Setyawati Fitrianggraeni, Agnes Wulandari, Irvena A. Dewanto and Nazaruddin Insyiroh

INTRODUCTION

Carbon Capture and Storage (CCS) is a business activity that includes the capture of Carbon and/or transportation of captured Carbon, injection, and storage of Carbon into ZTI (Zona Target Injeksi/Injection Target Zone) safely and permanently in accordance with good engineering principles.

Indonesia has great potential in the carbon capture and storage industry and market. This is because Indonesia has a supportive green ecosystem. In carrying out carbon capture and storage business activities, there are various risks that must be taken into account in carrying out carbon capture and storage activities. One of the potential risks that stakeholders (i.e governments of states and business actors) need to pay attention to in carbon capture and storage activities is the risk for disputes.

Potential disputes in carrying out carbon and capture storage activities can be derived from commercial and environmental sectors. Both commercial and environment could lead to disputes that the stakeholders may not desire. One of the potential disputes that may happen during the carbon capture and storage activities is within the cross-border transportation of carbon.

The dispute settlement mechanism of cross-border transportation of carbon is regulated limitedly in Article 47 paragraph (6) of Presidential Regulation Number 14 of 2024 concerning the Implementation of Carbon Capture and Storage Activities (“PR 14/2024”).  There are dispute settlement mechanisms that the business actors need to know, especially in the context of cross-border transportation of carbon.

POTENTIAL DISPUTES IN CROSS-BORDER TRANSPORTATION OF CARBON

• Commercial and Environmental Disputes

Carbon Transport is defined as a business activity that includes transporting carbon from a capture and/or processing facility by transportation mode up to the point of handover of carbon injection.[1] Carbon Transport business activities are carried out based on the Carbon Transport Permit after coordinating with the Minister of Environment and Forestry (“MoEF”).[2] Carbon transportation is carried out using:[3]

1. pipes;
2. tracks;
3. ships; and
4. other means in accordance with the development of science and technology.

Furthermore, Carbon Transport business activities can be carried out by:[4]

1. Business Entities; or
2. holders of Storage Operation Permits, after obtaining permission from the Minister of Energy and Mineral Resources (“MoEMR”) and/or the Minister of Minister of Transportation.

A potential dispute in the implementation of CCS may stem from leakage. Leakage is defined as carbon transfer out of the Injection Target Zone (“ZTI”) and/or transportation.[5]  Carbon can be safely stored underground provided that it is injected into a suitable site, with suitable geological conditions.[6] The ability for carbons to remain stored underground depends on a number of factors, including geochemical and geotechnical factors.[7] However, naturally occurring or induced faults may trigger rapid migration of carbon dioxide, which may ultimately escape into the atmosphere.[8] Furthermore, another potential effect of leakage also includes contamination of groundwater. [9] Additionally, the cost of recovery towards the effects of leakage is not inexpensive. [10]

Article 47 paragraph (4) of PR 14/2024 provides that, “In the event of a leakage during the cross-border carbon transport, the leakage does not add to Indonesia’s greenhouse gas inventory”. This provision, however, fails to outline which country’s inventory will the carbon be recorded in, and hence, which country will bear liability for the carbon emitted. Thus, provisions detailing liability towards the leaked carbon during cross-border carbon transport are of importance to clarify the existing grey area in the regulation.

• Dispute Resolution Mechanism According to Existing Regulations

To facilitate the transportation of cross-border CCS, bilateral cooperation agreements between countries are carried out.[11] The cooperation agreement becomes a guideline for all parties to issue recommendations or permits needed in the context of cross-border Carbon Transport in accordance with the provisions of applicable laws and regulations in their respective countries.[12] Hence, the transportation of Carbon into the Indonesian customs area is carried out after a bilateral agreement between the Republic of Indonesia and the country where the Carbon is produced and captured has been established.[13]

According to Article 47 paragraph (6) of PR 14/2024, “Rights and obligations related to the cross-border Carbon transporation mechanism including liability in the event of a Leakage in each process chain are regulated in applicable laws and regulations and in accordance with agreements between emitters and Carbon Transportation License holders, Storage Operation Permit holders, and/or Contractors”.

