Prerequisites for Geological Carbon Storage as a Climate Policy Option

Abstract

Carbon storage is increasingly being considered as an important climate change mitigation option. This paper explores provisions for including geological carbon storage in climate policy. The storage capacity of Norway’s Continental Shelf is alone sufficient to store a large share of European CO2 emissions for many decades. If carbon dioxide is injected into oil reservoirs there is an additional benefit in terms of enhanced oil recovery. However, there are significant technical and economic challenges, including the large investment in infrastructure required, with related economics of scale properties. Thus carbon capture, transportation and storage projects are likely to be more economically attractive if developed on a large scale, which could mean involving two or more nations. An additional challenge is the risk of future leakages from storage sites, where the government must take on a major responsibility. In institutional and political terms, important challenges are the unsettled status of geological carbon storage as a policy measure in the Kyoto Protocol, lack of relevant reporting and verification procedures, and lack of decisions on how the option should be linked to the flexibility mechanisms under the Kyoto Protocol. In terms of competitiveness with expected prices for carbon permits under Kyoto Protocol trading, the relatively high costs per tonne of CO2 stored means that geological carbon storage is primarily of interest where enhanced oil recovery is possible. These shortcomings and uncertainties mean that companies and governments today only have weak incentives to venture into geological carbon storage