Context

The barriers and opportunities relating to CO2 pipeline infrastructure to support CCS (including CO2 for EOR purposes) will necessarily depend on the assumptions CCS actors make about the timing, scope, and configuration of the anticipated growth in the current pipeline network. As such, it seems reasonable to presume that the development of CO2 pipelines for storage purposes will be largely driven by the enactment of legally binding restrictions on industrially produced CO2 emissions. Currently, CO2 pipelines are more associated with commercially attractive (i.e. no regret) business as usual commercial applications.

The lack of CCS operational experience, the absence of sufficient and long-term policy, financial, and regulatory drivers, and large uncertainties on the locations, capacities and timing of sources and sinks can serve to undermine and/or delay the commercial development of large scale CCS pipeline infrastructures. These barriers inevitably affect all components of CCS.

By far the most important challenge facing CO2 pipeline developers is either the absence or insufficiency (in many locations) of a long term value for CO2 abatement. An exception is where CO2 is transported for enhanced hydrocarbon recovery (gas and oil). Where national governments adopt stringent CO2 emission reduction targets, and where the market fails to provide sufficient reward for private investors to invest in CCS related mitigation activities, governments may choose to intervene and provide support for CO2 pipeline investment.

There exists substantial uncertainty surrounding the establishment of mandatory carbon constraints, including: whether they will be imposed (mandated emission reduction targets are subject to sovereign decision making); their timing and stringency; and manner of imposition of CO2 controls on industrial facilities. However, it may be reasonable to assume that governments will manage any such transition to a carbon constrained environment in such a way that avoids imposing abrupt and unnecessary economic costs to its economy in giving effect to a lower carbon signature. This suggests that it is unlikely that national CO2 pipeline networks will be needed imminently, allowing for a gradual expansion of related infrastructure over time as allowable levels of CO2 emissions tighten.

A major uncertainty for future CO2 pipeline networks is where and when geologic storage sites will be located, both nationally and internationally. The associated costs of pipeline construction and operation may be expected to influence to some degree the future sequencing of geologic storage sites.

It is also evident that simply mandating a requirement for carbon capture does not fundamentally change the distances required by CO2 pipelines, the associated costs of transportation, the physical location of sinks and CO2 sources, or the potential for adverse reactions from population centres.

An important consideration for governments therefore in the design of CCS friendly policies (such as mandating capture readiness) could be to recognise that in waiting for a specific storage site to be validated, and/or the rules and incentives for cross-border CO2 transport to be agreed to, some capture sources may choose to delay their planning for capture rather than risk developing assets that could become economically stranded in the future.

These types of factors will also inevitably affect the efficacy of policies to encourage CO2 pipeline investments, and emphasises the importance of designing and sequencing a whole-of-CCS chain of policies to address the significant logistical challenges of capturing, transporting, injecting and storing very large flows and stocks of CO2.

There may also be a range of competing issues for government consideration. For instance, regulatory frameworks often need to strike a balance between promoting private sector competition among pipeline operators while ensuring that CO2 capture sources are able to meet their emission management obligations through having access to dedicated and sufficient transport capacity. This necessarily draws a discussion on the potential for monopolistic market structures arising, government policies and regulations that can provide for the construction of a large pipeline rather than a number of smaller ones, and the efficiency of large pipeline operators versus small operators.