Why Europe is looking to Alberta on CCS liability
The fate of an industrial salve hangs on long-term responsibility for underground waste sites
Illustrations by Darcy Muenchrath
The Alberta government’s carbon capture and storage (CCS) legislation has no shortage of critics in its own province. But international supporters of the greenhouse gas cleanup method give the scheme good marks as a potential model for the European Union. “We think the Alberta government legislation on liability for storage sites is excellent,” says Giles Dickson, a member of the European Technology Platform for Zero Emission Fossil Fuel Power Plants (ZEP) Taskforce on Policy and Regulation. “It is the best in the world at the moment.”
Dickson’s organization is a European CCS coalition, composed mainly of industry interests but backed by government and academic members. Among the group’s goals is to “make CCS technology commercially viable by 2020 via an EU-backed demonstration program.” Dickson is also vice-president of government relations in Europe for Alstom Group, an international infrastructure and technology company currently involved in 12 CCS projects, including some in Alberta.
The Alberta legislature passed Bill 24, known as the Carbon Capture and Storage Statutes Amendment Act, last December after a heated debate over a tangle of property rights, safety and long-range financial liability issues. The definitive legislation means CCS storage site operators have it considerably better in Alberta compared to Europe.
The provincial law lays out a blueprint for carbon disposal that includes clarification of responsibilities, a schedule for handing over full sites to the government for permanent management, and an insurance-like fund for looking after them that will be collected from industry participants in CCS projects. The EU commission has issued a directive – which member states have time to translate into their laws – that puts liability for maintenance, accidents and cleanups on operators for a minimum of 20 years after deposits into underground carbon storage vaults are complete and the sites are closed to further disposal injections.
After the transfer of liability to governments, operators will still be required to pay a fee to the proper national authority to cover monitoring costs and “anything that might happen.” It will be up to the national governments of the member states to fix the level of the charges. The amounts are just one among the many uncertainties facing European CCS developers. The directive also implies that disposal operators will be responsible for their sites for a half-century after they close.
“That’s too difficult for commercial operators to look at if they are taking liability in that sense,” says Stuart Haszeldine, a professor of carbon capture and storage at the University of Edinburgh. The way the directive is structured, the liability is all on the operator and all at the future price of carbon dioxide. “In the European system that means that if any carbon dioxide leaks out then you have to pay the going rate at that future date of the value of that carbon dioxide in carbon tax terms.”
The EU carbon price is currently around €15/ton. However, the figure is liable to rise substantially as early as 2013 when the next phase of Europe’s cap-and-trade scheme, known as the EU ETS, tightens current emissions ceilings and begins phasing out free emissions allowances. The prospect is an incentive for starting up CCS schemes. In Europe, developers have only to look to Norway to see that a high carbon price quickly provides the necessary incentives to commercialize the technology. But that inducement to action is offset by the other side of the rule’s coin – it gives the liability directive discouragingly sharp teeth.
“At the moment the price is €15 a ton but in 2050 the price of carbon dioxide might be €150 in present day money,” says Haszeldine. This means that if 50 years after a site is closed carbon dioxide leaks out of the ground, a company will be charged at that future rate of carbon.
“If this liability question is not solved in a much more financially satisfactory way for the company, I am certainly told a CCS project will not stack up well against other types of options,” says the professor.
These worries have sent the liability portion of the directive back to the drawing board where it is still being grappled with. The new guiding document “has been emerging next week for the past couple of months so they are having a great deal of trouble with it,” says Haszeldine. In his view, it would be appropriate for EU member states to take liability for trial CCS validation projects. Then, after six to 12 disposal programs have proved themselves, a thorough and rigid liability law could be implemented. A shared sinking fund would provide funds to cover potential issues that may arise.
Dickson disagrees with the professor when it comes to the severity of the problem the liability law poses. “I don’t think we would say that it is the only factor and arguably it is not the main factor in the postponement, cancellation and delay in the small amount of projects that have not advanced,” he says. The main issue facing CCS at the moment is the level of public support and public funding. So far, there has been €1 billion devoted to CCS in Europe from economic stimulus funding. There is also a plan for eight to 10 projects to receive funding in the form of emissions allowances, with the value set at a level that covers up to 50 per cent of project costs at current carbon prices.
Compared to Alberta, the level of funding for European projects is smaller. “The money going into the TransAlta Corp. project alone [using Alstom technology at a power station west of Edmonton] is equivalent to €500 million from the Alberta and Canadian governments. If you compare this against the CCS project in Poland that we are involved in they are receiving the equivalent of about €118 million,” says Dickson. “You can see already that Canada has been more generous than what has been allocated by Europe so far. It’s generous, but not over generous – we think it is correct. There plants cost about €1 billion apiece and we think it is correct that public authorities pay half of that.”
Europe currently has 25 projects on the books and two are currently operating outside the EU in Norwegian offshore gas fields. While CCS proponents are reluctant to admit it, the support for the cleanup technology in Europe is underwhelming. Renewable energy sources have thus far received the lion’s share of funding through tariffs that subsidize electricity coming from energy sources deemed to be clean. The roster does not include thermal power generating plants that use CCS.
Budgetary problems incurred due to various European power tariff regimes have led several countries to question and cut into renewable energy subsidies. The extreme version of this has been the Czech Republic, which as a country of 10 million put more money into subsidizing a variety of solar energy known as PV, or photovoltaic, in the first seven months of last year than the entire United States. Due to the resulting strain on the national budget, the Czechs are considering a tax instead of a subsidy, notes Dickson. These flawed subsidy programs and the general unstable financial climate leave a big question mark over future CCS funding.
Haszeldine says a number of low-carbon power projects that have been planned for technically excellent sites are also facing problems with public acceptance. “This is a good lesson for everybody else. If the carbon is burned in town A they get the jobs and the revenue from that power plant. And if the carbon is captured in town A they get the new jobs, the green jobs and the new skills for building the capture plant. But then if it is pipelined through communities B, C and D to be stored underneath community E, community E gets no benefit from that. All they get is someone else’s waste product from maybe hundreds of kilometers away.”
This uneven distribution of benefits has caused problems for CCS in Germany, Holland and Poland. In France, there was a successful project because the carbon dioxide is going to be stored in a depleted gas field only 20 kilometers away from the jobs. Also, the site had been previously used to store a corrosive variety of waste known as acid gas. Carbon dioxide is a lesser hazard. When it comes to CCS policy Dickson says, “Honestly, it is really hard to say what Alberta can learn from Europe. Maybe it’s more a case of what Europe can learn from Alberta.”