Design Considerations for Financing a National Trust to Advance the Deployment of Geologic CO2 Storage and Motivate Best Practices
This paper explores how the flawed, widely held public policy view of an ever growing risk associated with long-term carbon dioxide (CO2) storage profoundly influences the public policy dialogue about how to best address the long term risk profile for geologic storage. In order to accomplish this, the authors present evidence from the rapidly emerging science and engineering of CO2 storage which demonstrates that, with proper site characterization and sound operating practices, retention of stored CO2 will increase with time thus invalidating the premise of an ever growing risk. The authors focus on key issues of fit, interplay, and scalability associated with a trust fund funded by a hypothetical $1/tonCO2 tipping fee for each ton of CO2 stored in the United States under WRE450 and WRE550 climate policies. The authors conclude there is no intrinsic value in creating a trust fund predicated solely on collecting a fixed fee that is not mapped to site-specific risk profiles. If left to grow unchecked, a trust fund that is predicated on a constant stream of annual payments unrelated to the site’s risk profile could result in the accumulation of hundreds of billions to more than a trillion dollars in real terms contributing to significant opportunity cost of capital. Further, rather than mitigating the financial consequences of long-term CCS risks, this analysis suggests a blanket $1/tonCO2 tipping fee may increase the probability and frequency of long-term risk by eliminating financial incentives for sound operating behavior and site selection criteria – contribute to moral hazard. At a minimum, effective use of a trust fund requires: (1) strong oversight regarding site selection and fund management, and (2) a clear process by which the fund is periodically valued and funds collected are mapped to the risk profile of the pool of covered CCS sites. Without appropriate checks and balances, there is no a priori reason to believe that the amount of funds held in trust will map to the actual amount of funds needed to address long-term care expenses and delimited compensatory damages. For this reason, the authors conclude that the financing of a trust fund or other risk management instrument should be based on a site delimited estimate of future expected financial consequences rather than on the random adoption of a fixed funding stream, e.g., a blanket $1/ton , because it ‘sounds’ reasonable.
- Research Organization:
- Pacific Northwest National Lab. (PNNL), Richland, WA (United States)
- Sponsoring Organization:
- USDOE
- DOE Contract Number:
- AC05-76RL01830
- OSTI ID:
- 972518
- Report Number(s):
- PNNL-SA-66255; 400408000
- Journal Information:
- International Journal of Greenhouse Gas Control, 4(2):381-387, Journal Name: International Journal of Greenhouse Gas Control, 4(2):381-387
- Country of Publication:
- United States
- Language:
- English
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