Questions and Answers on the proposal for a directive on the geological storage of carbon dioxide
1) What is carbon capture and storage?
Carbon capture and storage is a suite of technological processes which involve capturing carbon dioxide (CO2) from the gases discarded by industry and transporting and injecting it into geological formations.
The major application for carbon capture and storage (CCS) is to reduce CO2 emissions from power generation from fossil fuels, principally coal and gas, but CCS can also be applied to CO2-intensive industries such as cement, refineries, iron and steel, petrochemicals, oil and gas processing and others. After capture, the CO2 is transported to a suitable geological formation where it is injected, with the aim of isolating it from the atmosphere for the long term.
There are storage options other than geological storage such as storage in the water column and mineral storage. Storage in the water column is considered to present a high environmental risk and the Commission's proposed directive on CO2 geological storage bans it within the Union. Mineral storage is currently the subject of research. Developments will be kept under review.
2) How does geological storage work?
There are four main mechanisms which trap CO2 in well-chosen geological formations. The first is structural trapping, which is the presence of an impermeable cap-rock which prevents CO2 to escape from the outset. The second is called residual CO2 trapping where CO2 is trapped by capillary forces in the interstices of the rock formation, which develops about 10 years after injection. The third is solubility trapping where the CO2 dissolves in the water found in the geological formation and sinks because CO2 dissolved in water is heavier than normal water. This becomes important between 10 and 100 years after injection. Finally, mineral trapping happens when dissolved CO2 chemically reacts with the formation rock to produce minerals.
3) Why the need for CCS?
While energy efficiency and renewables are in the long term the most sustainable solutions both for security of supply and climate, EU and world CO2 emissions cannot be reduced by 50% by 2050 if we do not also use other options such as carbon capture and storage.
Timing is crucial. About a third of existing coal fired power capacity in Europe will be replaced within the next 10 years. Internationally, China, India, Brazil, South Africa and Mexico's energy consumption will lead a major global demand increase, which is likely to be met in large part from fossil fuels. The capacity to deal with these very substantial potential emissions must urgently be developed.
4) Is CCS technically mature?
The separate elements of capture, transport and storage of carbon dioxide have all been demonstrated, but integrating them into a complete CCS process and bringing costs down remain a challenge.
The biggest CO2 storage projects that European companies are involved in are the Sleipner project in the North Sea (Statoil) and the In Salah project in Algeria (Statoil, BP and Sonatrach). Both projects involve stripping CO2 from natural gas – a process which is already carried out before the gas can be sold – and storing it in underground geological formations. The Sleipner project was spurred on by the Norwegian tax on carbon dioxide which was significantly higher than the cost per tonne of CO2 stored in the Sleipner geological formation. The In Salah project was triggered by BP's internal carbon trading system. Other demonstration projects underway are the Vattenfall project at Schwartze Pumpe in Germany which is due to be operational by mid-2008 and the Total CCS project in the Lacq basin in France. The European Technology Platform on Zero Emission Fossil Fuel Power Plant (ETP-ZEP), a stakeholder initiative supported by the Commission, has identified some 15 full-scale demonstration projects that could go ahead once the necessary economic framework is in place.
5) How much will carbon capture and storage cost?
The cost of CCS involves partly capital investment on equipment to capture, transport and store CO2, and partly the cost of operating this equipment to store the CO2 in practice – such as the amount of energy required to capture, transport and inject the CO2. At current technology prices, up-front investment costs are about 30 to 70 % (i.e. several hundred million euros per plant) greater than for standard plants and operating costs are currently 25 to 75% greater than in non-CCS coal-fired plants. These costs are expected to substantially decrease as the technology is proven on a commercial scale.
6) When will widespread deployment happen?
Uptake of CCS will depend on the carbon price and the price of the technology. If the price per tonne of CO2 avoided by CCS is lower than the carbon price, then CCS will begin to be deployed. Although both of these prices remain highly uncertain, the climate and energy package will serve to stabilise them to some extent.
