The Insurability of the CO2 Leakage Liability
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Date
2024-08-08
Publication Type
Master Thesis
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yes
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Abstract
Geological storage of CO2 has been employed as a climate mitigation technology
for more than 25 years, and in the EU there has been a comprehensive regulatory
regime in place since 2009. Despite this, there are as yet no documented examples
of the CO2 leakage liability being commercially insured in the EU. This raises
the question of whether there are fundamental insurability barriers facing the CO2
leakage liability that could be holding back the CO2 storage method’s growth. In
addition, the planned integration of removals, some of which rely on geological storage,
into the EU’s climate policy regime poses the question of whether and how
insurance could play a role in safeguarding carbon storage integrity. This thesis
takes the insurability criteria of Berliner (1982) as a framework and undertakes a
systematic comparison of the insurability of the CO2 leakage liability with analogues
from established insurance markets, namely upstream oil & gas insurance and pollution
insurance. It is found that there are no fundamental barriers to insurability
facing the CO2 leakage liability, but with challenges emerging from the regulatory
environment. In particular, the combination of the low frequency of loss occurrence
with the EU ETS price (EUA) volatility presents a challenge to insurability. An
industry-wide in-kind reinsurance pool that holds EUAs as reserves could mitigate
this challenge. More broadly, insurance can contribute best to the policy goals of
scaling up geological storage and integrating removals into EU climate policy when
its risk-pricing function is supported.
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published
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Examiner : Steffen, Bjarne
Examiner: McCaughey, Jamie W
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ETH Zurich
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09576 - Bresch, David Niklaus / Bresch, David Niklaus