Norway drops carbon capture plan it had likened to "Moon landing"

Norway's outgoing centre-left government dropped plans on Friday for a costly large-scale project to capture carbon dioxide that it once compared in ambition to sending people to the Moon.

The International Energy Agency says deployment of carbon capture and storage (CCS) technology is critical to reducing carbon emissions, but so far there is no full-scale commercial plant operating anywhere in the world.

"The development of full-scale carbon dioxide capture at Mongstad is discontinued," Norway's oil and energy ministry said, adding that it was still committed to research into carbon capture and storage.

The plan had been to capture carbon emissions from a natural gas plant at the site, which also hosts an oil refinery, and pipe them into underground storage on the Norwegian continental shelf.

That would remove the gas from the atmosphere in a step to slow global warming. But low prices for carbon dioxide emissions and economic slowdown in many European nations had dimmed interest in the technology, the ministry said. "A full-scale carbon dioxide capture facility is still the objective.

The government has, however, concluded, after careful consideration, that the risk connected to the Mongstad facility is too high," Energy Minister Ola Borten Moe said.

The government said it would keep a research centre at Mongstad, testing various carbon capture schemes, with funding of 400 million crowns ($67.4 million) over four years.

Prime Minister Jens Stoltenberg, whose Labour Party and coalition allies lost power last week to right-wing and centrist parties in an election, said in 2007 that Norway would try to lead the world in carbon capture.

He said that heavy investments would be Norway's equivalent of a "Moon landing", referring to the U.S. Apollo project that sent Neil Armstrong and Buzz Aldrin to the Moon in 1969.

"This is one of the ugliest political crash landings we have ever seen," said Frederic Hauge of the Norwegian environmental group Bellona of the decision to drop the carbon capture plan.

The statement said that a draft 2014 budget would ask parliament to enact "the objective of realizing at least one full-scale carbon capture and storage project in Norway by 2020" and provide the needed funds.

The government will stand down after presenting the budget on October 14. The opposition Conservative Party, the big winner in last week's election, is in talks with possible coalition partners on forming a government to take over next month.

Norway has promised to cut its greenhouse gas emissions by at least 30% below 1990 levels by 2020. Emissions were five% above 1990 levels in 2012, and delays to carbon capture will make the 2020 goal ever more difficult.

A report by Norway's Auditor General this week criticised the Norwegian state's total spending of 7.4 billion crowns on carbon capture and storage projects from 2007-12.

"Substantial cost increases have occurred," it said. ($1 = 5.9321 Norwegian crowns)

(Reporting By Alister Doyle; editing by Keiron Henderson)