This is an extract from a recent report “Norwegian CCS: What have we learned?” by The Oxford Institute for Energy Studies.
Introduction
In 1996, Norway emerged as a Carbon Capture and Storage (CCS) leader in Europe and globally with the launch of the first offshore CCS project developed for the purposes of storing CO2 underground, as the Sleipner CCS project went live. Norway’s journey has so far culminated in the development of the ambitious Longship project, which will provide offshore CO2 transportation and storage for both domestic and internationally-captured CO2. Several key factors have contributed to the country’s relative success in implementing CCS and can potentially serve as a guide and offer lessons for other countries with plans to implement CCS policies, adjusting for political, institutional, economic and regulatory context and competitive advantages.
These factors include:
• Vast offshore CO2 storage resources
• Government approach and strategy
• Regulatory and licensing regime
• Government funding
• Commercial framework
• Cross-border transportation of CO2 and bilateral agreements
• Public acceptance
Regulatory & Licensing Regime
The regulatory framework and policies in Norway on climate change and energy are primarily defined and influenced by international agreements and policies. This includes the Kyoto Protocol, the Paris Agreement, and the UN Framework Convention on Climate Change (UNFCCC) which establish conditions for mitigating climate change. It is an international treaty designed to protect the marine environment by regulating the disposal of wastes and other matter at sea. Adopted in 1996 to update the 1972 London Convention, the Protocol prohibits the dumping of all wastes and materials except for a few categories. While Norway is not a member of the European Union, it is associated with the EU through its membership in the European Economic Area (EEA). This association makes Norway an equal partner in the Single Market, enjoying the same terms as EU Member States. Applying the regulatory framework on an industrial CCS chain, such as Longship, required significant government involvement to iron out solutions to problems faced.
Furthermore, transporting CO2 across borders introduces complexities. Aiding this process is the Norwegian Government’s effort to create CO2 atlases for the Norwegian offshore regions where, prior to applying for a CO2 storage licence, operators are able to screen the NCS for potential storage sites. In addition, the Government eased the licensing requirements for the Longship project as it was a FOAK CCS project and therefore did not require it to obtain some of the licences, including an exploration licence. For instance, the CCS business model, characterised by low market maturity, high risk, and low return, diverges significantly from that of the petroleum sector which features high market maturity, high risk, and high return. Regulatory bodies and Norwegian public sector entities play a significant role in the project’s development, each with distinct responsibilities. While some roles, such as regulatory functions, are clearly defined, there’s limited prior experience in regulating CCS activities.
Government Funding and Participation in CCS projects: Another factor which contributed to the development of CCS in Norway involved the Government’s substantial ownership and participation in CCS projects within the country. This included its deep involvement in the 2009-aborted full-scale Kårstø project, the operational CO2 capture Technology Centre Mongstad (TCM) project in 2012, and the 2013-aborted full-scale CCM (carbon capture at Mongstad) project. In the first phase, TCM was constructed to develop affordable and reliable capture technologies. Subsequently, in a second phase, the CCM was intended to sequester CO2 emissions from the Mongstad plant, thereby contributing to national emissions reduction efforts. Together, these initiatives epitomised the evolving goals of the CCS endeavour: to address emissions reduction from domestic sources, particularly amid the contentious debate on new gas-fired power plants and, equally important, to advance the development of cost-effective CCS technologies for global application.
Public CCS R&D Programme: As Norway sought cost-effective ways to implement its climate policy, it required a more refined approach to deploying CCS. This led to the establishment of a dedicated public CCS Research and Development (R&D) programme aimed at making CCS a cost-effective solution. Non-CCS power plants were permitted by the Labor government in 2000 which also created a public fund for CCS technology R&D, giving rise to the dedicated CLIMIT CCS R&D programme. The potential of technology development has become increasingly intertwined with Norway’s broader climate policy objectives and the global dissemination of CCS technology, aligning with Norwegian CCS international policy goals.
State Aid Agreements and Commercial Framework: Norway’s commercial framework has also played a significant part in the success of the CCS industry so far. The Government identified investment barriers to CCS early on in 2015 through a pre-feasibility study in cooperation with industry. In addition to technical matters, the study provided recommendations on how to overcome the identified barriers, which the government then went on to implement during their commercial negotiations on the Longship project. To incentivise the development of the CCS industry, the Norwegian Government provided generous funding through state aid agreements, which supplemented the EU-ETS price as well as a recently implemented national combustion tax. In the case of Longship, the Government also split the CCS value chain based on feedback from the industrial partners. This meant that each industrial partner had their own state aid agreement and the disbursement of government funds is contingent upon the successful completion of each industrial partner’s project, spanning both the construction and operational phases. Again, to incentivise the development of the CCS project as a FOAK project, the Norwegian Government stepped in to ensure that incentives for both capture projects were similar and added another support scheme which provided a similar incentive for capturing non-EU-ETS CO2 compared to the capture of EU-ETS CO2.
