CCS Projects: How Regulatory Framework Influences Their Deployment
Abstract
:1. Introduction
2. Materials and Methods
- Reports, outlooks, statistics, and data of organizations, institutes, agencies, and official structures that operate to ensure reliable, affordable, and clean energy (The Global CCS Institute [40], the World Energy Council [41], the International Energy Agency [42,43,44], The Intergovernmental Panel on Climate Change [45], the Carbon Capture and Storage Association [46]).
3. Results and Discussion
3.1. Factors Affecting CCS Projects
3.2. Assessment of the Maturity of Countries’ Policy Incentives and Regulatory Framework in CCS
- All these countries play a significant role in CO2 emissions, have a sufficiently high level of economic development, and have experience in CCS project implementation.
- CO2 storage is allowed in these countries. For example, in Estonia, Finland, and Ireland, CO2 storage is permanently prohibited, except for research purposes. In Latvia, Austria, the Czech Republic, Poland, and Sweden, CO2 storage was/is temporarily prohibited in order to understand the results of demonstration projects or until the large-scale deployment of CO2 storage technology [50].
- All these countries have huge CO2 storage capacity. For example, Finland and Estonia have no CO2 storage capacity.
- Planning and programming. A lot of countries, including Russia, ratified the Paris agreement, so it is important to incorporate the goal of reducing CO2 emissions and integrate CCS initiatives in energy and climate policy. Also, it is necessary to formulate goals and objectives of CO2 emissions reduction and set out a number of actions for the long-term CCS project development in CCS roadmaps and CCS programs or energy strategy. Countries such as the US, Canada, and Norway have made significant progress toward the implementation of CCS technology through a national climate policy, CCS programs, and roadmaps.
- Financing. It is obvious that low commercial effectiveness, complexity of technologies, high capital, and high operational costs make financial support crucial CCS project implementation. But, accessing to funding is a challenging process adding uncertainty in many countries. For example, about 10 years ago funding programs were announced in the US, Australia, Europe, Canada and Great Britain with $31 billion USD support for CCS projects, but only $3 billion USD was really invested from 2009 to 2014, mainly in Canada and the US. This was the main reason for CCS projects being cancelled in European countries, including Norway and Great Britain. It is therefore important to create stable, balanced, and dynamic financial support programs for CCS projects to provide confidence to business decisions and overcome high initial costs.
- Legislation. Before a CCS project’s implementation, it is necessary to introduce clear legislation for CO2 capture, storage, utilization, and transportation, which should be in accordance with other legitimate activities (for example, with hydrocarbon exploration and production, natural gas storage, drinking water production, geothermal resources development). It should also be predictable but flexible because of the unique characteristics of each project. Lack of special legislation can become a reason to postpone or cancel a CCS project. Also, it is important to create a CO2 storage permitting base. Worldwide experience shows that a permitting process adds uncertainty to project development, and it can be very complicated and time consuming.
- Public outreach. To accelerate the deployment of CCS projects, it is important to raise public awareness in CCS technologies, to interact with non-government organization, and implement government programs and guidelines to encourage companies to consider environmentally responsible business as part of their activity. Such measures can influence public perception and lead to positive effects in CCS projects development. A lot of projects were cancelled or postponed due to the negative public attitude toward these technologies.
- Taxation and crediting. From our point of view, at the first stage of CCS project’s implementation, CO2 tax could not be considered as an effective tool for noncommercial CCS projects.
3.3. Discussion
- Identification, classification, and interpretation of the factors affecting the CCS projects development;
- Assessment of maturity of policy incentives and regulatory in the field of CCS for different countries through a checklist method and verification of the received results through correlation analysis;
- Identification of the factors and measures creating favorable conditions for CCS technologies development;
- Development of recommendations aimed at establishment a policy and regulatory framework that encourages CCS projects’ deployment.
- Not all factors affect all CCS projects; we have attempted to create a comprehensive list of factors that may influence CСS projects, and it can be limited and adapted, where applicable.
