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Carbon Capture and Storage

Carbon Capture and Storage (CCS) is a multi-step process to reduce CO₂ emissions. It typically involves capturing CO₂ from various industrial sources like power plants or cement works, transporting it via pipelines or ships, and storing it underground in geological formations. Through this final storage, CCS enables a broad range of hard-to-abate sectors to reduce the carbon footprint of their products.

  1. Emitters across various industries capture their CO₂ and pay a tariff to a third party to remove it. Capture projects are seeing the most traction in geographies that have formalised commitments to achieve net-zero, and where government incentives (or costs to vent to atmosphere) have been set to help achieve this.
  2. A transportation company will aggregate CO₂ from different emitters within their infrastructure (e.g. pipelines, compression, temporary storage), before it is passed on for the final geological storage.
  3. The geological storage is the final part of the chain. The storage sites are typically operated by experienced exploration and production entities.

What are the risks?

While CCS projects present opportunities, they also bring new risks and new financial security requirements. The infographic below illustrates a typical commercial CCS value chain and lists some of the risks and solutions at various stages.

Marsh Solutions

The interconnected but separate parties within the removal chain adds complexity to the contracting regime that is in its early phase of development.  Marsh can help you evaluate your existing insurance program against those risks identified, and use that knowledge to unlock valuable, laser-focused solutions.

We consider three specific loss scenarios below, illustrating where traditional risk transfer solutions may need to be expanded to cater for certain risks.

Key risks

A major risk pertaining to CCS is underperformance of the carbon capture technology when deployed at scale.

Depending on the nature of the underperformance it can lead to significant impacts on revenue. Cost implications can be caused by:

  • Continued payment obligations for Transportation & Storage service during outage or shortfall in carbon output.
  • Financial implications on the price of the manufactured product e.g. cement that fails to meet required CO₂ emission thresholds.
  • Continued debt service.
  • Required equipment modifications / replacement due to technology underperformance.

Solutions

Conventional insurance:

  • Business Interruption, but only in the case of physical damage causing loss of revenue.

Innovation:

  • Technology performance warranty
  • Carbon credit invalidation or under-delivery

Key risks

The blending of CO₂ streams from different industries creates a challenge for the transport and storage infrastructure they share. Typically there is a wide variance in CO₂ concentration which can be accompanied by a range of impurities.

Alongside the physical risks posed by inconsistent CO₂ streams, there is a serious economic impact even in the event the CO₂ hasn’t caused physical damage: once revealed to be off-spec, the entire system may need to be vented to avoid causing damage up the chain. Depending on the geography of the project, this could result in:

  • Financial losses associated with ETS allowances and/or returning of upfront tax credits
  • Costs of cleaning and remedying the capture facility
  • Costs from redesign of technology and control protocols 
  • Environmental liability costs and obligations
  • Reductions in the various emitters’ product value (e.g. cement or power) when it is no longer zero-carbon.

Solutions

Conventional insurance (in the case of physical damage):

  • Property Damage and associated Business Interruption insurance
  • Tax or Carbon Credit Indemnification
  • Third Party and Environmental Liability insurance

Where there is no damage, Marsh can work with you to mitigate additional costs with solutions such as:

  • Environmental Impairment Liability 
  • Performance guarantees

In partnership with HDI Global, Marsh has launched a new insurance product designed to cover this specific risk in interdependent CCS value chains.

This innovative solution can provide:

  • Coverage for defense costs associated with litigation, which may be commenced before the party responsible for contributing off-spec CO2 is identified.

For an insured found to have contributed off-spec CO2, coverage for:

a. Carbon credits losses of co-emitters.
b. Other financial losses incurred by co-emitters.
c. Remediation and decontamination costs for the facilities involved.

Our Engineers and Advisory experts can support your business with risk mitigation measures such as reliable metering and sampling at appropriate locations. 

Key risks

Another potential risk scenario is CO₂ leaking from the geological storage complex, which can cause financial loss and introduce further complications for Operators:

  • Loss of revenue until the Operator is able to recommence injection
  • Financial losses associated with ETS allowances (according to geography)
  • Cost of corrective measures
  • Associated third party liabilities (legal or contractual)

The liability for the storage site (held by the Operator) extends beyond the operational phase of the store, often extending to 20+ years post closure.

