Sunday, March 22, 2009

How to make international environmental cooperation work; Or, Report from EU Workshop on Carbon Capture and Sequestration Regulation

This past Wednesday and Thursday, CGS attended a workshop on the European Union's Support to Regulatory Activities in Carbon Capture and Storage (CCS) (STRACO2) and Cooperation Action Within CCS EU-China (COACH) projects. The former, STRACO2, is devoted to gathering lessons for China from CCS regulatory regimes in place elsewhere, while the latter, according to its website, has as its main objective
"to prepare the ground for developing large-scale facilities for zero emission electric power using coal as a feedstock. Options for hydrogen production as well as for production of synthetic fuels, and provisions for heat integration with surrounding industries will be investigated too. In this endeavour CO2 capture and permanent storage - including use for enhanced oil or gas recovery (EOR or EGR) - constitute an inherent and decisive prerequisite."

Because they focus on a key climate change mitigation technology- CCS- the STRACO2/COACH projects represent an important case study in international environmental cooperation, hence CGS's interest. Briefly, CCS is a technology that envisions capturing carbon emissions from fossil fuel combustion and "storing" it in impermeable geological formations, preventing its escape to the atmosphere. CCS is typically envisioned as a major "wedge" in reducing global greenhouse gas (GHG) emissions, since it theoretically permits the use of abundant fossil fuels without contributing to the change in the planet's carbon balance. As one workshop speaker noted, many GHG reduction scenarios envision almost 30% of reductions coming from the large-scale deployment of CCS (see Rob Socolow and Steve Pacala's classic wedge paper on this). Problem is, it's far from a commercially-viable technology, hence the importance of the workshop. Deployment of CCS entails overcoming a number of challenges, including finding suitable geologic formations and developing an adequate regulatory framework for storing the carbon.

The STRACO2/COACH project is wide-ranging, including carbon storage site qualification and certification and financing. A particularly interesting feature of the STRACO2 project was the use of questionnaires to survey the CCS field in China, and which provide interesting insights into the prospects for China. Some 60 forms with questions on policy and finance, technology outlook, etc., were sent to a variety of environmental, energy, research, and consultancy firms in China, with 35 responses. These indicated that 43% of respondents see CCS as an "extremely important" technology for combatting climate change, while an additional 57% ranked it as "important." Respondents listed (in ranked order) high cost, unproven technology, underdeveloped law and policy, and underdeveloped technology as the most important barriers to CCS commercialization in China. Large majorities of respondents also reported that developed nations for pay for the development of CCS projects before commercialization, and that emissions trading offers the best prospect for long-term CCS financing. Notably, a significant majority also indicated that EOR technology, which involves injecting CO2 into oil wells as oil is withdrawn, represents the best storage option. Finally, respondents listed safety and responsibility as the most important considerations for developing a CCS regulatory regime in China.

The workshop also revealed a number of more general considerations and points of interest. There is a significant degree of suspicion over whether carbon can be safely stored underground, and whether "leakage" of carbon dioxide may pose a health risk to surrounding communities. China's geological storage potential also appears to be less favorable than in other countries, calling the widespread deployment of CCS into question. Several gaps were assessed in China's CCS capabilities, particularly in modelling technologies. The question of financing is also thorny; while most Chinese respondents indicated that developed countries should pay for the development of CCS technology, it's unclear how this might occur. Several experts, for example, spoke against inclusion of CCS in the Clean Development Mechanism, an important means of expanding clean technology in China. Perhaps most notably, one workshop speaker assessed the future of CCS as "uncertain," stating that its capabilities are "often assumed, not assessed."

In addition, the STRACO2/COACH project points out several significant issues for international clean technology cooperation. First is the need for robust stakeholder consultation: many in China remain suspicious of CCS. Second, governments will have to engage in significant discussion over intellectual property issues, and ensure that broader industrial and science/technology policy is aligned with clean technology cooperation. Much more attention will also have to be given to the details of financing and incentivization for clean technology.

Finally, the workshop highlighted the utility of person-to-person exchange in enhancing clean technology cooperation. Debbi Seligsohn of the World Resources Institute described a program that gathered an interdisciplinary team of experts from China and the US to explore the various issues involved in CCS deployment, and then organized a US study tour for participants, to be followed soon by a parallel China tour. By linking the people working on the ground in China with their counterparts in the US, the program helped to highlight important issues and challenges in CCS deployment, and stands a good chance of catalyzing long-term international partnerships.

In sum, then, the workshop illustrated several important lessons for international environmental cooperation. First, as China, America, the EU, and other nations struggle to ramp up clean technology deployment, such expert exchange programs will need to become a more common feature of the international landscape. Second, economists and policymakers should prioritize the issues of stakeholder consultation, financing, and intellectual property. CGS has been blessed to witness a sea change in the prospects for international environmental cooperation- but the hard work is yet to come.

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