Summary/Abstract
The Clean Development Mechanism (CDM) of the Kyoto Protocol, currently provides the only financial incentive for developing countries to reduce their CO2 emissions, but there is significant discussion as to whether Carbon Dioxide Capture and Storage (CCS) projects should be eligible in the CDM. Among several legal problems with CCS-CDM projects is the long-term liability for escaping CO2 in the post-crediting period. This paper analyses the literature addressing this issue and reviews the two central aspects of (i) who should be liable and (ii) how should liability be designed to account for CO2 seepage. This paper recommends elaborating on the liability of developing countries hosting CCS-CDM projects in conjunction with the liability of an industry financed fund that offers host countries financial recourse in the event of seepage. With regard to the accounting issues the paper prefers the view of those who argue that the problem of seepage should not preclude the issuance of permanent Certified Emission Reduction (CER).