 Having considered the cross-border nature of carbon transport, challenges, however, may be faced in determining the country that has the jurisdiction to settle the dispute, and where the dispute occurs.  This challenge may also be caused by difficulty in determining the location of the leakage. The various means of cross-border carbon transport, namely, pipes, tracks, and ships, may add further complexities to the issue.

POTENTIAL DISPUTE SETTLEMENT AND FORUM

2.1.  Arbitration

The parties to the dispute may refer their dispute to arbitration if they have agreed to do so in a contract, before the dispute, or after the dispute. According to Art. 1 par. (1) Law No. 30 of 1999 concerning Arbitration and Alternative Dispute Resolution (“Law 30/1999”), “Arbitration refers to a method for civil dispute settlement outside of general judiciary, which is based on arbitration agreement that is made in writing by both disputing parties”. Art. 1 par. (3) further elaborated that, “Arbitration agreement refers to an agreement in form of arbitration clause which is included in a written agreement that is made by both parties before the dispute occurs, or a separate arbitration agreement which is made by both parties after the dispute has occurred”.

In the context of cross-border transportation of carbon in carbon capture storage, a special arbitral tribunal stipulated in Article 287 of United Nations Convention on the Law of the Sea (UNCLOS) may be chosen by the parties.

This occurs because, when transferring CO₂ from a source of emission to an injection site, whether located onshore or offshore, it is typically compressed into either a liquid or supercritical state to ensure it is sufficiently dense for transportation via pipeline or storage in alternative containers. Pipelines need to adhere to precise standards to withstand the high pressures required for containing CO₂, which is considered a highly compact and hazardous substance during transit. Additionally, carriers designed for transporting significant amounts of CO₂ must be specifically engineered, utilizing materials capable of managing the low temperatures necessary to maintain CO₂ in a supercritical condition.[14]

Most proposed offshore CCS projects plan to capture emissions at an onshore facility and then transport them by pipeline to an offshore storage site. The buildout of CO₂ pipelines in the undersea environment is one of the concerns. Such a buildout would face several obstacles, including the challenges presented by seawater infiltrating pipelines during their construction offshore. The risk of pipeline leaks is heightened by operating offshore. Furthermore, transporting CO₂ by shipping increases emissions in one of the most difficult-to-decarbonize transport sectors.[15]

Since the dispute meets the requirements for special arbitration under Annex VIII of UNCLOS, which states that any party to a dispute concerning the interpretation or application of the articles of this Convention relating to (1) fisheries, (2) protection and preservation of the marine environment, (3) marine scientific research, or (4) navigation, including pollution from vessels and by dumping, may submit the dispute to the special arbitral procedure provided for in this Annex by written notification addressed to the other party or parties to the dispute.[16]

 2.2. Judicial Settlement

The parties to the dispute may refer their dispute to take judicial settlement if they have  agreed to do so in the bilateral agreement, before the dispute or after the dispute. According to Article 287 of  the UNCLOS, the judical settlement of disputes that may be chosen by the parties are through the International Tribunal for the Law of the Sea (ITLOS) and the International Court of Justice (ICJ).[17]

A. International Tribunal for the Law of the Sea

According to Article 21 of ITLOS Statute: the jurisdiction of the Tribunal comprises all disputes and all applications submitted to it in accordance with this Convention and all matters specifically provided for in any other agreement which confers jurisdiction on the Tribunal.[18]

The procedure section details how the Tribunal handles disputes. It begins with the initiation of proceedings through a special agreement or written application, with all parties being notified. The Tribunal can prescribe provisional measures, including through a summary procedure if necessary. Hearings are generally public and presided over by the President or another senior judge if needed. The Tribunal manages case conduct, including the timing and presentation of arguments. Proceedings can continue even if a party is absent, provided the Tribunal confirms jurisdiction and the validity of claims. Decisions require a majority vote from present members, with the President casting a deciding vote if there’s a tie. Judgments must include reasoning, list participating members, allow for separate opinions, and be publicly read. States with a legal interest or affected by interpretation issues can request to intervene. Tribunal decisions are final, binding only to the parties involved, and can be interpreted upon request. Typically, each party bears its own costs unless the Tribunal decides otherwise.[19]

