6 minute read
The Carbon Takeback Obligaton
The CTBO requires producers and importers of fossil fuels such as oil & gas to make sure that an increasing percentage of the amount of carbon extracted is also permanently stored.
The Carbon Takeback Obligation
NET ZERO EMISSIONS IN HYDROCARBONS INDUSTRY
Photo courtesy of Neptune Energy.
ONE COMPANY AFTER THE OTHER, INCLUDING IN THE OIL & GAS INDUSTRY, IS ANNOUNCING AMBITIONS TO REACH NET ZERO EMISSIONS. THESE AMBITIONS ARE NEEDED AS FIVE YEARS AFTER THE HISTORIC PARIS CLIMATE AGREEMENT, THE WORLD IS NOT ON TRACK TO REACH THE PARIS 2°C DEGREE TARGET, LET ALONE 1.5°C.
Margriet Kuijper has her own consultancy focusing on carbon capture and storage (CCS) and corporate social responsibility. Femke Perlot-Hoogeveen is Sustainability Advisor for the energy & resources sector at Deloite. Ofshore Industry speaks with them about a Carbon Takeback Obligaton, and how this can contribute to staying within the global carbon budget.
Ms Kuijper, you have been in the oil & gas industry for over 30 years and are now an independent advisor on carbon management solutions. Together with two co-authors, you recently published the results of a feasibility study on a ‘Carbon Takeback Obligation’. What is a Carbon Takeback Obligation, and what are the key takeaways of the feasibility study you did? Ms Kuijper: “The Carbon Takeback Obligaton, or CTBO for short, is a new policy instrument that could ensure that CO2 from fossil energy no longer ends up in the atmosphere. It requires producers and importers of fossil fuels such as oil & gas to make sure that an >>
Margriet Kuijper has her own consultancy frm focusing on carbon capture and storage (CCS) and corporate social responsibility. Femke Perlot-Hoogeveen, Sustainability Advisor at Deloitte.
You can see the carbon budget as a bathtub and the concentration of greenhouse gases in the atmosphere as the water level in the bathtub.
increasing percentage of the amount of carbon extracted is also permanently stored. This can be done by, among other things, CO2 capture and storage. In our feasibility study, we developed a workable model of how a CTBO could work in the Netherlands, focusing on natural gas producton and imports. The key takeaway is that a CTBO can give a strong additonal stmulus for the energy transiton. The Sounding Board Group that we worked with concluded that a CTBO can be an interestng additonal climate policy instrument. Ideas for a CTBO are also being developed in other countries. The system can be expanded to a larger region and more countries in the future.”
The Sounding Board Group consisted of key industry stakeholders – producers, emiters, researchers, NGOs, consultng frms, and policy makers. The feasibility study, which Ms Kuijper led together with De Gemeynt and Royal HaskoningDHV, was funded by the Dutch Ministry of Economic Afairs and Climate Policy, EBN, NOGEPA, and Equinor.
The Carbon Takeback Obligation is a new policy instrument that could ensure that CO2 from fossil energy no longer ends up in the atmosphere.
Ms Perlot-Hoogeveen, you work with Deloitte and were one of the participants in the Sounding Board Group. What is the driver for Deloitte to support the CTBO feasibility study? Ms Perlot-Hoogeveen: “Last year, Deloite launched ‘WorldClimate’, the enterprise’s global strategy to reach net zero ambitons. The strategy drives internal goals, for example by setng specifc goals for business travel emissions, ofces, car feet, and our major suppliers. But it also informs our collaboraton with clients, industry groups and NGOs to drive solutons to a low carbon economy. Being part of the Sounding Board Group for the CTBO fts in our strategy to support decarbonisaton in diferent industries. Deloite recently published ‘The 2030 decarbonizaton challenge’, which explores how companies in certain sectors like chemicals, oil & gas, mining and metals, and power, utlites and renewables can accelerate decarbonisaton over the next decade and achieve meaningful interim targets by 2030. Another visible example of Deloite’s focus on decarbonisaton is the joint work with Shell on sectorial decarbonisaton. In July 2020, the two corporates published ‘All Hands on Deck – Decarbonising Shipping’, and last month released the second industry analysis ‘Getng into Gear – Decarbonising Road Freight’.”
Why do we need a CTBO and how will it contribute to net zero? Ms Perlot-Hoogeveen: “When you look at global energy supply and demand, fossil fuels account for 80% of energy consumpton. Despite an incredible increase in renewable energy investments, producton,
A CTBO can ensure that along the value chain, the polluter not only pays but also cleans up.
Image courtesy of Deloitte.
and use, the global numbers hardly change. In other words: the increase in renewables is swallowed by our global consumpton increase. This will change at some point, but if we want to stay within the global carbon budget, that is the total amount of CO2 we can emit if we want to limit global warming to less than 2oC, it’s worth exploring net zero optons for the oil & gas industry.”
Ms Kuijpers: “You can see the carbon budget as a bathtub and the concentraton of greenhouse gases in the atmosphere as the water level in the bathtub. Current policies are focused on managing the waterfow into the bathtub. A CTBO would focus on the water producton. A CTBO for all producers and importers of fossil carbon products can ensure that an increasing percentage of the CO2 emissions from their products are captured and stored. That percentage starts low,but rises to 100% by 2050. It is similar to Extended Producer Responsibility schemes we already have for packaging waste, car tyres, and electric goods. This forces cooperaton in the value chain, as suppliers and customers together will have to decide on the best way to meet this obligaton. If insufcient carbon is stored, this will restrict producton and/or imports. A CTBO works on the supply side and is therefore complementary to demand-side regulaton such as carbon taxes and emission trading.”
What is the main difference from a CO2 tax or other instruments aimed at carbon neutrality? Ms Kuijpers: “A CTBO can ensure that along the value chain, the polluter not only pays but also cleans up. With a regular carbon tax, the polluter pays to be allowed to pollute. With a CTBO, the payments are used to clean up. Companies deciding on more producton or imports will have to explicitly consider whether they can make sure that the same amount of carbon extracted from geological storage goes back to geological storage permanently.”
The report explains in some detail how the instrument afects the entre value chain and who would pay how. In short, with a CTBO in place, the producer/importer is responsible for CO2 disposal and this leads to additonal costs. However, this can be absorbed in part by adding a surcharge, which would show the price diference between regular natural gas and climate-neutral natural gas. This will also encourage customers to look for alternatves, which will not only add to emissions reductons but to actual energy transiton as well.
The report came out on the same day Elon Musk announced he wanted to support carbon capture tech. A coincidence? Ms Perlot-Hoogeveen: “CCS is one of the main solutons to make a CTBO work and is now – afer some resistance – generally seen as an essental technology in reducing CO2 emissions. Mr Musk said he
Sources: egede-nissen.com; IPCC 2014; The Global Carbon Project 2017. Data as of January 2018. Image redesigned by Deloitte.
If we want to stay within the global carbon budget, that is the total amount of
CO2 we can emit if we want to limit global warming to less than 2°C, it’s worth
exploring net zero options for the oil & gas industry.
would award USD 100 million to the best carbon capture idea. I don’t know what idea will win, but to me it underscores how important it is that, in additon to energy efciency and replacing hydrocarbons, we also work on decarbonising fossil energy that we are likely to use for the next 30 years.”
