Inclusion of Carbon Capture and Storage in the CDM

Perhaps the most controversial of the agreements achieved at COP16 was the decision to make carbon capture and storage (CCS) eligible as a project activity under the CDM, provided certain issues are satisfactorily addressed.

There is, however, a long road to travel before the carbon reductions achieved by CCS projects are monetized via certified emission reduction (CER) credits. The COP's decision makes this a possibility, but it's by no means a fait accompli that the journey will be finished anytime soon. Moreover, even if CCS projects result in CERs, it seems clear that given current market prices for carbon, the financial inducement of CERs--taken alone--is hardly strong enough make CCS projects financially viable in developing countries. And of course CDM is all about developing countries.

The COP decision--which is available here--is carefully worded such that it opens the door for the inclusion of CCS under CDM, while simultaneously pointing out the array of concerns that need to be satisfactorily addressed prior that becoming a reality.

In the Preamble, the decision notes that the Parties have "highlighted issues which need to be addressed and resolved in the design and implementation of carbon dioxide capture and storage in geological formations, in order for these activities to be considered within the scope of the clean development mechanism . . . ."

The crux of the decision is that CCS is eligible, if and only if certain conditions are met—namely “the issues identified in decision 2/CMP.5, paragraph 29,” which must be “addressed and resolved in a satisfactory manner . . . .”

2/CMP.5 is available here. Agreed on at last year’s COP15, paragraph 29 delineates a number of “outstanding issues” pertaining to CCS, namely:

(a) Non-permanence, including long-term permanence;
(b) Measuring, reporting and verification;
(c) Environmental impacts;
(d) Project activity boundaries;
(e) International law;
(f) Liability;
(g) The potential for perverse outcomes;
(h) Safety; and
(i) Insurance coverage and compensation for damages caused due to seepage or leakage.

Under the COP16 decision, the Subsidiary Body for Scientific and Technological Advice (SBSTA) is tasked with elaborating “modalities and procedures for the inclusion of carbon dioxide capture and storage in geological formations as project activities under the clean development mechanism . . . ."

Modalities and procedures are the rules that govern the CDM that were adopted at COP 7 in Marrakesh in 2001 and later adopted by the Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol (COP/MOP) at COP/MOP in Montreal in 2005 in the Annex to Decision 3/CMP.1.

In addition to the concerns cited in 2/CMP.5, paragraph 3 of the COP16 decision requires that the SBSTA’s modalities and procedures address a number of related and distinct issues, such as site selection criteria; monitoring procedures for leakage; the use of modeling; delineation of project boundaries (which is required to include the project components related to “capture, treatment, transportation, injection” as well as the subsurface); reservoir pressure and pre-injection monitoring plans; the implications of transboundary CCS projects; leakage; risk and safety assessment methodologies; socio-environmental impact assessments; pre-approval determinations of short-, medium-, and long-term liability and the risk of inducing seismic events; the means for using such liability determinations to redress affected entities from leakage; liability allocation; transfer of liability; state liability; ecosystem remediation funding and mechanisms; and compensation for affected communities.

This is not a short or simple list to tackle.

Here’s the formal procedure going forward:

The decision invites observer organizations to submit to the secretariat their views on addressing the issues referenced in paragraph 3 by February 21, 2011. The secretariat is then charged with preparing a synthesis report based on these submissions.

The secretariat is then tasked with convening, prior to the 35th session of the SBSTA, a technical workshop of legal and technical experts to consider the synthesis report and discuss how best to resolve the issues noted in paragraph 3 through “modalities and procedures.”

Based on the synthesis report and the deliberations of the technical workshop, the secretariat is then charged with preparing draft “modalities and procedures” for consideration by the SBSTA at its 35th session.

Following this, the SBSTA is supposed to make a recommendation to the COP at its next session in Durban, South Africa.

And then it’s up to the COP to decide if these issues were resolved in a “satisfactory manner.”

So to sum up, there’s a long way still to go before CCS truly becomes a viable project category under CDM. And even if it does . . .