thursday 22.09.2011.

Dear Chairman Huhne, dear Honourable Chinese Hosts.

Thank you for the opportunity to speak to you today. I am very pleased to have been given the task to introduce this important Ministerial Session. International collaboration and concerted action is absolutely crucial if we are to succeed with our ambitions within Climate Change and CCS. We are facing a daunting challenge, and we represent the political leadership that can answer it.

I cannot think of a more important time and place to address these issues. Although we have been working on CCS for more than two decades, the technology is still in its infancy. We need new emerging regions to actively take on the technological challenge and join us in this mission. Asia and China are at the heart of global energy growth, and I would like to make the point – up front – that growth often leads to technological leadership. China has enormous opportunities in this respect. I am intrigued by today’s venue and the opportunity to discuss joint challenges and opportunities with the range of countries and regions represented here. Together we can accelerate CCS if we are successful in jointly identifying the roadmap and if we are prepared to lead the way.

This session is called: ”Driving RD&D Deployment – what will it take?” This is a title at the very core of our discussion. It underlines the fact that we are facing challenges in our work to make CCS a viable technology and thereby a tangible CO2 emission mitigation option. I believe that the challenges that lie ahead are considerable; we need to intensify our work in all three phases of the chain – research, development and demonstration.
Back-drop / setting the scene

This will take unprecedented action.  True commitment will require a strong collective recognition of the challenge. We need to be on the same page at the outset and accept the overall fundamentals of future energy realities.

We are facing an energy-hungry world. Energy is a key driver of prosperity and poverty reduction and is a precondition for economic development. Yet, 1.4 billion people still lack access to electricity. 2.7 billion people use coal or firewood for food preparation. Global poverty alleviation through long term global economic growth will require vast amounts of additional energy consumed and produced.

Let me briefly reiterate what we heard earlier today from Deputy Director Jones in the International Energy Agency; total energy demand is expected to increase by more than 35 % the next 25 years.  More than 50% of this increase will be met by fossil fuels. The fundamental hard truth of today’s energy scene; as can be seen from the slides is that current investments in oil, gas and coal all point towards continued reliance on fossil fuels. 

At the same time, we are facing the threat of climate change. In many parts of the world, there is an increased fear of life-threatening climate change, such as drought, catastrophic floods and extreme storms. Fresh water supplies are at risk. The IPCC tells us that to limit the temperature increase to a maximum of 2 degrees, we must cut emissions by as much as 85% by 2050.

The situation demands a continuous quest for energy supplies and energy security, in conjunction with a forceful and adequate response to the climate change challenge. We need to invest in low-emission technologies. We must decarbonise the production and use of fossil fuels, and we need to decouple economic growth and greenhouse gas emissions. I want to add on this point that the developed countries have a special responsibility in this respect.

We have known for some time that we need to radically transform the way we produce and use energy in order to achieve the 2˚C target. Clearly, huge investments in energy efficiency and renewables must be made. However, we cannot do without CCS to combat climate change. The IEA tells us that CCS must deliver up to 19% of needed emission reductions by 2050. Without CCS, the estimated cost of reaching the 2 degree target increases by 70%.

Given that we know the realities of today, and given that we believe we know the cure for tomorrow, the crucial initial question is; are we moving in the right direction? Are we willing to make sufficient investments? Are we implementing the right policies? How can we drive RD&D deployment of CCS, and are we in position for much-needed concerted action?

Status and challenges

Earlier today we were updated on the global CCS status. From what we have learned from this morning’s session, there are promising projects but they are few in number. CCS is still in its infancy. The first full-scale power plant with CCS is yet to be operational. There are significant challenges that we need to address:

* Reduce costs and close the financing gap.
* Accelerate RD&D and solve technical issues of integration and scale-up.
* Acquire more experience with environmentally sound CO2 storage.
* Engage with the public and achieve public acceptance.
In Europe we see considerable resistance to the issue of storage, and particularly to on-shore storage. Promising projects have been stopped due to public opposition. Public acceptance may be an issue that we haven’t been paying enough attention to.

Some building blocks are in place, and we must make use of the “lessons learned”. At the same time, I believe the deployment of CCS is more complex than we initially thought. We are behind schedule in terms of the deployment rate targets set at the highest political level.

What will it take?

First of all, I strongly believe that wide-spread global deployment of CCS will require a commercially attractive framework for investments in low-carbon technologies.

Therefore, we are in critical need of a global price on greenhouse gas emissions. This is without doubt the most cost-effective way to achieve deep emission cuts. Global challenges need global solutions. In order for CCS to be deployed rapidly enough, and in order to avoid potential carbon leakage, incentives must be found on a global scale. A global price on emissions has the potential to do the trick! This is both right and urgent. As politicians, in this situation, we must have confidence in the market. We need our world leaders to embrace this solution, and give a clear signal in Durban that – in due curse – there will be a price on emissions.