- The importance of the factors was not taken into account in our assessment, although it can vary; we see this as a direction for further research.
- Open sources of information were used, so we assume that some data on country initiatives or CCS projects may be slightly distorted.
- A common approach to assess the level of development (maturity) of policy initiatives and regulatory framework was proposed; it can be applied to any country (even those that are undeveloped in the field of CCS).
4. Conclusions
Author Contributions
Funding
Acknowledgments
Conflicts of Interest
Appendix A
Factors | Interpretation |
---|---|
1.1 | The agreement regulates measures to reduce carbon dioxide in the atmosphere since 2020. The ratification of this agreement contributes to the implementation of CCS projects; withdrawal from the agreement may have a negative impact on the intensification of these projects. |
1.2 | The climate and energy policies of states differ significantly in goals and tools. In a number of countries, the course toward reducing greenhouse gas emissions is the main focus of both climate and energy policies, which is reflected in a number of legislative acts, standards, and laws that are adopted on their basis and contribute to the implementation of CCS projects. |
1.3 | Government programs, strategies, and CO2 emission reduction roadmaps that are clearly formulated and consistent with strategic and climate policies can encourage CCS project implementation and deployment. However, their inconsistency, isolation, or lack of different factors consideration may become a barrier to the deployment of CCS projects. |
1.4 | There are special laws for CO2 transportation, onshore and offshore storage, and estimation of CO2 storage capacity in many countries, which create a clear legal framework and remove the uncertainty for stakeholders. However, in some countries, there are laws that do not allow any storage and create barriers for CCS projects. Also, in some countries, there is a conflict of interests between CCS and other legitimate activities—for example, with hydrocarbon exploration and production, natural gas storage, drinking water, or geothermal resources. Lack of legislation in CO2 storage makes it particularly difficult to deal with unique issues associated with CO2, including licensing authority, monitoring and reporting plans, and corrective and remediation measures. |
1.5 | Strengthening of environmental legislation, the introduction of standards for pollutants’ emissions into the atmosphere, standards for permissible impact on water, and the establishment of requirements for the production and consumption wastes management in order to prevent their harmful impact to the environment—all of these stimulate companies to implement environmental measures, including CCS projects. |
1.6 | There are certain requirements for the content of CO2 in the gas for its further transportation or liquefaction, which necessitates its removal during processing, as well as further storage. |
1.7 | Carbon tax is a very effective mechanism in cutting back on carbon emissions and its further storage. However, it can be considered to be an aggressive instrument of state policy that negatively influence on companies’ commercial efficiency. |
1.8 | The government may provide a reduction in taxes (royalties, income tax) for CCS projects, which positively affects to their implementation and distribution. |
1.9 | Carbon capture tax credit is a fiscal incentive to support access to the capital for CCS projects. It is a tax credit that can be available to companies that invest in CCS projects, and it is designed to stimulate these projects in all sectors of the economy. However, in a business model in which capture units and CO2 storage enterprises are independent of each other, CO2 subsidy allocation mechanisms need to be established and improved carefully. |
1.10 | An emission trade scheme is one of the world’s main climate policies to reduce CO2 emissions and can be considered as an effective mechanism to stimulate CCS projects implementation. This mechanism establishes emission reduction commitments for market participants and distributes emission quotas. Participants can buy their quotas to offset excessive emissions or sell their quotas. |
