Element Energy/ Vivid Economics report says CCS won’t work without public-private collaboration

May 15 2018

A new report shows that improving the dialogue and collaboration between public and private stakeholders would be crucial in supporting the deployment of CCS.

The report was prepared by Element Energy and Vivid Economics on request by the Oil and Gas Climate Initiative (OGCI) .

A common finding across technical and modelling studies such as IPCC AR5 and the IEA CCS scenarios is that CCS is vital to reducing emissions at lowest cost. However, both public and private sector stakeholders are hesitant to commit the resources necessary to scale-up and roll-out deployment of the technology.

"By recognising that CCS deployment is a shared beneficial endeavour, public and private sectors can collaborate to achieve scale-up, sais Emrah Durusut, of Element Energy. "Unfortunately, momentum in CCS deployment is currently low. A principal cause is that the dialogue between stakeholders has articulated the costs of CCS, without sufficiently articulating its value.”

The report suggests that CCS technology is technically available but all market participants must become familiar with the technology and the contractual arrangements supporting its deployment. The scale-up phase proposed in the report comprises a limited number of full-scale projects, focussed on improving cost certainty and proving deliverability globally in key application sectors.

“The scale-up phase reduces costs but still carries significant risks that make it challenging to finance," said Alex Kazaglis, of Vivid Economics. "Once multiple projects have been successful, the roll-out phase focuses on standardisation. The different purposes of these two phases, risk reduction followed by efficiency, demand distinct policy treatments, with a greater role for governments earlier on.”

This study also provides a timeline and comprehensive policy roadmap for the successful scale up and deployment of CCS, detailing the roles of government and business, and how policies may differ across regions. Policy options with a potential of achieving successful outcomes include:

·         Obligation with CCS certificates: Emitters or fuel suppliers are obligated by law to ensure a certain amount of CO2 is captured and stored. Certificates are awarded for storage and can be used to meet the obligation and traded freely.

·         Emission performance standards (EPS) with CCS certificates: An EPS sets minimum emission standards by which emitters must abide. The tradeable certificates function similarly to the obligation scheme and can be used to meet the standard.

·         Public procurement, including contract for difference (CFD), entails the government directly procuring CCS. It does not imply the government necessarily funds CCS.

·         Tax credits are reductions in the tax liability of firms if they perform CCS. Credits can be provided for stored carbon but also for capital investment.

·         Other options, such as carbon price (with the exception of Norway) have been insufficient to deliver CCS commercially to date.

Policy instruments should be tailored according to global regions where the specific political, legal and cultural contexts are considered. Secondly, a policy instrument should not be solely focussed on providing revenue for stored carbon but also needs to incentivise efficient investment in CO2 network infrastructure. Finally, all parties will have to contribute to the scale-up costs of CCS: governments in terms of tax breaks or investment, the private sector via investment measures or certificates and end users via levies (e.g. fuel consumers).

Element Energy
Vivid Economics

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