Handbook for CCS Carbon Credits
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

Published March 2023

Acknowledgements

This handbook is based on the contents and results of the international workshop on “Global Carbon Markets and
CCS: Towards ASEAN decarbonization” hosted by the Ministry of Economy, Trade and Industry of Japan; Japan
Organization for Metals and Energy Security (JOGMEC); and International Emission Trading Association (IETA)
held in January 2023. It was developed under the leadership of JOGMEC with support of the Mitsubishi ResearchInstitute.

The handbook was developed by Sakura Nishioka, Masumi Takanashi, and Yoshifumi Suehiro from JOGMEC, aswell as Tetsuya Nomoto, Kikuko Shinchi, Ha Vu, Noriko Kimura, and Nanako Otani from Mitsubishi ResearchInstitute, Inc.

We would like to thank and acknowledge the following speakers for their review: Dirk Forrister (IETA), Noora Al
Amer (Global CCS Institute), Kensuke Shiomi (METI), Matthias Krey (Perspective Climate Group), Maris
Densmore (American Carbon Registry), Gerald Ouellette (Verra), Christiaan Gevers Deynoot (CCS+ Initiative),
Elise Roc (Northern Lights JV), and Patrick Bürgi (South Pole).

Special thanks also go to the entire workshop audience for their active participation.

JOGMEC warmly thanks the Asia CCUS Network for supporting the workshop and its strong partnership.

Published by JOGMEC
2-10-1，Toranomon
Minato-ku, Tokyo 1050001, Japan© Japan Organization for Metals and Energy Security (JOGMEC)
March 2023

Cover design: Public Relations Division, JOGMEC/Keisuke Oki

Handbook for CCS Carbon Credits
Workshop report of “Global Carbon Market and CCS:Towards ASEAN Decarbonization”

Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

Preface
As of February 2023, the international community faces the challenge of securing energy access while
experiencing a rapidly growing world population and geopolitical instability. Simultaneously, theinternational community is accelerating its efforts to address climate change issues with the aim of building
a carbon-neutral society through cooperation and collaboration under the framework of the Paris Agreement,
which is essential for sustainable growth.
In building a sustainable carbon-neutral society, the energy sector has two important roles: the provisionof a stable supply of energy to support people’s daily lives and industrial activities, and mitigation of climatechange. As a governmental organization that supports the stable supply of energy and natural resources inJapan, we at the Japan Organization for Metals and Energy Security (JOGMEC) recognize the criticalchallenges that climate change poses to our society and are committed to achieving both a stable energy
supply and climate change mitigation 1.
Energy transitions to achieve carbon neutrality by 2050 require a phased approach that considers the socialand economic impacts. The impact of energy transition on people’s lives (transportation, housing
environment, etc.) is wide-ranging, especially in countries belonging to the Association of Southeast Asian
Nations (ASEAN). Fossil fuels that can generate large amounts of electricity in a stable manner will remain
important for social development, including energy access and industrial development, and for humandevelopment, including human rights, poverty reduction, and education. Therefore, there is an urgent needfor the deployment of carbon dioxide capture and storage (CCS) to reduce greenhouse gas (GHG) emissions
associated with fossil fuel development and thermal power generation.
However, there are many issues to be addressed for the deployment of CCS, and countries are currently
sharing knowledge and discussing issues related to its legal development, costs, technology, and social
acceptance. In particular, it is essential to improve economic efficiency to operate CCS sustainably. As CO2
sequestration alone does not generate monetary value, it is necessary to recognize the value of CO2 reduction
by CCS projects, to convert the CO2 reduction value into carbon credits, and to monetize the CCS projects
to improve the economic efficiency of CCS projects and realize their sustainable operation. Currently, most
CCS projects in the commercial phase are either carbon dioxide enhanced oil recovery (CO2EOR) projects,
which generate revenue from increased crude oil production, or projects in which a large amount ofgovernment subsidies have been invested. Therefore, for the deployment of CCS, it is important to realize
CCS carbon crediting, especially in countries with small macroeconomic scales and limited public funding.
1

In April 2021, JOGMEC published the “JOGMEC Carbon Neutral Initiative” *) and clarified its three basic policies:“Strengthening efforts for clean resources and energy,” “Strengthening efforts for decarbonized fuels and technology,” and“Contributing to the development of systems necessary for decarbonization.” On November 18, 2022, with the enforcement of
the revised “Japan Oil, Gas and Metals National Corporation Act” (JOGMEC Act), the JOGMEC added risk money support
schemes for initiatives such as the production and storage of hydrogen and ammonia, CCS, and geological structure survey foroffshore wind power generation, to accelerate its efforts to contribute to the realization of a carbon-neutral society.
Simultaneously, the organization’s name was changed to “Japan Organization for Metals and Energy Security” to promotevarious initiatives.
*) JOGMEC Carbon Neutral Initiative https://www.jogmec.go.jp/english/about/about_jogmec_01_000003.html

iHandbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

In the current situation, the number of carbon credit schemes that can generate credits from CCS projects
is limited. However, there are some positive updates; in the 2020s, the global momentum for CCS creditingis increasing, with the launch of the CCS+ Initiative (see 3.3.4), a multi-stakeholder initiative to develop amethodology for crediting CCS projects, and the establishment of the International Emissions Trading
Association’s (IETA) “High Level Criteria for crediting carbon geostorage” (see 3.1.2). Moreover, crosssectoral global cooperation and collaboration for CCS deployment, including the establishment of the Asia
CCUS Network, is growing.
To build on this momentum and share knowledge on CCS carbon crediting, JOGMEC hosted theinternational workshop “Global Carbon Market and CCS: Towards ASEAN Decarbonization”, with theparticipation of international front-runners in this area. The workshop was organized by the Ministry of
Economy, Trade and Industry (METI), JOGMEC, and IETA, and supported by the Asia CCUS network.
Mitsubishi Research Institute, Inc., served as the secretariat. To the best of our knowledge, this initiative isthe first workshop to compile such information comprehensively, and no guidance documents exist in thisfield. Therefore, we decided to comprehensively summarize the latest information on CCS carbon creditingin this handbook, focusing on workshop content. JOGMEC expects this handbook to be used by carboncredit registries, developers, CCS project developers and policy makers in ASEAN and other regions
worldwide.
This handbook, written by JOGMEC and Mitsubishi Research Institute and reviewed by the presenters at
the workshop, has been developed based on the content of the workshop presentations and is designed toprovide an understanding of the current status of the carbon market and CCS crediting. The first part
(Chapters 1–3) describes the overall trend in the carbon market, important discussions, and carbon-credit
schemes around the world. The second part (Chapters 4 and 5) describes the carbon credit lifecycle,
challenges, and prospects for CCS carbon credits, and Chapter 6 provides a comment summary andconsiderations based on the findings shared at the workshop.
Please note that this document is based on information as of January 2023. This is a rapidly evolving field;
therefore, please check the updated information when using it as a reference for carbon crediting scheme
development.

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Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

Table of Contents
1. Introduction ............................................................................................................ 1
1.1
1.2

How does CCS reduce global warming? ........................................................................1
Objectives of this handbook ...........................................................................................2

2. Carbon Market and CCS ....................................................................................... 4
2.1
2.2
2.3
2.4
2.5

Introduction to the carbon markets .................................................................................4
Overall trends in carbon markets....................................................................................4
CCS discussion at COP .................................................................................................6
Landscape and potential impact of Article 6 on the CCS sector .....................................7
Issues and expected measures towards CCS credits ....................................................8

3. CCS credit schemes around the world ................................................................ 10
3.1

3.2

3.3

Overview ......................................................................................................................10
3.1.1 CCS credit schemes around the world .............................................................10
3.1.2 IETA’s High-Level Criteria for Carbon Geostorage Activities .............................14
Country/ Regional Carbon Market ................................................................................15
3.2.1 Alberta Emission Offset Scheme (AEOS) .........................................................15
3.2.2 Emission Reduction Fund (ERF) ......................................................................16
3.2.3 Low Carbon Fuel Standard (LCFS) ..................................................................16
3.2.4 Joint Crediting Mechanism (JCM) .....................................................................17
Voluntary Carbon Market ..............................................................................................193.3.1 American Carbon Registry (ACR) .....................................................................19
3.3.2 Verified Carbon Standard..................................................................................19
3.3.3 Puro.earth .........................................................................................................21
3.3.4 CCS+ Initiative ..................................................................................................21

4. Introduction of financing case .............................................................................. 24
4.1
4.2
4.3

How carbon credit increases the economy of CCS projects .........................................24
Case of QUEST CCS ...................................................................................................24
Case of Northern Lights ...............................................................................................26

5. Prospect for CCS in carbon market ..................................................................... 27
5.1
5.2
5.3

Distinguishing between reduction and removal ............................................................27
Prospects for compliance and voluntary carbon credit markets ...................................28
Possibility of SCOPE 3 offsetting .................................................................................30

6. Discussion ........................................................................................................... 31

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Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

6.1
6.2

Comment summary and considerations based on the findings shared at the workshop.....................................................................................................................................31
Way forward .................................................................................................................32iv

Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

List of Figures
Figure 1-1 Positioning of CCUS and CDR to achieve net zero .........................................................1
Figure 1-2 CCUS by sector and emissions source in the NZE ..........................................................2
Figure 1-3 Opportunity factors for CCS in ASEAN regions ................................................................3
Figure 2-1 Overview of the carbon market ........................................................................................4
Figure 2-2 Map of national and subnational crediting mechanisms ...................................................5
Figure 2-3 Global volume of issuances by crediting mechanism category ........................................6
Figure 2-4 Voluntary carbon market growth ......................................................................................6
Figure 2-5 Current climate negotiation about CCS in COP27 ...........................................................7
Figure 2-6 Article 6 Landscape and CCS ..........................................................................................8
Figure 3-1 Overview of CCS credit scheme ....................................................................................10
Figure 3-2 History of CCS in carbon credit schemes....................................................................... 11
Figure 3-3 Concept of High-Level Criteria for Carbon Geostorage Activities...................................14
Figure 3-4 10 key safeguards of High-Level Criteria for Carbon Geostorage Activities ...................15
Figure 3-5 Overview of project type under LCFS ............................................................................17
Figure 3-6 Overview of CCS rules & guidelines under JCM ............................................................18
Figure 3-7 Concept of credit reserve in JCM registry ......................................................................18
Figure 3-8 Overview of EOR methodology under ACR ...................................................................19
Figure 3-9 Requirements for Geologic Carbon Storage Projects ....................................................20
Figure 3-10 Requirements for Geologic Carbon Storage Projects ..................................................20
Figure 3-11 Membership of CCS+ initiative .....................................................................................22
Figure 3-12 CCS+ Initiative's modular approach .............................................................................23
Figure 4-1 Carbon credits and public funding for CCS ....................................................................24
Figure 4-2 Concept of levarage to sustain CO2 value chain ...........................................................26
Figure 4-3 Creat a certified product for Cabon Removal Credit by Northern Lights ........................26
Figure 5-1 Concept of distinguishing between reductions and removals.........................................27
Figure 5-2 Global CO2 emissions and carbon sequestration in 2030 and 2050 .............................28
Figure 5-3 Hypothesis of voluntary carbon credit market ................................................................29
Figure 5-4 Hypothesis of function of compliance market for CCUS and CDR industries.................29
Figure 5-5 Accounting requirement for inset credits ........................................................................30v

Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

List of Tables
Table 2-1 Positioning of carbon credit market segments and examples ............................................4
Table 3-1 CCS requirements specified under the CDM ...................................................................12
Table 3-2 Overview of CCS in key carbon credit schemes ..............................................................13
Table 3-3 Methodology under Puro.earth ........................................................................................21
Table 4-1 Revenue in the QUEST Project .......................................................................................25vi

Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

List of Abbreviations
This report uses the following abbreviations.
In this report

Meaning

ACCU

Australia Carbon Credit Unit

ACR

American Carbon Registry

AEOS

Alberta Emission Offset Scheme

AETI

Asia Energy Transition Initiative

ASEAN

Association of Southeast Asian Nations

AZEC

Asia Zero Emissions Community

BECCS

Bioenergy with Carbon Capture and Storage

CAR

Climate Action Reserve

CCS

Carbon Capture and Storage

CCU

Carbon Capture and Utilization

CCUS

Carbon Capture, Utilization and Storage

CDM

Clean Development Mechanism

CDR

Carbon Dioxide Removal

CEF

Connecting Europe Facility

CER

Certified Emission Reduction

CO2

Carbon Dioxide

COP

Conference of the Parties

COP/MOP

Conference of the Parties serving as the meeting of the Parties to the Kyoto Protocol

CORSIA

Carbon Offsetting and Reduction Scheme for International Aviation

CTCN

Climate Technology Centre and Network

DAC

Direct Air Capture

DACCS

Direct Air Capture with Carbon Storage

E&P

Exploration and Production

EGR

Enhanced Gas Recovery

EOR

Enhanced Oil Recovery

EPA

Environmental Protection Agency

EPC

Emissions Performance Credit

ERF

Emission Reduction FundETS

Emissions Trading Scheme

EU

European Union

GCCSI

Global CCS Institute

GCS

Geologic Carbon Storagevii

Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

GHG

Greenhouse Gas

GST

Global Stocktake

GX

Green Transformation

IEA

International Energy Agency

IETA

International Emission Trading Association

IFRS

International Financial Reporting Standards

IPCC

Intergovernmental Panel on Climate Change

ISSB

International Sustainability Standards Board

ITMOInternationally Transferred Mitigation Outcomes

JCM

Joint Crediting Mechanism

JOGMECJapan Organization for Metals and Energy Security

LCFS

Low Carbon Fuel Standard

METI

Ministry of Economy, Trade and Industry

MRI

Mitsubishi Research Institute

MRV

Measurement, Reporting and Verification

NDC

Nationally Determined Contribution

NGERS

National Greenhouse Gas and Energy Reporting System

NGO

Non-governmental Organization

NPRT

Non-permanent Risk Tool

PJ

Project

PRF

Powering the Regions Fund

SB

Supervisory Body

SDGs

Sustainable Development Goals

SHK

Sokutei, Hōkoku, Kenshō (Japanese for “Measurement, Reporting and Verification”)

TCG

The Climate Group

TEC

Technology Executive Committee

TIER

Technology Innovation and Emissions Reduction

TSVCM

Taskforce on Scaling Voluntary Carbon Markets

UN

United Nations

UNFCCC

United Nations Framework Convention on Climate Change

US

United States

VCM

Voluntary Carbon Market

VCS

Verified Carbon Standard

VER

Verified Emission Reduction

WBCSD

World Business Council for Sustainable Development

WEF

World Economic Forumviii

Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

1. Introduction
1.1 How does CCS reduce global warming?
Rapid progress in carbon neutrality worldwide has led to expectations for the earliest possible
implementation of carbon capture utilization and storage (CCUS), which was once considered a technology
for the future. CCUS is a generic term for two technologies: carbon dioxide capture and storage, which is atechnology to separate, capture, inject deep underground, remove and store emitted CO2; and carbon dioxide
capture utilization (CCU), which is a technology used to reuse captured CO2 as a raw material for
manufacturing chemical products and fuels.
The background of the expectations for CCUS lies in the fact that reduction measures in all industries andbusiness sectors are becoming stringent, as countries set carbon neutrality goals in response to the Paris
Agreement, which became operational in 2020. Among these, CCS is being increasingly emphasized by theworld’s industrial sectors as an important measure in the hard-to-abate sectors (cement, steel, chemicals, etc.,
which require emissions from industrial processes and high-temperature heat) and in load-following thermal
power plants, which will continue to be needed to stabilize the electricity supply. CCUs are also attracting
attention for their emission-reducing effects in replacing conventional fossil-fuel-derived feedstocks andfuels by considering captured CO2 as a resource.
Pathways to achieve a net-zero energy system include: a substantial reduction in overall fossil fuel use,
minimal use of unabated fossil fuel and use of CCS in the remaining fossil fuel systems; electricity systems
that emit no net CO2; widespread electrification of the energy system including end uses; energy carriers
such as biofuels and low-emission hydrogen, and energy conservation and efficiency. Furthermore, Carbon
Dioxide Removal (CDR) will be needed to counterbalance the residual emissions in the energy sector, which
is an important measure in achieving and sustaining net-negative CO2 in the medium to long term.

Figure 1-1 Positioning of CCUS and CDR to achieve net zero
Source）IPCC, 2022: Climate Change 2022: Mitigation of Climate Change. Contribution of Working Group III to the Sixth Assessment Reportof the Intergovernmental Panel on Climate Change https://www.ipcc.ch/report/sixth-assessment-report-working-group-3/

The IEA released a report on how to achieve net zero emissions while maintaining universal access to stableenergy. The report is limited in scope to CO2 emission from energy use, but it identifies CCS and bioenergy

1Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

with carbon capture and storage (BECCS)/direct air capture with carbon storage (DACCS) as important
countermeasure technologies and presents “milestones” towards achieving net-zero emissions in 2050, firstfor electricity, followed by emission reductions in other sectors.
In the net-zero scenario, a total of 7.6 Gt-CO2 is estimated to be captured by 2050, of which almost 50%
comes from fossil fuel combustion, 20% from industrial processes, and approximately 30% from bioenergy
use with CO2 capture and direct air capture (DAC). The use of fossil fuels for CCUS may account for almost
70% of the total increase in CCUS through 2030.

Figure 1-2 CCUS by sector and emissions source in the NZE
Source） IEA, Net Zero by 2050-A Roadmap for the Global Energy Sector- https://www.iea.org/reports/net-zero-by-2050

1.2 Objectives of this handbook
One of the most significant challenges in promoting the development of CCS projects that contribute to
the realization of a decarbonized society is ensuring their economic viability. CCS is a large-scale
infrastructure and requires the development of a wide range of value chains, including CO2 separation,
capture, transportation, and storage, as well as public support for initial costs and project risks. In addition,
because CCS itself is not a revenue-generating project, it is necessary to establish an institutional framework
to support not only the initial investment in the construction phase, but also in the operation phase. This
includes tax incentives and subsidies for operational costs. Carbon pricing has been introduced in advanced
CCS countries and can be broadly classified into benefits for CO2 capture by emitters and benefits for storage
operators for CO2 sequestration. Trading CO2 emission reductions from CCS as carbon credits creates valueand helps ensure economic viability.
However, the position of CCS in the carbon-credit market is not clear. It is necessary to foster common
understanding on the potential of CCS in climate change mitigation, as well as issues such as emission
reductions accounting methodologies and risk management. To this end, it is important to learn fromprecedents and participate in international discussions. Additionally, knowledge sharing on good practices inusing the carbon market, including the evaluation of co-benefits other than the mitigation impact, will be key
while working towards the creation of high-quality carbon credits.
As part of these efforts, in collaboration with the Ministry of Economy, Trade and Industry (METI) andInternational Emissions Trading Association (IETA), Japan Organization for Metals and Energy Security(JOGMEC) held a workshop on the topic of carbon credit and the creation of environmental value by CCS

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Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

with the aim of facilitating CCS deployment through the appropriate use of carbon markets. This handbook
has been reorganized based on the materials presented at the workshop by the frontrunners in the carbon
crediting of CCS, aiming at a correct understanding of the current situation. The status of carbon crediting of
CCS is still unclear, and it is assumed that views will change depending on future discussion; but we hopethat this handbook will promote discussion on the future of carbon credits for CCS.
In addition, the purpose of holding the workshop was to consider the contribution to decarbonization of
ASEAN. Appropriate legal and regulatory frameworks are required to underpin the safe and effective
development of CCS and provide certainty for investors. Regulations to facilitate investment in CCS,
particularly CO2 storage, have yet to be developed in the region. The key issues to be addressed in theseregulations include site selection and permission requirements, long-term ownership and liability for stored
CO2, property rights, and requirements for financial securities. International financial support is essential for
CCS deployment in the ASEAN. Insurance and financial products are required for the high capital investment
and project risk sharing inherent in large-scale infrastructure. This will require increased access to grants andloans from institutions in the form of climate finance, to secure adequate financing for energy transition.
However, from a long-term perspective, carbon credits are expected to play an important role in the
deployment of CCS. In number of ASEAN member states, carbon pricing and carbon markets have been or
are in the process of being developed for both the public and private sectors, and it is important to explicitly
show the role that CCS should play in these activities. Against this backdrop, JOGMEC hopes that byshowcasing the key findings from the frontrunners, the positioning of CCS in the carbon market would be
realized, and that it would be appropriately reflected in the ASEAN region.

Figure 1-3 Opportunity factors for CCS in ASEAN regions
Source) IEA, “Carbon Capture, Utilization and Storage: The Opportunity in Southeast Asia https://www.iea.org/reports/carbon-captureutilisation-and-storage-the-opportunity-in-southeast-asia

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2. Carbon Market and CCS
2.1 Introduction to the carbon markets
The carbon market is roughly characterized by 1) cap-and-trade (emissions trading) and 2) baseline andcredit schemes. Carbon credits, the focus of this handbook, are GHG emission reductions from project
activities that can be specified and sold either domestically or in other countries. Carbon credit schemes issue
carbon credits according to a calculation protocol or methodology and have their own carbon credit registry.
In general, these credits can be used to meet the goals of international agreements, national policies, as well
as voluntary corporate goals for reduction in GHG emission.

Figure 2-1 Overview of the carbon market
Source) Mitsubishi Research Institute, Inc

2.2 Overall trends in carbon markets
There are two main types of carbon-credit markets: compliance markets and voluntary markets.
Compliance markets refers to government-led schemes, which can be broadly classified into three types:
international frameworks, such as the Clean Development Mechanism (CDM); bilateral frameworks, such as
the Joint Crediting Mechanism (JCM); and schemes that are mainly intended for transactions within the
country concerned. The voluntary market has been led by private organizations, and the Verified Carbon
Standard (VCS) is a typical example of such a system.
Table 2-1 Positioning of carbon credit market segments and examples
Market Segment

Compliance
CarbonMarketOverview

ExampleInternational

Credit purchases aimed at helping
countries meet their NDCs andairlines comply with CORSIA

Domestic

Credit purchases aimed atcomplying with obligations undercarbon taxes, ETS

Voluntary Carbon Market

Credit purchases
meeting voluntarycommitments

Source）The World Bank, “State and Trends of Carbon Pricing 2022”
additions and rearrangement

4

aimed
targets

ator・ UN: CDM, Article 6.4
・ Bilateral: JCM, KliK Foundation
・ California
ProgramCompliance

Offset・ ACCUs
・ J-Credit
・ VCS
・ Gold Standard

https://openknowledge.worldbank.org/handle/10986/37455 MRI

Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

According to a World Bank report 2, the total value of the voluntary carbon market has exceeded US$1
billion and continues to grow. The rapid increase in trading volume has been driven by an increase in thevolume of transactions due to rising corporate interest in climate change activities because of the growing
carbon neutrality momentum. The global average carbon credit price moved from US$2.49/tCO2e in 2020
to US$3.82/tCO2e in 2021, and the volume of credits traded in the voluntary market increased by 92% in2020 to over 362 million credits. Additional supply is expected owing to increased project registrations, newcredit issuances, and reduced retirements.
The development of domestic compliance markets, such as carbon taxes and emissions trading schemes invarious countries, continues to expand. Many schemes allow entities to use carbon credits to meet theiremission reduction obligations and have developed systems for domestic credit creation (e.g., baselines andcredit schemes). Although the supply of these domestic crediting schemes is currently limited, the demandfor credits may increase in the future, as countries increase their ambition to combat climate change anddemand increases due to the tightening of emission allowances for eligible companies under the carbon tax
and emissions trading schemes (ETS). Furthermore, there are initiatives to restrict credit demand, such as the
exclusion of credit from the Swiss ETS and EU ETS starting in 2021; so, future trends will need to be closely
monitored.