1.11 | Financial support from the government is crucial in many cases of the development and diffusion of low carbon technologies. A lot of projects have been supported by different policies, or, in some cases, blends of policies at federal, state, and local levels. However, despite the necessity of financial support, it is important to find the balance between state aid and the industry’s own investments in to secure both cost reduction and the efficient performance of projects. |
1.12 | There are many R&D research programs all over the world that stimulate the implementation of CCS technologies and are directed to reduce risk and cost while at the same time increasing the available resources in each project. |
1.13 | International cooperation on the development and commercialization of new CCS technologies plays an effective role in climate change mitigation. A lot of countries provide funding for CCS projects in cooperation with other countries and through existing programs and institutions. |
1.14 | The CO2 storage permitting process is a critical regulatory challenge faced by CCS projects that are common to all regions. A lot of projects all over the world were postponed or cancelled because of a comprehensive CO2 storage permitting process. |
1.15 | There are government institutes and organizations that connect parties around the world to solve problems, learn from each other to accelerate the deployment of CCS projects by assisting them, sharing knowledge, and increasing the awareness of the benefits of CCS and the role it plays within a portfolio of low carbon technologies. The creation of different sources of information can be crucial for public awareness and perception of CCS technologies. |
1.16 | A predictable legal framework, both national and international, is necessary to deploy CCS. Because of wide range of individual and unique physical conditions in each CCS project, it is important to have a flexible, but predictable, framework that can encourage reduction of CO2 emissions and investment in CCS technologies. |
1.17 | There are different government programs and guidelines to encourage companies to consider environmentally responsible business as part of their activity. These help companies understand their influence on the environment and can stimulate the implementation of environmental measures, including CCS projects. |
1.18 | A key part of government policy is to provide students with knowledge, skills, values, and attitudes to realize the importance and role of CCS projects in sustainable development. This policy should be introduced in all aspects of the formal, non-formal, and informal education system in different countries. |
2.1 | In cases of CCS-EOR projects, oil prices can be crucial for their commercial efficiency. High oil prices stimulate oil and gas companies to integrate CCS technologies into their activities. |
2.2 | Capital cost reduction of CCS projects is complex and crucial for further deployment of CCS. But CCS technologies are still in a learning phase, where costs are harder to control. Experts have identified the high investment cost of CCS as the major challenge preventing the widespread adoption of this technology. It is important to continue government and private support of CCS projects in order to provide cost reduction in the future. |
2.3 | Low profitability of CCS is currently among the key barriers for CCS projects. Low profitability is due to combination of increasing operational costs, especially transport and storage costs, and high capital costs. Commercial scale implementation requires a certain level of experience in the technical, operational, and economic feasibility of projects. |
2.4 | The cost of energy depends on process plant, capture technology, and storage solutions. The cost of electricity may be much higher when CCS is adopted instead of CCS-EOR for the storage of CO2. The cost of CCS has been previously identified as a major barrier to its adoption. |
2.5 | High CO2 prices can encourage participants to apply emission reduction measures comprising the CCS projects. However, significant fluctuations in CO2 prices have been observed recently, which led to an increase in the number of carbon pricing initiatives. |
2.6 | Private sector financing of CCS is becoming urgent because of high capital costs and long construction periods. However, the problem is that private investors want to know the first movers’ experience and invest money to the approved technology rather than deploy their capital on its development. |
3.1 | Due to the high cost and complexity of CCS projects, their implementation is only feasible in countries with a sufficiently high level of development. |
