Date faculty of lawgroningen centre of energy law CCS in the EU ETS and CDM Dr. E. Woerdman Associate Professor of Law and Economics & Mr. Anatole Boute PhD Researcher in Energy Law

Date faculty of lawgroningen centre of energy law I.CCS in the EU ETS (E. Woerdman) >CCS is not a necessary instrument, but an additional option to meet the emission caps >Not policymakers, but the ETS market should determine when CCS becomes profitable >Policymakers should be restrictive in giving subsidies to CCS, also in the demo phase

Date faculty of lawgroningen centre of energy law >ETS is corner stone of EU climate policy  Effective (cap) and efficient (trade)  Reduces costs and increases options >CCS is an additional option >Reject measures that:  Inflate cap or reduce efficiency  Increase costs or reduce options

Date faculty of lawgroningen centre of energy law >Incentivize CCS by giving extra allowances?  Bad idea: leads to over-allocation or subsidizes a costly technology >Incentivize CCS by giving auction revenues?  Bad idea: underinvestment in cheaper reduction methods >Incentivize CCS by making it obligatory?  Bad idea: increases costs

Date faculty of lawgroningen centre of energy law >Incentivize CCS by imposing a carbon tax?  Bad idea: effectiveness uncertain >Incentivize CCS by subsidizing demo projects?  Good idea: attacks innovation market failure  Big warning: increases costs when industries lobby for too much money for too long

Date faculty of lawgroningen centre of energy law II. CCS in the CDM (A. Boute) >The issue:  Huge storage potential in developing countries  Most future growth in GHG emissions  CDM could provide the required additional financial incentive for CCS projects

Date faculty of lawgroningen centre of energy law >The main regulatory challenge: Liability for emission releases Are rewards provided today for future emissions?  During crediting period: project emissions  After crediting period: temporary v. permanent CER; buyer v. host state liability.

Date faculty of lawgroningen centre of energy law >Assessment criteria:  Financial viability of CCS projects: market value of CERs;  Climate integrity: polluter pays (site selection);  Effectiveness: who controls the project?;  Administrative feasibility: weak capacity of developing countries;  Equity: developing countries to buy credits on carbon market?

Date faculty of lawgroningen centre of energy law >Potential outcome: Permanent credits with division of liability over 2 periods of time  Project participant: after injection;  Host country: transfer of liability after assessment of site;  CoP/MoP: storage site selection criteria;  UNFCCC: assist host country in site closure.

Date faculty of lawgroningen centre of energy law >Conclusion Woerdman:  Allowance price should and can determine when CCS becomes profitable >Conclusion Boute:  Division of liability would allow to reconcile financial viability with climate integrity of CCS projects