Risk Allocation and Regulation for CO2 Infrastructure

The UK has adopted a heavily regulated asset base (RAB) model for its CO2 transport and storage (T&S) infrastructure to mitigate 'cross-chain risks' and attract investment. Under the Transport and Storage Regulatory Investment (TRI) model, private Transport and Storage Companies (T&SCo) operate networks under licenses from Ofgem, with revenues derived from user tariffs and supported by a Revenue Support Agreement (RSA) and a Government Support Package (GSP) for high-impact risks. This contrasts with the Netherlands and Denmark, where infrastructure is more commercially driven or involves direct state equity stakes in storage. The UK intends to transition toward a more competitive market for storage after 2035, while onshore transport is expected to remain regulated.

• The UK's Transport and Storage Regulatory Investment (TRI) model utilizes a regulated asset base (RAB) approach to manage the high capital costs and 'cross-chain risks' of CO2 infrastructure, where risks are shared between the state and private developers.
• The Economic Regulatory Regime (ERR), administered by Ofgem, determines the 'allowed revenue' for a Transport and Storage Company (T&SCo) based on its Regulated Asset Value (RAV), operational costs, and a weighted average cost of capital (WACC).
• User tariffs for the CO2 network consist of a capacity charge for fixed capital, a volumetric charge for variable operational costs, and a residual charge to cover any remaining revenue shortfall, with tariffs standardized regardless of the user's location.
• Financial safety nets include the Revenue Support Agreement (RSA), which covers temporary shortfalls between allowed and actual revenue, and the Government Support Package (GSP), which acts as a backstop for 'showstopper' events like stranded assets or significant CO2 leakage.

APA

Lockwood, T. (2024). Risk Allocation and Regulation for CO2 Infrastructure. Clean Air Task Force. https://www.catf.us/resource/risk-allocation-regulation-co2-infrastructure/

Chicago

Lockwood, Toby. Risk Allocation and Regulation for CO2 Infrastructure. Clean Air Task Force, 2024. https://www.catf.us/resource/risk-allocation-regulation-co2-infrastructure/.

Wikipedia

{{cite report |last1=Lockwood |first1=Toby |title=Risk Allocation and Regulation for CO2 Infrastructure |publisher=Clean Air Task Force |date=14 March 2024 |url=https://www.catf.us/resource/risk-allocation-regulation-co2-infrastructure/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{lockwood2024risk, author = {Lockwood, Toby}, title = {{Risk Allocation and Regulation for CO2 Infrastructure}}, institution = {Clean Air Task Force}, year = {2024}, month = mar, url = {https://www.catf.us/resource/risk-allocation-regulation-co2-infrastructure/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }