IN DOHA, CCS ADVOCATES LOOK TO IRON OUT CDM TECHNICAL DETAILS

Proponents Also Push for New CCS-Specific Mechanism 

Tamar Hallerman
GHG Monitor
12/7/12

With seven years of hard-fought negotiations behind them, carbon capture and storage advocates came to the Conference of the Parties (COP) meeting in Doha, Qatar last week with the relatively simple task of smoothing out two details related to the technology’s recent inclusion into an international carbon offsetting scheme. Negotiators from nearly 200 nations wrapped up two weeks of intense negotiations under the United Nations Framework Convention on Climate Change late this week with fairly little progress to show in terms of negotiating a future global emissions reduction scheme. While there was far less gridlock in terms of clarifying the details of CCS’ role within the Clean Development Mechanism (CDM), delegates ultimately agreed to postpone the consideration of both issues for at least four years, allowing for developers to gain more on-the-ground experience related to CCS projects, they said.

CCS supporters secured a major win two years ago after the technology was officially approved as an eligible clean energy option under the CDM. That victory was cemented last year in Durban, when formal rules were established for its inclusion into the mechanism, effectively ending years of debate on the issue. The moves were cheered on by some CCS proponents who believed the technology’s inclusion into the scheme would help accelerate its deployment in the developing world. First implemented more than a decade ago, the CDM is meant to ultimately give rich nations involved in the Kyoto Protocol another way to meet their legally-binding emissions reduction targets, following the logic that it is often cheaper to cut down on emissions in developing countries than it is in their industrialized counterparts. At the same time, it is also seen as a chance for developing nations to create or catalyze new domestic markets for clean energy technologies. The mechanism does this by giving credits to developers building projects in industrializing countries, which rich nations can then purchase to ultimately apply toward their binding targets.

Panel Considered Transboundary Projects, Credit ‘Trust Fund’

While most of the issues related to CCS’ inclusion in the CDM were resolved over the last two years, negotiators in Doha under the Subsidiary Body for Scientific and Technological Advice (SBSTA) were tasked with deciding two outstanding issues. First, whether to include CCS projects that incorporate the transboundary movement of CO2 (such as those that incorporate multiple countries sharing one reservoir for CO2 storage or one nation exporting its captured CO2 to another for storage) as eligible under the CDM. The second outstanding issue had to do with whether to allow for the establishment of a reserve of CDM emissions reduction credits for CCS projects, meant to be used as an industry-wide trust fund for any liabilities that could arise from CCS projects in the long term.

In interviews with GHG Monitor, representatives from environmental NGOs remained fairly united in their support of including transboundary CCS projects as eligible under the CDM, but ultimately concluded that the issue was largely a non-pressing secondary concern. Meanwhile, several CCS advocates stepped out against adding the reserve of credits for CCS projects. Luke Warren, deputy chief executive at the London-based Carbon Capture and Storage Association, said that preexisting CDM rules already require project operators to set aside credits in a reserve account during the monitoring period and that adding another layer of regulation is unnecessary. “We just felt that it was overkill, really, because why do you need an extra financial mechanism when you have a net impact that really just makes these projects uneconomic? It would become counterproductive,” Warren said. The Global CCS Institute also spoke out against the provision. “This matter has little to do with enhancing environmental integrity,” Mark Bonner, principal manager for policy, legal and regulatory issues at the Global CCS Institute, told GHG Monitor.

Ultimately, the SBSTA decided that while both outstanding issues “merit inclusion” under the CDM, more on-the-ground experience is needed (particularly for the transboundary issue), and in its final conclusion decided to put off a decision until more information can be gathered on both issues. The issues will likely lie dormant until 2016, when the next meeting of SBSTA is scheduled.

Was Delay Needed?

