Even the most optimistic estimates for the rapid deployment of solar, wind, and other low-carbon resources recognize that coal, natural gas, and other fossil fuels will continue to dominate the world’s energy mix for decades. If the massive greenhouse gas emissions from burning these fossil fuels continue to enter the atmosphere, global warming will not be confined to tolerable levels. Carbon capture and geologic sequestration (CCS) represent a possible solution to the world’s carbon quandary.
Despite increased technology maturity and considerable public policy support, the necessary CCS rush is stalled due to inefficient and often suffocating liability regimes in the United States and elsewhere. A recent Nature Sustainability comment by Felix Mormann, a professor at Texas A&M University School of Law, reveals critical flaws in CCS liability management and proposes a multi-tiered framework, modeled after nuclear power plant liability, to reconcile the global interest in CCS deployment with developers’ limited risk-bearing capacity and the need for adequate compensation in the event of an accident.
The parallels between CCS and nuclear power are far from obvious at first glance. After all, nuclear produces a desirable commodity in the form of electricity, while CCS removes an unwanted by-product of generating that same commodity using fossil fuels.
Felix Mormann
Jurisdictions with specialized liability regimes for stored carbon fall into one of two categories. The first camp holds developers liable for carbon buried underground for long periods of time, such as the 50-year obligation imposed by US federal law, which is doubled to 100 years for projects that take advantage of the lucrative incentives granted by California law. The second camp, which includes Australia, the Canadian province of Alberta, as well as certain EU members and US states, among other jurisdictions, allows CCS operators to transfer liability for their sequestration sites quickly after carbon injections are completed.
“Neither of these approaches is likely to deliver the CCS projects we need to put a serious dent in the world’s carbon emissions,” Mormann said. “Strict long-term liability can have a stifling effect on deployment. The ‘get-out-of-jail-free-card’ of liability transfer, meanwhile, diminishes a developer’s incentives to apply the requisite care in the selection, development, and operation of their carbon sequestration site.”
Thinking through the challenges of managing CCS liability, Mormann was reminded of another sustainable energy technology – nuclear power – that struggled to enter the mainstream some seventy years ago.
“The parallels between CCS and nuclear power are far from obvious at first glance. After all, nuclear produces a desirable commodity in the form of electricity, while CCS removes an unwanted by-product of generating that same commodity using fossil fuels,” emphasizes Mormann. “But the more I studied it, the more I realized that CCS projects today engender many of the same competing interests that nuclear power evoked back in the 1950s: strong societal interest in more sustainable energy technology, private industry’s fear of possibly crushing liability, and the public’s need for protection against unlikely but potentially devastating accidents.”
Mormann’s statement, based on the nuclear-CCS parallel, recommends a multi-tiered structure for regulating CCS liability that is fashioned after the 1957 Price-Anderson Act, which sparked the US nuclear power sector. The proposed system would hold individual sequestration sites accountable up to the maximum amount of commercially available liability insurance. For damages exceeding these levels, all sequestration sites in the jurisdiction would contribute through a form of pooled industry self-insurance, again up to a predetermined limit.
“If the nuclear experience is any indication,” says Mormann, “this secondary layer of industry-shared liability is likely to encourage knowledge sharing and communitarian self-regulation among CCS operators that further reduces the risk of accidents.” Only once these first two layers have been exhausted, would government step in to provide additional funds, in recognition of the societal interest in the safe and timely deployment of this crucial decarbonization technology.
