1.6 Government policy and regulations

1.6.1 What has been the role of Government?

The Federal Governments in the USA and Australia are developing legislation for national-level schemes to introduce market based mechanisms to assign a value to carbon. The schemes proposed in the American Clean Energy and Security Act (ACES Act) and the Australian Carbon Pollution Reduction Scheme (CPRS) Act will provide a market based mechanism to assign a value to carbon. They propose to also provide bonus allowances and other incentives to assist with the funding of CCS facilities. These schemes must be implemented urgently if the G8 timeframe is to be achieved.

Proposed legislation such as the ACES Act and the CPRS Act must be implemented urgently if the G8 timeframe is to be achieved

Some jurisdictions, including Australia, China, Japan and some States in the USA, have introduced, or are considering introducing, complementary policies which have the effect of imposing a cost on carbon, or which provide support in the form of subsidies or enabling frameworks. The complementary laws and policies include mandatory renewable energy targets, emissions reporting, incentives for energy efficiency and feed-in-tariffs.

Some other jurisdictions, including Norway and Japan, have regulated existing CCS projects through partially integrated CCS schemes or by exception to existing regulations. These approaches can facilitate demonstration-scale projects but are not considered suitable for commercial-scale projects due to potential long-term liabilities.

As well as directly funding a number of demonstration-scale CCS projects, governments in the jurisdictions surveyed have made use of three main forms of domestic policy incentive to encourage the development of CCS.

  1. High-level CCS or energy management policies which can provide whole-of-government frameworks for initiatives to develop CCS, such as the USA government’s goal of reducing USA GHG emissions by 83 percent by 2050.
  2. Direct government funding and research support for CCS through cooperative research centres such as Australia’s Cooperative Research Centre for Greenhouse Gas Technologies (CO2CRC), South Africa’s National Centre for Carbon Capture and Storage and the Masdar Institute of Science and Technology in the United Arab Emirates (UAE).
  3. Government-business collaboration on demonstration projects such as the FutureGen project in Illinois in the USA or the Sleipner project in Norway.

Policy measures like these may also provide project participants with high-level political and policy support for their projects and technologies.

1.6.2 What changes need to be made to government policy and regulations around the world?

In developed economies, existing legal frameworks designed to deal with waste, transport, property rights and pollution liability do not readily accommodate the whole CCS project cycle. This will hamper investment not only in CCS projects but in the technologies required to achieve scalable projects within the G8’s timeframe.

Developing economies have not yet generally enacted specific CCS laws or taken steps to amend existing legislation to accommodate the CCS project cycle. In the absence of an approach such as the Clean Development Mechanism (CDM) it seems unlikely that investment in CCS will be achieved in many developing countries within the timeframe proposed by the G8.

In the absence of CCS being included in the Clean Development Mechanism, it is unlikely that investments in developing countries will be achieved within the G8 timeframe

Only a few jurisdictions have in place dedicated CCS regulatory regimes (or amendments to existing regimes) required to adequately manage the unique legal challenges posed by CCS. These jurisdictions include some Australian and USA jurisdictions, together with the European Union (EU) and some EU Member States. This poses significant barriers for investment in CCS projects in other jurisdictions. Potential investors and project proponents will be reluctant to support CCS projects where potential long-term risks are present due to insufficient or inflexible regulatory frameworks.

Key policy and regulatory recommendations to enhance further CCS development include:

  • immediate implementation of market based schemes to assign a value to carbon such as the ACES Act and CPRS Act;
  • aspects of the CCS specific laws and policies adopted by some governments (including the EU, USA, Japan and Australia) should be used as components of a ”CCS friendly” legal framework in those countries wanting to host such projects;
  • where time or other circumstances do not permit the development of integrated or dedicated CCS legal schemes, governments should amend existing legislation applicable to the CCS project cycle with particular emphasis on transport, storage and leakage liability;
  • all regulatory frameworks need to provide sufficient flexibility to accommodate evolving technological advances in CCS;
  • all regulatory frameworks need to accommodate the very long time frames associated with storage - without clear allocations of liability for leakage, insurance and investment may not be available or attracted to CCS projects;
  • planning and environmental laws should be used to compel (or at least make commercially viable) the use of CCS in new or refurbished power plants and other GHG emitting facilities and enterprises; tax or other incentives may be required to address the costs associated with such requirements;
  • where feasible, CCS enabling laws should be harmonised across national and international borders to allow CCS projects to operate on an international basis. This will be essential in areas such as Europe;
  • governments should continue to provide incentives for the development of CCS, principally through funding, scientific and bureaucratic support for CCS R&D;
  • there should be a concerted effort to coordinate current global, national and industry CCS research and promotional activities;
  • there should be an immediate completion of reviews of, and if necessary, amendments to, international agreements which could govern the transboundary movement of CO2, including the definitions of ”waste” under the London Protocol and ”hazardous waste” under the Basel Convention;
  • steps should be taken by those with a vested interest in the future of CCS to advocate its inclusion as a project type capable of generating carbon credits under the Flexible Mechanisms (CDM and JI) under the Kyoto Protocol (or its most relevant post-2012 manifestation); and in the EU, Member States should implement the CCS Directive as soon as possible.

There should be an immediate completion of reviews, and if necessary, amendments to international agreements, including the definitions of ”waste” under the London Protocol and ”hazardous waste” under the Basel Convention that currently prohibit the transboundary movement of CO2