Abstract
ABSTRACT As the Paris Agreement moves towards implementation, we explore opportunities it presents to move part of the climate change mitigation challenge upstream into supply-side climate policy. Supply-side climate policies have been sparsely employed to date, although interest is growing in approaches that can curtail and end fossil fuel production. Rather than focussing on fully eliminating fossil fuel production, we set out an alternative supply-side approach that involves fossil fuel producers taking progressive action to reduce and eliminate the climate impacts of their products. Our proposal uses the Paris Agreement’s framework for finance and international cooperation to establish supply-side climate action that supplements demand-side climate policies, and thereby enhance climate ambition. The concepts presented rely on large-scale geosequestration technologies that can deposit carbon into geological reservoirs at rates progressively aligned to those at which carbon is being extracted by fossil fuel producers. Convergence of extraction and deposition rates is a necessary condition for achieving net-zero CO2 emissions while still enabling some essential uses of fossil carbon. We propose an evolutionary approach to policy development, starting as a technology-support mechanism using results-based finance before transitioning into systematic measures under, firstly, Article 6 of the Paris Agreement, and, ultimately, decarbonised fuel standards. Collectively these could incentivise fossil fuel resource holders to manage both outflows and inflows of carbon in the geosphere, and in doing so, create, foster, accelerate and maintain an urgently needed market for geological CO2 storage. Key policy insights Balancing rates of carbon extraction from the geosphere (e.g. fossil fuel production) and rates of carbon deposition in stable geological reservoirs can achieve net-zero emissions alongside efforts to reduce emission flows to the atmosphere. Framing the climate mitigation challenge around carbon stock management on the supply-side of fossil fuel markets offers new ways to enhance climate ambition by mobilizing the financial and technical resources of fossil fuel producers in deploying carbon capture and storage. International cooperation under the Paris Agreement offers a powerful opportunity to establish tradeable units that support establishment of a liquid market in verified carbon storage.
Highlights
Economic theory suggests that pricing of greenhouse gas (GHG) emissions is an effective and efficient way to address the negative externalities of climate change (Baumol & Oates, 1971)
There has been a tendency to assume a need for direct accounting linkages between flow and stock measures, meaning adjustments must be made in carbon pricing schemes to allow for the introduction of a storage crediting instrument
While several core approaches for cooperation on a storage crediting mechanism can be envisaged in the context of the Paris Agreement, there is a need to balance the urgency to accelerate carbon capture and storage (CCS) deployment with a pace that allows thinking to mature around longer-term approaches and possible transitioning to supply-side climate action
Summary
Other (less radical) scenarios generated by integrated assessment models have been unable to achieve atmospheric GHG concentrations of 450 ppm CO2-equivalent or lower by 2100 if limitations exist on key technologies such as CCS (IPCC, 2014) On this latter basis, we consider the Paris Agreement to offer a timely opportunity to rethink the potential of stock-based, supply-side, climate policy to establish a multilaterally agreed approach to stimulating deployment of CCS and NETs. Our proposal is based on linking rates of carbon extraction and deposition from and to the geosphere, drawing upon the work of Allen et al (2009b), Allen et al (2015) and Haszeldine (2016) among others, and evolving the proposal set out in Zakkour and Heidug (2019). We discuss whether and how the approach might enhance deployment of CCS and NETs relative to experiences of the past, and finish with some summary observations, potential constraints, and areas for further investigation
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