CCS proponents ultimately seemed split on whether postponing an agreement until 2016 was a needed delay. “This is a disappointment, but it’s not really a surprise,” Camilla Svendsen Skriung, a CCS policy advisor for the Norwegian Zero Emission Resource Organization (ZERO), said in an interview. “I think we have all the information we could need on that issue.” Warren, though, said it was beneficial to wrap up the outstanding issues for a defined period of time instead. “We didn’t want to see those [issues] hanging around and potentially coming in and complicating any projects that might come forward,” Warren said. “While the decision in Doha was perhaps not the best outcome that we would have liked, it was a pretty good compromise. Overall, it wasn’t a big deal in the grand scheme of things.”

In a report released on the sidelines of the COP meeting this week, the ENGO Network on CCS, a recently-created group of international environmental NGOs looking to forward the development of CCS technology, recommended that CCS’ inclusion in the CDM not lose focus on environmental integrity and sound project planning. “It will be paramount for expertise that resides mostly in industrialized countries to be transferred to host [developing] countries in order to ensure sound site selection, operation, monitoring, accounting and project closure,” according to the report. “The CDM should not be allowed to lead to a second-tier approach to CCS implementation, nor should it result in the tarnishing of the excellent track record that CCS projects have created to date. Doing so would jeopardize its future prospects for broader development.”

Advocates Call for More Actions Outside of CDM

In its report, ENGO emphasized that a new CCS-specific mechanism should be created beyond the CDM that could ultimately help further accelerate the deployment of CCS technology in developing nations with the help of industrialized countries. One of the co-authors of the report, George Peridas of the Natural Resources Defense Council, emphasized that point further in an interview this week. “As it stands, the CDM could give rise to some projects and select applications but it will not lead us to the wide-scale power sector deployment of CCS that we would like to see. For that to happen, we either need to see a pretty drastic revision of the CDM or some different dedicated mechanism,” he said.

Svendsen Skriung also emphasized how nations should look beyond the CDM to help drive CCS investment in developing nations. “The CDM is one of several mechanisms that can help CCS move forward in growing economies, but it shouldn’t be the only one,” she said. “On its own, it’s not going to be enough. We need more mechanisms to support CCS in growing economies and poorer countries, but the CDM is a start.”

More action outside of the CDM could be necessary given that its future is fairly foggy. The first phase of the Kyoto Protocol wraps up at the end of the year, and outside of the European Union and Australia, most other countries have refused to extend their emissions reduction agreements into 2013. With the future of the Protocol largely unknown, it is unclear whether the CDM will become moot in the future if a new global emissions reduction regime is agreed to in the years to come. Likewise, even if the Protocol is extended, many of the great hopes for CCS under the CDM were dashed when the European Union announced earlier this year that it would begin enforcing a provision passed in 2009 that requires the body to support CDM projects only in the world’s least developed countries, most of which are located in sub-Saharan Africa or Southeast Asia in areas without ideal geologies for CO2 storage or the infrastructure to make projects truly feasible. Since the EU dominates the market for CDM credits, the declaration effectively killed the chances of developing giants considered favorites for CCS deployment such as China, India and South Africa from receiving investment under the CDM.

Global Emissions Reduction Scheme Remains the Holy Grail

In interviews over the last two weeks, CCS advocates underscored that the most important issue discussed at Doha regarding CCS’ future centered on negotiations for some sort of comprehensive international emissions reduction scheme. Whether through an extension of the Kyoto Protocol, the further development of a plan around the structure agreed to at Durban or an entirely new agreement, proponents stressed that ultimately the main policy driver for CCS deployment on an international basis will be the requirement to manage or limit CO2 emissions. “Ultimately, what we need is some kind of international agreement that puts a price on carbon and creates a demand for CCS,” Warren said.

The ENGO report also emphasizes the need for a major binding climate policy to help the CCS industry ultimately overcome the initial high cost hurdle the technology. The analysis emphasizes the large role governments play in enabling CCS deployment in that respect. “The biggest policy imperative for CCS, or indeed other large-scale clean energy technologies, is for limits on carbon emissions and an associated price on carbon. Without limits and a price—be it direct or indirect—there is no real need for markets to gravitate toward a technology that is specifically targeted toward reducing carbon emissions,” the report argues.