3.2 | Fossil fuels will play a significant role in meeting energy needs in the coming decades; in this case, CCS technologies will be in demand to reduce CO2 emissions. |
3.3 | Using renewable energy has been a key factor contributing to limiting political support for CCS. Due to limited financial resources, CCS and renewables projects are competing for the same public and private investments. |
3.4 | Carbon capture is applicable to different industries (natural gas processing, power generation, iron and steel production, cement manufacturing, etc.), but its storage is expedient if saline aquifers are located near emission sources. Nevertheless, CO2 storage in saline aquifers is considered to be one of the most feasible technologies. |
3.5 | Due to huge storage capacity and existing infrastructure, depleted hydrocarbon reservoirs are one of the most favorable storage options, but they must be located near the emission sources. These reservoirs are considered for EOR, which makes them economically more favorable than saline aquifers. |
4.1 | Such centers could help in CCS technology development. |
4.2 | The lower technical and commercial complexity of renewables’ technologies has led to a much greater project success and will be an important factor in competition with CCS technologies, which are considerably more complex than other low emission technologies. |
4.3 | Various components of CO2 capture, transport, and geological storage are at different stages of technological maturity. Some capture technologies, particularly in industrial sectors, are commercially efficient, but in the power sector, where the largest potential for CCS deployment resides, full-scale demonstrations remain to be built. |
5.1 | National CO2 emissions are crucial for political decisions on CCS technologies. Most of the research and development activities occur in the states with the highest emissions intensity to prevent negative impact to the environment. |
5.2 | The possibility of potential leaks of CO2 is one of the largest barriers to large-scale CCS projects, although well-selected storage sites are likely to retain over 99% of the injected CO2 over 1000 years |
6.1 | Public acceptance is key to the deployment of carbon capture and storage locally and globally. There is no general model able to explain public acceptance, but it may include a range of different factors affecting acceptance—attitude, knowledge, experience, trust, perceived costs, risks, and benefits. |
6.2 | Negative opinion of different non-commercial organizations often causes projects to be cancelled or postponed. |
6.3 | Implementation of CCS projects can create jobs and reduce employment deficits. |
6.4 | Interest in other environmentally friendly technologies can provoke negative acceptance of CCS technologies. |
6.5 | Implementation of CCS projects may have a negative impact on the activities of the local population. |
6.6 | There is an important question: who is going to pay for CCS projects? Non-commercial organizations are against government subsidy for CCS projects. However, if the companies pay for CCS, it increases extra costs and can be the reason of high electricity prices. |
Factors | Research Question | Answers and Scores |
---|---|---|
1.1 | Has the country ratified the Kyoto protocol and Paris climate agreement? | No or just in formal way (it means that government does not take this document seriously and implement different initiatives to follow the obligations)—0 points; Yes, but it was decided to withdraw from the document or review the terms of participation—1 point; Yes, not formally—2 points |
1.2 | Has the country adopted energy and climate policies and how it reflects the goal of reducing carbon dioxide emissions? | No, there is no climate or energy policy—0 points; Yes, but the goal to reduce CO2 emission is not clearly presented in these documents, or energy and climate policies are just formal documents—1 point; Yes, the course towards reducing greenhouse gas emissions is the focus of these policies and they are not formal—2 points |
1.3 | Are there government programs or strategies for implementation of CCS projects, CO2 emission reduction roadmaps, and how are they formulated? | No, there is no government programs, strategies for implementation of CCS projects, CO2 emission reduction roadmaps—0 points; Yes, but they are very complicated and could become barriers for CCS projects’ implementation, or they are just formal documents—1 point; Yes, they are clearly formulated and consistent with other documents—2 points |
