Canada: CCS: Identified Challenges to Implementation

Carbon capture and storage (CCS) is interesting as a case study of a CO2 mitigation technology that maintains considerable political and fiscal support even though its long-term economic viability is dependent on high carbon prices and even though its implementation will in many cases require that U.S. states and Canadian provinces enact new legislation and regulations. This article considers the current legislative debate in the U.S. and examines the ways in which the absence of federal climate change legislation in the U.S. and Canada affects both the price of carbon and the implementation of carbon abatement technologies. It also identifies regulatory gaps that must be addressed before CCS can be widely implemented.

Introduction to CCS

CCS involves the capture, compression, transportation, and underground injection of high volumes of CO2 emissions, which would otherwise be released into the atmosphere by industrial greenhouse gas (GHG) emitters. CCS is a promising technology that may enable certain emissions-intensive industries to reduce CO2 emissions while still maintaining reliance on fossil-fuels or emissions-intensive processes. The North American oil and gas industry has captured and injected CO2 into existing reservoirs to displace oil and enhance recovery (known as enhanced oil recovery or EOR) since the 1970s, and also captures CO2 in connection with international natural gas processing, where the high pressure-produced acid gas must be stripped of contaminants to meet pipeline specifications. Higher cost opportunities also exist to capture CO2 from flue gas at refinery and petrochemical operations, and also in the steel, ammonia, and ethanol production industries. Finally, electricity generators have a stake in the success of CCS as they are major emitters and can incorporate CCS technologies into both existing and new coal-fired or gas-fired operations to reduce the release of CO2.

There has been substantial political support and fiscal incentives for multiple demonstration projects of CCS, and, in fact, this technology is widely recognized by governments, research institutions and industry as an essential tool for the reduction of GHG emissions and a cornerstone in climate change policy. As detailed in past ETCC Updates, Canadian governments have provided approximately $3 billion of funding for CCS in Canada, in connection with research, development, and demonstration of CCS. Nonetheless, there are several significant hurdles to the widespread implementation of CCS.

Part I: The Economic Viability of CCS and the Cost of Carbon

Cost is one hurdle to the widespread implementation of CCS. While not a legal issue per se, carbon pricing (and, by extension, the economic viability of CCS) is affected by legislative measures, e.g. cap-and-trade or a carbon tax. For CCS to be economically viable, the market price for carbon would need to exceed $90 per tonne1 of CO2, by some estimates, compared to a market price in compliance-based markets of around $20 per tonne in Europe and $8-13 (Cdn.) per tonne in Alberta (which is subject to a price cap of $15 per tonne). Without sufficiently high pricing, CCS will be dependent on subsidies. The International Energy Agency (IEA) has indicated that $20 billion of immediate support is required to establish CCS technologies within the next decade. Its Executive Director has also suggested that thirty new projects would need to be constructed annually to stabilize GHGs and that one quarter of global power generation would need to incorporate CCS by 2050 to meet reduction goals. A recent audit by the Global Carbon Capture and Storage Institute found that only 62 of 213 active or planned projects were fully integrated commercial-scale projects, of which only seven were actually operating. The scarcity of viable projects is largely attributable to high cost, even with subsidies. For example, in early March 2010, one of the largest electricity generators in the U.S. cited economics when it pulled out of a $700 million CCS project in Alabama that was earmarked for $295 million in federal funding.

Update on Proposed Federal Carbon Pricing Legislation in Canada and the United States


In North America, the price of carbon is currently determined on voluntary markets, various exchanges, or by local compliance-based legislation. No federal legislative framework exists, such as emissions quota or a carbon tax, and it appears unlikely that any such framework will be developed this year. On February 1, 2010, Environment Minister Jim Prentice announced that Canada intends to harmonize its legislation and policies with those of the United States. Following the December 2009 global climate change talks in Copenhagen, Canada filed with the U.N. an emissions reduction target of 17% from 2005 levels by 2020, matching that of the United States. Canada's target had previously been to cut Canada's GHG emissions 20% by 2020 from 2006 levels. Minister Prentice further indicated that Canada would only be willing to implement cap-and-trade or a regulatory regime when the U.S. signalled that they would do the same.

