CO2 Storage Crediting as a Mechanism

under the Paris Agreement

Wolfgang Heidug

OGCI Expert Workshop, Paris, 14 - 15 October 2019

Milestones for CCS Policy

2005 2010 2015 2020

“Decision 10/CMP.7

Modalities and procedures for

carbon dioxide capture and

storage in geological

formations as a clean

development project activity”

3

1. CCS economic in some circumstances, but not widely replicable

2. Climate policies do not adequately value the role of CCS as an option in avoiding dangerous climate change

Carbon pricing does not incentivize nascent, higher cost low-carbon technologies

Other low-carbon technologies benefit from supplemental subsidies alongside explicit or implicit carbon prices (e.g. renewables)

3. Commercial market for CCUS poses challenges

Demand-side policies place all the incentive on emitters

CCS also needs price signal for “storers”

Issues for CCS Today

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1. CCS economic in some circumstances, but not widely replicable

2. Climate policies do not adequately value the role of CCS as an option in avoiding dangerous climate change.

Carbon pricing does not incentivize nascent, higher cost low-carbon technologies

Other low-carbon technologies benefit from supplemental subsidies alongside explicit or implicit carbon prices (e.g. renewables)

3. Commercial market for CCUS poses challenges

Demand-side policies place all the incentive on emitters

CCS also needs price signal for “storers”

Issues for CCS Today → Solutions for CCS Today

Transformative support mechanism for CCS should seek to

address issues by being:

■ Widely applicable to a range of circumstances

■ Cognizant of the current maturity of CCS

■ Compatible with Paris Agreement architecture, mechanisms and

goals

■ Able to address commercial barriers to CCS deployment

■ Able to create a pathway to systematic long-term support for CCS

Carbon Storage Units Based Mechanism

CAPTURE

PENALTY

ACTUAL

EMISSIONStCO2

CSUs

DEMAND SIDE /

CONSUMPTION-BASED

SUPPLY SIDE /

PRODUCTION-BASED

Net-Zero Emissions (stock)

Em

issi

ons

Rem

oval

s

Reference

Emissions

Baseline

Stored

Emissions

Avoided

Emissions

CERsEmission Reductions

(Flow)

Net Zero Emission (Stock) CSUs

Advantages of Carbon Storage Units

tCO2

P2

P1

$/tCO2

CERs

CSUs

PHYSICAL CO2

price formation

($/tCO2)

CERs

CSUs

Address C-market failures Create physical C-market

Building Blocks of a Paris Agreement CCS framework

CONTRIBUTION

- Art 3 & 4 (NDCs)

COOPERATION

- Art. 6.1 (Deploy)

- Art 10 (Tech)

MECHANISM

- Art. 6.2 (ITMO)

- Art. 6.4 (SDM)

MARKET

- Results-based Fin

- Obligations

Carbon

Storage

Units

Deeper contributions

to emission reductions

“Club” with common

interests in CCUS

Systematic, long-term

support for CCUS

Nationally Determined Contributions (NDCs) cornerstone of Paris Agreement

“nationally determined” = latitude for countries to decide how they contribute

Contributions: Articles 3 & 4

Country NDCs with explicit

reference to CCS technology

Bahrain, China, Egypt, Iran,Iraq,

Malawi, Norway, Saudi Arabia, South Africa,

United Arab Emirates

Country NDCs listing CCS as a

source sector category

European Union*, Japan

Mexico, Montenegro

Countries not mentioning CCS

in NDC but with potential

interests

Australia 1 Brazil 1, 2 Canada 1, 2 Colombia 1

Indonesia 3 Malaysia 3 Russia 1South Korea 1

Thailand 3 Trinidad & Tobago 3 United States 1, 3 Vietnam 3

Notes: * 28 member state countries. 1 = Member Country of either CSLF, IEA Greenhouse Gas R&D Programme or Global CCS

Institute; 2 = active CCS pilot, demonstrator or large-scale plant(s) in operation. 3 = Significant energy sector emissions and

potential for low cost CCS from high purity sources.

In comparison with:

145 NDCs referring to renewable energy (109 with specific targets)

157 NDCs referring to AFOLU

10

31

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International cooperation can take a two-track approach:

1. DEPLOYMENT

Voluntary cooperation with transferable outcomes - Article 6

Driving Cooperation: Article 6 & 10

Establish “club” that act unilaterally outside of Paris Agreement but:

Guided by PA goals

Linked to PA mechanisms

Measurable in PA transparency framework / “MPGs”

Establish mechanism to unify common interests:

Focus on finance and incentives to drive deployment

Single metric or unit that provides systematic support for CCUS

2. DEVELOPMENT, TRANSFER, CAPACITY BUILDING

Technology mechanism - Article 10

Evolution of CSU Mechanism

Results-based finance

Procure CSUs & disburse to club members.

Price set according to:

Technology

Costs

Other finance sources

Club priorities

REV

IEW

Emission-based policies

Carbon pricing instruments

Supply-based policies

Supplier pledges/obligation

Decarbonized oil sales

PILOT PHASE SYSTEMATIC DEMAND

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www.kapsarc.org/research/publica

tions/a-mechanism-for-ccs-in-the-

post-paris-era/

Thank you for

listening tomy presentation