Carbon storage units and carbon storage obligations: A review of policy approaches

Abstract

Policies that incentivize the capture and geological storage of CO2 from large point sources (‘CCS’; and more recently, atmospheric removals), have so far tended to reward the resultant avoided CO2 emissions (or CO2 removals) achieved by operators at the point of capture. The expectation has been that geological CO2 storage sites, as well as the connecting infrastructure, will be developed and operated based upon the funding delivered from the single point of incentive (e.g. under an emissions trading system or a carbon tax, only CO2 capture installation operators are absolved of the obligation to acquire and surrender CO2 emission rights or to pay the tax). Project-based crediting mechanisms (e.g. in the voluntary carbon market) tend to treat the entire chain of operations as a single entity to be supplied with emission reduction or removal credits. Consequently, there has been minimal explicit financial incentive to store CO2. Yet a multiple gigaton-per-year scale capture and storage industry requires complex CO2 networks to evolve, with multiple sources connecting to multiple sinks, with installations owned by different operators with different technical expertise, climate mitigation goals and obligations. This multiplicity of goals and incentives can create agency problems and cross-chain risks, which impact negatively upon investment decisions. In this paper, we review the history, evolution and potential of geological net zero (GNZ) and carbon storage (or takeback) obligation concepts applied to fossil carbon producers and suppliers as a means to address these risks alongside policies aimed at atmospheric net zero (ANZ) and fossil carbon emitters.