‐ClientEarth Briefing, October 2008 Legal Briefing on Corrective Measures and Liability for CO2 Storage Proposal for a directive on the geological storage of carbon dioxide 2008/0015 (COD) Summary •
The proposed directive on the geological storage of carbon dioxide 2008/0015(COD) (the Directive) requires operators to take corrective measures in the case of significant irregularities or leakages. Corrective measures must prevent or minimise the release of CO2 from the storage complex. •
The Directive proposes to rely on external mechanisms to address liability for leakage. These are the Environmental Liability Directive (ELD), the EU ETS and liability in tort (negligence). •
Financial security will be required for corrective measures and for liability under the EU ETS i.e. to prevent/ minimise/halt the release of CO2 and to surrender allowances for leaked emissions to the atmosphere. The Directive does not require financial security from operators to cover liability under the ELD or in tort. •
The ELD is an inadequate mechanism for dealing with damage to the environment and human health as it only applies in a narrow set of circumstances. In particular, the ELD would not cover instances where damage occurs to the environment as such (the ELD only covers specific EU, and in some cases national, protected species and habitats), where damage occurs to land without causing a human health threat or where atmospheric releases of CO2 affect only human health in the absence of other environmental damage. Actions in tort would be very hard to win. The effect is that in the event of a leakage from a storage site causing damage to human health, there could be no legal liability under EU legislation (unless it is caused via soil contamination) •
We therefore recommend that the definition of corrective measures is extended to specifically include measures to remedy or mitigate any negative impact on the environment or human health. This would be complementary to actions under the ELD and in tort, but would ensure that operators must take immediate action under the permit where they had caused or might cause damage as a result of leakage. This is necessary to provide greater clarity and certainty to both operators and regulators, and help to build public confidence that any risks to human health and the environment are managed under the new permitting system and that any damage will be remedied. •
Amendments to Recital 23 and Articles 3(17) and 16(1) of the Directive, as proposed in this legal briefing, should be adopted. Analysis Article 16(1) of the draft Directive requires operators to take corrective measures in the case of “significant irregularities or leakages”. This provision was amended by the Environment Committee on 7 October 2008 under Amendment 96, to require corrective measures “in case of significant irregularities or leakages that could have a negative impact on human health or the environment, as defined by the criteria to be determined in the guidelines referred to in Article 4(3)”. Unfortunately, this amendment narrows the scope of corrective measures from any leakage to leakages which could have a negative impact on human health or the environment. The problem with this amendment is that operators would only have to take action to halt leakages in cases where the leakage had the potential to cause damage to human health or the environment. The original wording proposed by the Commission is preferred because it would ensure that action must be taken immediately in all cases of leakage, irrespective of whether damage could be caused to human health or the environment, or not. Corrective measures are defined in Article 3(17) as “any measures taken to correct significant irregularities or to close leakages in order to prevent or minimise the release of CO2 from the storage complex”. The word “minimise” was replaced by “halt” under Amendment 44, voted by the Environment Committee on 7 October 2008. This amendment places a stronger requirement on the operator to stop leakage rather than reduce leakage. Such measures must be specified in the corrective measures plan, submitted as part of the permit application process, approved by the competent authority and then included as a condition of the permit. The competent authority may request at any time that the operator takes different or additional measures to those set out in the corrective measures plan, and may also at any time take such measures itself, recovering costs from the operator (Articles 16(2) to (4)). Currently, corrective measures under the Directive are limited to measures to prevent/ halt the release of CO2. They do not require measures to remediate or mitigate damage to the environment or human health caused by any leakage. The scope of corrective measures is therefore relatively narrow. Explanation of the corrective measures provision is provided in the impact assessment to the draft Directive1 at paragraphs 155 and 156: “(155) The Environmental Liability Directive provides detailed provisions on the measures to be taken in case of events causing local environmental damage. Thus the default option for imposing corrective measures is to leave them to the Environmental Liability Directive. Any leakage incident that caused local environmental damage would be caught by the ELD and appropriate measures would be required. (156) However, there is in theory the possibility that an event would cause global environmental damage (emissions to the atmosphere) without causing local environmental damage that would trigger ELD requirements (for instance, the contamination and damage to the local environment may fall below a de minimis threshold even though the cumulative quantity of leakage to the atmosphere was still significant). The Commission has thus decided to include in the enabling legal framework for CO2 storage 1