1.4 | Has the government detailed CCS-specific laws, and how do they work? | No, there is no detailed CCS-specific laws—0 points; Yes, but it raises legislation uncertainty—1 point; Yes, it creates a clear legal framework—2 points |
1.5 | Does the country have environmental legislation? | No, there is no special environmental legislation—0 points; Yes, there is special environmental legislation, but emission standards cover limited spheres or are rather easy to comply with—1 point; Yes, there is special strict environmental legislation—2 points |
1.6 | Is gas produced in the country, and are there restrictions on its carbon dioxide content? | No, there is no production in the country—0 points; Yes, there is production, but there is no restriction on its carbon dioxide content, or these restrictions are not significant—1 point; Yes, there is production and restriction—2 points |
1.7 | Has the country adopted a CO2 tax and in what amount? | No, there is no CO2 tax in the country—0 points; Yes, there is CO2 tax, but its amount is not enough to push the companies to implement CCS projects—1 point; Yes, there is CO2 tax, and its amount is the reason for the companies to implement CCS projects—2 points |
1.8 | Are there tax incentives for companies implementing CCS projects provided in the country? | No, there is no preferences—0 points; Yes, but they are quite limited—1 point; Yes, there is a wide range of preferences—2 points |
1.9 | Is there tax credit system for accessing the capital for CCS project implementation provided in the country? | No, there is no tax credit system—0 points; Yes, but it is not well developed—1 point; Yes, there is well developed tax credit system—2 points |
1.10 | Is there an emission trade scheme provided in the country and used for CCS project implementation? | No, the emission trade scheme is not used in the country—0 points; No, but it was an attempt to use it or this scheme is under consideration—1 point; Yes, there is well organized emission trade scheme—2 points |
1.11 | Is significant financial support organized at different levels in the country, and are they well functioning? | No, there is no any organized financial support or it amount is not enough—0 points; Yes, but it is rather complicated—1 point; Yes, there is well functioning financial support—2 points |
1.12 | Is state R&D funding organized in the country? | No, there is no any organized R&D funding—0 points; Yes, but it is rather complicated or not enough—1 point; Yes, there is well functioning system and enough funding—2 points |
1.13 | Does the country internationally cooperate on developing and commercializing CCS technologies? | No, there is no cooperation with other countries—0 points; Yes, the country participates in some international programs—1 point; Yes, the country actively provide funding for CCS and CCUS projects in cooperation with other countries—2 points |
1.14 | Is the CO2 storage permitting process complicated, and are there any restrictions? | Yes, the CO2 storage permitting process is complicated, takes long time and there are strong restriction for CO2 storage—0 points; Yes, the CO2 storage permitting process is rather complicated, takes time and there are some restriction for CO2 storage—1 point; No, the CO2 storage permitting process is well organized—2 points |
1.15 | Is there any special organization or different informational resources in the country to inform the public about CCS technologies? | No, there is no special organization and different resources —0 points; Yes, there are a number of organizations and some information resources, where public can get information about CCS—1 point; Yes, there are a lot of government organizations that hold meetings with public, support informational resources and provide active policy to improve public awareness on CCS technologies—2 points |
1.16 | Is the legal framework, especially the financing process, predictable or stable? | No, the legal framework is not predictable and always fluctuate—0 point; Yes, the legal framework is predictable, but from time to time it changes—1 point; Yes, there is predictable, but flexible legal framework—2 points |
1.17 | Are there different government programs and guidelines to encourage companies to consider environmentally responsible business as part of their activity? | No, there are no programs—0 points; Yes, there are few government programs—1 point; Yes, there are different government programs and guidelines—2 points |