Cross-border Transport of CO2 and Bilateral Agreements: As Norway develops Longship CCS with the outlook to store CO2 from neighbouring European countries in the future, therefore requiring cross-border movement of CO2, the Norwegian Government had to resolve the London Protocol prohibition. The London Convention, the common name for the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, is an international agreement prohibiting the export of all waste and other matter to other states for dumping or incineration at sea. In 1996, the London Protocol was agreed to further modernise the Convention which had been in force since 1975, and eventually replace it. Under the Protocol, all dumping is prohibited including the transboundary movement of CO2.
Public Acceptance: Public acceptance is crucial for the successful development and implementation of CCS projects. Without broad public support, CCS projects may face significant opposition, delays, or even cancellation, such as the case in Poland, Germany and the Netherlands. Opposition and the minimised role of CCS in the German climate agenda, as well as banning onshore CO2 storage in the Netherlands are some of the factors that have hampered the development of CCS in Europe to date. Public acceptance can drive policy decisions, secure funding, and facilitate smoother project implementation by reducing resistance from local communities and stakeholders. Effective proactive communication to raise public awareness about the knowledge, benefits, safety, and necessity of CCS in mitigating climate change is essential to garnering this acceptance and the ability for the public to make informed decisions about individual projects. In fact, public acceptance of CCS in Norway has been relatively strong, driven by the country’s robust commitment to climate change mitigation and its successful history with CCS projects. By involving communities, addressing concerns transparently, and showcasing the environmental and economic advantages of CCS, Norway has fostered a positive public perception, positioning CCS as a key component of its climate strategy.
International CCS Policy Focus and Cooperation: A final factor which propelled Norway’s CCS journey was the government’s international focus and cooperation. For example, the government had envisioned TCM as a global technology development Centre for CCS, intending for it to be part of Norway’s contribution under the UNFCCC and Kyoto Protocol, as well as a component of broader cooperation between developing and developed nations. As such, an invitation was extended to countries and companies worldwide to join the TCM initiative. Norway’s international CCS policy objectives were outlined for gradual implementation, with a consistent focus on advocating for CCS deployment in alignment with the two-degree target. In the short and medium term (2008-2015), Norway aimed to actively participate in international mechanisms for CCS implementation, advocate for CCS inclusion in the post-2012 climate regime, influence EU and international regulations regarding CO2 storage, identify potential cooperation projects in specific countries and regions, and subsequently support the implementation of these projects. In the long term, priority was given to transferring technology and expertise from the Norwegian CCS initiatives. Additionally, Norway emphasised the externally-oriented benefits of its TCM and CLIMIT R&D programmes, seeking to contribute to the global development of replicable and cost-effective CCS technologies through its domestic efforts. From 2008 onwards, Norway’s international CCS policy focused on four main areas:
a) Advocating for the inclusion of CCS within the Clean Development Mechanism (CDM) of the United Nations Framework Convention on Climate Change (UNFCCC).
b) Supporting full-scale and pilot CCS projects in the European Union, China, and South Africa.
c) Providing financial assistance to civil society organisations dedicated to promoting CCS acceptance and favourable regulatory frameworks.
d) Engaging in bilateral and multilateral CCS discussions.
Concluding Remarks:
The development of CCS in Norway stems down to political willingness of the Norwegian Government to engage in CCS at a very early stage as well as providing the legal and regulatory framework and support mechanisms to attract private investment. The ambitious Norwegian CCS policies must be placed in the context that the Norwegian oil and gas sector is the country’s largest and most important sector when considering the revenues, export value and associated benefits on the national economy and welfare state. This paper argues that Norway’s CCS story to date has been of a successful one, yet the ultimate measure of success will depend on the future operational and commercial successes of Longship and other CCS projects which the country is embarking on. While government support has been critical to kickstart the CCS industry, government role should decline as a commercial market matures. At that critical juncture, the government’s main role should be mainly limited to regulation and supervision. To that extent, some key questions remain: will the Longship project succeed in storing the projected amounts of CO2 and creating a self-sustaining commercial model by signing up additional emitters in both Norway and neighbouring countries? Will other Norwegian CCS projects – such as Luna and Havstjerne, Polaris, Trudvang, Stella Maris and Smeaheia – become game changers and provide large-scale CO2 transportation and storage for European customers, with minimum government support and intervention?