Accompanying document to the Proposal for a Directive of the European Parliament and of the Council on the geological storage of carbon dioxide, Impact Assessment, 23.1.2008. 2 additional provisions on corrective measures to be taken in the case of leakage. These are modelled on those of the ELD but apply without prejudice to the ELD requirements.” As currently drafted, the Directive relies on the following external mechanisms to address contingent liabilities for leakage: i) strict liability on the operator under the Environmental Liability Directive (ELD) where the leakage causes significant local environmental damage (which is actually very restrictive and only encompasses very serious damage to certain protected species and natural habitats, some water bodies and land only if there is a threat to human health); ii) financial liability to buy carbon credits under the EU‐ETS at the prevailing market rate, where CO2 leaks into the atmosphere or sea (Article 19 of the draft Directive requires financial security to cover this liability); and iii) liability in tort (negligence) where the leak causes property or health damage to a third party. These mechanisms are external to the Directive and have considerable weaknesses in providing a comprehensive regime to address liability for damage. Environmental Liability Directive (Directive 2004/35/EC) The ELD establishes an overarching framework for environmental liability within the EU. It is based on the “polluter pays” principle, holding the polluter to account and requiring it to remediate the damage. In the context of this Directive, it is also a strict liability regime, so operators are liable to remediate regardless of whether or not they are at fault (subject to certain exceptions, see below). The ELD covers three categories of environmental damage: i) damage that has significant adverse effects on biodiversity, protected at EU and in some cases, at national level; ii) damage that significantly adversely affects water bodies covered by the Water Framework Directive (Directive 2000/60/EC); and iii) land contamination that creates a significant risk of human health being adversely affected. The principal limitation of applying the ELD to liability for CO2 leakage is that it does not cover instances where atmospheric releases of CO2 affect human health in the absence of environmental damage, as it is intended to prevent and restore damage to the environment, not to human health. Further, the fact that environmental damage itself is defined in such a restrictive way, is severely limiting. The ELD only covers very serious damage, it does not apply to biodiversity that is not protected under EU legislation, it does not cover damage to small water bodies and it does not cover soil contamination unless there is a danger to human health. In contrast, parts of the proposed Directive make it clear that both harm to human health and the environment in general are relevant considerations. For instance, Article 4(2) of 3 the proposed Directive requires that “no significant environment or health impacts are likely to occur” in relation to selection of storage sites. This wording is similar in Article 13(1)(d) which states that the purpose of monitoring is to detect “significant adverse effects for the surrounding environment, human populations, or users of the surrounding biosphere”. Since the ELD relates to very restricted types of local environmental damage only, there is currently a gap in the liability regime for damage caused to human health and to the environment in general. This is a major risk where CO2 is released onshore. The effect is that in the event of a leakage from a storage site causing damage to human health or the general environment, there could be no legal liability under EU legislation. The regime anticipates that claims for personal injury or harm to public health will be brought in tort (negligence). However, actions in tort do not generally impose strict liability. Rather they are based on fault, making it necessary to show for example that the operator failed to exercise reasonable care in managing the storage site which resulted in damage from CO2 leakage, and in practice this type of case could be very difficult to establish. The omission of liability for harm to human health from the Directive is a crucial gap. Another implication of applying the ELD to leakage of CO2 is that it does not impose liability if more than 30 years have passed since the emission, event or incident resulting in the damage occurred. Given the long timeframes for CO2 storage liability to occur, a 30 year longstop date may prove to be inadequate. Further, the ELD does not provide for compulsory financial security by the operator, nor does it require public authorities to remedy environmental damage where the operator is not financially able to do so. Also, the ELD provides the possibility, while being transposed nationally, to exempt operators from bearing the costs of remedial action if they have complied with certain operating permits or if they have used state of the art technology and knowledge. There will also be differences in the way the ELD is implemented across Member States, resulting in a dramatically varied European environmental liability regime between countries, and depending on how Member States have implemented the ELD, more than one competent authority may be involved, increasing the administrative complexity . This may influence CO2 storage operators to operate sites in Member States with weaker liability rules. For the reasons described above, the ELD is not a comprehensive regime to address liability for leaked CO2. Recommended approach A more coherent approach would be to address remediation/ mitigation through the permitting regime established by the Directive by making it a condition of the relevant permit that any irregularity or leakage which could cause damage to the environment or human health, would need to be stopped immediately and any damage caused would need to be remedied, and if it could not be fully remedied, mitigatory and compensatory measures should be taken. This