1.18 | Are any educational tools used in the country? | No, educational tools are not used in the country—0 points Yes, but rather pointwise—1 points Yes, there are wide range of tools that are used in the country—2 points |
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Group of Factors | Factors | Manageability * | ||
---|---|---|---|---|
1 | 2 | 3 | ||
1. Political-legal factors | 1.1 Kyoto protocol and Paris climate agreement (ratification, withdrawal) 1.2 Climate and energy policies of the country 1.3 Government programs, strategies for implementation of CCS projects, CO2 emission reduction roadmaps 1.4 Detailed CCS specific laws 1.5 Environmental legislation (environmental protection, water, air and waste quality acts) 1.6 Standard, limiting CO2 concentration in gas 1.7 CO2 tax 1.8 Tax preferences for companies implementing CCS projects 1.9 Carbon capture tax credit 1.10 Emission trade scheme 1.11 Direct financial support for CCS projects implementation by different state funds and structures 1.12 Government support for R&D research 1.13 International cooperation on CCS projects 1.14 CO2 storage permitting process 1.15 CCS technology promotion institutes and organizations 1.16 Predictable legal framework 1.17 Promoting environmentally responsible business 1.18 Educational tools at all levels of education | V V V V V V V V V V V V V V V V V V | ||
2. Economic factors | 2.1 Oil prices 2.2 Capital costs of CCS projects 2.3 Commercial efficiency of CCS technological schemes 2.4 Cost of energy required for CCS projects 2.5 CO2 prices 2.6 Private financing of CCS technologies | V V V V V | V | |
3. Organizational factors | 3.1 Level of economic development of the country 3.2 Focus on traditional energy sources 3.3 Renewable energy usage 3.4 Presence of the saline aquifers for CO2 storage close to the sources of emissions 3.5 Presence of the depleted hydrocarbon reservoirs close to the sources of emissions | V V V | V V | |
4. Technological factors | 4.1 Advanced centers for CCS technologies promotion (development and implementation) 4.2 Development and implementation of other environmental technologies 4.3 Non-maturity of technologies used in different stages of CCS chain | V V V | ||
5. Ecological factors | 5.1 Significant CO2 emissions 5.2 Possibility of CO2 leaks from geological formations | V V | ||
6. Social factors | 6.1 Public acceptance of CCS projects 6.2 Non-commercial organizations’ attitude to the CO2 storage 6.3 Employment deficit in the region 6.4 Public interest in other environmental technologies 6.5 Impact on economic activity by locals (farming, agriculture, fishery) 6.6 Monetary burden on taxpayers | V V V V V V |
Policy Incentives and Regulatory Framework | Countries | ||||||
---|---|---|---|---|---|---|---|
USA | Canada | Australia | Norway | Germany | Great Britain | China | |
1.1 | 1 | 2 | 2 | 2 | 2 | 2 | 2 |
1.2 | 2 | 2 | 2 | 2 | 2 | 1 | 2 |
1.3 | 2 | 2 | 2 | 2 | 1 | 1 | 1 |
1.4 | 2 | 2 | 2 | 1 | 1 | 1 | 1 |
1.5 | 2 | 2 | 1 | 1 | 1 | 1 | 1 |
1.6 | 1 | 1 | 1 | 2 | 0 | 0 | 1 |
1.7 | 1 | 1 | 0 | 2 | 0 | 1 | 0 |
1.8 | 2 | 2 | 0 | 0 | 0 | 0 | 0 |
1.9 | 2 | 0 | 0 | 0 | 0 | 0 | 0 |
1.10 | 1 | 1 | 1 | 0 | 0 | 1 | 1 |
1.11 | 2 | 2 | 1 | 1 | 1 | 1 | 1 |
1.12 | 2 | 2 | 1 | 1 | 2 | 2 | 1 |
1.13 | 2 | 2 | 2 | 2 | 1 | 2 | 1 |
1.14 | 2 | 1 | 1 | 1 | 1 | 1 | 1 |
1.15 | 1 | 1 | 2 | 2 | 1 | 1 | 1 |
1.16 | 1 | 1 | 0 | 1 | 0 | 0 | 1 |
1.17 | 2 | 2 | 1 | 2 | 1 | 1 | 2 |
1.18 | 2 | 1 | 1 | 1 | 2 | 1 | 2 |
Total score | 30 | 27 | 20 | 23 | 16 | 17 | 19 |
Country | CCS Projects [4,37,38,39] | Dpl | ECCS | ||
---|---|---|---|---|---|
Active | Completed | Postponed and Cancelled | |||
USA | 30 | 49 | 34 | 30 | 2.3 |
Canada | 7 | 6 | 8 | 27 | 1.6 |
Australia | 8 | 5 | 11 | 20 | 1.2 |
Norway | 6 | 0 | 4 | 23 | 1.5 |
Germany | 1 | 4 | 5 | 16 | 1 |
Great Britain | 3 | 0 | 6 | 17 | 0.5 |
China (case 1) * | 7 | 2 | 4 | 19 | 2.25 |
China (case 2) ** | 5 | 1 | 4 | 19 | 1.5 |
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Romasheva, N.; Ilinova, A. CCS Projects: How Regulatory Framework Influences Their Deployment. Resources 2019, 8, 181. https://doi.org/10.3390/resources8040181
Romasheva N, Ilinova A. CCS Projects: How Regulatory Framework Influences Their Deployment. Resources. 2019; 8(4):181. https://doi.org/10.3390/resources8040181
Chicago/Turabian StyleRomasheva, Natalia, and Alina Ilinova. 2019. "CCS Projects: How Regulatory Framework Influences Their Deployment" Resources 8, no. 4: 181. https://doi.org/10.3390/resources8040181