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Connections

Insights, perspectives and viewpoints from our lawyers on topical issues

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9/27/2024 9:03:23 AM | 2 minute read

Nuclear inspiration?

Sustainable practices for carbon reduction of factories. Renewable energy. Wind and solar power for sustainable energy. Sustainable transportation. Green energy. Carbon offsets and carbon credits.
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The Asian Development Bank has estimated that SE Asia has 54 gigatons of capacity for storing CO2.  The International Energy Association's SE Asia Carbon Capture Report highlighted the significant environmental and economic benefits the development of CCS can offer in the region.

As with many nascent technologies, government support, regulatory and policy updates are critical.  Some countries in the region have been proactive in setting the legal terms for the opening of the market.  Indonesia published a new framework in early 2024 as well as enabling technical regulations by SKK Migas, the oil and gas regulator.  These are welcome developments and further detailed regulations are necessary before any parties can look to sign the cooperation agreements.

Malaysia's Economy Ministry is hoping to table a comprehensive CCS Bill before the end of the year that will set out the framework for the full value chain from capture, transportation and storage.  Similarly, Thailand's Master Climate Change Plan states that CCS is a key pillar in the reduction of greenhouse gases but no specific reforms have been tabled yet.

One issue the industry continues to wrestle with is the long term liabilities associated with storage.  What happens if the CO2 escapes? Who is liable? What if it happens in 50 years, or even in 100 years?

Similar questions were asked in the 1950's as the US tried to promote its nascent non-military nuclear reactor program which led to the passing of the Price-Anderson Act in 1957.  Under that regime which has been periodically updated, liability is limited for reactor owners if there is any issue that causes damage to the public.  Firstly, each site is required to purchase the maximum amount available of third party liability insurance which is today, $500m.  Secondary insurance is required under which every reactor in the country would be obliged to make a payment, capped overall per reactor in aggregate at $158m (industry self insuring).  This structure limits the total liability of the industry at just over $16bn.  The law is not without contention, with strong supporters and detractors for and against the law either because it promotes the industry or unduly shields participants when other industries do not enjoy similar protection.

In a recent Paper published by the Global CCS Institute, the authors advocate in the US, (but make the point it can be adopted elsewhere), for the establishment of a Carbon Dioxide Storage Trust Fund; annual fees will be partly used for permitting, monitoring and oversight of each storage facility, and the other part held in escrow after closure of the site has been approved and contingent liability passes on to the State, a public private partnership.  The UK regime currently permits transfer of liability to the State after 20 years assuming the site has otherwise been in compliance with the relevant laws as one part of a package of support agreements designed to mitigate the risks associated with CCS and to ensure that operators are held accountable for the safe and effective management of carbon storage sites.  This ultimately is everyone's goal and it will be interesting to see which path individual States will take on their journey to develop a CCS low carbon economy.

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energy and infra, transport, banking and finance, climate change, projects, esg and sustainability, geopolitical risk, governance, next generation fuels, regulation, renewables, shipping, sustainable finance

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