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Shell: market alone cannot deliver green energy

Royal Dutch Shell CEO Peter Voser says falling carbon price is stifling investment. Photograph: Jim Watson/AFP/Getty Images home

• Chief executive says falling carbon price stifling investment
• Call for government action to support new technology

Tim Webb, Tuesday 24 November 2009 20.56 GMT

Shell’s new chief executive has called on governments to intervene in carbon markets, the first time the Anglo-Dutch oil company has acknowledged that markets cannot be left to set the price of pollution.

Peter Voser told the Guardian that action needed to be taken to make expensive green projects like carbon capture and storage (CCS) economically viable.

He cited the example of Shell’s CCS project in Australia where the government has introduced a carbon tax, or a minimum price of carbon. “That is a way of making sure it gets the support,” he said.

The Shell boss has become the latest and most high profile business leader to moot the idea of a tax, which is also receiving growing support from politicians in the UK and France ahead of the Copenhagen summit on climate change next month.

He said Shell, which until very recently had opposed any such government intervention in carbon markets, had revised its view based on its experiences of Europe’s emissions trading scheme. Companies wanting to build costly low carbon power plants complain that the price, which has slumped since the recession began, is too low to make them competitive.

As the Guardian revealed last month, the government’s Office of Nuclear Development has promised energy companies that ministers are prepared to set a minimum carbon price to make building new nuclear reactors economic. The UK could act in concert with other European countries next year.

Voser said that such government intervention would only be needed for a few years. Beyond that, the market should still be capable of setting the carbon price. “Over the long term the market should be capable of working out the CO2 price,” he said, in one of his first interviews since taking the top job at Shell in the summer. “But I can see a scenario where in the first few years you have to intervene to get the market going. I should not be opposed to that.” He did not say where any minimum price should be set, describing the U-turn as a “refinement” “not a big change”.

Only last month, David Hone, Shell’s climate change adviser, echoed Shell’s long-standing position on carbon trading when he wrote to the Guardian to say Shell did not support governments setting a floor price within Europe’s trading scheme.

“This is a market based system and the market needs to be left to find the price that is required to deliver the necessary reductions to meet the clear environmental objective of the system,” he wrote. “Today, as a result of the financial crisis and a consequent reduction in emissions across the EU due to lower industrial activity, the market is telling us that it can meet the 2020 20% reduction objective at a price of around €15. We should respect this and allow the market to do its job.”

Voser said Britain and the rest of Europe was losing its leading position on developing CCS technology. “Europe had a leading position for some time but has slowed down on funding [being made available for projects]. Maybe they are losing their CCS leadership – we have conveyed that message to Brussels and the UK.”

A Greenpeace spokesman said: “Shell is accepting what everyone else has known for a long time – that you can’t rely on the European Union’s emissions trading scheme to deliver technologies like CCS, as pointed out by the likes of Lord Turner in his climate change report last year.”

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