Governments must share some of the risk of carbon dioxide leaking from carbon capture and storage (CCS) sites if investors are to secure insurance. That was the conclusion of a report by climate change risk specialist Climate Wise.
There is no insurance framework for risks specific to CCS, the report warned, including potential leakage of carbon dioxide. That gap created “a material barrier to the development of CCS at scale in Europe”.
Storage operators faced losing emissions allowances under the European Union Emission Trading System (EU ETS) for leakages at an unknown future cost because of the varying price of carbon.
Climate Wise recommended agreeing a carbon credits price in advance for CCS projects to cap the risk. It said this would require the operator to declare upfront the volume of carbon dioxide to be stored, and to accept residual risk.
John Scott, chief risk officer at Zurich Global Corporate, said: “Neither insurers nor storage operators will be able to bear unlimited liabilities, so risk-sharing with government will be required to develop CCS at scale in Europe.”
This article first appeared in Utility Week’s print edition of 30th November 2012.
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