Figure 2-2 Map of national and subnational crediting mechanisms
Source）The World Bank, “State and Trends of Carbon Pricing 2022” https://openknowledge.worldbank.org/handle/10986/37455

Looking at trends in credit issuance, the highest ever volume was in 2012, due to the huge volume of credit
generated by former Soviet Union countries towards the end of the Kyoto Protocol commitment period. As
mentioned above, the volume of credit issuance has increased rapidly in recent years, with a clear trend fromthe CDM to voluntary credit, of which the VCS accounts for the majority. In addition, credits originatingfrom national/regional guidance programs (regional credits) such as the California Compliance Offset
Program and Australia’s Emission Reduction Fund (ERF) are also on the rise, and can be seen as related tothe strengthening of long-term emission reduction plans in each country/region.
2

The World Bank, “State and Trends of Carbon Pricing 2022” https://openknowledge.worldbank.org/handle/10986/37455 MRI
additions and rearrangement

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Figure 2-3 Global volume of issuances by crediting mechanism category
Source）The World Bank, “State and Trends of Carbon Pricing 2022” https://openknowledge.worldbank.org/handle/10986/37455

According to the Taskforce on Scaling Voluntary Carbon Markets (TSVCM) 3, a group of credit market
participants aiming to develop and expand rules for voluntary credits, the credit that could be realized in 2030
is estimated to be 8–12 billion tons per year, of which 1–5 billion tons could be marketed.

Figure 2-4 Voluntary carbon market growth
Source) Presentation material by South Pole at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

2.3 CCS discussion at COP
The discussions on CCS at Conference of the Parties (COP) began in 2005 with the CDM, a carbon credit
mechanism created in the Kyoto Protocol, the first international agreement to reduce carbon emissions. The
details are discussed below; however, for a variety of reasons, the project has not yet become a reality.
3

The TSVCM was recently formed into the Integrity Council for the Voluntary Carbon Market (ISVCM)

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Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

The Glasgow Climate Pact at COP26 made a clear decision on the phasedown of “unabated coal” in all
countries, implying the need for CCS in the energy transition of many countries. No specific reference to
CCS has been made in the Paris Rulebook; however, guidance on carbon removal, including provisions forgeological storage, was discussed at COP27 in the context of Article 6.4, which is a successor scheme to the
CDM.
The report by Global CCS Institute (GCCSI) 4 outlines the main outcomes of COP27 from a CCS
perspective and provides an assessment of the way forward for the net-zero goal and international climate
policy, particularly with respect to: The Global Stocktake (GST) and its impacts
 Key decisions on Article 6
 The forum on the implementation of response measures Newly established joint work program of the Technology Executive Committee (TEC) and the
Climate Technology Centre and Network (CTCN)

Figure 2-5 Current climate negotiation about CCS in COP27
Source) Presentation material by GCCSI at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

2.4 Landscape and potential impact of Article 6 on the CCS sector
The market mechanism under Article 6 of the Paris Agreement uses emission reductions fromdecarbonization projects implemented in one country to achieve reduction targets of another. At COP26, theguidelines for the implementation of Article 6 were agreed upon, including ways to prevent double counting.
At COP27, the parties decided on the detailed rules necessary for the implementation of Article 6 of the Paris
Agreement, including a reporting format for the international trading of emissions reductions, a system ofrecords such as a registry, and an expert review procedure, as well as the implementation of a market
mechanism to be administered by the UN.
4GCCSI, “COP 27 Outcomes” https://www.globalccsinstitute.com/resources/publications-reports-research/cop-27-outcomes/

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Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

The status of CCS under Article 6 of the Paris Agreement remains unclear: Article 6.2 is a scheme thatallows countries to trade emission reductions and removals with each other through bilateral or multilateralagreements, and it is left to the discretion of cooperating countries to include the Internationally Transferred
Mitigation Outcomes (ITMOs) issued from CCS projects. Furthermore, whether the ITMOs issued under
Article 6.2 can potentially be used under Article 6.4 will depend on future discussions. Article 6.4 details a
global carbon market supervised by the Article 6.4 Supervisory Body (SB), and is positioned as an alternative
to the CDM under the Kyoto Protocol. Under the CDM, “modalities and procedures,” or CCS rules for project
activities have been adopted including guidelines for generating credits from CCS projects, but to date there
is no approved CCS methodology based on them. It should be noted that these will be transferred to Article
6.4. It should also be noted that the SB is currently developing a removal methodology, which should include“nature-based removal” and “engineered- removal,” the latter being a matter of impact with respect to CCS
storage. A recommendation on the removal activities was submitted to COP27, but was not adopted by
COP27, and work will continue.

Figure 2-6 Article 6 Landscape and CCS
Source) Presentation material by GCCSI at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

2.5 Issues and expected measures towards CCS credits
The GCCSI noted the following issues at the workshop:
 Monitoring requirements to address leakage risks for geological storage
 The IPCC GHG Inventory Guideline 2006 (Vol. 2 Energy, Capture 5: CO2 Transport, Injection,
and Geological Storage) includes monitoring methods and leakage risk assessment.
 The EU CCS Directive includes monitoring requirements, storage closure, and post-closure
obligations with compensatory safeguards in EU legislation in case of leakage, by surrendering

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a corresponding amount of EU ETS allowances (Rickels et al., 2021 5).
Concerns over the environmental and socials impacts of CCS
 Scientific research in this area can be useful to address concerns raised.
External pressure from environmental NGOs as well as parties not comfortable with CCS
 Increased advocacy and collaboration on CCS with NGOs, governments and civil society.

Furthermore, the Mitsubishi Research Institute (MRI) noted the following issues at this workshop:
 Methods of enabling CCS project formulation by private business entities under credit schemes, while
protecting integrity
 Types of eligible CCS activities: Eligibility of CCS-EOR (enhanced oil recovery) in the transition to
net-zero under some circumstances Long-term monitoring: possibilities of setting conditions to limit the temporal and spatial extent ofmonitoring Avoidance of double counting: either the capturer or injector can claim credits
 New challenge: Multiple CO2 sources added to various phases using a common infrastructure;
Repercussions of the monitoring regime and CO2 ownership

5

Rickels, W., Proelß, A., Geden, O., Burhenne, J., &Fridahl, M. (2021). Integrating Carbon Dioxide Removal Into European
Emissions Trading. Frontiers in Climate, Volume 3, https://doi.org/10.3389/fclim.2021.690023

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3. CCS credit schemes around the world
3.1 Overview
3.1.1

CCS credit schemes around the world
The landscape of the carbon market is complex, with many schemes around the world. On the demandside, public/regulatory schemes, including emission-reduction targets of respective countries/regions or
sectoral targets such as the Carbon Offsetting and Reduction Scheme for International Aviation (CORSIA)of the aviation sector, permit the use of carbon credits as offsets to meet part of the reduction. Some schemes
restrict offset use to country/region programs, while other schemes such as CORSIA allow for all types ofcredits, including voluntary credits, as long as they meet certain standards. Corporates use all types of credit.
On the supply side, we have mechanisms based on international agreements, such as Art. 6.2 and 6.4 of theParis Agreement, country/regional programs such as the Australian carbon credit units (ACCUs) of Australia,
J-credit of Japan, and voluntary schemes, such as VCS and the American Carbon Registry (ACR). It is to be
noted that as carbon credits are used offset remaining emissions of a user entity. As such, an entity moves
closer towards carbon neutrality and will eventually need to be replaced by carbon removal to achieve net
zero emissions.

DemandCountry
targets

Sector B

Sector A

Corporate
offsetCORSIA

Partially used for compliance

CDM
Conditionaltransfer

JCM, etc
Supply(cooperate approach

64 Mechanism

Article 6.2
Paris Agreement

Article 6.4
Paris Agreement

Voluntary use

ACCU

J-Credit

T-VER

AEOS

Country/regional

VCS

Gold
standard

ACR

GCC

Voluntary-international

Figure 3-1 Overview of CCS credit scheme
Source) Mitsubishi Research Institute, Inc

Before the Paris Agreement, the Kyoto Protocol was an international agreement to reduce carbon
emissions; it gave birth to a carbon credit mechanism called the CDM. The consideration of CCS and CDM
began in 2005, and rules were adopted in 2011; however, no project ever materialized under CDM for avariety of reasons. In mid-2010, specific country/region programs adopted CCS as one of the project scopes
for carbon credit, and this trend was seen in areas such as the State of California in the US, Alberta Province
in Canada, and Australia, where there was a specific interest in CCS projects. In the 2020s, there has been an
increasing number of cases of CCS methodology development in voluntary schemes.

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UNFCCC Consideration
2005

2011

CCS
Methodologies
proposed

CDM CCS Modalities ＆Procedures adopted at
COP17

2023
Article 6,
Paris
Agreement

2010* ISO 27914 and 27916 on CCS and EOR were
published in 2017 and 2019 respectively

COP16 decided toinclude CCS in CDM

Country/regional/voluntary programme
2015
CCS
Methodologies
adopted in
ACR USA) andAEOS(Canada)

ACR: A m er i can Car b on Reg i st r y

2021
CCS method
approved in
ERF(Australia)

2018

AEOS : Alb er t a Em i ssi ons Offset S chem e
ERF : Em i ssi ons Red uct i on F und

CCS Protocol
adopted by

L CF S : L ow Car b on F uel S t and ar d

LCFS in CA, USA.

2021
CCS+
initiative
launched2022
Geological carbon
storage requirements
published by VCS

2022
CCS Methodology
adopted in
Puro.earth(voluntary scheme)

Figure 3-2 History of CCS in carbon credit schemes
Source) Mitsubishi Research Institute, Inc

Owing to the CDM’s decision to include CCS in its sectoral scope, Conference of the Parties serving
as the meeting of the Parties to the Kyoto Protocol (COP/MOP 7) (Durban, 2011) adopted Decision 10
on the modalities and procedures for CCS (later included in the CDM project standard). After that, theworking group of the CCS was established but has never been convened, as no submission has been
made on a specific project. As robust requirements were set in place, such as the legal system and longterm monitoring, there was potentially a wide gap between the requirements to ensure integrity andcapability on the project side at the time. To provide some insight, the requirements included putting alegal system in place, conducting 20 years of monitoring after the end of the crediting period, making
advanced financial arrangements, and establishing a liability scheme, among others.

