Policy and regulatory challenges for CCS

1. Policy and regulatory challenges for CCS Dr Paul Zakkour, ERM Energy & Climate Change Services, UK International Workshop on CCS in the Power Sector: R&D Priorities for India. Delhi 23rd January 2008

2. Overview • Policy: • Designing approaches to promote and incentivise climate change mitigation measures (e.g. technology) • Regulation: • Ensuring effective deployment of those measures (including safety and cross-media considerations)

3. Policy to incentive CCS • Public policy is vital to incentivise CCS development and deployment: on the whole, CCS is a solely climate change driven technology (exc EOR) • Options include: • Market mechanisms (carbon trading): cap and trade or project based • Fiscal (tax relief): on capital and operating costs • R&D support (grants, subsidies): grants, competitions, feed-in tariffs • Mandatory obligations: difficult for new technology • Combinations thereof

4. Market mechanisms and CCS • International AAU trading (Art 17 of KP) • Approval of 2006 IPCC GLs will allow govt to govt trade of any AAUs from CCS • EU Emissions Trading Scheme • Various workstreams ongoing to ensure recognition of CCS by 2013 at latest • Kyoto project mechanisms (Art 6 & 12 of KP) • Not in CDM. Lack of support from NAI countries • Some legitimate concerns, but no good reasons to reject so long as framework is right– esp. early opps

5. Liability and permanence are tricky! Source: ERM 2004

6. Other incentive mechanisms • Fiscal • Tax relief, feed-in tariffs (generally market mechs are chosen instrument for climate change) • R&D • CCS in power sector will need R&D support. Some early opps (high purity CO2 streams) may be possible with carbon market, but not power. • Fiscal and R&D can be linked (e.g. auction fund recycle) • Mandatory CCS • Difficult to mandate until proven. • Combined approaches • Likely to be the most effective approach…market mechanism “plus”

7. Combining approaches 2012 Price convergence point Marginal abatement cost – CCS ($/ t CO2) ? $ / tCO2 CO2 price ($ / tCO2) $20 / tCO2? time Other support mechanisms + ETS? ETS

8. Regulating CCS • Why regulate? • To mitigate risk of leakage and/or unintended migration • To ensure liability allocated to recover cost of damages • Will help to build confidence in the technology • What to regulate? • Capture: as for other chemical and power installations (not covered today) • Transport: as for other gas pipelines (also not covered here) • Storage: new area of regulation needed • Note: Regulations and incentives inherently linked in context of liability for any emissions

9. Regulatory issues for CO2 storage • Leakage IS NOT always an inherent function of storing CO2 • Leakage IS more a function of: • Site characterisation and selection • Risk assessment • Risk management • Monitoring and reporting • Remediation and short-term liability • Decommissioning • Stewardship and long-term liability • Think: Leakage events, rather than leakage rates

10. Risks posed by leakage Geological sequestration risks International issue (UNFCCC/Kyoto) Local EHS regulatory issues Local Global • Surface release • Suffocation • Ecosystem impacts (tree roots, ground animals • CO2 in subsurface • Metals mobilisation • Other contaminant mobilisation • Quantity-based • Ground heave • Induced seismicity • Displacement of groundwater resources • Damage to hydrocarbon production • Surface release • CO2 back to the atmosphere Source: Wilson and Keith (2002)

11. Site characterisation and selection - trapping • Ultimate objective: to find and select sites with evidence of effective long term trapping mechanisms Source: IPCC SRCCS, 2005

12. Risk assessment - FEPs • Feature:characteristic of system components boreholes, lithography, nearby communities.. • Event:a particular happening pipe fracture, nearby earthquake, meteorite impact.. • Process:natural phenomenon corrosion of casing, dissolution of packing material, convection of groundwater.. Scenario

13. Injected CO2 migrates up dip maximising dissolution & residual CO2 trapping Aquifer E A B D G F C Storage formation Fault Potential escape mechanisms A.CO2 gas pressure exceeds capillary pressure & passes through siltstone B.Free CO2 leaks from A into upper aquifer up fault C.CO2 escapes through ‘gap’ in cap rock into higher aquifer D.Injected CO2 migrates up dip , increases reservoir pressure & permeability of fault E.CO2 escapes via poorly plugged old abandoned well F.Natural flow dissolves CO2 at CO2 /water interface & transports it out of closure G.Dissolved CO2 escapes to atmosphere or ocean Remedialmeasures A. Extract & purify ground water B. Extract & purify ground water C. Remove CO2 & re-inject elsewhere D. Lower injection rates or pressures E.Re-plug well with cement F. Intercept & re-inject CO2 G. Intercept re-inject CO2 Risk management - remediation

14. Local EHS risks Civil, Criminal law, etc. Evidence of damage and proof of negligence key features Will depend on liability in regulatory regime Global EHS risks Regulate and Offset, or ………? ………? Risk management - approaches MONITORING & REPORTING Environmental (H&S) Impact Assessment Physical remediation Financial instruments (insurance, bonds etc.

15. IPCC 2006 GHG Inventory g/lines Site characterisation Risk assessment Risk management (monitoring) Risk management (reporting)

16. The role of Impact Assessment • EIA will be an important component of project approval • Needs risk-based approach • Gorgon (Aus): Risk-based EIA approval process for CCS being tested

17. A step-wise process to manage risks Step Documentation Data catalogue (geology, geophysics, old wells, other uses) QA/QC 1. Literature & data review Agreed / qualified / verified set of static Earth models inc. rational behind decisions / choices – define project boundary QA/QC 2. Build static Earth model Source sink matching; injection plan; numerical simulations; plume behaviour; ultimate fate; trapping mechs; flux rates across boundary, secondary containments; seepage pathway; hydro-geology; biosphere QA/QC 3. Run Dynamic models QA/QC EIA; environmental baseline 4. Define risks (ESHIA) QA/QC Detailed monitoring plan 5. Define monitoring scheme

18. Summary: regulatory needs for CO2 storage

19. Approaches to designing CCS regulations • Carbon trading • Creates a chain of custody for CO2 from capture to storage • Provides mechanism to manage “global” risk • Environmental, health and safety • Need to modify existing EHS regulations to fit the regulatory needs highlighted above • Provide mechanism to manage “local” risk • Legal systems • Property (storage) rights, licensing, liability etc…

21. Regulating and Incentivising CCS Dr Paul Zakkour, Email: paul.zakkour@erm.com T: +44 20 7465 7200 International Workshop on CCS in the Power Sector: R&D Priorities for India. Delhi 23rd January 2008