CCLP Financial Security Study


The purpose of this study is to clarify the issues surrounding mandatory financial security in the context of carbon capture and storage (CCS) and wider environmental regulation.

This has been one of the most controversial aspects of regulatory regimes in recent years, but also one of the most technical. It is a subject on which there has been considerable muddle and unclarity in policy debates, with some discussions seeming to lack a grasp of what is at stake.

The aim of this study is not to provide solutions to the issues involved, but simply to examine what the issues entail and what the implications are of adopting different approaches. The end product will be a short report in the form of a non-specialist, general reader's guide to this debate.

The method of study will involve examination of past debates and policy documents, together with interviews and discussions with people who have practical experience of handling insurance and financial security in this field, or have been closely involved in the current developments on CCS and associated areas. The scope will be modest, rather than comprehensive.

The interviews will be conducted between November 2011 and March 2012, covering a range of selected jurisdictions. The report is due to be published in April 2012.

Primary questions

  • What is mandatory financial security for? What is it trying to achieve?
  • How much financial security should be required? Are there limits to what can be covered?
  • What types of instrument are available? Why choose one type rather than another?
  • What terms and conditions should be required? Should there be standardised wordings?
  • Why have insurers sometimes been reluctant to enter this field?
  • How best to regulate the issuers of security instruments and the regime as a whole? What can go wrong?
  • How best to finance long-term stewardship? What are the relative merits of pooling versus individual provision?
  • What are the implications of governments underwriting some of the risks?


Core documents

  • European Commission (March 2011), Implementation of Directive 2009/31/EC on the Geological Storage of Carbon Dioxide:
  • Guidance Document 3 - Criteria for Transfer of Responsibility to the Competent Authority
  • Guidance Document 4 - Article 19 Financial Security and Article 20 Financial Mechanism
  • US EPA (July 2011), Geologic Sequestration of Carbon Dioxide: Underground Injection Control (UIC) Program Class VI Financial Responsibility Guidance
  • US EPA (July 2011), Underground Injection Control (UIC) Class VI Program - Public Comments Received on the Draft Underground Injection Control (UIC) Class VI Program Financial Responsibility Guidance
  • European Commission (October 2010), Report from the Commission ... under Article 14(2) of Directive 2004/35/CE on the environmental liability with regard to the prevention and remedying of environmental damage (COM(2010) 581)
  • European Commission (November 2009), Study on the Implementation Effectiveness of the Environmental Liability Directive (ELD) and Related Financial Security Issues - Final Report
  • Fogleman, Valerie (Witherbys, 2005), Environmental Liabilities and Insurance in England and the United States (Chs 5, 11-14, 20, 24, 26-30)
  • US Environmental Financial Advisory Board (EFAB) reports:
    • Financial Assurance for Underground Carbon Sequestration Facilities (March 31, 2010)
    • Financial Assurance: Commercial Insurance as a Financial Assurance Tool (February 25, 2010)
    • Workshop on Financial Assurance in EPA Programs (June 17, 2008)
    • The Use of Captive Insurance as a Financial Assurance Tool in Office of Solid Waste & Emergency Response Programs (March 20, 2007)