United States

As discussed in greater detail in our December 2009 update, recent months have seen considerable activity in the U.S. Congress on the climate change front. Several bills have been proposed, including two cap-and-trade bills (the Waxman-Markey bill and Kerry-Boxer bill) that have since failed to garner enough support to pass in the Senate. In response, Senators Joseph Lieberman, John Kerry and Lindsey Graham are developing a bipartisan climate change bill that would strike a compromise between existing approaches. The bill, which is intended to be released in mid-April, proposes a carbon tax on transportation fuels and cap-and-trade for electricity-generating utilities. On March 9, U.S. President Barack Obama met with key senators at the White House to discuss climate change efforts in the Senate and reemphasize its priority. Meanwhile, an effort is underway in the U.S. House of Representatives to delay or block the Environmental Protection Agency (EPA) from regulating GHGs. Reports indicate that executives and investors are increasingly questioning whether the U.S. climate change debate will be resolved this year.

Carbon Markets in the U.S. and Canada

Amid legislative uncertainty and the outcome of Copenhagen, confidence in the strength of the carbon market is eroding. Regional Greenhouse Gas Initiative (RGGI) permits auctioned in the RGGI March 10 quarterly auction sold at an average of $2.07 per tonne which, while up $0.02 from the record low in December 2009, is still ten times cheaper than in Europe. The low price has been attributed also to an oversupply of carbon allowances and reduced energy demand caused by the recession. Even the EU, with a compliance-based market, is struggling with reduced demand and an oversupply of carbon allowances. Industry insiders suggest that it is the U.S. and Australia's failure to commit to real reductions that has given the EU little incentive to tighten up emissions caps - an action that would increase the demand for offsets. With a soft and volatile carbon market and the absence of definitive climate change legislation, many investors in North America must rely on fiscal incentives, policy pronouncements, and provincial and state initiatives to guide investment.

The legislative void at the federal level has been filled to some extent by the more than twenty U.S. states and seven Canadian provinces that are either implementing or proposing climate change strategies locally, or are participating in or observing a regional trading system. In Canada, Alberta has implemented cap-and-trade, British Columbia and Quebec have implemented carbon taxes, and British Columbia, Manitoba, Ontario, and Quebec are committed to or are taking steps towards implementing cap-and-trade. As discussed in our December 2009 ETCC Update, British Columbia, Manitoba, Quebec, and Ontario are also parties to the Western Climate Initiative (WCI), a regional GHG cap-and-trade regime the first phase of which is to take effect in 2012. The WCI is expected to be four times bigger than the current RGGI, which is the only operational regional trading system in North America. Recent reports have indicated that members of the RGGI and WCI are in discussions regarding the feasibility of linking their regimes.

While regional initiatives may fill a gap, comprehensive federal legislation is still an important goal. In fact, two commonly identified structural impediments to CCS include the lack of a national strategy to control CO2 emissions and the need for coordinated efforts among federal and state or provincial governments. For one thing, the scope of implementation matters for pricing strategies like cap-and-trade or carbon taxes. In the case of cap-and-trade, especially, meaningful economy-wide compliance-based emissions caps and appropriate standards for what qualifies as abatement are required for an efficiently operating market. Whether the federal legislature adopts a carbon tax, cap-and-trade, cap-and-dividend, or a combination thereof will impact the pricing of carbon and will determine which kind of market-based incentives are available. Depending on the details of proposed federal legislation, its implementation may require the harmonization of existing rules across the provinces. Such harmonization may be resisted by provinces with local legislation, like Alberta, which may conflict with or may not be as stringent as proposed federal legislation. Nonetheless, the hope is that any harmonization associated with the introduction of federal legislation will provide administrative and legislative certainty to industry, which does not exist in today's regulatory patchwork.

Part II: Identified Regulatory Gaps

The other impediment to CCS that has been identified is the existence of significant regulatory gaps - CCS having consistently been identified as a technology where regulation is needed. The IEA, the Alberta Carbon Capture and Storage Development Council, and the U.S.-Canada Clean Energy Dialogue Action Plan, to name only a few, have identified the regulatory gap as an issue or offered guidance on how regulations should be designed. Additionally, in February 2010, President Obama released a Presidential Memorandum establishing an Interagency Task Force on Carbon Capture and Storage with the mandate of overcoming legal and other barriers to the widespread cost-effective deployment of CCS within 10 years. Despite this call for regulation, only a handful of jurisdictions are developing or have adopted CCS-specific regulations (notably Australia, several U.S. states and certain international treaties). In others, such as the EU and the U.S., guidelines of CCS regulation have been adopted or proposed, but no actual regulations have been implemented. It was expected that Alberta, which has five major CCS projects in the pipeline which are to be developed over the next several years and $2 billion committed to these projects, would release regulations on CCS last year. According to recent reports, however, the Government of Alberta will not confirm whether a bill is being prepared.

