Designing a Workable Carbon Capture Use and Storage Regulatory Regime: Key Policy Challenges

Carbon capture, use, and storage (CCUS) is being adopted by signatories to the Paris Agreement to assist them in meeting their nationally determined contributions (NDCs) to reduce greenhouse gas emissions.

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Carbon capture, use, and storage, CCUS, is being adopted by signatories to the Paris Agreement to assist them in meeting their nationally determined contributions, NDCs, to reduce greenhouse gas emissions. Building a credible CCUS regulatory regime requires more than solving legal puzzles about ownership and liability. It requires practical rules that align investor incentives, manage shared infrastructure, and enable projects to operate across borders. This article explains the main policy tools governments use, how they are combined in practice, and what a well-designed regime looks like. Financial incentives. Policymakers use several types of financial support to make CCUS projects bankable. One common approach is a contract for difference, CCFD. The government guarantees a price for each ton of CO2 avoided, making revenue predictable for the project. CCFDs provide targeted price certainty, but require careful administration. Tax credits or investment tax credits provide capital support per ton and can be scaled through existing tax systems. Tax credits are easier to scale, but are blunt and may not fully address long-term revenue risk. Grant programs and direct payments also used where upfront costs are a barrier. Another approach is a regulated asset base, RAB, model for shared transport and storage infrastructure, where users pay tariffs calculated to allow the operator to recover costs plus an allowed return. The single common challenge is demand creation. Without a consistent, predictable market for stored carbon, either through compliance markets or durable public support, projects rely disproportionately on subsidies. Open access. Shared pipelines and storage sites are central to scaling CCUS, and rules for open access and competition matter. When a network is controlled by one company, regulators must ensure non-discriminatory access and transparent tariffs to avoid abuse of market power and to allow multiple emitters to plug in. Some jurisdictions build open access conditions into licenses or economic regulations. Others rely on competition authorities. Well-designed hub models, where trunk lines and large storage units are governed to allow multiple users, reduce transaction costs, and prevent single-user dominance. If a lead developer is state-owned, the legal framework must include clear, independent oversight to maintain fairness, land access and spatial planning. Land access and spatial planning are other practical concerns. Coordinating routes for pipelines, sighting compressor stations, and sequencing cluster development requires statutory tools to avoid holdouts that can block entire networks. Some governments use compulsory purchase or expropriation powers for projects of public benefit, with fair compensation and procedural safeguards. Where land ownership is concentrated and cooperative, negotiation can work. Where ownership is fragmented, statutory tools aligned with robust public engagement speed up build out while protecting rights. Cross-border projects. International projects raise extra complexity. Recent updates to the international law framework allow CO2 to be transported across borders for sub-seabed storage, but that move requires clear bilateral consent, compatible MRV systems, and agreement on liability if problems occur. A cross-border storage hub only works if countries align on verification rules, recognize each other's monitoring results, and prevent double counting of emissions reductions in carbon accounting systems. Governments that want to become regional storage hubs must put export slash import authority into law and agree in advance on dispute resolution and chain of custody rules. Conclusion. Good policy design is less about copying one model and more about combining a few practical principles in a way that fits the country's legal and political context. Tie CCUS international climate and carbon accounting systems so stored tons are consistently treated as not omitted and leakage is addressed. Embed life cycle licensing gates into primary law but allow technical and economic details to be updated through regulation and guidance as operational experience grows. Clarify poor space rights and provide practical tools, such as unitization rules or fair expropriation procedures, to assemble storage areas when the public interest requires it. Define clear closure and liability transfer tests, and set up ring-fenced contingency funds to handle long-term monitoring and residual risks. Require non-discriminatory access to shared infrastructure under transparent tariffs backed by independent oversight. Establish measurement, reporting and verification, MLV, and data transparency infrastructure at the hub scale, and align standards with international rules for cross-border projects. Design incentives that create durable demand, linking public support to market prices where possible, or using CCFDs and RABS to address specific market failures. Taken together, these elements can move CCUs from pilot projects to a portfolio of commercially viable facilities that support decarbonisation at scale. The institutional challenge is substantial, but it is also achievable. With clear roles, predictable incentives, robust monitoring, and strong public engagement, countries can build a legal and regulatory architecture that lets carbon capture deliver on its promise without shifting undue risk to states, taxpayers, or communities. Partner. g.nelson at Tamimi.com. View LinkedIn profile. Building a credible CCUS regulatory regime requires more than solving legal puzzles about ownership and liability. It requires practical rules that align investor incentives, manage shared infrastructure, and enable projects to operate across borders. Comparison of policy approaches. A simple comparison of jurisdictional policy approaches helps illustrate how these pieces fit together. The table below summarizes typical strengths, common policy tools, and recurring challenges for different types of regimes. Jurisdiction type, typical strengths, common policy.