would impose a much stronger duty on operators to take action to prevent and restore relevant damage. It would also remove the uncertainty of bringing actions under the ELD and tort, as these would have limited application in the CCS liability 4 regime 2. In bringing obligations to remedy/ mitigate damage to human health or the environment under corrective measures, financial security required under the permit would also apply to this type of liability. Penalties under Article 26 of the proposed Directive for non‐implementation of corrective measures by the operator or competent authority would also extend to a failure to take remediation/ mitigation steps. Further, the defences of compliance with a permit and use of state of the art technology would not be relevant, as the obligation to remediate would fall under the permit rather than the ELD. This would neatly bring damage to the environment and human health within the CCS regulatory regime and promote public confidence and careful management of the storage complex. This approach would be complementary to the underlying ELD liability which would have effective application in certain cases, for example, damage to species and natural habitats protected at EU level. Proposed Amendments: Recital 23, Article 3(17), Article 16(1) ClientEarth’s proposed amendments to the draft Directive are shown below. Recital 23 Provisions are required covering liability for damage to the local environment and climate damage, resulting from any failure of permanent containment. Liability for environmental damage (damage to protected species and natural habitats, water and land) is regulated by Directive 2004/35/EC of the European Parliament and of the Council of 21 April 2004 on environmental liability with regard to the prevention and remedying of environmental damage, which should be applied to the operation of storage sites pursuant to the present Directive. Liability for climate damage as a result of leakages is covered by the inclusion of storage sites in Directive 2003/87/EC of the European Parliament and of the Council of 13 October 2003 establishing a scheme for greenhouse gas emission allowance trading within the Community and amending Council Directive 96/61/EC [14], which requires surrender of emissions trading allowances for any leaked emissions. In addition, this Directive should establish the obligation on the operator to take corrective measures in case of significant irregularities or leakages on the basis of a corrective measures plan submitted to and approved by the competent national authority. Corrective measures should also include measures to remedy or mitigate any negative impact on the environment or human health. Where the operator fails to take the necessary corrective measures, these measures should be taken by the competent authority, which should recover the costs from the operator. Article 3(17) 2
This view is also supported by the EEB in their “Position paper and amendments to proposed Carbon Capture and Storage Directive”, May 2008. The paper states that “The Directive should ensure that operators can be made responsible for restoration or compensation for human and environmental damage due to leakages, and that companies also have to guarantee financial security for these damages”. 5 'corrective measures' means any measures that must be taken to correct significant irregularities or to close leakages in order to prevent and/or minimise halt [inserted by Amendment 44] the release of CO2 from the storage complex and, measures that must be taken to remedy, mitigate or compensate for any damage or adverse effect on the environment or human health; Article 16(1) Member States shall ensure that in case of significant irregularities or leakages, the operator immediately notifies the competent authority and takes the necessary corrective measures, including measures to remedy or mitigate any negative impact on the environment or human health. Reject Amendment 96 voted in the Environment Committee on 7 October 2008. Amendment to Article 18(6) We note that this wider definition of corrective measures is suggested in Amendment 108 of Article 18(6) which relates to recovery of costs from the operator after responsibility is transferred to the competent authority (relevant words highlighted in bold below). However, this wording is not reflected in the Article 3(17) definition, suggesting a conflict in the definition. “There shall be no recovery of costs incurred from the former operator after the transfer of responsibility to the competent authority pursuant to paragraphs 1 to 4. This shall not apply in cases where it is established that, due to the fault or negligence of the operator, or through an act of deliberate and wilful falsification, the evidence provided for the purposes of paragraph 1 had been based on inaccurate or incomplete information. In this case the operator shall remain liable for the costs of corrective measures to remedy, mitigate and compensate any damage to human health or the environment. In other cases, the costs may be covered by the fund established under Article 19a, financed by operators' contributions and managed by the competent authority.” The amendments proposed above would make the provisions of the Directive consistent. ClientEarth October 2008 Reference: ClientEarth (2008) Laying the Regulatory Foundations for Carbon Capture and Storage in the EU – A Legal Review of the Draft European Directive on Geological Storage of Carbon Dioxide. Available at www.clientearth.org 6 For further information contact: Marta Ballesteros t +32 (0)2 340 09 67 e [email protected] w clientearth.org Brussels Bd. Emile Jacqmain 90 Bruxelles 1000 Karla Hill t +44 (0)207 749 5972 e [email protected] London 3 Chapel Place London EC2A 3DQ ClientEarth is a company limited by guarantee, registered in England and Wales, company number 02863827, registered charity number 1053988, registered office 2‐6 Cannon Street, London EC4M 6YH. www.clientearth.org 7