As of today, The Clean Development Mechanism, CDM, represents the only mechanism where credits are generated by projects in developing countries, and it is the closest we get to a global price on emissions. This is why Norway welcomes the decision in Cancun last year that CCS is an eligible project activity under the CDM. We will contribute to resolve the outstanding issues identified.

Yet, in the international climate change negotiations, it is apparent that we are moving further away from the idea of a global price on greenhouse gas emissions and towards a more fragmented system with regional or even national systems.
This worries me deeply because, in the long run, a global price on emissions is the only instrument that would truly create business opportunities and a commercially attractive framework for private investment.

I am such a strong believer in a price on emissions, because I have seen it work. The CO2 tax on the Norwegian Continental Shelf, introduced in 1991, resulted in the Sleipner CO2 storage project, (recognised here at the CSLF meeting this week). The CO2 stored annually equals almost 2 % of Norwegian emissions.

I have also seen the effect of other climate change mitigation measures in the Norwegian petroleum and energy sector, for instance the implementation of strict environmental standards and the ban on flaring. During the last 13 years, these policies have led to 40 million tons of CO2 avoided in the Norwegian petroleum sector, 50 % of them resulting from energy efficiency and reduced flaring.

The implementation of strict policies has the potential to scare us, in terms of the effects they might have on energy and electricity prices and employment rates. However, the lessons from Norway tell us that by implementing a price on emissions and strict environmental and technological policies and standards, industries find solutions and greenhouse gas emissions are reduced or avoided.

In many respects, Norwegian industry is a world leader when it comes to environmental standards. And the best of all – it is healthy economics and good business. Strict standards bring results. Bold action is required, and I believe the same goes for CCS!

I am confident that with the right measures and policies in place, CCS can also prove to be commercially viable in the long-term. Development of technology has become an important business opportunity for Norwegian companies, which have seen strong increases in international business in recent years. High regulatory standards and best practices will eventually pave the way for large scale CCS deployment locally and regionally. This will help create the learning curve needed to move towards a commercially viable technology.

In a short-term perspective, in the absence of a global price on greenhouse gas emissions, what can we do? And what major corner-stones are important to put in place? 

Firstly, regional and country-level initiatives are crucial. One fitting example is the policies of the European Union. With a combination of market-based instruments, financial mechanisms, a legal framework, and putting a price on emissions while also giving thought to the possibility of carbon leakage, large-scale integrated CCS projects are emerging.
This kind of leadership is important because we find ourselves in a situation where initial project funding is crucial. I believe governments have a responsibility to bridge the commercial gap during this demonstration phase – especially in today’s global economic turmoil.

But again, I realise that many developed countries are in a better financial position to do this, especially if the necessary investments are prioritised and we orchestrate our actions to enable higher leveraging of our combined resources.

Industry will still have to shoulder its share in forging the necessary commercial developments in the initial stage through pioneering investments. More early movers will have to follow the handful of projects we now see materializing on the global scene. I am a believer in efficient policy signals to spearhead efforts and commitments. If we as governments are clear in our roles and projections, industry will follow in preparing for the future market.  We need to make green growth a mainstream incentive for investments.  This is achievable through targeted government measures, even without overall economic instruments in place on the international scene.

I want to go into a bit more detail with regard to necessary R&D efforts. Governments will need to intervene with targeted technology policies to ultimately bring down the cost of low-carbon alternatives to create markets for technologies that are not yet fully commercial. Public R&D expenditure generates additional investments in industry and leads the way to critical collaboration based on strong public-private partnerships.
 
In the last few years, public low-carbon energy RD&D spending has increased in IEA countries. This is a much welcomed and needed trend. However, this increase comes after many years of decline.

According to the IEA, public RD&D spending on low-carbon technologies needs to be between 19 and 37 billion dollars annually. The current spending should be increased 2-5 times

Climate change is a daunting prospect and we need to join forces.  In the face of such a challenge, we should expect at least a similar level of RD&D expenditure from industry. Pure investments in innovation are not the only thing we need to get there.  Public - private partnerships to demonstrate ongoing R & D would help accelerate developments.  

The same effect could be expected from dedicated platforms for knowledge exchange. Just a few days ago, the IEA Working Party for Fossil Fuels organized a workshop in conjunction with MOST and Acca21, our Chinese Hosts, where initial results from the world’s largest knowledge exchange network for large scale CCS projects were presented. The network will be an important data collection and information exchange platform where both early movers and later project proponents can benefit. 

I believe this is one type of vehicle we need to move CCS deployment forward.
 
Clearly, the growing number of CSLF-recognized projects represents an important arena where Governments together with Industry and the research community can jointly track developments.  I look forward to seeing how such collaborations can be further developed.