Solutions

Where conventional insurance cannot cover the risks, innovation is needed:

  • Bespoke Leakage Event trigger. Marsh’s non-damage trigger provides compensation for geological CO₂ leakage without requiring physical damage to have occurred, covering corrective measures, the cost of acquiring carbon credits, and associated loss of tariff whilst unable to accept CO₂ from customers.
  • Contingent Business Interruption insurance for Emitters reliant on a single storage site.

 

Our services to help you navigate the CCS ecosystem

No matter your business’ role in the value chain, insurance solutions can play a critical role in managing the multifaceted risks associated with CCS projects by addressing technical, financial, and environmental challenges. Our placement specialists advise on insurance policies that can help your business mitigate risks along the entire CCS lifecycle and provide financial security and regulatory and stakeholder confidence.

Onshore & offshore construction

Compliance credit indemnities

Business interruption (including contingent) insurance

Operational and site-specific risks including geological leakage

Counterparty and contractual risks

Environmental impairment liability insurance

Non-damage triggers for CO₂ leakage

Carbon credit delivery and invalidation

Lenders due diligence

Risk engineering

Marsh can help you navigate the CCS market

As the drive to decarbonise accelerates, carbon capture and storage (CCS) has been identified as a vital tool in supporting the global transition to a lower-carbon economy.

Carbon capture and storage expertise

Our dedicated team of in-house specialists have an in depth understanding of the CCS market and a track record of building new solutions for the nuanced risks missed by conventional products. We are well-positioned to identify your project risk, map the extent to which your existing insurances are effective, and provide thoughtful and competitive insurance solutions to fill the gaps.

Global reach, local solutions

As the world’s largest insurance broker and risk advisor, our global footprint combined with our local expertise allows us to drive change. With placement specialists and risk engineers in every region, our global reach gives us a powerful perspective on the emerging CCS market and associated risks.

 

Unrivaled breadth of expertise

At Marsh McLennan, we bring a connected approach to our work within the carbon markets. Our modelling, advisory, actuarial, and analytical work is enhanced by bringing together climate experts from each of our global businesses – Marsh, Guy Carpenter, Mercer, and Oliver Wyman.

Talk to us

For more information about CCS market, its mechanics, and the solutions available to the risks it poses, fill out the form and connect with a Marsh specialist.

Fill out the form

To understand our full suite of capabilities, please contact:

Hannah Jennings

Hannah Jennings

Senior Vice President and CCS Working Group Lead, Energy and Power

  • United Kingdom

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Everett Hansen

Vice President & US Nuclear Energy Leader, US Energy & Power

  • United States

Oyvind Berg

Øyvind Berg

Head of Power & Renewable Energy, Norway

  • Norway

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Brad Vescarelli

National Energy Industry Leader

  • Canada

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Jane Smith

Head of Energy and Power, Pacific

  • Australia

Alex Cohen

Alex Cohen

CCS Pacific

  • Australia

Vlad Vorobet

Vlad Vorobet

Onshore Construction Carbon Capture

  • United Kingdom

Vimal Patel

Vimal Patel

Offshore Construction CO2 Transport and Storage

  • United Kingdom

Global CCS Risk Engineers

Prakash Patel

Prakash Patel

Global Hydrogen Risk Engineering Leader

  • United Kingdom

Lauren Kassapian

Lauren Kassapian

CO2 Transport & Storage

  • United Kingdom

Lawrence Walters

Lawrence Walters

Lead Business Interruption Risk Engineer

  • United Kingdom

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This publication is not intended to be taken as advice regarding any individual situation and should not be relied upon as such. The information contained herein is based on sources we believe reliable, but we make no representation or warranty as to its accuracy. Marsh shall have no obligation to update this publication and shall have no liability to you or any other party arising out of this publication or any matter contained herein. Any statements concerning actuarial, tax, accounting, or legal matters are based solely on our experience as insurance brokers and risk consultants and are not to be relied upon as actuarial, accounting, tax, or legal advice, for which you should consult your own professional advisors. Any modelling, analytics, or projections are subject to inherent uncertainty, and any analysis could be materially affected if any underlying assumptions, conditions, information, or factors are inaccurate or incomplete or should change.

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