Delivering sustainable solutions in a more competitive world
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
Delivering sustainable solutions in a more competitive world
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)
Delivering sustainable solutions in a more competitive world
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
Delivering sustainable solutions in a more competitive world
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
Delivering sustainable solutions in a more competitive world
Liability and permanence are tricky!
Number of years 1 10 100
5 year periods of the
EU ETS
Project based mechanisms e.g.CDM crediting periods of
7 (x3) or 10 years
Detailed storage site assessment: every 10
years+?
Handling of long-term liability for a storage site by a host government.
Transfer of liability or end of licensing period 50-500 years?
Possibility of seepage of CO2 back to the atmosphere over
geological timescales?
1 yearsurrender EUAs annually under the
EU ETS.
Source: ERM 2004
Delivering sustainable solutions in a more competitive world
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”
Delivering sustainable solutions in a more competitive world
Combining approaches
time
$ / tCO2
Price convergence pointMarginal abatement cost
– CCS ($ / t CO2)
CO2 price ($ / tCO2)
Other support mechanisms + ETS?
ETS
$20 / tCO2?
2012
?
Delivering sustainable solutions in a more competitive world
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
Delivering sustainable solutions in a more competitive world
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
Delivering sustainable solutions in a more competitive world
Risks posed by leakage
Geological sequestration risks
Local Global
Surface releaseSuffocationEcosystem impacts (tree roots, ground animals
CO2 in subsurfaceMetals mobilisationOther contaminant mobilisation
Quantity-basedGround heaveInduced seismicityDisplacement of groundwater resourcesDamage to hydrocarbon production
Surface releaseCO2 back to the atmosphere
Source: Wilson and Keith (2002)
Local EHS regulatory issues
International issue (UNFCCC/Kyoto)
Delivering sustainable solutions in a more competitive world
Site characterisation and selection - trapping
• Ultimate objective: to find and select sites with evidence of effective long term trapping mechanisms
Source: IPCC SRCCS, 2005
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Risk assessment - FEPs• Feature: characteristic of system components
boreholes, lithography, nearby communities..
• Event: a particular happeningpipe fracture, nearby earthquake, meteorite impact..
• Process: natural phenomenoncorrosion of casing, dissolution of packingmaterial, convection of groundwater..
Scenario
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Risk management - remediation
Potential escape mechanisms
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
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
Remedial measures
Fault
AB
C
D
E
F
G
Injected CO2 migrates up dip maximising dissolution & residual CO2 trapping
Aquifer
Storage formation
Delivering sustainable solutions in a more competitive world
Risk management - approachesLocal 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
• ………?
• ………?
MONITORING & REPORTING
Environmental (H&S) Impact Assessment
Physical remediation
Financial instruments (insurance, bonds etc.
Delivering sustainable solutions in a more competitive world
IPCC 2006 GHG Inventory g/lines
Site characterisation
Risk assessment
Risk management (monitoring)
Risk management (reporting)
Delivering sustainable solutions in a more competitive world
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
Delivering sustainable solutions in a more competitive world
A step-wise process to manage risks
1. Literature & data review
2. Build static Earth model
3. Run Dynamic models
4. Define risks (ESHIA)
5. Define monitoring scheme
Data catalogue (geology, geophysics, old wells, other uses)
Agreed / qualified / verified set of static Earth models inc. rational behind decisions / choices – define project boundary
Source sink matching; injection plan; numerical simulations; plume behaviour; ultimate fate; trapping mechs; flux rates across boundary, secondary containments; seepage pathway; hydro-geology; biosphere
EIA; environmental baseline
Detailed monitoring plan
QA/QC
QA/QC
QA/QC
QA/QC
QA/QC
Step Documentation
Delivering sustainable solutions in a more competitive world
Summary: regulatory needs for CO2 storage
NEED BASIS FOR REGs
Site characterisation and selection
IPCC 2006
Risk assessment IPCC 2006, FEPs, others
Risk management
- remediation & liability
- monitoring and reporting
EIA, ESHIA
IPCC 2006
EU CCS Directive
Decommissioning Petroleum/mining regs, EIA, ??
Stewardship and long-term liability
Financial instruments, EIA, ??
Delivering sustainable solutions in a more competitive world
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…
Delivering sustainable solutions in a more competitive world
Regulating and Incentivising CCS
Dr Paul Zakkour,
Email: [email protected] T: +44 20 7465 7200
International Workshop on CCS in the Power Sector: R&D Priorities for India. Delhi
23rd January 2008