CCS under the CDM – will recent progress be undone by carbon market dynamics?

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After a struggle of many years, a decision was made at the last United Nations Climate Change Conference, COP16 in Cancun, Mexico last year that “carbon dioxide capture and storage in geological formations is eligible as project activities under the Clean Development Mechanism [CDM], provided that the issues identified in decision 2/CMP.5, paragraph 29, are addressed and resolved in a satisfactory manner”. The Conference requested the Subsidiary Body for Scientific and Technological Advice (SBSTA) to elaborate modalities and procedures in order to enable the inclusion of CCS under the CDM by its 35th session (December 2011) during COP17 in Durban South Africa.

Remaining CCS Issues

The issues identified in decision 2/CMP.5 , include permanence of sequestration, long term liability and the risk of leakage. These issues are not new and addressing them should be achieveable in the required timeframe. Consequently SBSTA is likely to devise a workable proposal for dealing with these issues - which will be a positive for CCS activities.

Eligibility under the CDM means that CCS project activities will be entitled to generate Certified Emissions Reductions (CERs) – the carbon credit associated with the CDM – and to take advantage of other CDM benefits such as clean technology transfer.

However, battlelines already drawn elsewhere in the negotiations may negate this progress on CCS and eventually exclude countries like China, India, Ghana, Qatar, United Arab Emirates and South Africa from the CDM altogether. It goes without saying that excluding these countries from the CDM will have the knock-on effect of also removing the lion’s share of developing country CCS from the carbon market.

LDC Exclusivity?

This situation will arise because the European Union (EU) – the largest buyer of CERS in the international market – has indicated that it will purchase CERs exclusively from CDM projects located in Least Developed Countries (LDCs) from 2013.

There is concern among those involved with CDM projects in non-LDCs that this issue is being neglected in the negotiations, as other sources of climate funding, such as the yet to be established Green Climate Fund appear to be gaining favour. While developing countries seek to tap into these “new” sources of funding, there is a dearth of defence of the non-LDC CDM space.

The irony? Now that we are on the verge of seeing CCS included in the CDM, thereby unlocking carbon financial support for the CCS, those non-LDCs with the greatest potential as CCS destinations (whether this potential resides in the country’s advanced state of technical know-how or an abundance of pore space), are soon to be excluded from the CDM arena, altogether, by the largest buyer of carbon credits in the carbon market.

On the 8th of November 2011, the UNFCCC Secretariat has published the draft modalities and procedures

Source- Carbon Capture Journal