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Table 3-1 CCS requirements specified under the CDM
Items
Host Country
participation
requirement

Overview
・A legal system is in place for site selection procedures, ownership of subsurface porespace, corrective measures for environmental and personal damage, corrective
measures for unintentional leaks, and liability, etc.

・Monitoring should be conducted for 20 years after the end of the crediting period,
corrective action should be implemented in case leak occurs, and financial arrangements
should be made to enable the host country to fulfill its responsibilities associated with thetransfer of liability.

・Transfer to the host country after the monitoring period has ended and been approvedby the host country.

・

There is no significant risk of seepage or risk to humans and the environment, not locatedin international waters (determined by e.g. data, history matching, etc).

・

5% of the CER issued is placed on reserve account, to be used to compensate forleakage.

・To compensate for the leakage, (1) the contribution from the reserve account, (2) the
pending account, and (3) CER issued to the account of the project operator, in that order.

・

If the above cannot be covered, it will be covered by other Kyoto units such as CDM.

・

The second and subsequent verifications shall be submitted within five years after theend of the previous verification period.

・Carry out history matching and where necessary, update numerical models used.

・

Verification and certification shall continue beyond the end of the last crediting period
and shall only cease after the monitoring of the geological storage site has been
terminated.

・

Shall not be terminated earlier than 20 years after the end of the last crediting period orafter the issuance of CERs has ceased, whichever occurs first.

・Only be terminated if no seepage has been observed at any time in the past 10 years
and if all available evidence indicates that the stored CO2 will be completely isolated
from the atmosphere in the long term

Operator
Requirements

Liabilities
Site
Requirements
Compensatingforleakagemeasures

Verificationandcertification

Monitoring

Source) Mitsubishi Research Institute, Inc

Outside international agreement-based schemes, there are several baseline & credit schemes with CCS as
one of the covered sectors. Of such credit schemes, ACR, Alberta Emission Offset Scheme (AEOS), ERF,
Puro.earth, and VCS have been studied to identify some similarities and differences among the schemes.
Regarding the purposes of schemes, programs such as the AEOS of Alberta, Canada and the Emissions
Reduction Fund of Australia were created to meet compliance targets under certain jurisdictions, while others
were developed purely for voluntary purposes. Regardless of the original purpose, many are used for bothcompliance and voluntary purposes. Regarding legal framework requirements, country/region-based
programs naturally refer to the CCS regulations of their respective jurisdictions as part of the applicability
conditions for project registration. It is interesting to see that Puro.earth requires US, EU, or equivalent
regulations as conditions for their projects.
All the aforementioned schemes require a credit buffer/reserve to address the potential leakage risk.
ERF/Puro. earth has a blanket requirement of a certain percentage for all CCS projects, whereas VCS has aunique risk assessment framework to determine the buffer on a project-to-project basis. For the monitoring
regime, most schemes require monitoring after the end of the project, which is assumed to be the end of CO2
injection; however, their durations differ. For country/regional programs such as AEOS and ERF, we see acorrelation with the legal requirements of their respective jurisdictions, while schemes such as ACR or VCS,

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not tied directly to any jurisdiction, are independent of legal requirements. Most schemes refer to site closuresand related monitoring. The ACR is unique in that it does not refer directly to site closure but mentions thetransfer of responsibility as the end of all risk management activities.
Table 3-2 Overview of CCS in key carbon credit schemes(as of January 2023)

PurposeApproved
CCS
method/guideline

ACR
(USA)
Compliance(California
compliance offset
program) andvoluntary

AEOS (Alberta,
Canada)Complianceoffset for TIER

ERF(Australia)
Complianceoffset forsafeguard
mechanism,
voluntary

2015

2015

2021

Legal
framework

US federal/state

Canadafederal/province

Australia
commonwealth/province

Applicability

CCS and CO2EOR

CCS and CO2EOR

CCS

Projects

5 projects

Creditbuffer10% (optional)or
private insuranceLong-termmonitoring

SiteclosureCreditbuffer1CCS (Quest)
1CO2-EOR(MEglobal)
0%~50%
depending on
project type for
EOR
None for CCS

Moomba3%

Puro.earth(international)

VCS(international)

Voluntary

Voluntary(eligible forcompliance offset
in some areas)

2022

2023 (tentative)

US EPA (Class I,
II, IV) or EU CCS
Directive
equivalent
DACCS and
BECCS with
EOR+
AspiraDAC
project, BECCS
Norway10% for all
projects (not just
CCS)

Minimum of 10
years after end of
crediting period

15 years ofextendedaccounting
period after endof crediting
periodn/aOnly reference ismade to “transfer
of responsibility”

Reference topost-closure
monitoring inaccordance withthe appliable
regulation

Reference toextendedaccount period
monitoring inaccordance withthe appliable
regulationn/a

10% (optional)or
private insurance

0%~50%
depending on
project type for
EOR
None for CCS

3%

10% for all
projects (not just
CCS)

Minimum of 5
years ofmonitoring afterend of project
term.

Source) Mitsubishi Research Institute, Inc from various sources

13

CCS, DACCS,
BECCS(tentative)n/a

Determined per
project based onrisk assessment
Minimum of 10
years requiredfor combined
duration ofmonitoring postinjection until
storage site
closure and postclosure.
Storage site
closureconditions need
to be specified
and closure planneeds to be
documented.
Determined per
project based onrisk assessment

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3.1.2

IETA’s High-Level Criteria for Carbon Geostorage Activities
CCS carbon credit is expected to be traded among companies and countries through Article 6, but there
are various barriers to future scaling up that need to be overcome. The IETA has been working to identify
and develop a set of proposed high-level geostorage criteria to be considered for geological storage projects
through stakeholder meetings and other means. The criteria identify the top areas of common principles for
credits to be considered, and are organized to include elements that differ from existing credit criteria 6. In
addition, it is expected that these criteria will be useful for initial institutional consideration in countries suchas the ASEAN region, where the legal framework for CCS is not yet in place.

Figure 3-3 Concept of High-Level Criteria for Carbon Geostorage Activities
Source) Presentation material by IETA at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

The High-level Criteria identify 10 key safeguards consisting of three areas: political acceptability, legal
and regulatory frameworks for safe storage, and environmental and social safeguards. For each criterion,
evidence and checkpoints are organized to confirm their content and compliance.

6

IETA, “High-Level Criteria for Carbon Geostorage Activities” https://www.ieta.org/High-Level-Criteria-for-Carbon-GeostorageActivities

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Figure 3-4 10 key safeguards of High-Level Criteria for Carbon Geostorage Activities
Source) Presentation material by IETA at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

3.2 Country/ Regional Carbon Market
3.2.1

Alberta Emission Offset Scheme (AEOS)
Alberta has an emissions trading program called TIER (Technology, Innovation, and Emissions Reduction),
which imposes emissions benchmarks on Alberta’s large emitters (over 100,000 tonnes of greenhouse gas
emissions) and opt-in facilities (small emitters who voluntarily opt-in). Facilities subject to TIER are required
to reduce their year-over-year operating emission benchmarks, by reducing their efficiency. In the unlikely
event that the benchmark is not achieved, the facility may choose one of the following options: Purchasing “Fund Credits” from TIER for each ton of excess emissions.
 Submitting an Emissions Performance Credit (EPC) showing that emissions for the previous orcurrent year were below the benchmark.
 Offsetting emissions with credits generated from the AEOS carbon credit system.
The majority of projects registered under TIER is in the renewable energy and industrial sectors; however,their scope is expanding to include other sectors, including the CCUS sector. The CCS methodologies under
the program have been published, and Shell Canada’s Quest project has issued credit since 2015.
There are two methodologies for the CCS sector: one of them, covering the entire CCS chain from capture
to compression, transport, injection, and storage, “CO2 Capture and Permanent Storage in Deep Saline
Aquifers,” was developed in 2015. The other is the EOR methodology for CO2 injection into enhanced oil
recovery schemes and emission offset projects in the oil and gas industry, which was published in 2007. It
was subsequently revised in 2022, with the main points of revision as follows: The protocol scope was revised to reflect carbon dioxide emissions and handling, to exclude oil
production and oil handling emissions, and to cover various stages and activities of projects using theprotocol. Baselines and project scenarios were revised to include emission sources and other terms

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






and conditions.
The priced and non-priced emissions sections were updated: emission offsets are only for emissions
not covered by carbon prices or fuel surcharges. Projects must quantify and report the reduction inemissions that are subject to carbon prices.
Provided quantification for CO2 transfers and reversals: Provided quantification methods fortransferring CO2 from not EOR approved areas and for transferring CO2 from EOR reservoirs toother locations.
The crediting period was extended from eight years (extension can be applied) to 20 years (extension
is possible for five years).
Conditions for the director’s approval of the pre-registration of EOR emissions offset projects aredescribed.

Alberta is implementing institutional changes to address the issue of the potentially large amount ofemission offset credits in its carbon credit market as CCS projects come on line between 2024 and 2030.
Specifically, the changes include the creation of two new types of credits: sequestration credits and recovered
recognition tons. The sequestration credit covers CO2 storage after 2022, and can be used for the Clean Fuels
Regulation, which is a separate regulation. Consequently, it is expected that offset credits from CCS and thestorage credits that convert them will be traded as a value separate from offset credits from other technologies.

3.2.2

Emission Reduction Fund (ERF)
In Australia, businesses above a certain size 7 are required to report their GHG emissions to the National
Greenhouse Gas and Energy Reporting System (NGERS), and a safeguard mechanism is applied to large
facilities emitting more than 100,000 tons of carbon dioxide equivalent. Additionally, responsible emitterswith facilities that have exceeded or are likely to exceed the baseline have several options for managing
excess emissions. One option is to use ACCUs as an offset.
The ERF has several methodologies for generating ACCUs, and the methodology for CCS was developedin October 2021 after public comments. In November 2021, Santos Moomba Project in South Australia wasregistered by ERF project using this methodology.
The approved CCS methodology is not applicable to the EOR or DAC. In addition, a new CCUS
methodology focusing on CO2 capture, including for industrial products and building materials, is underconsideration.
In addition, the Australian government is consulting on the proposed reform of the safeguard mechanism
and the proposed design of a “Regional Revitalization Fund (PRF)” to reduce industry emissions in line with
Australia’s climate goals. Despite the government’s decision to cut funding to the ERF, the PRF, as currently
proposed, includes the government’s purchase of carbon credits and CCUS projects in its scope8.

3.2.3

Low Carbon Fuel Standard (LCFS)The LCFS was designed to decrease the carbon intensity of California’s transportation fuel pool and

7

There are two types of thresholds that determine which companies have an obligation: facility and corporate group thresholds.
https://www.cleanenergyregulator.gov.au/NGER/Reporting-cycle/Assess-your-obligations/Reporting-thresholds
8 DCCEEW, “Powering the Regions Fund” https://consult.dcceew.gov.au/powering-the-regions-fund

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provide an increasing range of low-carbon and renewable alternatives, reducing petroleum dependency andachieving air quality benefits. Under the LCFS program, the types of CCS projects that can be certified are
low carbon fuel pathways (e.g., ethanol or biogas), refinery investments (e.g., steam reforming), innovative
crude oil (e.g., cogeneration in oil fields), and direct air capture projects. In addition, all targeted reservoirs
are onshore, and the types are saline formations, depleted oil and gas reservoirs, and CO2-Enhanced oil
recovery.
In response to the potential market impact of leakage, the LCFS specifies what percentage of CCS projectcredits must be contributed to the LCFS buffer account based on the project’s risk assessment. Project risk
will be determined by assessing the types of risk, such as financial, social, management, site, and wellintegrity, with the buffer account contribution ranging from 8% to 16.4%.

Figure 3-5 Overview of project type under LCFS
Source) CARB, “Overview of CARB’s Carbon Capture and Sequestration Protocol Under the Low Carbon Fuel Standard”
https://ww2.arb.ca.gov/sites/default/files/2022-06/EJAC%20Meeting%20CCS%20Overview%20Presentation%20-%202022-0627.pdf

3.2.4

Joint Crediting Mechanism (JCM)
The basic concept of JCM lies with the diffusion of leading decarbonizing technologies and infrastructure
supported by Japan, thereby contributing to GHG emission reduction or removal and sustainable
development in partner countries. To contribute to the achievement of both Japan and partner countries’
nationally determined contributions (NDCs), it is important to ensure the avoidance of double counting
through corresponding adjustments, and implement JCM consistent with the guidance on cooperative
approaches referred to in Article 6, paragraph 2 of the Paris Agreement.
To expand JCM towards the goal of “international emission reductions and removals at the level of acumulative total of approximately 100 million t-CO2 by fiscal year 2030”, it is essential to realize CCS
projects under JCM. METI is working on the development of potential CCS projects through JCM Feasibility
studies to move to the demonstration stage. In addition, the JCM Rules & Guidelines are being revised tocover CCS projects.

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Figure 3-6 Overview of CCS rules & guidelines under JCM
Source) Presentation material by METI at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

CCUS-related projects under the JCM are currently envisioned for CCS, EOR, and enhanced gas recovery(EGR), while CCU will not be covered at this point. With regard to monitoring during the closure period, theprinciple is that the same should be determined in accordance with the regulations of the host country or
region. In the absence of such regulations in the host country or region, the necessary duration to determine
whether there is any detectable long-term CO2 leakage should be established. In addition, credit reserves are
considered a measure for addressing risk of leakage. A portion of the verified credits is subtracted from theissued credits as reserves. The corresponding reserve credits are canceled when a CO2 leakage is detected,
and if no leakage is detected, the remaining credits in the reserve account are distributed to the project
participants.
The current target year is 2026, and METI will continue its activities towards the realization of CCS
projects through the demonstration stage and issuance of CCS credits in JCM. In addition, METI expects the
proposal of other CCS projects in JCM based on these experiences.

Figure 3-7 Concept of credit reserve in JCM registry
Source) Presentation material by METI at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

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3.3 Voluntary Carbon Market
3.3.1

American Carbon Registry (ACR)The ACR is a voluntary carbon trading market in the United States that has been operated by Winrock
International, a non-profit organization, since 1996. All accounting methodologies and protocols weredeveloped according to the ISO 14064 standards. The CCS methodology was published in Ver. 1.0 in 2015.
The domain was expanded in 2022, and public consultation for ver. 2.0 was conducted. The main points ofthe proposed revisions under public consultation include extending eligibility to projects that utilize carbon
dioxide removal (CDR) technologies, such as direct air capture (DAC), and the use of sustainable biomass
as feedstock. It also extends the eligibility criteria for geological storage to saline and depleted oil and gas
reservoirs, significantly expanding the geographic scope of the supported projects. For projects that use CO2
for enhanced oil recovery, the calculation includes the consideration of emissions from transportation,refining, and end-use of the produced hydrocarbons.

Figure 3-8 Overview of EOR methodology under ACR
Source) Presentation material by ACR at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

3.3.2

Verified Carbon Standard
The VCS Program is the world’s leading greenhouse gas mitigation program. Globally, stakeholders canapply to register their emissions reduction and/or removals projects to receive verified carbon units (VCUs)
for their project activity. High integrity emissions measurement and accounting methodologies detail projectrequirements which must be adhered to and are verified and validated by a third party. In addition to the VCS
methodologies projects can apply methodologies developed under the United Nations Clean Development
Mechanism and the Climate Action Reserve.

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Figure 3-9 Requirements for Geologic Carbon Storage Projects
Source) Presentation material by Verra at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

Under the VCS program Verra has released a standalone document Geological Carbon Storage (GCS)
Requirements 9, which includes specific requirements for GCS projects such as details for regulatory oversight,
technical and non-technical project design, project ownership, storage site monitoring and closure, andproject crediting periods. The Geologic Carbon Storage (GCS) Non-Permanence Risk Tool (NPRT) has beenreleased. This document provides details and procedures for the assessment of project specific nonpermanence risk to determine the GCS buffer pool contribution.
The NPRT specifies criteria for projects to be evaluated against to determine their overall risk. GCS project
are scored using the tool based on key categories related to the regulatory framework of the projectjurisdiction, political risk, land and resource tenure risk, closure financial risk and technical design risk.
Scoring from each of these respective categories for a GCS project is compiled to determine the overall
project risk score and subsequently the buffer pool contribution. This approach ensures high integrity andtransparency of projects while mitigating and safeguarding against environmental, social and safety risks.

Figure 3-10 Requirements for Geologic Carbon Storage Projects
Source) Presentation material by Verra at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023
9

Verra, “AREA OF FOCUS - CARBON CAPTURE AND STORAGE“ https://verra.org/programs/verified-carbon-standard/areaof-focus-carbon-capture-storage/20

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3.3.3

Puro.earth
Puro.earh was established in April 2019 by entrepreneurs from Finland with the support of Fortum, a Finelectric power company, as the world’s first voluntary crediting scheme dedicated to negative emissions. In
June 2021, Nasdaq Puro.earth launched the world’s first carbon removal index in March 2022. Currently,
credits are issued under seven types of methodologies, including geological carbon storage for DACCS,
BECCS, and Bio-CCS combined with geological storage, such as the direct injection of CO2 into deep
geological formations and oil and gas reservoirs as part of EOR+. This geological carbon storage
methodology does not cover CO2 captured from fossil fuels, but only biogenic sources.
Table 3-3 Methodology under Puro.earth

Methodologies

Projects selling credits (as of 16/01/2023)

Biochar25 (12)

Carbonated Building ElementsーBio-based Construction Materials

8

Geological carbon storage(2)

Woody Biomass Burial(1)

Soil amendment

1(1)Enhanced weathering(2)

Source) Puro.earth website, https://puro.earth/carbon-removal-methods/ （Accessed 16 January 2023)
Note: The numbers in parentheses refer to the pre-Corq period (credits issued for projects under development).

For projects using Puro.earth’s geological carbon storage methodology, the Aspire DAC project was listedon the Marketplace as the first 10. AspiraDAC follows an innovative first-of-its-kind approach to DAC that
employs modular solar-powered units. The compact units developed by the Southern Green Gas Technology
Company are portable, which enables them to be scaled efficiently in a distributed network. Fully recyclable,
each unit can sequester 2t-CO2 per annum and requires 90% less land than reforestation carbon capture
projects. These units will be deployed in Australia, whose climate is ideal for solar power generation and hassome of the world’s best geological sequestration sites.

3.3.4

CCS+ Initiative
CCS+ initiative 11 is a multi-stakeholder alliance which aims to leverage carbon markets and scale up
global decarbonization and carbon removal efforts through the appropriate and clearly differentiatedquantification of GHG emissions reduction and removals resulting from such activities. It will produce two
rigorous and coherent, high-quality and high-integrity framework methodologies – aiming for as highstandards as regulated markets. A clear pathway towards compliance with Article 6 of the Paris Climate
Agreement and compatibility with regulated markets is aspired to. This includes a full suite of methodologies
and tools under the Verified Carbon Standard (VCS) to account and credit CCS+ projects at the national andinternational level. Activities addressed by the CCS+ initiative span point-source (pre- and post-combustion)
capture of emissions (including from cement, blue hydrogen production plants), processes that can enable

10

Puro.earth adds AspiraDAC's first Direct Air Capture project to marketplace following Frontier Fund commitment
https://7518557.fs1.hubspotusercontent-na1.net/hubfs/7518557/Puro%20-%20AspiraDAC%20News%20Release%20FINAL.pdf
11 CCS+ Initiatives https://www.ccsplus.org/

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GHG removals, such as by capturing emissions from biogenic point sources or direct CO2 air capture, avariety of CO2 transport modes, and various forms of geological sequestration, as well as storage in various
long-lived products, such as construction materials, and potentially short-lived products.

Figure 3-11 Membership of CCS+ initiative
Source) Presentation material by CCS+ initiative at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards
ASEAN Decarbonization”, Jan 2023

The Initiative adopts a modular approach to design and develop methodologies. Under this approach, acentralized methodology is supported by different modules and tools, together referred to as framework
methodology, unless mentioned otherwise. The CCS+ Initiative will develop separate CCS+ and CCU+
framework methodologies.
The framework methodology establishes critical requirements such as applicability conditions (including
eligible project activities and technologies), baseline scenario and additionality, that are common to all
projects. It also establishes overarching project boundaries, a quantification approach, and a monitoring
approach.
The Modules are developed for specific technologies of capture, transport, utilization, and storage of CO2
eligible under the CCS+ methodology frameworks. The modules establish a specific project boundary andsubsequently the approaches for quantification of GHG emissions or removals associated with the process.
For example, the module for DAC under the ‘capture’ category establishes project boundaries (source, sinks
and reservoir) for the DAC technologies and subsequently the equations for quantification of GHG removals
associated with the process. The module also establishes the parameters fixed ex-ante and parameters which
are required to be monitored during implementation.
Other modules and tools are developed for specific purposes such as for establishing guidance todistinguish between emission reductions and removals, and allocation of project emissions when the transportand storage facilities are shared with a non-VCS activity.

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CCS+ Initiative
Overview and approach
Overarchingmodules

CaptureCCS+ modulesve

Guidance and Principles

rk Carbon Capture from
Air

Transport
modules

Storage anduse modules

Consolidated module
for Transport via
Pipeline, Ships, Road
and Rail

Geological Carbon Storage (inaquifers and in depleted oil andgas fields)

Conversion of CO2 => CaCO3 for”construction” additives

CCS+ Methodology

CCU+ Methodology

Carbon Capture fromPower and Heat

Carbon Capture from
Industrial Processes

Mineralization of CO2 injected in
the concrete production for readymix and precast

Injection of CO2 into the baking
process to produce ceramics

Admixture to cement, reducing
clinker usage
Tool for Differentiation
between Emission
Reductions andRemovals in Carbon
Capture Project
Activities
Tool for Baseline
Quantification and
Allocation of Project
Emissions in Carbon
Capture Project
Activities

Carbon Capture from
Oil and Gas
Production andProcessing

Carbon Capture from
Bioenergy• Modules grouped along CCS andCCU value chain, i.e. in capture or
removal, transport, utilization andstorage modules.
• Staggered approach: Methodology

and tool development

is phased,

starting with the most mature andimpactful use cases.

Storage in igneous rockformations by mineralisation

CO2 storage in long lifetime
products, e.g. building elements• Additional modules
by the Steering

can be added

Committee.

CO2 utilization and storage inshort lifetime products

10

www.ccsplus.org| info@ccsplus.org

Figure 3-12 CCS+ Initiative's modular approach
Source) Presentation material by CCS+ Initiative at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards
ASEAN Decarbonization”, Jan 2023

CCS+ initiative also work on development of guidance notes for various regulatory schemes in order to
identify opportunities and challenges between the target’s instruments and the CCS+ initiative’s methods andtools.
As of January 26, 2023, CCS+ initiative will soon submit a part of its methodologies to Verra. And thesubmitted methodologies will be subject to an in-depth review by Verra, a public stakeholder consultation
hosted on the Verra website and an independent assessment by one validation/verification body, before final
approval by Verra.

