Clayton Utz Insights

22 December 2011

Carbon capture and storage: a done deal at Durban

By Claire Smith.

Key Points:

The inclusion of carbon capture and storage in the Clean Development Mechanism at COP17 is a milestone decision.

Developing countries can now earn certified emission reduction credits for any greenhouse gases injected and stored as part of carbon capture and storage (CCS) CCS projects after CCS was introduced into the Clean Development Mechanism (CDM) at the latest round of talks at the Climate Change Conference (COP 17) held in Durban this month. The decision came on the last day of two weeks of intense negotiations.

The inclusion of CCS in the CDM is a milestone decision and sets an important precedent for a greater widespread implementation of CCS technology as credits generated from CCS projects in developing countries may be sold for value, or credited towards meeting that country's Kyoto targets.

So why did it take so long?

The inclusion of CCS as a CDM project activity has been the subject of heated debate concerning a range of issues since 2005, including potential environmental risks and uncertainties surrounding technical aspects of the technology. Opponents have also argued that, contrary to the objectives of the Kyoto Protocol, CCS technology encourages the continued burning of fossil fuels, and developing countries should therefore be encouraged to dedicate resources to renewable energies rather than the development of CCS.

At the 2010 Cancun Conference, it was determined that CCS might be considered an eligible project activity under the CDM but only if certain issues were satisfactorily addressed and resolved. These included permanence, measuring, reporting, verification, environmental impacts, project activity boundaries, international law, liability, potential for perverse outcomes, safety, insurance coverage and compensation for damages caused due to seepage or leakage. Parties and non-government observers were invited to respond to the prospect of the inclusion of CCS as a CDM. Australia was one of only 10 countries to make a submission, supporting its inclusion.

Technical guidelines of the modalities and procedures of CCS as a CDM activity were then developed by the Subsidiary Body for Scientific and Technological Advice (SBSTA), with its final report setting out draft modalities and procedures being used as a recommendation at COP 17 to include CCS as a project under the CDM.

The report set out approaches to site selection, defining project boundaries, accounting for greenhouse gas emissions, addressing transboundary issues and the movement of CO2 across jurisdictions, assessing risk, safety and socio-environmental issues, managing permanence and determining liability in cases of seepage.

The details of inclusion

Based on the SBSTA recommendation, it was agreed that regulatory mechanisms be established so that a country may only host a CCS project if it submits an agreement letter to the UNFCCC Secretariat and implements specific domestic legislation to adequately govern CCS technology. Five per cent of credits generated by CCS projects will also be set aside in reserve for 20 years, in case of the need to offset any seepage from the CCS project.

 

You might also be interested in ...

For more information, contact...
Email: Claire Smith, Partner
Tel: +61 2 9353 4713
Disclaimer
Clayton Utz communications are intended to provide commentary and general information. They should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this bulletin. Persons listed may not be admitted in all states and territories.
Claire Smith
Claire Smith