Aligning CCS under the CDM

2011-12-20 13:37 by Anja Reitz

The United Nations climate change talks in Durban agreed a package of measures early on Sunday – on the second extra day of negotiations – that would eventually force all the world's polluters to take legally binding action to slow the pace of global changing.

Key agreements include: a second commitment period under the Kyoto Protocol; a mandate to get all countries in 2015 to sign a deal that would force them to cut emissions no later than 2020; the design of a Green Climate Fund; and for the big news for the CCS community – agreement to include CCS as an offsetting mechanism under the Clean Development Mechanism (CDM).

The latter paves the way for developing countries to access project finance and contribute to global greenhouse gas emission reduction efforts. It also sets an important precedent for the inclusion of CCS into other financing and technology support mechanisms and establishes a benchmark for managing CCS projects in developing countries.

Before going to Durban, the Global CCS Institute released a report that looked at how various parts of the project development cycle for CCS will need to align with the requirements under the CDM, and potentially other forms of climate finance that help fund mitigation activities in developing countries.

Those interested in this topic should read the full report. Here I’ll provide a short summary.

What policy-makers need to know

The paper’s key findings suggest several considerations for policy-makers in designing the right approach for securing climate finance for CCS projects:

  • Sustainable sources of project revenue are essential to drive a project through technical design and investment cycles. Climate finance, such as the CDM, could be the number one factor supporting investment into CCS in developing countries today. Clear guidance on eligibility requirements and coherent milestones for project approvals is essential. The creation of fungible carbon assets linked to structured approaches to the stewardship of stored CO2 over the long term is also critical to build investor confidence.
  • Explicit legal and regulatory requirements and transparent permitting of projects by national regulators will be critical for project success in early stage planning. Such requirements must be aligned with eligibility criteria for climate finance. Meeting project requirements such as detailed site characterisation and risk assessments with a high degree of confidence is a costly exercise, and will only be carried out if certainty around the future provision of climate finance is secured.
  • The stages of the CCS project development cycle, key decision points, the time involved in development and the levels of financial commitment necessary to meet requirements must be well understood by policy-makers. Acceptance that projects require considerable effort to identify, evaluate and define must be integrated into considerations for climate finance. The timing of project registration, the level of detail required, as well as related costs (that could impact on the determination of additionality), needs to work around these cycles.
  • The right policy framework is one that is sufficiently flexible and iterative to ensure that all of these factors can be properly synchronised across development planning for CCS. The level of effort involved in characterising a site, assessing risks, and developing an injection strategy means that a continuous process of design, evaluation, assessment and dialogue with regulators is required to ensure appropriate approval of a project will be achieved. Ongoing dialogue with regulators can foster and sustain developer confidence in the eligibility of the project.

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Source: Global CCS Institute,  Blogs - Kristina Stefanova 13. Dec. 2011

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