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4. Introduction of financing case
4.1 How carbon credit increases the economy of CCS projects
According to an IEA report, appropriate policy architecture evolves as technology matures. It begins withtechnology-specific support that explicitly targets the development of CCS into a commercial activity throughthe provision of capital grants, investment tax credits, credit guarantees, or insurance.
Regarding the situation of carbon credits in CCS projects, CCS requires the incentive of a carbon price inthe long term. However, to move CCS from the pilot project, which is the initial phase, to the demonstrationand then deployment phase, a policy commitment by the government to strategic funding is required.
Furthermore, in the near term, carbon pricing systems may only incentivize incremental efficiency
improvements towards the theoretical efficiency limits. Because CCS is a large infrastructure and long-term
technology, it can be neglected. However, CCS projects can take over a decade to plan, construct, operate,
and optimize. Prospective operators need confidence that CO2 prices are rising and that their industrial basewill be maintained over this period.
In addition, credits for CCS may be of higher interest because of its more stable long-term potential for
CO2 removal compared to nature-based solutions. However, CCS can be categorized into several types, andpricing is expected to vary depending on whether it involves emission reduction or carbon removal.

Figure 4-1 Carbon credits and public funding for CCS
Source) Presentation material by Perspective Climate Group at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS:
Towards ASEAN Decarbonization”, Jan 2023

4.2 Case of QUEST CCS
The purpose of Quest is to deploy technology to capture the CO2 produced by the Scotford Upgrader andcompress, transport, and inject it for permanent storage in a brine formation near Thorhild, Alberta, Canada.
As of December 2021, Quest had injected 6.8 million tons of CO2 since project inception. Reservoir
performance and injection rate evaluations to date suggest that sufficient injection rates can be maintained
for the life of a project, and no further well development is warranted.

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The following is an overview of Quest, an AEOS registered CCS project 12.
Project Name: Quest Carbon Capture and Storage ProjectApplicable Methodology: CO2 Capture and Permanent Storage in Deep Saline Aquifers

Developer: Shell Canada Limited
Verifier: ICF Consulting Canada, GHD Ltd, Tetra Tech EBA Inc.

Offset period: August 23, 2015 - August 22, 2035
Life Cycle Emission Reductions: 17,620,000 t-CO2
Annual Emission Reductions: 881,000t-CO2
Quest has safely injected over 1.055 Mt-CO2 in 2021. The overall project injection surpassed 6.8 Mt-CO2
through December 31, 2021. The revenue streams generated by Quest are twofold: Generation of offset credits for net CO2 sequestered and additional offset credit generated for CO2
captured under the Technology Innovation and Emissions Reduction Regulation (TIER) $298 million in aggregate funding from the Government of Alberta during the first 10 years ofoperation for capturing up to 10.8 million tons. In the 2021 compliance year, the value of the TIER
fund credit was $40/t-CO2.
Table 4-1 Revenue in the QUEST Project

Source) Quest Carbon Capture and Storage Project ANNUAL SUMMARY REPORT - ALBERTA DEPARTMENT OF ENERGY: 2021
https://open.alberta.ca/publications/quest-carbon-capture-and-storage-project-annual-report-2021

12 Alberta Carbon Registries (2019) Quest Carbon Capture and Storage Project,https://alberta.csaregistries.ca/GHGR_Listing/AEOR_ListingDetail.aspx?ProjectId=215

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4.3 Case of Northern Lights
The Longship Project is a Norwegian full-chain CCS in which CO2 is captured from multiple emission
sources, transported by ship to a collection point, and stored in a subsurface reservoir. The transport andstorage portion of the project is called Northern Lights as a shared infrastructure. The transport and storage
capacities for 2024 are 1.5Mt/year. The initial capture volume is expected to be 800,000 tons/year.
Regarding financing, emitters in the EU-ETS storing their CO2 at a site located in the EU-ETS are exempt
from surrendering allowance under the EU-ETS and/or exempt from carbon tax. In the absence of exemptions,carbon credits will be granted based on the storage amount. For example, because waste treatment facilities
are not covered by the EU-ETS, it is expected that carbon credits will be generated by storing CO2 emitted
from such facilities. The Innovation Fund, CEF, and Transition Fund may be applied as subsidies from theEU, and support from the national government is also envisaged. This assumes a CCS cost range of 30–55
EUR/t-CO2 for the 2034–2048 period.

Figure 4-2 Concept of levarage to sustain CO2 value chain
Source) Presentation material by Northern Lights at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards
ASEAN Decarbonization”, Jan 2023

In addition, Northern Lights initiated a study on a certification scheme for carbon credits in the CDR sector.
This will make an empirical contribution to the measurement, reporting and verification (MRV) methodology
of BECCS and DACCS under the VCS scheme being considered by the CCS+ initiatives for collection,transport, and storage modules.

Figure 4-3 Creat a certified product for Cabon Removal Credit by Northern Lights
Source) Presentation material by Northern Lights at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards
ASEAN Decarbonization”, Jan 2023

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5. Prospect for CCS in carbon market
5.1 Distinguishing between reduction and removal
The current carbon market has a variety of approaches and types of credits, with limited distinction
between whether the underlying action that produces the units is emission reduction, carbon removal, or a
combination of both. There are various views when it comes to the field including CCS and CCU, but they
can be categorized in terms of whether the CO2 source is fossil fuel, biomass, or direct air capture, andwhether the destination is material or other for CCS and CCU.
The trading price of voluntary credits varies depending on whether credits are derived from emission
reduction or removal. This is due to the preference of credit purchasers, who are willing to pay higher prices
for credits with higher quality in terms of integrity and project attributes, such as co-benefits, nature-based
solutions, technological solutions, and emission reductions or removals.

Figure 5-1 Concept of distinguishing between reductions and removals
Source) Presentation material by South Pole at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

According to the IETA and University of Maryland’s report 13, in the net-zero scenario of Article 6, buyer–
seller dynamics are heavily influenced by nature-based solutions and carbon sequestration. The role of naturebased solutions will change with the scenarios envisioned and over time. Carbon markets provide incentives
for parties with significant land-use potential to utilize nature-based solutions and create credits that can besold internationally. These credits would be purchased by countries with high abatement costs and, especiallyin the short term, would greatly expand the use of land sinks to mitigate carbon emissions. However, the roleof nature-based solutions will gradually diminish over time, while carbon sequestration technologies will
become increasingly important: in 2050, cooperative implementation of net-zero targets will lead to increased
deployment of CCS (including bioenergy with CCS) and reduced emissions from fossil fuels and industrial
sources of CO emissions from fossil fuels and industry.

13 IETA and the University of Maryland, “The Potential Role of Article 6 Compatible Carbon Markets in Reaching Net-Zero
Working Paper” https://www.ieta.org/resources/Resources/Net-Zero/Final_Net-zero_A6_working_paper.pdf

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Figure 5-2 Global CO2 emissions and carbon sequestration in 2030 and 2050
Source) Presentation material by IETA at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

5.2 Prospects for compliance and voluntary carbon credit markets
The carbon market includes both voluntary and compliance markets. At present, the size of the voluntary
market is US$2 billion/year, with a potential of US$100–$500 billion/year by 2050. On the other hand, thissize is far short of the scale of investment currently required by CCS, which is US$130 billion/year(significantly higher than the expected size of voluntary markets over the next ten to twenty years). In
addition, the lead time required for CCS development requires an immediate willingness to invest. However,
the traditional willingness to pay and the ability to enter long-term offtake agreements over ten years or moreon the part of voluntary credit buyers is unlikely to reach the level required for CCS projects over the next
10 years.
In addition, the voluntary market has a clear preference for projects that contribute to social andenvironmental co-benefits and SDGs and is reluctant to finance oil and gas or heavy industry, mainly becauseof limited public acceptance and criticism by NGOs. Therefore, CCS diffusion is more likely to be driven by
the development of compliance markets rather than voluntary markets. It was also pointed out that aframework such as SBTi could impact the market due to recommendations to buyers to prioritize the purchaseof credits within their own supply chains. For example, it has been suggested that the oil and gas sector may
face a situation in which it must invest in CCS projects or purchase CCS credits instead of credits fromnature-based solutions. However, despite the limited potential for voluntary markets to finance CCS projects
at scale in the short term, it will make significant contributions towards the development and evolution ofregulatory frameworks for compliance schemes (e.g., the transfer of lessons from the CCS+ Initiative under
the VERRA framework to the JCM and J-credit schemes).
From another perspective, the voluntary market is to play an important role in promoting CDR projects.
Net-zero strategies by countries and private companies are expected to trigger clear and significant demand
for CDR. The supply of carbon removed from nature-based solutions (e.g., reforestation and soil carbon) is
insufficient to cover the required levels of removal as per the IPCC, and the risk of non-permanence is high.
Therefore, it is essential to promote technological solutions, including CCS.

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Figure 5-3 Hypothesis of voluntary carbon credit market
Source) Presentation material by South Pole at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

Voluntary markets are expected to contribute to the development and evolution of the regulatory
framework necessary for the development of a CDR market. For example, as noted above, the IETA has
developed high-level criteria for CCS and the CCS+ Initiative is currently developing a comprehensive,modular set of CDR methodologies, which are likely to become a starting point for the development ofregulated carbon pricing schemes around the world. Given the stronger interest and faster pace of voluntarycarbon markets in relation to CDR, they will play an influential role in stimulating a debate and creating
solutions for regulatory gaps at international and national level. An example of such regulatory gaps atinternational level is the lack of explicit definitions of CDR as well as CDR targets and accounting rules
under the Paris Agreement. Another example relates to the London Protocol regarding cross-border CDR and
CCS value chains. And last but not least, an example at national level is the lack of regulations for theapproval, construction and operation of CO2 pipelines, which will be required for CCS, CCU and CDR
markets at scale.

Figure 5-4 Hypothesis of function of compliance market for CCUS and CDR industries
Source) Presentation material by South Pole at METI-JOGMEC-IETA joint workshop, “Global Carbon Markets and CCS: Towards ASEAN
Decarbonization”, Jan 2023

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5.3 Possibility of SCOPE 3 offsetting“The Land Sector and Removals Guidance” drafted by the GHG Protocol specifies that double counting
must be avoided for Scope 3 inventory emissions and inset credits. The relationship between offsets andinsets is defined in relation to the corporate value chain, as follows:・

Offset credits are typically generated from projects or interventions that reduce emissions or increase
removal outside the corporate value chain.

・The term “inset credit” is sometimes used to refer to activities that use the same quantification
methods as offset credits, but reduce emissions or increase removals within the reporting company’svalue chain.

Figure 5-5 Accounting requirement for inset credits
Source) Greenhouse Gas Protocol Land Sector and Removals Guidance (Draft for Pilot Testing and Review, September 2022)
https://ghgprotocol.org/land-sector-and-removals-guidance

The first issue with double counting is with regard to reductions or removal. That is, under inventory
accounting, mitigation actions in the value chain must be accounted for in the Scope 3 inventory as either“reductions in Scope 3 emissions” or “increases in Scope 3 removals.” The second aspect is to address GHG
reductions in collaboration with value chain partners. To avoid double counting, a company concerned must
“purchase and retire inset credits from suppliers and other value chain partners,” or “enter into othercontractual agreements whereby its own claims of GHG reductions or removals from value chain activities
are not credited to third parties through credits elect not to be sold/transferred” is recommended. In otherwords, inset credits use credits as a tool to ensure reductions within the value chain and prohibit the use ofgenerated credits to adjust Scope 3 emissions or removals.
This is a concern that while implementing CCS will have a reduction value if it falls under Scope 1 or
Scope 2, it will weaken the incentive for reduction to Scope 3. In other words, if a company conducts a CCS
project in Scope 3 and issues credits, it is prohibited from using these credits to offset its own Scope 1.

