Chris Clarke - University College London

1. PANEL 5
DEFINING AND QUANTIFYING CCS RISK AND LIABILITY
Sandra Locke – Government of Alberta
Chiara Trabucchi – Industrial Economics
Chris Clarke – University College London

2. LONG TERM LIABILITY RISK: THE
PUBLIC POLICY DIMENSION
(GCCSI International Members’ Meeting
Calgary, 10-11 October 2012)
CHRIS CLARKE
Visiting Fellow, Carbon Capture Legal Programme, Faculty of Laws
University College London
Centre for Law and the Environment, Bentham House
Endsleigh Gardens
London WC1H 0EG
Tel: +44 (0)20-8348 5589 (Dir); +44 (0)20-7679 1504 (Centre)
email: chris.clarke@ucl.ac.uk
www.ucl.ac.uk/cclp

3. Multiple liability regimes
• first tier:
– CCS laws & regulations
• site selection/construction, operation, post-injection care
• remedial action in cases of leakage or significant irregularity
• financial security + financial contribution
• specified obligations under associated laws
– emissions allowances/credits
– wider clean-up duties
• second tier:
– liability/clean-up rules under other laws
• contaminated land, water pollution, waste, nature conservation
– civil/common law liability
• personal injury, property damage + some economic loss

4. Transfer of responsibility
• a major concession, but not unlimited
• transfer conditions & tests
– closure/removal/reclamation + financial contribution
– permanent containment, absence of leaks, trend towards stability
• limits to transfer
– covers all obligations under CCS & associated laws, but
– liability continues under other regimes unless expressly specified
• fault clause & grounds for re-opening
– ambiguous standards (negligence, deficient data, etc)
– in extremis?
• unresolved issues/incomplete remediation

5. Moving goalposts
• with long timescales, the rules will change
– standards in 2040, 2050 or 2070 will not be the same as today
– those standards will determine future obligations, eg:
• how much remediation operator has to do
• how stringent the transfer conditions are
– development risk + regulatory risk
• government commitments have a limited life
– legal rules an important constraint, but not absolute in long run
– science changes, political mood changes ⇒ govts have to react
• liability burden also about (future) public policy
• need strategy & mechanisms to manage that risk
– promote excellence, maximise self-regulation, protect goodwill

6. Three key factors
• performance
– less damage ⇒ less liability (!)
– confirmation that CCS works
• the technical safety case is correct, the risks are minimal
– not just operator’s own site(s) - also CCS worldwide
• reputation
– a valued contribution to climate change mitigation/env goals
– despite changes in scientific understanding
– public confidence, despite changing political priorities
• harm
– scale/seriousness if it occurs: manageable mishaps v major events
– effectiveness of detection & response action
– never underestimate the consequences of a serious event

7. Insurance/financial security
• perfectly sensible idea, if implemented reasonably
– protect the environment & the taxpayer/ensure obligations are met
• policy muddle (in some jurisdictions?)
– needs to be taken more seriously at legislative/policy stage
– history of regulatory failures & problems
• potential roadblock to CCS deployment
• need to be clear about:
– the purpose: what is it for? what is it supposed to achieve?
– the amount: how much security is needed? how is that calculated?
– capacity: how much is possible, by various means?
– technical & legal constraints: financial services law, insolvency, etc
• not a panacea or a magic wand

8. Financial security: suggestions
• helpful to make three distinctions:
– technical v. political issues
– unavoidable obligations v. contingent liability risks
– risk transfer v. non-risk transfer products
• the amount is fundamental
– very large amounts may require radical/collective solutions
• some discounting for probability is inevitable
• all options should be on the table
– individual provision, phasing, pooling mechanisms, financial tests
– different solutions for different jurisdictions
• emissions allowance risk a special problem
• financial services expertise is essential