1. Delivering sustainable solutions in a more competitive world Monitoring and reporting for CCS in the EU ETS: Inclusion under Art. 24 of ETS Directive Dr Paul Zakkour, ERM Energy & Climate Change Services Ad hoc Group on CCS MRGs DTI, London, 6 th June 2007

2. Delivering sustainable solutions in a more competitive world Overview Background to MRG issues and developments Assume all in attendance aware of 1 st efforts and the “permitting” based approach Approach to opt-in via Art 24 Monitoring and reporting approach Above ground elements Below ground monitoring approach Enhanced oil recovery Outstanding issues

3. Delivering sustainable solutions in a more competitive world Background to development of M&R guidelines Revised MRGs invites: “ Recognition of activities relating to carbon capture and storage is not provided for…but will depend on an amendment of Directive 2003/87/EC or by the inclusion of those activities pursuant to Article 24 [opt-in]. ” Directive won’t be amended before Phase II Projects due to commence before 2013 need to opt-in under Art. 24 Chasing a moving target! Opt-in runs in parallel with both: EU ETS Directive review – end 2007 EU CCS Legal framework – autumn 2007

4. Delivering sustainable solutions in a more competitive world Developing an activity/installation definition Opt-in requirements: Define installation/activity Consider effects on environmental integrity of scheme Other issues (internal market etc) EC preferred approach: Single activity covering CO 2 generation, capture, transport & storage Creates issues for permitting, ownership etc Still unresolved at this point on how to handle this issue

5. Delivering sustainable solutions in a more competitive world Emission sources for CCS Fugitive emissions: can occur across whole CCS chain (capture, transport, injection) Indirect emissions: additional power requirements for capture, transportation, injection (energy penalty, booster stations etc.) Seepage from storage reservoirs: short and long term seepage issues to consider Break-through CO 2 in EOR: need to consider the relevant emission sources and how to monitor Emission sources form the basis for defining installation boundaries which in turn form the basis for defining the opt- in activity

6. Delivering sustainable solutions in a more competitive world Fugitive emissions Calculate CO 2 emissions using approved M&R plan for installation, based on primary fuel input to operations Measure (metering to custody transfer standard): exports of CO 2 to pipeline imports of CO 2 to injection facility Reconcile: estimate fugitive losses across the chain using a mass balance calculation

7. Delivering sustainable solutions in a more competitive world Indirect emissions Energy penalty for capture: accounted for by calculating CO 2 produced at installation using primary fuel inputs Can use existing guidelines (Decision C(2004)130) for all “installations” covered by scheme Booster stations: >20MW thermal input = installation in its own right <20MW thermal input = outside scope of EU ETS Need to avoid double counting Treatment of gas-fired booster stations still requires clarification (“technical connection”)

8. Delivering sustainable solutions in a more competitive world Seepage from storage sites “Permanence”: most problematic aspect! Range of literature looking at ex ante methods to account for possible future seepage: Discounting of emissions (like DCF) Default factors Temporary crediting (like for LULUCF) Creates a number of problems: Assume storage site will leak; That the timeframe and flux rate can be determined ex ante Discount factor could be so small to = <1 EUA / yr etc.

9. Delivering sustainable solutions in a more competitive world Seepage from storage sites Current approach to include storage site in EU ETS as activity/installation Creates obligation to monitor and make-good any emissions from storage Differs from previous proposal whereby obligation written into storage site permit MRG requirements could be fulfilled by adhering to CCS Directive monitoring requirements In either case, still need to consider storage site M&R approach

10. Delivering sustainable solutions in a more competitive world Seepage MRGs Monitoring plan to collect data for accounting for emissions Need method to actually do the calculation in the MRGs Below ground parts: IPCC 2006 forms important basis IPCC range of techniques – “shopping” list Should not be overly prescriptive on techniques Should be risk-based and subject to approval by the competent authority

11. Delivering sustainable solutions in a more competitive world M&R Below ground – key steps & documentation 1. Literature & data review 2. Build static Earth model 3. Dynamic Earth model 4. Define EIA (risk-based) 5. Define monitoring scheme Data catalogue (geology, geophysics, old wells, other uses) Agreed / qualified / verified set of static Earth models inc. rational behind decisions / choices – define project boudary Source sink matching; injection plan; numerical simulations; plume behaviour; ultimate fate; trapping mechs; flux rates across boundary, secondary containments; seepage pathway; hydro-geology; biosphere EIA; environmental baseline EU ETS monitoring plan QA/QC StepDocumentation

12. Delivering sustainable solutions in a more competitive world QA/QC procedure Does this MRG scheme for storage sites work?

13. Delivering sustainable solutions in a more competitive world Breakthrough emissions in EOR TO ATMOSPHERE Oil reservoir Injected CO 2 streamProduced oil Oil-gas separators Onsite power plant CH X + CO 2 Flare stack CH X + CO 2 CO 2 purge system CO 2 + CH X CO 2 recycle CO 2 + CH X Fugitive emissions CO 2 + CH X Breakthrough CO 2 plus other hydrocarbon gases (CH X +CO 2 )

14. Delivering sustainable solutions in a more competitive world Range of other factors Some new definitions on emissions types may be needed De minimis and minor source streams need to be clarified – all emissions in CCS should be minor! Need to ensure simplified monitoring plan modification procedure Cost effectiveness – will be an issue for storage sites

15. Delivering sustainable solutions in a more competitive world Breakthrough emissions in EOR (2) Onsite power plant: included under EU ETS via combustion installation. Need to sample and analyse gas Flare: as for power plant Purge: as for the flare? Fugitives: purged via flare of purge Are there other emission sources outside these? Should this be treated as one installation, linked to the opted-in activity? Is this applicable in all situations?

16. Delivering sustainable solutions in a more competitive world Summary of outstanding issues Single/multiple installations: Still unresolved at this point on how to handle this issue Gas-fired booster stations: still requires clarification on whether part of the installation (“technical connection”) Storage site MRGs: need method to actually do the emissions calculation does the methodology outlined actually work?! EOR: are there any other emission sources? should it all be included as 1 x installation? is it applicable in all situations?

17. Delivering sustainable solutions in a more competitive world Monitoring and reporting for CCS in the EU ETS: Inclusion under Art. 24 of ETS Directive Dr Paul Zakkour, ERM Energy & Climate Change Services Ad hoc Group on CCS MRGs DTI, London, 6 th June 2007 THANK YOU