The sharing of experiences from early projects will also play an important role in building confidence in the technology. We have a collective responsibility in communicating to the public the potential for emission reductions offered by CCS.

Knowledge sharing is, of course, closely related to capacity building and technology transfer. Poor countries should not bear the cost of importing expensive CCS technologies. They must take part in the development. Therefore, CCS technologies should be developed through joint efforts that involve developing countries. If not, the ambition of global deployment of CCS could face serious delay.

When I met South African President Jacob Zuma in Oslo on the 1st of September, to discuss CCS, the need for knowledge sharing and technology transfer was one of his key messages to me. His message is something we should all take with us, and it is a reflection that seems obvious when it comes to genuine global roll-out of CCS.

On capacity building, the CSLF is taking concrete action, through the CSLF Capacity Building Programme and the Capacity Building Fund. I am pleased that capacity building projects are now taking place in CSLF countries.
I believe knowledge sharing and capacity building are areas where the CSLF really has a role to play. That is why Norway supports the CSLF and also the World Bank capacity building Fund financially.

A key element of Norway’s CCS policy is to contribute to a wider deployment of CCS technology. The Technology Centre Mongstad is an essential part of our strategy. The main goal for TCM is to establish an arena for targeted development, testing and qualification of carbon capture technology.  The construction of the centre is now about 80 % finished, with testing of Aker and Alstom’s capture technologies scheduled to start in 2012.

The ambition is that the experiences from the centre should be spread internationally in what is essentially a global effort to reduce costs and risks related to CCS. Participation by international companies introduces different perspectives and skills to the project. The latest company to join was the South African SASOL. I would hereby like to extend an open invitation to all interested parties to consider joining our efforts at the TCM.

Several analyses of the global portfolio of CCS projects tell us that these projects are highly heterogeneous, due to national circumstances and site-specific challenges. Tailor-made solutions are often needed. But we must cherish the lessons learned.  The technology must be applied to industrial sources to realize the potential of CCS. The UNIDO roadmap, launched earlier this week, tells us that in some sectors, CCS is the only means of achieving necessary deep emission reductions.

I also fully support the inclusion of UTILIZATION into the CSLF mission. Utilization of CO2, such as for EOR, has the potential to put a value on CO2 that can trigger more and more capture projects and hence bring costs and risks down. Alternative utilization of CO2 could also have positive effects in stimulating innovation and creating new jobs and revenues. 
 
The absence of a global price on greenhouse gas emissions, mentioned earlier, must not keep us from putting in place the necessary building blocks in other areas. For instance, driving CCS deployment requires the completion of an international comprehensive legal framework. This is a precondition for reducing investor risks. Making CCS commercially attractive requires predictable legal frameworks.

It is our responsibility to establish such frameworks. Let me give you an example of one thing that we can easily do. In 2009, following a Norwegian proposal, the “IMO London Convention on the Prevention of Marine Pollution”, also referred to as the London Protocol, was amended to allow safe transboundary transport of CO2 offshore. Such transportation is an important factor for CO2 storage because it would facilitate CCS infrastructure and enable CO2 offshore storage for countries or companies that don’t have access to storage sites in their vicinity. In turn, this could contribute to the commercialisation of CCS.

However, in order for this amendment of the London Protocol to come into force, it must be ratified by two-thirds of the Contracting Parties. Up to this point, the amendment has only been ratified by two parties, Ghana and Norway. I urge all contracting parties to consider ratification of the amendment.

Driving CCS RD&D deployment will require unprecedented action and true commitment. It will require the implementation of bold policies, standards and regulations, significant investments, and, without doubt, persistence. But most importantly, it will take political leadership and political will.
Here, we need to consider our role. What can CSLF do?

The beauty of CSLF is that we are committed frontrunners, and we have a global meeting-place where we discuss only CCS. We have broad representation from developed and developing countries alike, we are continuously broadening our membership base, and we are bringing increased awareness of CCS globally.

We need to continue and strengthen this effort.  The problem is not that we don’t have the arenas or meeting-places or initiatives in place. The challenge is – how to make the best possible use of the ones we have.

We represent the global political leadership within CCS. Before we enter this afternoon’s debate, my key question to you is, do we have the political will to implement the necessary policies? And are we able to extend and enhance a global political momentum for CCS?

The Norwegian Government firmly believes that in the equation between economic development and climate change prevention, CCS must play an important part. CCS is one of the climate change mitigation measures that must be deployed to reach our targets. We are doing this because it is right and because it is wise. Deploying CCS gives us advantages that we otherwise wouldn’t have. Regardless of short-term developments on the global political scene, Norway remains committed.

Before I give the floor to the Chairmen, I would like to acknowledge the lead taken by the United States in the establishment of the CSLF and the daily operation of the Secretariat. I would also like to thank our generous Chinese hosts.

Thank you for your attention.