Carbon Market Watch

For fair and effective climate protection.

Implications of the possible inclusion of CCS as CDM project activities (Newsletter #3)

05 Sep 2009

The inclusion of Carbon Capture and Storage in geological formations (CCS) in the CDM is currently being discussed in the framework of the UNFCCC. In preparation for the 5th meeting of the Parties to the Kyoto Protocol (CMP5) to take place in Copenhagen, in December 2009, the Board was requested to assess the implications of the possible inclusion of CCS as CDM project activities. During this EB meeting, the Board will consider a first draft of the experts’ recommendation which was prepared over the last months.

Recommendations in this new assessment are made hypothetically under the condition that CCS is considered eligible under the CDM. Main highlights of the report concern the establishment of a CCS Working Group which shall have the mandate to support the Board on technical issues related to CCS, including the accreditation of DOEs to validate CCS projects, supporting the Board in developing criteria for the assessment of CO2 storage site selection and approval, and preparing recommendations on technical matters related to the permanence of CO2storage in submitted proposals for new baseline and monitoring methodologies. These specialized DOEs with CCS expertise should then take care of most issues, including site characterisation and selection, validation of the seepage remediation plan, assessment of a monitoring programme (in the PDD) etc. There are also chapters about regulation of CCS in the host country, project boundaries and potential CO2 seepage. Moreover, the report also reflects concerns over possible impacts on the carbon market that could arise from including CCS as a CDM project activity, including

  • The possibility that huge quantities of CERs from CCS projects would be made available to Annex I Parties, which may undermine the carbon market and reduce CER prices.
  • The risk that CCS being eligible as a project activity under the CDM would lower the level of domestic mitigation action by Annex I Parties as it would open up a new source of cheap CERs.
  • That CCS being eligible as a project activity under the CDM would allow coal-fired power plants to operate in Annex I Parties without CCS, whereas similar plants in non-Annex I Parties would be employing CCS.

The technology of capturing and storing carbon dioxide has been promoted as a means to reduce global greenhouse pollution. CO2 Carbon Capture and Storage (CCS) is the method of removing carbon dioxide emitted from sources such as coal-fired, gas or biomass power stations to store in geological formations (oil and gas wells, unmined coal seams, in saltwater trapped underground or into the oceans).

CDM Watch’s Opinion: A number of initiatives to facilitate international transfer of knowledge and technology related to CCS have been taken by the Asian Development Bank, the World Bank, the EU, and the European Investment Bank. However, as long as the following concerns regarding the technology have not been addressed, CDM Watch as well as other NGOs including CAN Europe, urge you to oppose the inclusion of Carbon Capture and Storage in the Clean Development Mechanism:

  • With the lack of experience in the OECD, CCS technology has not yet been shown to be environmentally “safe and sound”, a requirement for inclusion in the CDM, according to the Marrakech Accords. A critical issue that has not been dealt with so far is: to what extent can CCS in the CDM effectively promote “sustainable development?”
  • Issues such as permanence, liability, responsibility and insurance against leakage need to be addressed in an adequate framework. The Intergovernmental Panel on Climate Change Special Report on CCS has highlighted the “limited experience with the monitoring, verification and reporting of actual physical leakage rates and associated uncertainties”.
  • Monitoring and liability do not conflict with cost minimisation, as suggested by industry, they are about risk minimisation, which requires long-term monitoring and clear liability rules for those who purchase credits, as well as guaranteeing environmental integrity.
  • Allowing CCS into the CDM could divert investments from renewables and energy efficiency, and the multiple long-term benefits they provide, including sustainable development opportunities.
  • Proponents argue that including CCS in the CDM will provide a good incentive for enhanced oil recovery (EOR). However, increased oil and gas production from EOR makes CO2 injection more profitable, thereby not meeting the additionality criteria in the CDM.
  • No credits should be generated for exporting CO2 in Countries which have no binding legislation or regulatory framework to capture, transport and store CO2.
  • Ocean storage should under no circumstances be a CDM project.
  • Carbon Dioxide Capture and Storage may have the potential to reduce GHG emissions in developing countries, but without appropriate safeguards, certainty and the establishment of a strong regulatory framework to minimize the risks and liability to future generations and the environment, CCS could compromise the sustainable development objectives of the CDM.