The bulk of regulatory work for low carbon technologies will have to occur at a local level. The federal government can set emissions pricing or targets, regulate those activities (including transportation) that occur on federal lands, inter-provincially or internationally, and establish minimum technical or performance standards. Provinces have the authority to regulate health and safety, sitting, permitting, property laws, and emissions legislation and will likely need to do the bulk of work relating to injection, monitoring, and verification. For the capture, transportation, and injection well components of CCS, existing regulations (such as regulations for acid gas and EOR) provide a natural framework on which regulation could be based. Storage, however, is a unique process in the sense that it is expected to be perpetual and every site is different. It has been recommended that specific regulations relating to property rights and liability at the storage site (both during injection and post-closure) be developed that attend to the long-term nature of the process and that are flexible enough to address site-specific characteristics, emerging technologies and new information.

Property Rights

Property rights should be formalized with respect to the storage site (i.e. subsurface and pore space property rights and liabilities) and the mechanisms by which the rights to CO2 are transferred throughout the supply chain. With respect to the ownership of CO2, it is necessary to determine whether the owner of the source of CO2 retains ownership, or whether it is transferred as a result of capture, transportation, and/or sequestration by the operator. With respect to rights to the storage site, it is necessary to contemplate the possible impacts of a CCS license on land title (especially that of First Nations), access rights, mineral rights and pore space ownership. Much of this will turn on whether CO2 becomes tied to the property into which it was injected or whether it retains a separate legal identity. For instance, where ownership of surface rights is divorced from the subsurface rights, third parties may be granted access rights to the lands or rights for mineral or petroleum licensing over the same property.


Potential liabilities at the storage site include harm to local environment or human health caused by leakage or common law liabilities, such as nuisance, negligence, or trespass. When operators are liable, they carry the risk of compensatory damages. Consequently, where regulation is uncertain, participants may be exposed to unlimited risk. This exposure is exacerbated by uncertainties such as the reliability of capture, the effectiveness of monitoring methodology and remediation techniques and physical site specific risks, including subsurface fractures, tectonics, well integrity and non-geologic operational risks. Regulators should assign clear responsibility for leaks or excursion outside of the area subject to a CCS license, expressly setting out liabilities and penalties and their scope (especially in respect of remediation) and requiring appropriate operational and corrective measures. One of the most important ways to manage long-term liabilities associated with CCS is through careful site selection. Stringent siting regulations can ensure that injection wells are not sited in areas that could potentially damage public and private property, such as population centres, areas in communication with subsurface resources, including water sources or minerals, or sensitive habitats. Additionally, regulators should review the design of the injection well, the quantities of CO2 that can be injected, and reservoir pressure limits.

One of the most the crucial issues for CCS projects is the assignment of long-term responsibility for sites, including post-closure. In many jurisdictions, the operator must post financial assurance and assume responsibility for monitoring and verification for a certain length of time, at which point the responsibility for sites will transfer to the public sector. It is therefore necessary for regulators to assign responsibility for long-term financing and management of the site, to determine when the public sector should assume responsibility for post-closure liabilities and remediation and to select the regulatory agency responsible for long-term stewardship of CCS sites.


CCS has gained momentum as a promising technology to facilitate GHG emissions reductions. Two commonly identified impediments to the widespread deployment of CCS include the cost of implementing CCS and a lack of regulation addressing unique CO2 storage issues. While CCS has enjoyed various financial incentives and political support, it is equally necessary to develop a comprehensive legislative framework to give potential investors regulatory certainty and stable market-based incentives. Comprehensive and broadly implemented legislation that puts a price on carbon would encourage investment in carbon abatement technologies and help offset the current cost disadvantage of CCS. The second major type of impediment - an unclear regulatory environment - creates a risk of unpredictable and un-measurable liability that impedes investment. Well-designed regulations would mitigate this risk by clearly identifying the ownership of CO2, the scope of associated potential liability and remediation obligations, and the long-term liability for CCS.


1. Unless otherwise noted, monetary amounts in this article are stated in U.S. dollars.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions