The North Sea could become a ‘central storage camp’ for carbon waste. Not everyone likes the idea

The receiving dock at the Northern Lights carbon capture and storage project, controlled by Equinor ASA, Shell Plc and TotalEnergies SE, at Blomoyna, Norway, on Friday, Jan. 19, 2024.

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Norway’s government wants to show the world it is possible to safely inject and store carbon waste under the seabed, saying the North Sea could soon become a “central storage camp” for polluting industries across Europe.

Offshore carbon capture and storage (CCS) refers to a range of technologies that seek to capture carbon from high-emitting activities, transport it to a storage site and lock it away indefinitely under the seabed.

The oil and gas industry has long touted CCS as an effective tool in the fight against climate change and polluting industries are increasingly looking to offshore carbon storage as a way to reduce planet-warming greenhouse gas emissions.

Critics, however, have warned about the long-term risks associated with permanently storing carbon beneath the seabed, while campaigners argue the technology represents “a new threat to the world’s oceans and a dangerous distraction from real progress on climate change.”

Norway’s Energy Minister Terje Aasland was bullish on the prospects of his country’s so-called Longship project, which he says will create a full, large-scale CCS value chain.

“I think it will prove to the world that this technology is important and available,” Aasland said via videoconference, referring to Longship’s CCS facility in the small coastal town of Brevik.

“I think the North Sea, where we can store CO2 permanently and safely, may be a central storage camp for several industries and countries and Europe,” he added.

Storage tanks at the Northern Lights carbon capture and storage project, controlled by Equinor ASA, Shell Plc and TotalEnergies SE, at Blomoyna, Norway, on Friday, Jan. 19, 2024.

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Norway has a long history of carbon management. For nearly 30 years, it has captured and reinjected carbon from gas production into seabed formations on the Norwegian continental shelf.

It’s Sleipner and Snøhvit carbon management projects have been in operation since 1996 and 2008, respectively, and are often held up as proof of the technology’s viability. These facilities separate carbon from their respective produced gas, then compress and pipe the carbon and reinject it underground.

“We can see the increased interest in carbon capture storage as a solution and those who are skeptical to that kind of solution can come to Norway and see how we have done in at Sleipner and Snøhvit,” Norway’s Aasland said. “It’s several thousand meters under the seabed, it’s safe, it’s permanent and it’s a good way to tackle the climate emissions.”

Both Sleipner and Snøhvit projects incurred some teething problems, however, including interruptions during carbon injection.

Citing these issues in a research note last year, the Institute for Energy Economics and Financial Analysis, a U.S.-based think tank, said that rather than serving as entirely successful models to be emulated and expanded, the problems “call into question the long-term technical and financial viability of the concept of reliable underground carbon storage.”

‘Overwhelming’ interest

Norway plans to develop the $2.6 billion Longship project in two phases. The first is designed to have an estimated storage capacity of 1.5 million metric tons of carbon annually over an operating period of 25 years — and carbon injections could start as early as next year. A possible second phase is predicted to have a capacity of 5 million tons of carbon.

Campaigners say that even with the planned second phase increasing the amount of carbon stored under the seabed by a substantial margin, “it remains a drop in the proverbial bucket.” Indeed, it is estimated that the carbon injected would amount to less than one-tenth of 1% of Europe’s carbon emissions from fossil fuels in 2021.

The government says Longship’s construction is “progressing well,” although Aasland conceded the project has been expensive.

“Every time we are bringing new technologies to the table and want to introduce it to the market, it is having high costs. So, this is the first of its kind, the next one will be cheaper and easier. We have learned a lot from the project and the development,” Aasland said.

“I think this will be quite a good project and we can show the world that it is possible to do it,” he added.

Workers at an entrance to the CO2 pipeline access tunnel at the Northern Lights carbon capture and storage project, controlled by Equinor ASA, Shell Plc and TotalEnergies SE, at Blomoyna, Norway, on Friday, Jan. 19, 2024.

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A key component of Longship is the Northern Lights joint venture, a partnership between Norway’s state-backed oil and gas giant Equinor, Britain’s Shell and France’s TotalEnergies. The Northern Lights collaboration will manage the transport and storage part of Longship.

Børre Jacobsen, managing director for the Northern Lights Joint Venture, said it had received “overwhelming” interest in the project.

