Carbon dioxide capture and storage (CCS) in Germany by Prof. Dr. Norbert Kämper and Dr. Daniel Al-Talal

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1 Carbon dioxide capture and storage (CCS) in Germany by Prof. Dr. Norbert Kämper and Dr. Daniel Al-Talal I. Introduction The carbon dioxide (CO 2 ) produced by the industry is actually released freely into the atmosphere and contributes to the global warming. Nevertheless, in future the national and international energy requirements will be generated by fossil fuels like coal and gas. At present, fossil fuels are the dominant source satisfying the global primary energy demand, and this is likely to remain so for the rest of the century. Especially the central importance of coal for the production of energy cannot be put in doubt. That is why the German government still sees fossil fuels as an important part of the future energy provision, despite of the necessary move towards alternative energy sources Carbon dioxide capture and storage is meant to be a bridging technology which shall contribute to climate change mitigation. The process of carbon capture and storage covers a broad range of technologies that are being developed to allow carbon dioxide emissions from fossil fuel to be used at large point sources to be transported to safe geological storage, rather than being emitted to the atmosphere. The recent German law on carbon dioxide capture and storage ( CCS-act ) establishes the legal framework for the testing of the technologies to capture, transport and store carbon dioxide. First off all, this article gives an overview on the background of carbon dioxide capture and storage (II.) Furthermore it will present the applicable German legal framework (III.) and finally provide an outlook for the future of CCS in Germany (IV.). II. Background: In essence CCS is a three stage technology where CO 2 is captured from large CO 2 emission sources, transported via a network of pipelines and stored in deep subsurface geological formations. CCS can capture up to 90% of the carbon dioxide emissions produced from the use of fossil fuels in electricity generation and industrial processes. In order to prevent this large volume of CO 2 reaching the atmosphere it can be injected and safely stored in depleted hydrocarbon reservoirs, non-potable saline aquifers or unminable coal seams. As mentioned, the CCS chain consists of three parts: capturing the CO 2, transporting the CO 2, and securely storing the CO 2 emissions, underground in depleted oil and gas fields or deep saline aquifer formations. First, capture technologies allow the separation of CO 2 from gases produced in electricity generation and industrial processes by one of

2 2 three methods: pre-combustion capture, post-combustion capture and oxy-fuel combustion. CO 2 is then transported by pipeline for safe storage. Millions of tons of CO 2 are already transported annually for commercial purposes. The CO 2 is then stored in carefully selected geological rock formations that are typically located several kilometers below the earth's surface. However, the CCS-technology is still in the development stage and needs additional testing. Each of the different components of CCS, namely capture, transport and storage of carbon dioxide has been an object of pilot projects on a smaller scale than required for their industrial application. These components still need to be integrated into a complete CCS process. Nevertheless the European Commission expects that a large-scale application of CCS will be possible in 2020 and therefore promotes CCS testing projects to contribute to the further development of this bridging technology in Europe. III. The Legal Framework In the following, the legal framework for CCS in German law is briefly explained. 1. The difficult process of establishing a legal framework for CCS in Germany The recent German CCS-act which came into force in June 2012 is an omnibus act, which serves the implementation of the Directive 2009/31/EG in German law. The Directive 2009/31/EG is part of the European Climate Change Programme, which aims at the reduction of the greenhouse gas emissions by 20 % until the year 2020 in comparison to the year Actually the Directive was due to be implemented in German law by 25 June In 2009 the German government (Bundesregierung) developed a first draft for a CCS-act. However, carbon dioxide capture and storage is discussed highly controversial between politicians as well as in German public, so the first draft law failed in face of political resistance. In view of the failure of the first draft of the CCS-act in 2010 a second draft was developed by the German parliament (Bundestag). However, the federal council (Bundesrat) refused its consent to the second draft, so the deadline for the implementation of the Directive in German law passed and an infringement proceeding against Germany was initiated. The CCS-act that came into force in June 2012 is the final result of a compromise between the parliament (Bundestag) and federal council (Bundesrat) that was developed on the base of the fore mentioned second draft from The act as its German title indicates - only sets up a legal framework for the testing of technologies to capture and store carbon dioxide.

3 3 2. Essential contents of the legal framework The omnibus act is divided in 9 Articles. The first Article contains the Kohlendioxid- Speicherungsgesetz (KSpG). It is the core of the German legal framework for CCS. The Articles 2-8 generate necessary changes in other German laws, for example changes in the Kreislaufwirtschaftsgesetz (KrWG). The most important aspects of the German CCS-act, namely the different permissions, which are necessary for building a complete carbon dioxide storage site, liability questions and the derogation options for the German federal states will be summarized briefly in the following: a) The different permissions The planning, installation and construction of each of the different components of CCS requires the granting of a separate permission. First of all, the site on which the CO 2 is separated from other substances which accrue during the combustion of fossil fuels needs permission according to the Federal Immission Control Act (Bundes- Immissionsschutzgesetz). In this connection it is also important to mention that in consequence of the CCS-act those sites on which the carbon dioxide is separated from other substances have to go through an environmental impact assessment (Umweltverträglichkeitsprüfung). Secondly, the pipelines in which the separated carbon dioxide is transported to the underground storage site need permission. Required by sec. 4 KSpG the installation, operation and essential change of those transporting pipelines have to go through a planning permission procedure (Planfeststellung). Thirdly, the carbon dioxide storage site itself needs a separate permission. Sec. 11 KSpG requires that the installation, operation and essential change of the storage site have to go through a planning permission procedure (Planfeststellung). Furthermore, the installation and operation have to go through an environmental impact assessment. Finally sec. 17 KSpG requires permission as well as an environmental impact assessment before the decommissioning of a storage site.

4 4 b) Questions of liability Another controversial issue in the legislation process were liability questions. Sec. 29 KSpG provides a strict liability (Gefährdungshaftung) of the plant operator for all damages caused by the storage of carbon dioxide. The liability even lasts at least 30 years after the decommissioning of the storage site (sec. 30 para. 1 KSpG). c) Federal derogation options As a result of the compromise between the German parliament and the federal council sec. 2 para. 5 KSpG provides a derogation option for the federal states (Bundesländer). This means that it is possible for the federal states to prohibit the storage of carbon dioxide on their territory. This regulation is a concession to those federal states (especially Schleswig-Holstein) that have been strictly against CCS during the whole political process. d) Quantitative Limits Another part of the fore mentioned compromise is sec. 2 para. 2 KSpG. This regulation limits the storage capacities on 1,3 million tons of carbon dioxide per year. This ensures that the sites are really only build for the testing of the CCS-technology. IV. Outlook One of the main goals of the German CCS-act was to provide certainty for investments made by plant operators in order to encourage them to take part in the testing of CCS in Germany. Though theoretically this goal might have been reached, yet there are no concrete plans for the testing of CCS to any appreciable degree in Germany. A reason for this could be that the public discourse on the sense of CCS is still going on. Those who are against CCS fear incalculable risks, such as an insufficient impermeability of the underground storage sites. It cannot be excluded that many federal states will make use of their derogation options (sec. 2 para. 5 KSpG). This applies in particular to Schleswig-Holstein and Niedersachsen, although these states have many potential areas for an underground storage. And this fact might lead to a situation where no suitable grounds for the testing of the CCS-technology can be found. Furthermore, the costs for the realisation of CCS-projects are expected to be high, which might discourage plant operators to invest in the technology of CCS. Nevertheless CCS can be seen as an opportunity to reduce the harmful emission of carbon dioxide into the atmosphere. Therefore it was essential to develop a safe legal framework for the testing of

5 5 CCS in Germany. When the safety of CCS can be proven, it can make a big contribution to the necessary mitigation of the greenhouse effect. September 2012 Prof. Dr. Norbert Kämper Rechtsanwalt, Partner Dr. Daniel Al-Talal Rechtsanwalt n.kaemper@taylorwessing.com d.al-talal@taylorwessing.com Taylor Wessing Partnerschaftsgesellschaft von Rechtsanwälten, Steuerberatern, Solicitors und Avocats à la Cour