A Policy Strategy for Carbon Capture and Storage

A Policy Strategy for Carbon Capture and Storage

Acknowledgements

This report benefited from the contributions of numerous experts both within and outside the International Energy Agency (IEA). Special thanks are extended to Robin Smale, John Ward, and Max Krahe at Vivid Economics for their expert advice and the development of the draft text.

Executive Summary

The report outlines a comprehensive policy strategy for Carbon Capture and Storage (CCS), emphasizing the importance of addressing climate change through effective CCS implementation. It highlights the need for a stable yet flexible policy framework that evolves as CCS technology matures.

Policy Architecture

The policy strategy focuses on controlling carbon emissions, promoting learning, and addressing capital and financial market failures. It also considers transport and storage issues, sector and country assessments, and the selection of pilot sectors. The report advocates for locally appropriate policies and provides incentives for developing countries, particularly for Bioenergy with Carbon Capture and Storage (BECCS).

Policy Life Cycle

The policy life cycle involves different stages of intervention, starting from the initial development of CCS as a competitive abatement option and progressing to more advanced stages. The rationale for policy intervention evolves over time, reflecting the changing technological and economic contexts.

Policy Focus

As CCS technology matures, the policy focus shifts to supporting the commercialization of CCS projects. A stable yet flexible policy framework is recommended, combining various policy instruments to achieve the desired outcomes.

Policy Instruments

The report discusses several policy instruments aimed at controlling carbon emissions, promoting learning, and addressing market failures. These include direct carbon pricing mechanisms, subsidies, and regulations. The goal is to create a supportive environment for CCS projects, especially in industries like power, cement, steel, natural gas processing, and refineries.

Controlling Carbon Emissions

Effective carbon pricing mechanisms are crucial for controlling emissions. The report suggests using a combination of cap-and-trade systems, carbon taxes, and performance standards. These instruments help ensure that carbon emissions are reduced without imposing excessive costs on industries.

Promoting Learning

Promoting learning and innovation is essential for the successful deployment of CCS technologies. The report recommends various policies to encourage R&D, demonstration projects, and knowledge sharing. This includes providing grants, tax credits, and regulatory support for CCS projects.

Capital and Financial Markets

Addressing capital and financial market failures is critical for the widespread adoption of CCS. The report suggests measures such as public-private partnerships, risk-sharing mechanisms, and green bonds to mobilize private investment. These instruments help reduce the financial barriers to CCS deployment.

Transport and Storage

Transport and storage infrastructure is a key component of CCS projects. The report emphasizes the need for robust infrastructure planning and regulation to ensure safe and efficient transportation and storage of captured CO2. It also discusses the role of enhanced oil recovery (EOR) as a storage option.

Sector and Country Assessment

The report assesses the suitability of different sectors and countries for CCS projects. It identifies developed countries that are most motivated to support CCS in developing countries and those with the greatest strategic interest in deploying CCS technology.

Selecting Pilot Sectors

Pilot sectors are chosen based on their potential for significant emission reductions and their readiness for CCS implementation. The report recommends prioritizing sectors like power, cement, steel, natural gas processing, and refineries due to their large-scale emissions.

Locally Appropriate Policy

Locally appropriate policies are essential for the successful implementation of CCS projects. The report suggests tailoring policies to local needs and circumstances, ensuring that they are effective and sustainable in the long term.

CCS Incentives for Developing Countries

Developing countries face unique challenges in implementing CCS projects. The report recommends providing targeted incentives and support to overcome these challenges. This includes financial assistance, technical expertise, and capacity building.

BECCS

Bioenergy with Carbon Capture and Storage (BECCS) is highlighted as a promising approach for achieving negative emissions. The report proposes additional incentives for BECCS, focusing on the lifecycle emissions of BECCS projects. It also discusses the challenges and opportunities associated with BECCS.

Implementing the BECCS Incentive

Implementing the BECCS incentive involves designing policies that encourage the deployment of BECCS projects. The report provides guidance on how to structure these incentives, including regulatory frameworks, financial support, and monitoring and verification mechanisms.

Conclusions

The report concludes by reiterating the importance of a well-designed policy framework for CCS. It emphasizes the need for a balanced approach that addresses both immediate and long-term challenges, fostering innovation and sustainable development.

References

A detailed list of references is provided for further reading and verification.

Appendices

• Appendix A: Cost Pass-Through Analysis

  • Electricity Markets
  • Industrial Settings
  • Carbon Leakage

• Appendix B: List of Figures

  • Figure 1: Current carbon prices from the EU Emissions Trading Scheme or the Clean Development Mechanism
  • Figure 2: Development of CCS as a competitive abatement option