A. Waste incineration has an important and necessary function in society

Norway's waste incineration facilities ensure safe and environmentally friendly final treatment of waste that cannot or should not be materially recycled. The waste incineration plants have an important and necessary function in society and contribute to maintaining an environmentally friendly and circular economy. The facilities produce energy and are the most important source of the city's district heating network, which greatly relieves the power grid and affects network rent and electricity prices. In many cities, electricity and steam are also produced for nearby industry. The waste that is finally treated has both fossil (e.g. plastic) and biogenic (e.g. impregnated wood) origins. About 50% of CO2-utslippene er biogene. CCS vil derfor bidra til både å redusere fossile utslipp av CO2 og til fjerning av CO2 fra atmosfæren (ofte kalt CO2-fjerning (CDR), negative utslipp eller karbonfjerning). 

KAN believes that the capacity of waste incineration plants in Norway should be maintained. CCUS at waste incineration plants must be prioritized. 

B. CCUS for waste incineration is necessary to achieve the climate goals 

In order for Norway to be able to reduce its greenhouse gas emissions by at least 55% and fulfill its obligations under the Paris Agreement, Norway needs a plan for how to get CO2 management in place at waste incineration plants in Norway. Support schemes and framework conditions must collectively make it possible to realize CCUS at waste incineration plants. 

KAN's partners can capture 1.3 million tons of CO2 in 2030 and thus contribute to local and national climate targets, provided the right framework conditions are in place. 

C. The costs of CO2 capture and storage must be covered by predictable sources of income 

The business model for CCUS for waste incineration is mainly linked to avoided cost (the fossil CO2 tax/EU ETS) and revenues for the removal of biogenic CO2 through the sale of CO2 removal certificates. In the future, the EU ETS and other market mechanisms will hopefully provide sufficient incentives for emission cuts and CCUS, but there is a need for public support and risk relief during a transitional period. The instruments must provide income that is stable and predictable over a longer period and must be able to be combined with (not added to) possible inclusion in the EU ETS and the sale of CO2 removal certificates in the voluntary market. The mechanisms must be cost-effective and market-based and stimulate technology development and the development of competition-based markets, in addition to being manageable administratively for industry players and authorities.

KAN's preliminary cost analysis, mainly from feasibility studies, shows lifetime costs per tonne of CO2 in 2024 kroner*. Different scenarios show costs in a range between NOK 2,500/tonne in a scenario with low transport and storage costs, and NOK 3,300/tonne in a scenario for a plant with a small volume and a long transport route. These are total lifetime costs for the entire value chain, including all investment and operating costs, as well as return requirements, development costs and uncertainty reserve. The costs vary both depending on the size of the capture facility and, to a large extent, the distance to permanent storage.

Of total costs, costs for the capture plant typically make up approximately 50%, up to NOK 1,500/tons CO2 [2]. Operating costs are up to NOK 1,500/tons CO2. These mainly consist of ship transport and permanent storage [3] which, for an example plant, makes up about a third of the total costs. The transport costs vary widely between the partners, as BIR in Bergen can transport the CO2 directly to Northern Lights in Øygarden by truck, while SAREN in Tromsø has a long sea route to the same storage.

There is great uncertainty related to the cost estimates which are assumed to have an uncertainty of up to -30/+ 50%. Transport costs have economies of scale and can be reduced by 20-30% through cluster cooperation. The costs of final storage are uncertain and depend on the negotiating position of the facilities, the market power of the storage operators and supply and demand. The cost per tonne of CO2 is uncertain and very sensitive to transport and permanent storage, yield requirements and investment costs.

KAN believes that it may be possible to realize CCUS at the waste incineration plants at around NOK 3,000/tonne CO2.

1. Levelized cost of carbon capture (LCCC) is estimated based on estimates for investment costs and operating costs, expected lifetime of 20 years, adjusted for inflation, with a discount rate of 8% and calculated back to 2024 kroner. The figures are from all the companies except Hafslund Celsio.
2. Disse består av: selve fangstanlegget, kompresjon og flytendegjøring, varmeintegrasjon, lagring og lossing, tomt og areal, prosjektledelse og usikkerhetsreserve.
3. As well as costs related to the capture facility, which include energy, personnel, consumables and maintenance and operation.

D. Cost of emissions of fossil CO2 in the waste value chain is an important incentive for CCUS 

KAN believes that it is right that it should cost money to emit CO2, also in the waste sector. The CO2 tax in combination with other measures should provide sufficient incentives for CCUS, reduced amounts of waste and increased reuse and recycling. At the same time, the CO2 tax must provide incentives to utilize the waste that cannot be reused or recycled for district heating.

Today's arrangement, where the cost placed on the waste incineration plant cannot be passed on to either district heating customers or waste owners due to price regulation of district heating and strong competition from Swedish incineration plants, leads to a large financial burden. This can lead to increased export of waste with the climate and environmental challenges it presents, as well as threaten district heating production, which is mainly based on surplus heat from waste incineration. It is therefore important that the industry gets a transition period with low or no fee until the inclusion in the EU ETS, so that the necessary capital can be used to mature CCUS projects. The scheme should be designed so that it is not at a competitive disadvantage for facilities in Norway that are already included in the EU ETS. At the same time, we see that the level of avoided CO2 tax or allowance price will not be sufficient to cover the costs of CCUS. Additional measures will therefore be necessary. 