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6. Discussion
6.1 Comment summary and considerations based on the findings shared at theworkshop
The workshop shared knowledge of the importance of CCS, existing and developing carbon credit
schemes, and methodologies that will accelerate its implementation, as described in this report. The
following comments and requests were received from participants:

a. Generate and increase the value of CCS carbon credits in the compliance market
Currently, only a limited number of schemes can generate carbon credits for CCS. Among these, only
Australia’s Emission Reduction Fund and Canada’s Alberta Emission Offset Scheme have standards that canbe used for domestic compliance regulations.
It is important to improve the value of CCS carbon credits, maintain a high standard carbon price, andpromote the social deployment of CCS. In countries and regions with relatively small macroeconomic scales,
national CAPEX and OPEX support for CCS projects would be limited; therefore, a mechanism formonetization through carbon credits will become more important. Creating an economically viable businessmodel for CCS projects is a key pathway for ASEAN and other countries to achieve carbon neutrality. In thisregard, the early realization of CCS carbon credits under the CDM successor scheme and bilateral scheme(e.g., JCM) under the Paris Agreement is expected.
In addition to the early realization of CCS carbon credit generation under the JCM, several Japanese
exploration and production (E&P) companies expressed their expectations for the early development of CCS
methodologies under the J-credit scheme to promote CCS projects in Japan. J-Credit schemes are applied toJapan’s greenhouse gas reporting system (SHK scheme) and are also used in the GX League and GX-ETS in
future.
In this regard, recommendations and encouragement to accelerate the development of CCS methodologies
in the Japanese government’s J-credit scheme are expected. Moreover, the Japanese government’s
encouragement of industries that use fossil fuels, such as steel, cement, and power generation, to offset their
CCS carbon credits in the GX-ETS would contribute significantly to increasing the value of CCS carbon
credits.

b. Maintain quality and price of CCS carbon credits
Regardless of whether it is a compliance or voluntary standard, it is essential that the quality and price of
CCS carbon credits to be appropriately maintained in each standard from the perspective of the sustainable
implementation of CCS projects.
It is important for carbon credit registries to aim for high-quality (high reliability) CCS credit generationin line with international discussions, such as Article 6 of the Paris Agreement, to maintain prices. If CCS
carbon credits are considered to be of low quality, buyers will not buy them. In addition to climate change
measures (reduction of CO2 emissions from hard-to-abate industries), one of the unique values of CCS
carbon credits is their sufficient permanence compared to nature-based carbon credits and are more certain
than nature-based credits in the sense that CO2 is physically stored deep underground. Another advantage isthat building CCS infrastructure will also increase the economic viability of promising CO2 removal projects,

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such as DACCS/BECCS. Furthermore, to increase the value of CCS carbon credits, it is important toimplement co-benefits equivalent to or greater than community-based carbon credits. Therefore, sharing
social values and good practices across borders is critical.
In addition, as indicated in the workshop, some buyers may hesitate to purchase CCS carbon credits;
therefore, it is expected that governments and municipalities will promote awareness of the effectiveness andvalue of CCS carbon credits in the energy transition period and help maintain the reputation and price of CCS
carbon credits. Moreover, it is important to consider various means of improving the economic viability ofactual CCS projects, of which CCS credit is certainly one.

c. Practical application of existing methodologies to accelerate methodology
development
As mentioned above, CCS carbon credits are expected to be generated, especially in compliance schemes(including JCM and J-credits), and it is efficient to utilize existing CCS methodologies (CCS methodologiesof the US ACR, Australian ERF, and VCS) to accelerate methodology development. In the process ofdeveloping CCUS guidelines in the JCM scheme, it has already made reference to existing CCS carbon credit
methodologies. By referring to these methodologies as a base, instead of establishing a methodology fromscratch, and by fully considering the business environment of each country/region, it will be possible toquickly design a system and develop a methodology suited to the characteristics of the region.

d. Further Capacity Building
The design of carbon-credit standards requires expertise particularly in the methodological areas of carbon
crediting in addition to knowledge of the energy and environmental sectors. While this workshop has
contributed to knowledge sharing and capacity building, there is a strong need for further programs in the
ASEAN region. For this region, the Japanese government’s capacity-building program within the frameworkof the Asia Zero Emissions Community (AZEC) and the Asia Energy Transition Initiative (AETI) is expected.
Specifically, when building capacity in countries and regions where the environment for CCS
implementation is not yet mature, the IETA’s “High Level Criteria for crediting carbon geostorage” (see3.1.2) and JOGMEC’s guidelines 14 may be used in addition to this handbook. Collaborative scheme design
through multilateral dialogue platforms, such as AZEC, AETI, and the Asia CCUS Network, will drive CCS
implementation in ASEAN.

6.2 Way forward
This workshop, on the theme of CCS carbon credits, was the first of its kind worldwide and succeeded inaccelerating international collaboration in this field. It also contributed to the development of the CCS
business environment in the ASEAN region, where carbon credit schemes are being considered, byfacilitating the implementation and enhancement of such schemes in each country.
Currently, the international discussion on Article 6.4 of the Paris Agreement (UN-driven carbon credit
schemes) is coming to a critical phase: since the requirements stipulated in Article 6.4 will have a significant
impact on other carbon credits schemes around the world, it is important for stakeholders that are promoting

14

JOGMEC’s CCS Guidelines and GHG/Carbon Intensity Guidelines (both published in May 2022)
https://www.jogmec.go.jp/english/news/release/news_10_00004.html

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CCS to follow this discussion and provide appropriate input.
As noted in the comment summary and considerations, CCS carbon credits are critical for ASEAN
countries that would have a high need for fossil fuels, and a concerted effort that takes maximum advantageof the AETI and AZEC frameworks is expected. Therefore, Japan’s leadership is crucial in this regard.
JOGMEC would like to contribute to this effort by utilizing its expertise in energy and mineral resource
development.

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Appendix
METI – JOGMEC – IETA Joint Workshop:“Global Carbon Market and CCS - Towards ASEAN Decarbonization”
Background
In April 2021, the JOGMEC formulated the “Carbon Neutral Initiative,” which sets forth policies forstrengthening Japan’s energy security and addressing climate change. The JOGMEC has launched various
projects to ensure energy security and contribute to a decarbonized society. In particular, the JOGMEC
positions CCS as a technology that will contribute to the stable supply of energy resources and the realizationof carbon neutrality by 2050. The organization intends to accelerate its efforts to support domestic andinternational CCS projects promoted by Japanese companies and strengthen international collaboration, witha particular focus on ASEAN.
To facilitate CCS project development and contribute to decarbonization, it is necessary to foster acommon understanding of the potential of CCS in climate change mitigation, as well as issues such as
emission reduction accounting methodologies and risk management. To this end, it is important to learn fromprecedents and participate in international discussions. Additionally, knowledge sharing on good practices inusing the carbon market will be key in initiatives towards creating high-quality carbon credits, including theevaluation of co-benefits other than the mitigation impact.
As part of these efforts, in collaboration with the METI and IETA, the JOGMEC held a workshop on the
topic of carbon credit and the creation of environmental value by CCS with the aim of facilitating CCS
deployment through the appropriate use of carbon markets.
Basic information
 Date and Time: Day 1: January, 25 2023 (Wed.) 14:00–16:45 (JST) / 12:00–14:45 (UTC+7)
 Day 2: January 26, 2023 (Thur.) 14:00–16:45 (JST) / 12:00–14:45 (UTC+7)
 Organizers: Japanese Ministry of Economy, Trade and Industry (METI), Japan Organization for
Metals and Energy Security (JOGMEC), International Emissions Trading Association (IETA) Official supporter: Asia CCUS Network
 Secretariat: Mitsubishi Research Institute (MRI) Language: Japanese and English (simultaneous interpretation)
 Program: Day 1: For those interested in CCS carbon credits
 Day 2: For companies involved in CCS business Registration and viewing statistics:
 Total registrations: 1,702
 Day 1 live viewers: 837
 Day 2 live viewers: 561

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AgendaDay 1: Overview of carbon market and CCS carbon credits(1) Day 1 overview
 Masumi Takanashi, Project Director, Global Coordination Division, Hydrogen and CCS Project
Department, Japan Organization for Metals and Energy Security (JOGMEC)(2) Opening remarks
 Takeshi Soda, Director, Oil & Gas Division, Agency for Natural Resources and Energy, Ministry of
Economy, Trade, and Industry (METI), Japan(3) Keynote speeches “Comprehensive support for CCS” by Dr. Koji Yamamoto, Vice President, Energy Business Unit,
JOGMEC “Introducing the IETA High-level Criteria for Crediting Carbon Geostorage” by Dirk Forrister, CEO
of International Emissions Trading Association (IETA)(4) Presentations
 “CCS credit schemes around the world” by Kikuko Shinchi, Research Director, Mitsubishi ResearchInstitute (MRI) “CCS, Article 6 & Beyond: Global Perspectives” by Noora Al Amer, Senior International Climate
Change Policy Advisor, Global CCS Institute (GCCSI).
 “Overview of CCS activities on the JCM” by Dr. Kensuke Shiomi, Assistant Director, Global
Environmental Affairs Office, Industrial Science and Technology Policy and Environment Bureau,
METI(5) Summary of day 1
 Masumi Takanashi, Project Director, Global Coordination Division, Hydrogen and CCS Project
Department, Japan Organization for Metals and Energy Security (JOGMEC)
Day 2: CCS-related methodologies, project cycle, finance(1) Day 2 overview
 Dr. Sakura Nishioka, Deputy Director, Global Coordination Division, Hydrogen and CCS Project
Department, JOGMEC(2) Presentations
 “How carbon credits can incentivize CCS projects” by Matthias Krey, Managing Director,
Perspectives Climate Group “Enabling CCUS Project Deployment through the Carbon Markets” by Maris Densmore, Director ofIndustrial Solutions, American Carbon Registry (ACR)
 “The Verified Carbon Standard and Requirements for Geologic Carbon Storage” by Gerald Ouellette,
Manager, Energy Innovation, Verra “CCS methodology development in the CCS+ Initiative” by Christiaan Gevers Deynoot, Deputy
Secretary General, CCS+ initiative
 “Introduction of financing case of Northern Lights project” by Elise Roc, Senior Business
Development Advisor, Northern Lights JV
 “Prospects for CCS in Carbon Markets” by Patrick Bürgi, Co-Founder/Managing Director Japan,
South Pole
(3) Summary of workshop
 Dr. Sakura Nishioka, Deputy Director, Global Coordination Division, Hydrogen and CCS Project
Department, JOGMEC

