CO2 sequestration: an interesting climate policy option, but should it be subsidised?

Many Dutch subsidy schemes, such as those for renewable energy and energy conservation, were introduced with the aim of reducing greenhouse gas emissions. Today, though, sequestration of CO2 from fossil fuel combustion appears to be in potential competition with renewable energy and energy saving with respect to subsidisation. The Dutch chapter of Friends of the Earth (Milieudefensie) therefore asked CE to examine whether it is desirable, from a societal perspective, that CO2 sequestration be subsidised.

The report concludes that CO2 sequestration is an effective means of reducing greenhouse gas emissions. However, there are no good reasons for additional subsidisation of CO2 sequestration at power stations (i.e. over and above emissions trading) via operating subsidies like the MEP ‘green power’ subsidy, for example, because there are no major secondary objectives, as in the case of renewable en-ergy, that justify operating subsidies on top of the emissions trading price.