“There’s a long history of trying to get CCS going in one way or another in Norway and I think this culminated a few years ago in an attempt to learn from past successes — and not-so-big successes — to try and see how we can actually get CCS going,” Jacobsen told CNBC via videoconference.

Jacobsen said the North Sea was a typical example of a “huge basin” where there is a lot of storage potential, noting that offshore CCS has an advantage because no people live there.

A pier walkway at the Northern Lights carbon capture and storage project, controlled by Equinor ASA, Shell Plc and TotalEnergies SE, at Blomoyna, Norway, on Friday, Jan. 19, 2024.

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“There is definitely a public acceptance risk to storing CO2 onshore. The technical solutions are very solid so any risk of leakage from these reservoirs is very small and can be managed but I think public perception is making it challenging to do this onshore,” Jacobsen said.

“And I think that is going to be the case to be honest which is why we are developing offshore storage,” he continued.

“Given the amount of CO2 that’s out there, I think it is very important that we recognize all potential storage. It shouldn’t actually matter, I think, where we store it. If the companies and the state that controls the area are OK with CO2 being stored on their continental shelves … it shouldn’t matter so much.”

Offshore carbon risks

A report published late last year by the Center for International Environmental Law (CIEL), a Washington-based non-profit, found that offshore CCS is currently being pursued on an unprecedented scale.

As of mid-2023, companies and governments around the world had announced plans to construct more than 50 new offshore CCS projects, according to CIEL.

If built and operated as proposed, these projects would represent a 200-fold increase in the amount of carbon injected under the seafloor each year.

Nikki Reisch, director of the climate and energy program at CIEL, struck a somewhat cynical tone on the Norway proposition.

“Norway’s interpretation of the concept of a circular economy seems to say ‘we can both produce your problem, with fossil fuels, and solve it for you, with CCS,'” Reisch said.

“If you look closely under the hood at those projects, they’ve faced serious technical problems with the CO2 behaving in unanticipated ways. While they may not have had any reported leaks yet, there’s nothing to ensure that unpredictable behavior of the CO2 in a different location might not result in a rupture of the caprock or other release of the injected CO2.”

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Swiss central bank promises regulation review after collapse of Credit Suisse

Thomas Jordan, president of the Swiss National Bank (SNB), speaks during the bank’s annual general meeting in Bern, Switzerland, on Friday, April 28, 2023.

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The Swiss National Bank on Friday pledged to review banking regulations during its annual general meeting in Bern, following recent turmoil involving Credit Suisse.

Set against a backdrop of protest over its action on climate change and its role in the emergency sale of Credit Suisse to Swiss rival UBS, Thomas Jordan, chairman of the governing board at the SNB, said banking regulation and supervision will have to be reviewed in light of recent events.

“This will require in-depth analysis … quick fixes must be avoided,” he said, according to a statement.

The central bank played a key role in brokering the rescue of Credit Suisse over the course of a chaotic weekend in March, as a flight of deposits and plummeting share price took the 167-year-old institution to the brink of collapse.

The deal remains mired in controversy and legal challenges, particularly over the lack of investor input and the unconventional decision to wipe out 15 billion Swiss francs ($16.8 billion) of Credit Suisse AT1 bonds.

The demise of the country’s second-largest bank fomented widespread discontent and severely damaged Switzerland’s long-held reputation for financial stability. It also came against a febrile political backdrop, with federal elections coming up in October.

Jordan said Friday that future regulation will have to “compel banks to hold sufficient assets which they can pledge or transfer at any time without restriction, and which they can thus deliver as collateral to existing liquidity facilities.” He added that this would mean his central bank could would be able to provide the necessary liquidity, in times of stress, without the need for emergency law.

A shareholder holding a placard reading in German: “Invest in the planet and not in its destruction” takes part in a protest ahead of a general meeting of of the Swiss National Bank (SNB) in Bern on April 28, 2023. (Photo by Fabrice COFFRINI / AFP) (Photo by FABRICE COFFRINI/AFP via Getty Images)

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The SNB faced questions and grievances from shareholders about the Credit Suisse situation on Friday, but the country’s network of climate activists also sought to use the central bank’s unwanted spotlight to challenge its investment policies. Activists failed to gain traction with a vote to reprimand the SNB’s investment decisions, with just 0.8% of shareholders backing the move, according to Reuters.

