Relative costs of carbon abatement

Here's a thought from the skeptical environmentalist school.

If we're worried about carbon abatement (and I am), shouldn't we be looking for best value least cost solutions? If so, let's look at the relative costs of abated carbon from difference sources:

Roughly speaking, a marginal MWh of power in the UK, as provided by gas-fired CCGT, involves 0.4 tonnes of CO2. A MWh from coal is responsible for around 1 tonne of CO2, and nuclear and renewables are effectively zero carbon (not including embedded carbon in construction, decommissioning and operation). There's an interesting factsheet here...

The current carbon price in the ETS is around €22/tonne, so a permit to emit this MWh from CCGT (in principle somehow magically making it carbon neutral, or at least "allowing" it), would cost around £12/tonne or around £5/MWh. For coal, the same permit would cost c. £12/MWh.

Now, I realise that the ETS doesn't correctly internalise the carbon cost yet. Or put another way, the current ETS price isn't sufficient to make generators indifferent between renewables and fossil-fired generation.

Under the Renewables Obligation, onshore wind gets an effective subsidy of 1 ROC/MWh, and a ROC is currently worth around £50. So the additional cost of a wind-generated abated MWh is around £45 relative to gas and £38 relative to coal. Wave and tidal power will get 2 ROCs per MWh from April 2009, and offshore wind 1.5 ROCs, making these premia nearly £100/MWh. There are good strategic national reasons for encouraging these technologies, not least that as fossil prices go up, having renewables capacity offers security of energy supply and also that these businesses, specifically offshore wind, wave and tidal, could be nucleated in the UK (which has world-leading resources in these areas).

At the moment, there's a lot of heat and not much light about Carbon Capture and Storage. At the moment, CCS looks as if it will benefit from the ETS value of the the carbon not emitted - but this benefit is nothing close to the value of RO. How about including CCS in the Renewables Obligation, to help meet these targets and provide a more attractive incentive mechanism?