The EU Emissions Trading System will recognise CO2 captured, transported and safely stored as not having been emitted. The revision to the system to implement the trading sector's share of the European Union's 20% GHG reduction target should ensure a robust carbon price.
The Communication on Supporting Early Demonstration of Sustainable Power Generation sets out the Commission's commitment to early effective demonstration of CCS and calls for timely and bold industry and public initiatives. The aim of demonstration is to learn from practical integration of the process components on a commercial scale. The enabling legal framework will apply to demonstration projects and all other future CCS projects. With demonstration projects in place, the price of the technology should decrease substantially over the next ten years.
According to the Commission's projections laid out in the Impact Assessment of the proposal for a directive on the geological storage of carbon dioxide the uptake of CCS on a commercial scale is likely to begin some time around 2020 and increase substantially after that.
7) Who will bear the cost?
The proposal to enable CCS will not impose additional costs over and above those required to meet the 20% greenhouse gas reduction target. Once CCS is mature, it will be for individual operators to decide whether to release emissions and pay ETS allowances to cover them or use CCS to reduce their emissions and their ETS liabilities. The maximum an operator will pay will be largely set by the carbon price: CCS will only be deployed if the cost per tonne of CO2 avoided is lower than the carbon price. In this respect the carbon price internalises the climate cost of CO2 emissions. Depending on the conditions in the market in question, operators may pass on a portion of the carbon cost to consumers. (See MEMOs on effort sharing and revised ETS proposal)
In the early phase, CCS demonstration projects will require additional finance over and above the incentive provided by the carbon market because the current cost of the technology is substantially higher than the carbon price. To catalyse this additional finance, decisive financial commitment from industry will be crucial and Member State support measures are also likely to play a major role.
In view of the importance of early demonstration of CCS in power generation and given that a number of those projects may require some public funding, the Commission is ready to view favourably the use of state aid for covering the additional costs related to CCS demonstration in power generation projects. This commitment is reflected in the revised Environmental State Aid Guidelines adopted with the package.
8) Will CCS be made mandatory?
Not at this stage. The Commission proposal enables carbon capture and storage by providing a framework to manage environmental risks and remove barriers in existing legislation. Whether CCS is taken up in practice will be determined by the carbon price and the cost of the technology. It will be up to each operator to decide whether it makes commercial sense to deploy CCS.
The Impact Assessment for the proposed directive examines the implications of making CCS mandatory. While there will be some early CCS deployment, this would come at significant cost and would provide no clear advantage neither in stimulating technological development and improving air quality nor in promoting the earlier uptake of CCS by non-EU countries. Making CCS mandatory would also run counter to the market-based approach of the European Trading System. Also, mandating a technology that is yet to be demonstrated on a commercial scale presents risks that are not currently justified.
However, this situation may evolve. To meet GHG reductions beyond 2020, the deployment of CCS will be essential, and by 2015 the technological options will be clearer. So if commercial take-up of CCS is slow, policy-makers will be obliged to look again at the compulsory application of CCS technology.
9) How will CCS be treated under the EU Emissions Trading System?
The ETS will provide the main incentive for CCS deployment. CO2 captured and safely stored according to the EU legal framework will be considered as not emitted under the ETS. In Phase II of the ETS (2008-12) CCS installations can be opted in. For Phase III (2013 onwards), under the proposal to amend the Emissions Trading Directive, capture, transport and storage installations would be explicitly included in Annex I of the ETS.
10) How much will CCS contribute to reducing CO2 emissions in the EU?
The precise contribution will depend on the uptake of CCS, but projections made for the Impact Assessment of the proposed directive show that, with CCS enabled under the ETS and assuming a 20% GHG reduction by 2020 and further significant progress towards our mid-century objective by 2030, 7 million tonnes of CO2 could be captured in 2020, rising to around 160 Mt in 2030. The CO2 avoided in 2030 would represent around 15% of the reduction required in Europe. Estimates for the potential global contribution are similar, in the order of about 14% by 2030.
