EU needs to embrace natgas to halt coal

BRUSSELS Wed Apr 25, 2012 11:58pm BST

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BRUSSELS (Reuters) - EU policy-makers must focus on natural gas as the near-term solution to halting the rise of carbon-intensive coal and curbing emissions, Norwegian oil and gas producer Statoil (STL.OL) said on Wednesday.

Rune Bjornson, senior vice president for natural gas at Statoil, also said action was needed to ensure a higher carbon price on the EU's Emissions Trading Scheme (ETS), but he would not specify any level, saying it varied from country to country.

"It's a paradox in the (EU) policy that we end up with a situation where coal is substituting gas," Bjornson said in an interview. "The price of carbon is now so low that the fuel of choice has become coal."

He was in Brussels, with other officials, for a debate on gas, including in the context of the EU's 2050 energy road map.

The idea is to give industry and investors guidance until law can be agreed to succeed existing policy that runs to 2020.

Gas executives have argued the Commission should add gas to its so-called "no-regrets options" of more renewables, better infrastructure and improved efficiency.

"The road map mentions gas, but I think it needs to be much more specific," Bjornson said. "Our main message is that gas is the only fuel that can strike the right balance between reduced emissions, economic growth and Europe's competitiveness."

Gas is the least carbon-intensive of the fossil fuel sources of energy and gas power plants are more efficient than nuclear and coal in converting energy into power.

"Gas is an up to a 70 percent reduction (in carbon), compared with a coal-fired plant," he said.

The Commission, the EU's executive arm, envisages virtually carbon-free power by 2050 and for gas to be still part of the mix carbon capture and storage would need to be commercial.

Statoil is working on that and testing should begin at a research plant in Mongstad, Norway, next month, Bjornson said.

Part of the problem in getting to proven technology has been the weakness of the carbon price, which has hobbled investment.

The EU's ETS touched a low below 6 euros early this month and is still only just above 7 euros.

Last week, the Commission said it would review its auctioning rules to tighten the supply of permits and boost the market.

"In one way or another we need to recognise the initial intention of the ETS," Bjornson said, adding it no longer encouraged low carbon investment or a cut in emissions.

Emissions rose in 2010 from 2009, according to BP's annual statistical review, after they had fallen from 2008 to 2009.

"Something needs to be done to make sure that they pursue a policy that actually reduces carbon emissions, which is not the case today," Bjornson said.

Another heated debate in Brussels is how to improve the EU's record on energy saving.

Some of the opposition to planned legislation to cut energy use through measures such as better insulation, has come from energy suppliers nervous about the impact on their business.

Bjornson said Statoil was still evaluating the EU's draft efficiency law.

Green campaigners are opposed to continued investment in gas and other fossil fuels, even as a means to avoid coal.

"As a solution for carbon reductions gas is a wash-out. There is no such thing as low-carbon fossil fuels," Brook Riley, climate campaigner at Friends of the Earth, said. "The EU's priority must be to develop renewables and reduce energy demand, not to lock itself into decades of gas dependence".

(Additional reporting by Jeff Coelho in London, editing by William Hardy and Alden Bentley)

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