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CPB Policy Brief 2017/02, 19 January 2017
The European Union aims at reducing its greenhouse gas emissions in 2050 by 80‐95% in order to prevent climate change. In this Policy Brief, we analyse the potential role of negative‐emissions technology in reducing these emissions. A prime example of such a technology is the gasification of biomass in specially designed power plants that capture CO2 and store it underground (Biomass Energy with Carbon Capture and Storage, or BECCS). We conclude that this type of technology substantially reduces climate policy costs.
Total cost savings from redirecting biomass to BECCS in an 80% reduction scenario equals to approximately 0.3 trillion (300 billion) euros, while in a 95% reduction total cost savings increase to as much as 7.7 trillion (7700 billion) euros. Depending on the EU's climate ambitions, total savings per capita are between 500 and 15000 euros.
Surprisingly, redirecting biomass to BECCS decreases the global demand for biomass. The reason is that the use of BECCS increases the EU's carbon budget. This enables EU‐countries to use more fossil energy without having to jeopardise the overall emission reduction targets. This, in turn, lowers the price of energy in the EU, which results in lower demand for biomass and associated land‐use requirements. Thus, it also alleviates pressures on food production and forests.
The increased use of fossil fuels means that the reduction in the EU's air pollution is less substantial. However, by taking additional and relatively cheap measures, such as selective catalytic reduction, the EU member states can easily undo these unfavourable impacts on their air quality. Notice that, concerns regarding the safety of CO2 storage can be alleviated by simply prohibiting onshore storage of CO2.
Redirecting biomass to BECCS is also attractive from an economic perspective. This also holds when accounting for the extra mitigation costs to maintain air quality. Because of the extra carbon budget, more CO2 can be emitted in the non‐electricity sectors without having to jeopardise the overall emission reduction targets for 2050. And although electric driving and zero‐energy homes have positive effects in terms of both climate and air quality, we find that their large‐scale application before 2050 is much more expensive from a societal point of view.
However, in order to actually reduce climate‐policy costs, the EU needs to rectify a flaw in its Emissions Trading System (ETS), as in the current system, firms are not rewarded for their investments in negative‐emissions technology. A correction of this flaw is needed to reestablish the level‐playing field between all emission‐reducing technologies.
But, even if this flaw were to be corrected, firms would still face insufficient incentives to invest in BECCS. The issue is that BECCS changes the efficient distribution of the EU’s carbon budget between the ETS and the non‐ETS sector. More specifically, the non‐ETS carbon budget needs to be increased at the expense of the ETS carbon budget in order to establish uniform CO2 pricing across the economy. Only then will the EU be able to reduce climaterelated costs by 0.3 to 7.7 trillion (300 to 7700 billion) euros.
In an earlier version of this Policy Brief, the presented costs of emission reduction over the 2015–2050 period were discounted with a discount rate that was too high. These costs have been corrected upwards. Therefore, the economic advantage of using BECCS is now also substantially higher. This correction has no impact on the analysis or conclusions of this report.