IEA: CCS REGULATION ADVANCING ‘VERY WELL’

Lindsay Kalter
GHG Monitor
07/20/12

While the absence of incentive policies, federal involvement and public support continues to hamstring the deployment of carbon capture and sequestration projects, regional jurisdictions have made significant headway on the development of regulatory frameworks, according to the International Energy Agency. In its most recent annual report on CCS legal and regulatory frameworks released earlier this week, IEA states that several areas of North America are making key strides in this domain, most notably in Alberta, Canada, where the Regulatory Framework Assessment process is projected to be completed by the end of 2012. “Regulation really seems to be tracking very well,” primary author of the report Justine Garrett told GHG Monitor.

CCS Projects Relying on EOR for Support, Cost Mitigation

One contribution to this regulatory momentum among regions is the use of CO2 captured from CCS projects for enhanced oil recovery operations, IEA reports. A fairly recent development—it was not discussed in IEA’s previous edition of this report released last summer—EOR has been used as a mechanism for garnering economic support for CCS, offsetting costs and understanding the transportation infrastructure of CO2, IEA says. The U.S. Department of Energy reported in IEA’s review last year that six states had regulatory initiatives already in place. One of those states, Texas, has since expanded its existing guidelines to address both CO2 injection for geologic storage and CCS for the purposes of EOR, according to this year’s report.

Despite EOR’s role as an early driver for CCS deployment, there are still some key issues to be resolved, the report says. Before CO2-EOR was employed for climate mitigation, project managers for EOR projects aimed to keep the amount of CO2 injected to a minimum, given that it was one of their greatest financial strains. Therefore, these endeavors have not adequately examined CO2’s ability to remain sequestered—a concern among many CCS opponents. In addition, sites for CO2-EOR are chosen based on oil availability rather than storage potential. “Whether CO2-EOR is an emission reduction technology depends not only on the technical aspects of project design, but also much on the policy and regulatory environment in which the project operates,” the report states. “From a legal and regulatory perspective, the minimum requirements for a CO2-EOR project to qualify as a CO2 storage project include regulatory standards for monitoring, measurement and verification and long-term storage that are equivalent to those applied for other types of CO2 storage, to ensure operations are undertaken with a view to safe, effective and permanent storage.”

Incentives Still Largest Roadblock

The biggest barrier CCS faces is a lack of political and economic incentives, according to Garrett. Without it, the need for technology development and high operating costs will deter private investors, she said. “Incentive is really the difficult part, because it requires strong involvement from the government,” Garrett said. According to the report, there have been some attempts of government action through targeted deployment programs. A white paper published by the United Kingdom’s energy ministry published last summer proposed an emissions performance standard in order to prevent the construction of coal-fired plants without CCS. It also called for the creation of a carbon price floor and the development of feed-in tariffs to incentivize the technology, actions that the U.K. government has moved forward on this year. The U.K. government has stated that it will be moving on aspects elements of this proposal, “which reflect that the current, fully privatized electricity market is unable to drive sufficient investment in low-carbon technologies,” according to the report.

At the federal level in the U.S., the Environmental Protection Agency has expanded its Safe Drinking Water Act Underground Injection Control permitting program and has proposed to “conditionally exclude CO2 streams” injected into Class VI wells from hazardous waste regulations, the report says. Last month, a federal appeals court upheld EPA’s ability to regulate greenhouse gas emissions and its endangerment finding—one of the upshots being any new power plants must be built with CCS capabilities. 

As time goes on and technologies become more reliable, technology-neutral policies like cap-and-trade schemes and carbon taxes should become the dominant force behind mass deployment, IEA says. Government can provide industry with more stability on the issue by setting “gateways” that keep stakeholders apprised of policy developments, the report says. “For example, a first gateway, where policies move from instruments such as capital grants, operating subsidies and loan guarantees to a quantity support mechanism, may be triggered based on CCS technologies demonstrating technical feasibility on an integrated basis at scale, passing a first cost threshold, and confirmation of storage capacity availability,” the report says.