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CCS in the EU ETS and CDM

CCS in the EU ETS and CDM. Dr. E. Woerdman Associate Professor of Law and Economics & Mr. Anatole Boute PhD Researcher in Energy Law. CCS in the EU ETS (E. Woerdman) CCS is not a necessary instrument, but an additional option to meet the emission caps

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CCS in the EU ETS and CDM

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  1. CCS in the EU ETS and CDM Dr. E. Woerdman Associate Professor of Law and Economics & Mr. Anatole Boute PhD Researcher in Energy Law

  2. CCS in the EU ETS (E. Woerdman) • CCS is not a necessary instrument, but an additional option to meet the emission caps • Not policymakers, but the ETS market should determine when CCS becomes profitable • Policymakers should be restrictive in giving subsidies to CCS, also in the demo phase

  3. ETS is corner stone of EU climate policy • Effective (cap) and efficient (trade) • Reduces costs and increases options • CCS is an additional option • Reject measures that: • Inflate cap or reduce efficiency • Increase costs or reduce options

  4. Incentivize CCS by giving extra allowances? • Bad idea: leads to over-allocation or subsidizes a costly technology • Incentivize CCS by giving auction revenues? • Bad idea: underinvestment in cheaper reduction methods • Incentivize CCS by making it obligatory? • Bad idea: increases costs

  5. Incentivize CCS by imposing a carbon tax? • Bad idea: effectiveness uncertain • Incentivize CCS by subsidizing demo projects? • Good idea: attacks innovation market failure • Big warning: increases costs when industries lobby for too much money for too long

  6. II. CCS in the CDM (A. Boute) • The issue: • Huge storage potential in developing countries • Most future growth in GHG emissions • CDM could provide the required additional financial incentive for CCS projects

  7. The main regulatory challenge: Liability for emission releases Are rewards provided today for future emissions? • During crediting period: project emissions • After crediting period: temporary v. permanent CER; buyer v. host state liability.

  8. Assessment criteria: • Financial viability of CCS projects: market value of CERs; • Climate integrity: polluter pays (site selection); • Effectiveness: who controls the project?; • Administrative feasibility: weak capacity of developing countries; • Equity: developing countries to buy credits on carbon market?

  9. Potential outcome: Permanent credits with division of liability over 2 periods of time • Project participant: after injection; • Host country: transfer of liability after assessment of site; • CoP/MoP: storage site selection criteria; • UNFCCC: assist host country in site closure.

  10. Conclusion Woerdman: • Allowance price should and can determine when CCS becomes profitable • Conclusion Boute: • Division of liability would allow to reconcile financial viability with climate integrity of CCS projects

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