Monitoring and reporting for CCS in the EU ETS: Inclusion under Art. 24 of ETS Directive

1. Monitoring and reporting for CCS in the EU ETS: Inclusion under Art. 24 of ETS Directive Dr Paul Zakkour, ERM Energy & Climate Change Services Ad hoc Group on CCS MRGs DTI, London, 6th June 2007

2. Overview • Background to MRG issues and developments • Assume all in attendance aware of 1st efforts and the “permitting” based approach • Approach to opt-in via Art 24 • Monitoring and reporting approach • Above ground elements • Below ground monitoring approach • Enhanced oil recovery • Outstanding issues

3. Background to development of M&R guidelines • Revised MRGs invites: “Recognition of activities relating to carbon capture and storage is not provided for…but will depend on an amendment of Directive 2003/87/EC or by the inclusion of those activities pursuant to Article 24 [opt-in].” • Directive won’t be amended before Phase II • Projects due to commence before 2013 need to opt-in under Art. 24 • Chasing a moving target! Opt-in runs in parallel with both: • EU ETS Directive review – end 2007 • EU CCS Legal framework – autumn 2007

4. Developing an activity/installation definition • Opt-in requirements: • Define installation/activity • Consider effects on environmental integrity of scheme • Other issues (internal market etc) • EC preferred approach: Single activity covering CO2 generation, capture, transport & storage • Creates issues for permitting, ownership etc • Still unresolved at this point on how to handle this issue

5. Emission sources for CCS • Fugitive emissions: can occur across whole CCS chain (capture, transport, injection) • Indirect emissions: additional power requirements for capture, transportation, injection (energy penalty, booster stations etc.) • Seepage from storage reservoirs: short and long term seepage issues to consider • Break-through CO2 in EOR: need to consider the relevant emission sources and how to monitor • Emission sources form the basis for defining installation boundaries which in turn form the basis for defining the opt-in activity

6. Fugitive emissions • Calculate CO2 emissions using approved M&R plan for installation, based on primary fuel input to operations • Measure (metering to custody transfer standard): • exports of CO2 to pipeline • imports of CO2 to injection facility • Reconcile: estimate fugitive losses across the chain using a mass balance calculation

7. Indirect emissions • Energy penalty for capture: accounted for by calculating CO2 produced at installation using primary fuel inputs • Can use existing guidelines (Decision C(2004)130) for all “installations” covered by scheme • Booster stations: • >20MW thermal input = installation in its own right • <20MW thermal input = outside scope of EU ETS • Need to avoid double counting • Treatment of gas-fired booster stations still requires clarification (“technical connection”)

8. Seepage from storage sites • “Permanence”: most problematic aspect! • Range of literature looking at ex ante methods to account for possible future seepage: • Discounting of emissions (like DCF) • Default factors • Temporary crediting (like for LULUCF) • Creates a number of problems: • Assume storage site will leak; • That the timeframe and flux rate can be determined ex ante • Discount factor could be so small to = <1 EUA / yr etc.

9. Seepage from storage sites • Current approach to include storage site in EU ETS as activity/installation • Creates obligation to monitor and make-good any emissions from storage • Differs from previous proposal whereby obligation written into storage site permit • MRG requirements could be fulfilled by adhering to CCS Directive monitoring requirements • In either case, still need to consider storage site M&R approach

10. Seepage MRGs • Monitoring plan to collect data for accounting for emissions • Need method to actually do the calculation in the MRGs • Below ground parts: IPCC 2006 forms important basis • IPCC range of techniques – “shopping” list • Should not be overly prescriptive on techniques • Should be risk-based and subject to approval by the competent authority

11. M&R Below ground – key steps & documentation Step Documentation Data catalogue (geology, geophysics, old wells, other uses) QA/QC 1. Literature & data review Agreed / qualified / verified set of static Earth models inc. rational behind decisions / choices – define project boudary QA/QC 2. Build static Earth model Source sink matching; injection plan; numerical simulations; plume behaviour; ultimate fate; trapping mechs; flux rates across boundary, secondary containments; seepage pathway; hydro-geology; biosphere QA/QC 3. Dynamic Earth model QA/QC EIA; environmental baseline 4. Define EIA (risk-based) QA/QC EU ETS monitoring plan 5. Define monitoring scheme

12. QA/QC procedure • Does this MRG scheme for storage sites work?

13. TO ATMOSPHERE Fugitive emissions CO2 purge system Flare stack Onsite power plant CO2 + CHX CO2 + CHX CHX + CO2 CHX + CO2 Oil-gas separators CO2 recycle CO2+ CHX Injected CO2 stream Produced oil Oil reservoir Breakthrough CO2 plus other hydrocarbon gases (CHX+CO2) Breakthrough emissions in EOR

14. Range of other factors • Some new definitions on emissions types may be needed • De minimis and minor source streams need to be clarified – all emissions in CCS should be minor! • Need to ensure simplified monitoring plan modification procedure • Cost effectiveness – will be an issue for storage sites

15. Breakthrough emissions in EOR (2) • Onsite power plant: included under EU ETS via combustion installation. Need to sample and analyse gas • Flare: as for power plant • Purge: as for the flare? • Fugitives: purged via flare of purge • Are there other emission sources outside these? • Should this be treated as one installation, linked to the opted-in activity? • Is this applicable in all situations?

16. Summary of outstanding issues • Single/multiple installations:Still unresolved at this point on how to handle this issue • Gas-fired booster stations: still requires clarification on whether part of the installation (“technical connection”) • Storage site MRGs: • need method to actually do the emissions calculation • does the methodology outlined actually work?! • EOR: • are there any other emission sources? • should it all be included as 1 x installation? • is it applicable in all situations?

17. Monitoring and reporting for CCS in the EU ETS: Inclusion under Art. 24 of ETS Directive THANK YOU Dr Paul Zakkour, ERM Energy & Climate Change Services Ad hoc Group on CCS MRGs DTI, London, 6th June 2007