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Detailed program
Day 1: Overview of carbon market and CCS carbon credits(1) Day 1 overview
Masumi Takanashi, the Project Director, Global Coordination Division, Hydrogen and CCS Project
Department, Japan Organization for Metals and Energy Security (JOGMEC), began the session by
explaining the significance of the workshop and JOGMEC’s initiatives. She expressed her gratitude to thediverse audience that had shown interest in this workshop, not only the oil and gas industry but also otherfields, including electric power, shipping, construction, steel, and financial institutions. She emphasizedthat JOGMEC would continue to promote the implementation of CCS projects in Japan and abroad andfacilitate international collaboration, especially in ASEAN. She also stated that JOGMEC plans to preparea handbook for issuing credits from CCS based on discussions at this workshop.
(2) Opening remarks
Takeshi Soda, Director, Oil & Gas Division, Agency for Natural Resources and Energy, Ministry of
Economy, Trade, and Industry (METI), Japan, introduced CCS initiatives in ASEAN, such as the joint
research initiative with AZEC, Asia CCUS Network, and Pertamina, as well as efforts within Japan,
including the pilot project in Tomakomai. According to Mr. Soda, carbon credits are an important methodof CCS monetization. Based on the recent increase in credit-trading volumes and the discussion of Article
6 of the COP, the use of carbon credits in the GX League has been discussed in Japan. However, because
there are no unified standards for CCS crediting, it is important to formulate rules and methodologies incooperation with the policies of other countries around the world. He concluded the opening speech by
expressing his expectation that this workshop would share global trends and knowledge in this field witha large audience, thereby fostering momentum in ASEAN regarding the use of CCS credits and paving theway for the monetization of CCS in the future.
(3) Keynote speeches
Regarding comprehensive support for CCS, on behalf of JOGMEC, Dr Koji Yamamoto, the Vice
President of the Energy Business Unit, expressed the organization’s commitment to both a stable energy
supply and climate change mitigation by adding hydrogen, ammonia, CCS, and offshore wind power
generation projects to its business domain, in accordance with the 2022 revision of the JOGMEC’s law.
He explained that the JOGMEC offers comprehensive support for CCS projects, including feasibility
studies, research and development, and the formulation of guidelines in related fields, to promote CCS
projects by Japanese companies in Japan and abroad. He also introduced the CO2-EOR guidelines
currently being developed. In the Q&A session, he mentioned that the JOGMEC hoped to learn about
different ways to obtain CCS credits through this workshop and discussed the JOGMEC’s efforts to acquire
CCS-related data.
Following Dr. Yamamoto’s speech, Dirk Forrister, CEO of the IETA, introduced overall carbon credit
market trends and high-level criteria. As the Paris Agreement establishes a framework for countries toachieve “net zero” emissions balanced by emissions from technological or natural solutions, Mr. Forrister
pointed out the importance of the role of CCS and CDR in this process. He explained that carbon removal

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Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”

credits are expected to be traded among companies and countries through Article 6, but at present, there
are various barriers to be overcome for future scaling-up, and that he has been working to identify themthrough stakeholder meetings. He suggested that more carbon credit criteria are needed to scale up
geological storage and introduced a set of high-level credit criteria to be considered for geological storage
projects. During the Q&A session, he referred to the background of restrictions on the use of credits in theInternational Financial Reporting Standards (IFRS)/International Sustainability Standards Board (ISSB)
standard and the current expectations for CCS compared to the past.
(4) Presentations
In her presentation entitled “CCS credit schemes around the world,” Kikuko Shinchi, Research Director,
Mitsubishi Research Institute (MRI), presented a bird’s-eye view of the carbon market by explaining
carbon credit schemes in several countries and regions where CCS projects are active, as well as recent
trends in the development of CCS methods in international credit schemes. She also pointed out issues
with CDM as a transition mechanism from a technical viewpoint. In addition, she provided an overview
of how CCS is handled in the Paris Agreement and other countries’ schemes. Finally, some common key
issues are mentioned, including credit buffers that consider leakage risk, credit ownership, long-termmonitoring, and avoidance of double counting. During the Q&A session, she discussed the status of CCS
methodology development in Southeast Asia and the transfer of credit to other countries.

Regarding the landscape and potential impact of Article 6 and its rule book on the CCS sector, Noora Al
Amer, Senior International Climate Change Policy Advisor, Global CCS Institute (GCCSI), explained thestatus of the Paris Agreement Article 6 negotiations and their relevance to CCS. Based on the development
at COP27, she also mentioned the importance of synergy among economic, environmental, and social
requirements in constructing a framework for CCS other than Article 6 negotiations. Furthermore, she
identified the challenges in generating CCS carbon credits and their potential countermeasures,emphasizing the need to develop national and international regulations, rules, and modalities. She also
provided some suggestions on key points to be considered in the future regarding the positioning of CCS
within the Article 6 framework. During the Q&A session, she discussed each country’s position on CCS
and the impact of CCS guidance, in addition to Article 6.

Presenting on CCS activities in JCM, Dr. Kensuke Shiomi, Assistant Director, Global Environmental
Affairs Office, Industrial Science and Technology Policy, and Environment Bureau of METI, talked about
the history of JCM, a scheme that contributed to global decarbonization and NDC achievements in Japanand JCM partner countries, as well as the support provided by METI. He introduced a few feasibility studies,including specific projects with high potential, which are currently under consideration for inclusion in theJCM. He also shared the status of policy considerations in Japan, including the revision of existing rules
and guidelines to position CCS in the JCM target scope and indicated that the current initiatives are
expected to continue until 2026, before JCM credits for implementation projects are officially issued. He
explained in detail the future utilization of JCM credit during the Q&A sessions.

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Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”(1) Summary of day 1
Masumi Takanashi expressed her gratitude to the speakers and provided a brief review of the content on
Day 1. She reminded the audience and speakers that a handbook summarizing all the content of theworkshop was being prepared. She introduced topics and speakers for the second day as well.
Day 2: CCS-related methodologies, project cycle, finance(4) Day 2 overview
Continuing from Day 1, Dr. Sakura Nishioka, Deputy Director, Global Coordination Division, Hydrogenand CCS Project Department, JOGMEC, reiterated that the JOGMEC positions CO2 capture, transport,
and storage as important technologies and will offer support for Japanese companies and facilitate
international collaboration, especially with the ASEAN. She expressed her hope that this workshop would
promote an understanding of carbon credits and CCS among the audience. She then proceeded to provide
an overview of the second day of the workshop, and announced that the JOGMEC was compiling a
handbook on carbon credits for CCS, based on the results of this workshop, and the same would be releasedin early March.
(5) Presentations
Speaking on how carbon credits can incentivize CCS projects, Matthias Krey, Managing Director of
Perspectives Climate Group, opened his presentation by providing an overview of how carbon credit
mechanisms work and showing how carbon credits generate revenue and can be an incentive to invest in
various types of CCS projects. He also provided an overview of the credit issuance cycle, recent trends inthe development of the voluntary credit market, and a summary of credit issuance principles and existing
CCS methodologies. He then discussed the relationship between CCS abatement costs and carbon credit
prices and noted that current carbon credit prices are too low to incentives CCS projects at large scale. He
illustrated this statement with a carbon credit investment analysis model for CO2 capture and storage usingcase studies based on data from real projects. Matthias Krey concluded that for the foreseeable future
public financing for CCS project investments and carbon markets need to work together to enable bankable
CCS projects. During the Q&A sessions, questions were raised regarding the attribution of the emission
reductions or removals from CCS projects when CO2 is transported and stored in a shared infrastructure(CCS hubs).
Next, Maris Densmore, Director of Industrial Solutions, American Carbon Registry (ACR), shared about
CCS methodology development in ACR, which went into effect in 2015 but was recently expanded in
2022, and public comments were being held at the moment. She discussed, in detail, the CO2 emission
source and reservoir requirements in the CCS methodology as well as the position of the EOR and thetreatment of emission reductions and pore space ownership. She also introduced the ACR’s approach
regarding MRV, quantification, methods to ensure permanence with credit quality assurance, and measures
to implement CCS quickly and effectively. During the Q&A session, she discussed EOR boundary-setting
as well.
The session by Gerald Ouellette, Manager of Energy Innovation, Verra, focused on the world leading
Verified Carbon Standard (VCS) program and the program level requirements for geologic carbon storage

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Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”(GCS) projects. Mr. Ouellette introduced the success of the VCS program to date and the global reach of
the program with over 1900 projects registered across 88 countries accounting for over 1 billion verified
carbon units issued. He highlighted recent GCS documents released setting the stage for the onset of future
CCS projects seeking registration in the VCS program. In particular, he provided an overview of the GCS
Non-Permanent Risk Tool and provided specific examples of scoring criteria and the tool application as
CCS projects seek to score their projects to determine the buffer pool contribution. He also shared thefuture direction of the VCS program, anticipating significant growth and high emissions reduction andremoval potential with the future registry of CCS, CCUS and CDR projects as methodologies aredeveloped. During the Q&A, he went into more detail about the status of the CCS methodology.
Subsequently, sharing the development of CCS Methodology in the CCS+ Initiative, Christiaan Gevers
Deynoot, Deputy Secretary General of the CCS+ Initiative, outlined the activities and structure of the
CCS+ Initiative, noting that it aims to scale up these solutions by developing a robust carbon accounting
methodology with environmental integrity at its core and mobilizing funds from the global carbon market.
Regarding the development of technical activities, he discussed the MRV methodology system thatencompasses each CCS value chain, and the steps to be considered in the future. Then, discussing policy
trends, he introduced the EU’s Compliance Guidance, emphasizing that its purpose is to identify
opportunities and issues with the methods and tools to be developed by CCS+ and that it does not envision
further involvement in specific incentive measures. In the Q&A session, he discussed how the CCS+
Initiative methodology could be applied to ASEAN.
To substantiate the previous discussions, Elise Roc, Senior Business Development Advisor, Northern
Lights JV, introduced the financing case of the Northern Lights project. First, she described thedevelopment of the world’s first open-source CO2 transport and storage infrastructure and indicated thatthe strategic objectives were to make it a commercial enterprise with environmental integrity and to build
best practices that can be applied by other companies. She mentioned that they were working with the
CCS+ Initiative to create a rigorous process to certify, not only CCS, but also DACCS, BECCS, and other
CDR fields with voluntary carbon standards. Finally, she shared five guiding principles for accelerating
future CCS activities.
The final presentation, delivered by Patrick Bürgi, Co-founder/Managing Director Japan–South Pole,highlights the prospects for better utilization of carbon credits through CCS. He discussed the difference
between CCUS and CDR in terms of their roles in achieving net zero. While noting the great potential in
the compliance and voluntary markets, he suggested that voluntary markets do not always lead tomeaningful financial support, and expressed expectations for the development of an empirical technicalframework with MRV. During the Q&A session, with regard to credit purchase needs, he discussed thedifference between CCS and CDR, regional differences from Japan, Europe, and the U.S., and differencesin project types, including forest conservation.
(6) Summary of workshop
Finally, Dr. Nishioka thanked the speakers for their contributions and presented a review of the workshop.

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Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”(Workshop materials)
All presentation slides and video recordings are archived on the following websites (scan the QR codes below toaccess):(Global Disclaimer)
The information contained on the handbook is provided for general information purposes only and does not include,
nor shall it be construed as including, investment advice on, advice on the merits of, or a recommendation in
relation to, buying, selling, subscribing for, or underwriting any securities, shares, or other financial investments ofany kind. JOGMEC does not guarantee the accuracy or reliability of such information and shall have no liability for
any losses or damages that may arise from using or relying on the information.

Handbook for CCS Carbon Credits:
Workshop report of “Global Carbon Market and CCS: Towards ASEAN Decarbonization”
March 2nd, 2023
Japan Organization for Metals and Energy Security (JOGMEC)
Contact: jogmec-ccs-globalcoordination@jogmec.go.jp

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