11) What type of sites will be selected and how?
There are two main kinds of geological formation that can be used for CO2 storage: depleted oil and gas fields, and saline aquifers (groundwater bodies whose salt content makes them unsuitable for drinking water or agriculture).
Site selection is the crucial stage in designing a storage project. Member States have the right to determine which areas of their territory are free to be used for CO2 storage. Where exploration is required to generate the necessary information, exploration permits must be issued on a non-discriminatory basis, valid for 2 years with the possibility of extension.
A detailed analysis of the potential site must be carried out according to criteria specified in Annex I of the proposal, including modelling of the expected behaviour of CO2 following injection. The site can be used only if this analysis shows that under the proposed conditions of use there is no significant risk of leakage, and that no significant health or environmental impacts are likely to occur.
The initial analysis of the site is done by the potential operator, who then submits the documentation to the Member State competent authority in the permit application. The competent authority reviews the information and if it satisfied that the condition is met, issues a draft permit decision.
For the early storage projects the proposal includes an additional safeguard. To ensure consistent application of the directive across Europe and promote public confidence in carbon capture and storage the draft permits may be reviewed by the Commission with the assistance of a scientific panel of technical experts. The Commission's opinion will be public, but the final permitting decision remains with the national competent authority according to the subsidiarity principle.
12) Will storage be allowed outside the EU?
The proposed directive can only regulate storage within the European Union and (if it is incorporated into the EEA Agreement, as the Commission expects to happen, the European Economic Area. Emissions stored in these regions, in accordance with the proposed directive will be considered as not having been emitted under the ETS. Storing CO2 emissions outside the European Union will not be banned, but any emissions so stored will receive no credit under the ETS, thus providing little incentive to store carbon dioxide in this way.
13) What is the risk of leakage? What will happen if a site leaks CO2?
The risk of leakage will depend very much on the site in question. The IPCC Special Report on CCS concluded that:
'observations...suggest that the fraction [of CO2] retained in appropriately selected and managed geological reservoirs is very likely to exceed 99% over 100 years and likely to exceed 99% over 1000 years'.
The key issue is thus the appropriate selection and management of sites. The requirements on site selection are designed to ensure that only sites with a minimal risk of leakage are chosen, and the review of draft permit decisions by the Commission – assisted by an independent scientific panel – will provide additional confidence that the requirements will be implemented consistently across the EU.
A monitoring plan must be set up to verify that the injected CO2 is behaving as expected. If, despite the precautions taken in selecting a site, it does leak in practice, corrective measures must be taken to rectify the situation and return the site to a safe state. Emissions Trading Allowances must be surrendered for any leaked CO2, to compensate for the fact that the stored emissions were credited under the ETS as not emitted when they left the source. Finally, the requirements of the Environmental Liability Directive on repairing local damage to the environment will apply in the case of leakage.
14) Who will be responsible for inspecting CO2 storage sites?
The competent authority in Member States must ensure that inspections are carried out to verify that the provisions of the proposed directive are observed. Routine inspections must be carried out at least once a year, involving examination of the injection and monitoring facilities and the full range of environmental effects from the storage complex. In addition, non-routine inspections must be carried out if any leakage has been notified, if the operator's annual report to the competent authority shows that the installation is not compliant with the proposed directive, and if there is any other cause for concern.
15) How is the responsibility for the site ensured in the long term?
Geological storage will extend over much longer periods than the lifespan of an average commercial entity. Arrangements are needed to ensure the long-term stewardship of storage sites. The proposal thus provides for sites to be transferred to Member State control in the long term. However, the polluter pays principle requires that the operator retain responsibility for a site while it presents a significant risk of leakage. Also, rules are needed to ensure that no distortion of competition arises from different Member State approaches. Under the proposed directive a storage site shall be transferred to the state when all available evidence indicates that the CO2 will be completely contained for the indefinite future. As this is the second key decision in the lifecycle of a storage site (the first being the decision to permit the site for use), a Commission review is proposed.