We are now all working hard to install solar panels on our roofs, windmills at sea, and the number of cars running on electricity is growing fast. Despite all that, it is still difficult to reduce our fossil energy use. Global energy demand and the use of fossil fuels is still increasing. And this means that our emissions are still growing.
Optimists think this will change quickly if we reach so-called ‘tipping points’. These magical moments have been proudly announced several times over the past decade. The hope being that after reaching tipping points we can sit back and watch progress accelerate: when sun and wind are cheaper, who wants fossil energy? The reality is more complicated.
Therefore, it would be prudent to also install a safety net—Just to be Safe. After all, the risks are quite high if we do not succeed in reducing our emissions in a timely manner.
The safety net we propose is the Carbon Takeback Obligation: an obligation for all producers and importers of fossil carbon products to 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 – but then for fossil carbon. This forces cooperation in the value chain as suppliers and customers will have to decide together what the best way is to meet this obligation. If insufficient carbon is stored, this will restrict production and/or imports. A CTBO works on the supply side and is therefore complementary to demand-side regulation (such as carbon taxes and emission trading).
In 2020 we (the initiators: Margriet Kuijper, Jan Paul van Soest, Evert Holleman) together with a broad group of experts and stakeholders carried out an exploratory study on the possible role of a CTBO in the Netherlands. The Ministry of Economic Affairs and Climate Policy, EBN, NOGEPA and Equinor have supported this work financially. The results of this work can be found in the report published today.
The general conclusion was that a CTBO can indeed be a potentially interesting addition to the toolbox with climate policies and regulations. The value added of a CTBO seems to be particularly promising for natural gas. A follow-up study on how this could be designed in more detail is therefore in preparation.
What are the main benefits of a CTBO?
A CTBO provides long-term certainty about the conditions under which fossil energy can still be brought to market. Decision-making on more production will therefore have to explicitly consider how sufficient CCUS (Carbon Capture, Utilisation and Storage) capacity can be available in time.
A CTBO will ensure that the polluter not only pays but also cleans up. With a simplecarbon tax, the polluter pays to be allowed to pollute. With a CTBO payments are used to clean up. External costs are thus reduced and instead included in the gas price.
All in all, this increases the likelihood that the required emission reductions can be achieved on time and will enable a less disruptive energy transition (capital, employment).
While we all continue to work hard on energy efficiency and the transition to renewable energy sources, the Carbon Takeback Obligation ‘in the background’ can ensure that the required emission reductions are indeed achieved, even though we may still use too much fossil energy for too long.
Just to be Safe.