The most important instrument for maintaining waste incineration with CO2 capture is equal framework conditions for waste incineration in Norway and Sweden.

KAN believes that emitting CO2 should cost. At the same time, fairer competition conditions for waste incineration must be ensured between Norwegian and foreign plants and equivalent and sufficient framework conditions and support schemes for CO2 capture as in our neighboring countries.

E. Framework and revenue sources for CO2 removal must be in place

Removing biogenic CO2 from the atmosphere has as much benefit as reducing fossil emissions but is not valued today. A set of regulations for CO2 removal is on the way at European level, which is necessary for the industry, but it is important that the Norwegian authorities quickly value CO2 removal in line with emission reductions. There is a voluntary market for the trading of CO2 removal certificates, but the market is immature, mainly based on bilateral agreements, few but large buyers, and missing/different regulations for certification and bookkeeping.

KAN believes it is essential to quickly establish a framework at both national and European level for CO2 removal that can provide a stable source of income for the capture and storage of biogenic CO2.

F. Framework for CCUS at waste incineration plants should be established quickly

KAN wants:

• A subsidy scheme that covers both investment and operation
• Contracts for difference where both fossil and biogenic CO2 are part of the same mechanism and are priced the same, with the EU ETS/CO2 tax as the reference price for fossil emissions and potential income from voluntary markets or the EU ETS for biogenic CO2.
• contracts for difference that are two-sided, where the market participant receives part of the upside from the sale of CO2 removal certificates
• A direct allocation to waste incineration plants, which will realize KAN's CCUS projects

The means must:

• Be cost-effective, but also include the socio-economic consequences for waste management and delivery of heat to the district heating network if CCUS at waste incineration plants is not realised. 
• Be initiated quickly to achieve the goals of realization in 2030, with clear signals in 2024 and during 2025 the mechanism must be known at a detailed level.
• Be administratively feasible for market players such as waste incineration plants with complex ownership structures and limited resources and expertise
• Last 15-20 years to provide sufficient risk relief, stability and predictability.
• Take into account that the technology is still commercially immature. Several projects must be realized before competition-based technology-neutral schemes are used.  
• Ensure risk relief for the establishment of the value chain.
• In a competition-based scheme, use various criteria in addition to price, such as geography, maturity, environmental impact, energy efficiency, geography and ripple effects in the local environment.

KANs CCUS-prosjekter spiller en nøkkelrolle i klyngesamarbeid rundt de store byene, og med modne prosjekter kan disse spille en viktig rolle i utviklingen av en regional stam-infrastruktur for CO2-håndtering. Vi ser det derfor som viktig å prioritere realisering av disse prosjektene.

KAN does not recommend auctions in a first phase where we consider that the players will not compete on an equal basis. Among other things, certain industries are part of the EU ETS and are allocated free quotas. The value chain is also not proven and commercially mature, it is an almost monopoly situation for permanent storage. In the absence of an established infrastructure for transport and storage, the costs and risks could be disproportionately high for small players. If auctions were to be introduced, contrary to conjecture, we would like a series of auctions to be planned and known to ensure predictability and for projects with similar conditions to compete with each other, for example for small and medium-sized projects. KAN does not recommend a separate auction scheme for waste incineration plants as we do not consider it to be a sufficient basis for competition.

KAN recommends a quick introduction of directly awarded contracts for difference for waste incineration plants.

G. Maturation and rollout

The costs for the players for the maturation and development of projects are significant in the entire phase from idea to realization, so continued and reinforced risk relief and financial support is an important and essential means of action. KAN believes it is important to have long-term, predictable and good support schemes for the maturation of projects in the feasibility phase, concept phase and pre-project phase. The amount of support should be as high as possible and a minimum of 50%. Investigations into regional transport and storage services should be able to be supported to give point emissions the lowest possible costs. Industrial collaboration and clusters that deal with several parts of the value chain are an important tool in the development of everything from framework conditions to concrete solutions for transport and other infrastructure, and must be included in the support programmes.

KAN wants a minimum of 50% of the project development costs in all phases to be covered.

H. Transport and storage

Access to transport and storage solutions for CO2 constitutes a significant barrier to CO2 capture at waste incineration plants. It will be necessary for the facilities to have predictability. In the EU, Norway and the regions, long-term solutions must be developed, but at the same time temporary arrangements must be found that will solve the challenges the fishing projects face in the short term.

The authorities must set clear targets for the infrastructure and lay down a concrete plan for development.

It is important to provide support for cluster solutions and look at the possibility of relieving risk, as the various projects in the cluster will be realized at different times. The costs of transport and storage are expected to decrease as the technology and the market develop, but for the first projects where the risks and costs are high, risk mitigation becomes essential.

KAN recommends that the state takes a coordinating role in the procurement of storage and transport services on behalf of the fishing operators.

Utilization of CO2 (CCU) as an alternative to permanent storage

Decarbonisation of industry leads to increased demand for biogenic CO2. If sustainable use of biogenic resources is ensured, CCU will be an alternative to permanent storage, where the costs and risks are high. KAN supports the development of technology and markets for the alternative use of biogenic CO2 and the inclusion of CCU projects in the support programmes.