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The Carbon Takeback Obligation—A Proposal for Reaching Net Zero

Researchers from Oxford Net Zero, a University of Oxford interdisciplinary research initiative dedicated to climate neutrality, and other climate-focused organizations, have proposed a policy mechanism to combat climate change. The Carbon Takeback Obligation, which is gaining traction across Europe, would require fossil fuel producers to permanently sequester a percentage of the carbon dioxide ("CO2") generated by their products.

Background

The Paris Agreement establishes a global framework to combat climate change by limiting global warming to below 2°C above pre-industrial levels and pursuing efforts to further limit that number to 1.5°C. However, to successfully limit the increase of global warming at this level, greenhouse gas emissions need to be reduced to net zero by 2050. One critical technology in reducing greenhouse gas emissions is Carbon Capture and Storage ("CCS"). CCS captures CO2 at the source by separating COfrom other gases and compressing it; the compressed COis then injected deep underground, safely sequestering the COand preventing its entry into the atmosphere. Ideally, CCS would be utilized to capture and store one ton of CO2 for every ton generated. 

The Proposal

Extractors and importers of fossil fuels would be obligated to permanently store, or "take back," a percentage of the CO2 generated by the products they sell. The Carbon Takeback Obligation would increase incrementally over time. Oxford Net Zero suggests the obligation could start at 1% in 2023 before increasing to 10% in 2030 and reaching 100%, meaning net zero, by 2050. Proponents of this idea believe it is a viable pathway towards net zero that will accelerate adoption of CCS by key industry players. 

Increased Traction

The idea was proposed as an amendment to the UK's 2015 energy bill but was ultimately rejected due to opposition from lobby groups. The suggestion of a Carbon Takeback Obligation has been recently considered in a UK government consultation on engineered greenhouse gas removals. The consultation closed on September 27, 2022. At the time of writing this article, the findings have yet to be published; one suggestion considered was the development of a compliance market whereby emitters from certain sectors would be required to purchase negative emission credits to compensate for their remaining emissions. Failing to either comply with their takeback obligation or to purchase sufficient credits would cause emitters to incur a penalty for each remaining ton of CO2. Enforcing the "polluter pays" principle in this way would, according to supporters, encourage competition, drive efficiency, and relieve the burden on the taxpayer.

The Carbon Takeback Obligation is certainly not without its critics. Some argue that it is simply a license to continue extracting fossil fuels rather than investing in renewable alternatives. Others argue that the hurdles to implementing such a scheme are too great and that the associated costs would ultimately be borne by the consumers.

Support for a Carbon Takeback Obligation continues to gain traction, however. The Dutch government recently commissioned a feasibility report to understand the viability of imposing such an obligation on the Dutch oil and gas sector. And in the UK, short-lived prime minister Liz Truss confirmed the government's intention to issue further licenses for oil and gas extraction in the North Sea, and the new prime minister, Rishi Sunak, has not yet reversed this. Without accelerating the adoption of CCS, it may be difficult for the government to reconcile increased fossil fuel extraction with its commitment to achieving net zero by 2050.

More generally, the concept of CCS is experiencing a fresh wave of political and industrial support. ExxonMobil recently proposed a large-scale CCS project in the Houston Ship Channel and the United States Congress is set to invest billions of dollars in CCS through tax incentives contained in the Inflation Reduction Act. A Carbon Takeback Obligation may further push CCS into the foreground. 

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