Perfect regulation risks stalling CO2 shipping

“In this nascent market, perfect can be the enemy of good,” Carbon Capture and Storage Association (CCSA) head of EU external affairs Stefano Miriello told delegates during the first session of Riviera’s CO2 Shipping & Terminals Conference in London.

Mr Miriello said over-regulation at this early stage could stall projects already underway and deter further private investment. “If we start putting strict rules on specific projects, we might fall into a situation where projects that are already running do not happen,” he said, “We need rules that lay the groundwork so the market can start, then revise them once there is a clearer structure.”

He added that, for non-pipeline transport modes such as shipping, negotiated third-party access would be a more appropriate interim measure.

This would allow the market to function until a formal regulatory framework was introduced. During a live poll, nearly 70% of attendees identified the lack of guaranteed revenue streams as the main risk to using negotiated tariffs rather than regulated ones.

Rystad Energy vice president for CCUS and hydrogen supply chain Lein Mann Bergsmark echoed this caution, stating, “We need to focus on the opportunities and be a little bit nervous about the risks.”

According to Ms Bergsmark, most early-stage projects rely on public subsidies, but future projects may need to be self-sustaining, “The projects that will start up later this decade may not receive that funding. The EU ETS will likely be higher, but maybe not by enough to compensate,” she said.

Ms Bergsmark presented data forecasting CO2 shipping volumes could reach 45M tonnes per annum by 2030, supported by a fleet of 30 vessels.

However, she warned progress was being constrained by a lack of port infrastructure. “These are proposed terminals… the absolute majority do not exist today,” she said.

Terminal development delays were also cited by delegates as the biggest constraint to CO2 shipping expansion, selected by almost 40% of respondents in a separate poll.

Intertanko gas manager Evangelos Tzitzis said regulatory fragmentation and limited industrial demand had discouraged owners from committing to projects. “Some disparities we have identified – such as regulatory frameworks, industrial demand and cluster development – may make [owners] think twice or three times before they go on,” he said.

Capital Gas vice president commercial, energy transition William Bjorn said the company had prepared for regulatory uncertainty by designing multi-gas, low-pressure vessels that could be used flexibly. “We are moving into this space ahead of the curve… we have designed the ships to be able to adapt and provide flexibility,” he said.

Within the UK, government policy has focused to date on pipeline-linked clusters, and UK Department for Energy Security and Net Zero (DESNZ) representative Alex Hitchman said a policy consultation would be launched later this year to address the role of shipping in connecting dispersed emitters. “Shipping opens up benefits such as increased competition and resilience,” he said. “We recognise the need to connect dispersed sites, including domestically.”

UK CCSA director Mark Sommerfeld said perceived divergence between the UK and EU regulatory regimes might be overstated, “There are two markets evolving, but they have strong benefits to each other. It is about ensuring they come together effectively,” he said.

According to Mr Miriello, a harmonised approach to cross-border transport could reduce the cost of CO2 storage for European emitters. “With no cross-border options in the North Sea, prices will go to €52 (US$60) per tonne. With cross-border access, this falls to €41 [per tonne],” he said, citing modelling conducted with Exergia Group and the European Commission Joint Research Centre.