Unlike many major central banks, the SNB operates publicly-traded company, with just over half of its roughly 25 million Swiss franc ($28.1 million) share capital held by public shareholders — including various Swiss cantons (states) and cantonal banks — while the remaining shares are held by private investors.

More than 170 climate activists have now purchased a SNB share, according to the SNB Coalition, a dedicated pressure group spun out of Alliance Climatique Suisse — an umbrella organization representing around 140 Swiss environmental campaign groups.

Around 50 of the activist shareholders were attendance on Friday, and activists had planned to make around a dozen speeches on stage at the AGM, climate campaigner Jonas Kampus told CNBC on Wednesday. Protests were also held outside the event with Reuters reporting that the campaigners totaled 100, leading to tight security.

The group is calling for the SNB to dispose of its stock holdings of “companies that cause serious environmental damage and/or violate fundamental human rights,” pointing to the central bank’s own investment guidelines.

In particular, campaigners have highlighted SNB holdings in Chevron, Shell, TotalEnergies, ExxonMobil, Repsol, Enbridge and Duke Energy.

Members of a Ugandan community objecting to TotalEnergies’ East African Crude Oil Pipeline, were also set to attend on Friday, with one planning to speak on stage directly to the SNB directorate.

As well as a full exit from fossil fuel investments, activists are demanding that the SNB implement the “one for one rule,” — a capital requirement designed to prevent banks and insurers benefiting from activities that are detrimental for the transition to net zero.

In this context, the SNB would be required to set aside one Swiss franc of its own funds to cover potential losses for each franc allocated to financing new fossil fuel exploration or extraction.

Ahead of the AGM, the central bank declined on legal grounds to schedule three motions tabled by the activists, and said on Wednesday that it would not comment on protest plans, instead directing CNBC to its formal agenda. Yet Kampus suggested that just the process of submitting the motions itself had helped expand public and political awareness of the issues.

“From all sides, there is public pressure and also political pressure that the SNB needs to change things. At this moment, the SNB is really far behind in terms of their actions taken compared to other central banks,” Kampus told CNBC via telephone, adding that the SNB takes a “very conservative view” of its mandate regarding price stability and financial stability, which is “very narrow.”

The shareholders’ cause is also backed by a motion in parliament, with support from lawmakers ranging from the Green Party to the Centre [center-right party], which demands an extension of the SNB’s mandate to cover climate and environmental risks.

“While other central banks around the world are going well beyond the steps taken by the SNB in ​​this respect — the SNB has repeatedly taken the position that its mandate does not give it sufficient leeway to take climate risks fully into account in its decisions and monetary policy instruments,” reads the motion, filed on March 16 by Green Party lawmaker Delphine Klopfenstein Broggini.

Swiss National Bank chair: Maintaining stability is our main goal

“The present parliamentary initiative is intended to ensure this leeway and to make it clear that the SNB must take climate risks into account when conducting monetary policy.”

The motion argues that climate risks are “classified worldwide as significant financial risks that can endanger financial and price stability,” concluding that it is in “Switzerland’s overall interest that the SNB proactively address these issues” as other central banks are seeking to do.

Kampus and his fellow activists hope the national focus on the SNB after the Credit Suisse crisis provides fertile ground to advance concerns about climate risk, which he said poses a risk to the financial system that is “several times larger” than the potential fallout from Credit Suisse’s collapse.

“We feel that there is also a window of opportunity on the SNB side in that they maybe this time are a bit more humble, because they obviously also have done some things wrong in terms of the Credit Suisse crash,” Kampus said.

He noted that the central bank has always asserted that climate risk was incorporated into its models and that there was “no need for further exchange with the public of further transparency.”

Investor who predicted Credit Suisse decline says Swiss banking model is 'damaged'

“Very central to the SNB’s work is that the public just needs to trust them. Trust is something that is very important to the central bank, and to demand trust from the public without leading up to it or supporting it with further evidence that we can trust them in the long run is quite scary, especially when we don’t know what their climate model is,” he said.

The SNB has long argued that its passive investment strategy, which invests in global indexes, is part of its mandate to remain market neutral, and that it is not for the central bank to engage in climate policy. Activists hope mounting political pressure will eventually force a change in legislation to broaden the SNB’s mandate to accommodate climate and human rights as risks to financial and price stability.

UBS and Credit Suisse also faced protests from climate activists at their respective AGMs earlier this month over investment in fossil fuel companies.

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