Delivering sustainable solutions in a more competitive world Policy and regulatory challenges for CCS Dr Paul Zakkour, ERM Energy & Climate Change Services,

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


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)


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


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


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


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”


Combining approaches

time

$ / tCO2

Price convergence pointMarginal abatement cost

– CCS ($ / t CO2)

CO2 price ($ / tCO2)

Other support mechanisms + ETS?

ETS

$20 / tCO2?

2012

?


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


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


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)


Site characterisation and selection - trapping

• Ultimate objective: to find and select sites with evidence of effective long term trapping mechanisms

Source: IPCC SRCCS, 2005


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


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


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.


IPCC 2006 GHG Inventory g/lines

Site characterisation

Risk assessment

Risk management (monitoring)

Risk management (reporting)


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


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


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, ??


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…



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


Delivering sustainable solutions in a more competitive world Policy and regulatory challenges for CCS Dr Paul Zakkour, ERM Energy & Climate Change Services,

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