Published: 16 Dec 2010 12:38 PM CET Last updated: 16 Dec 2010 12:58 PM CET
Plans to include CCS in the CDM could boost post 2012 CER supply by 300 million credits ERM said.
The UN climate body, which met last week in Mexico, agreed to allow emission reduction projects that capture carbon and store it underground to earn carbon credits under the UN clean development mechanism.
But while the first credits to emerge will likely take years, John Curtis, head of sustainability and climate change at consultancy firm Environmental Resource Management (ERM), said the move could allow up to 300 million certified emission reductions (CERs) to be issued after 2012.
“CDM countries with oil and gas basins like Thailand and Saudi Arabia were strong proponents for the inclusion of CCS, and have stated their desire to implement projects domestically as soon as possible,” he said in an email, adding that China could also play a major role.
A technical panel will next year seek to address the main issues of concern about the inclusion of CCS, such as how developers would be able to ensure the permanence of emissions reductions, and who would take on the liabilities involved.
Before 2020
The report is due to deliver its findings at next year’s climate summit in Durban, South Africa.
“After that, CCS methodologies need to be approved first. Hence, it will take some time until we see the first CCS project requesting validation,” said Michael Lehmann, director of services and technologies of climate change and environmental services at auditors DNV.
He noted, however, that some CCS methodologies have already been developed and submitted, but were put on hold by the UN.
“I would expect that the first project is registered before 2020,” he said.
ERM is one of the companies that has already worked on CCS methodologies, and Curtis said projects could be registered up to six years earlier.
“Assuming an end-of-life oil and gas field as the storage site, constructing a CCS project is a two-to-five year undertaking. So the earliest we would expect to see credits is in 2014,” he said.
Doubts
Others however were unconvinced that many CCS CDM projects would emerge.
"Given we haven't done CCS in Europe yet, I don't see it having a massive impact on CER supply in at least in the next five years, possibly in 10,” said Trevor Sikorski, head of carbon research at Barclays Capital.
The European commission has set a 2015 deadline for its plans to have up to 12 commercial-scale CCS demonstration plants in operation, using both public and private funding.
Mischa Classen, senior project manager with Swiss-based project developer and consultancy First Climate also questioned developing countries appetite for taking on this type of project.
“In the EU utilities have compliance targets to meet so there is an incentive for them to proceed with CCS technology,” Claussen said.
“But whether there will be a clear incentive for utilities in countries like India and China is unclear, especially as it is unlikely that CDM revenues would cover the investment costs required,” he added.
A 2008 study by consultancy firm Mckinsey suggested that early demonstration CCS projects at new coal power installations would typically cost around €60-90 ($80-120) per tonne of CO2 abated, falling to €30-45 per tonne by 2030.
The spot price for secondary CERs on Thursday was just under €12.
The EU is the world’s biggest buyer of CERs, with the bloc’s emissions trading scheme allowing companies to buy up to 1.7 billion offsets from 2008 through 2020 to help meet pollution caps.
Analysts at Point Carbon forecast around 2.5 billion CERs will be issued in the period from 1 May 2013 to 2020.
By Susanna Twidale –st@pointcarbon.com
London