B.International Court of Justice

Article 36 par.1 set that the jurisdiction of the International Court of Justice comprises all cases which the parties refer to it and all matters specially provided for in the Charter of the United Nations or in treaties and conventions in force. [20]

ICJ type of cases:

1. Contentious cases (legal disputes between states submitted to it by relevant states).

Article 34 of the International Court of Justice (ICJ) statute stipulates that only states are eligible to be parties in cases brought before the Court. Meanwhile, Article 59 clarifies that the Court’s decisions are binding solely on the parties involved in the specific case and do not establish a precedent with binding authority for other cases.[21]

2. Request for advisory opinions on legal questions referred to it by United Nations organs and specialize agencies (advisory proceedings)

Article 65 of ICJ Statute: the court may give an advisory opinion on any legal question at the request of whatever body may be authorized by or in accordance with the Charter of the United Nations to make such a request.[22]

States may only refer to contentious cases, as the request for advisory opinions submitted only by the UN Organs and specialized agencies.[23]

CONCLUSION

 The objective of determining the dispute resolution mechanism is to achieve a favorable outcome for a dispute. A resolution that is agreeable to all parties involved and aligns with the covered agreements is undoubtedly the preferred outcome.

In summary, there is a possibility for disputes to arise in the cross-border transportation of carbon within the Carbon Capture and Storage (CCS) industry, highlighting Indonesia’s significant potential in this market due to its supportive green ecosystem. However, this also poses various risks, including potential commercial and environmental disputes, particularly from leakage during transportation, which may result in environmental pollution and high recovery costs.

The current regulatory framework, as per PR 14/2024, is inadequate in defining liability for such leakage, especially across borders. To address disputes, parties may choose dispute resolution mechanisms including arbitration, guided by Law 30/1999 and UNCLOS provisions, and judicial settlement through the International Tribunal for the Law of the Sea (ITLOS) and the International Court of Justice (ICJ). These mechanisms are critical for resolving jurisdictional challenges and ensuring clear liability and effective dispute resolution in the cross-border CCS context.

REFERENCES

Deep Trouble: The Risks of Offshore Carbon Capture and Storage, Center for International Environmental Law (CIEL), November 2023.

Hang Deng, Jeffrey M. Bielicki, Michael Oppenheimer, Jeffrey P. Fitts, Cahterine A. Peters, ‘Leakage Risks of Gelogic CO2 Storage and the Impacts on the Global Energy System and Climate Change Mitigation’ (2017) Climatic Change <https://link.springer.com/article/10.1007/s10584-017-2035-8> accessed 17 May 2024.

International Court of Justice, ‘How the Court Works’ < https://www.icj-cij.org/how-the-court-works > accessed 14 June 2024.

Johannes M. Miocic, Stuart M. V. Gilfillan, Norbert Frank, Andrea Schroeder-Ritzrau, Neil M. Burnside, R. Stuart Haszeldine, ‘420,000 Year Assessment of Fault Leakage Rates Shows Geological Carbon Storage Is Secure’ (2019) Nature Scientific Reports <https://www.nature.com/articles/s41598-018-36974-0> accessed 17 May 2024.

MIT Climate Portal, ‘What is the Risk That CO2 Stored Underground After Carbon Capture Will Escape Again?’ (Climate Portal, 23 February 2024) < https://climate.mit.edu/ask-mit/what-risk-co2-stored-underground-after-carbon-capture-will-escape-again> accessed 17 May 2024.

Presidential Regulation Number 14 of 2024 concerning Implementation of Carbon Capture and Storage Activities.

Statute of International Court of Justice.

Statute of International Tribunal for the Law of the Sea.

United Nations Convention on the Law of the Sea.

Footnotes :

[1] Presidential Regulation Number 14 of 2024 concerning Implementation of Carbon Capture and Storage Activities, Article 1 Number 14.

[2] Ibid, Article 30 paragraph (1).

[3] Ibid, Article 30 paragraph (2).

[4] Ibid, Article 30 paragraph (4).

[5] Ibid, Article 1 Number 17.

[6] MIT Climate Portal, ‘What is the Risk That CO2 Stored Underground After Carbon Capture Will Escape Again?’ (Climate Portal, 23 February 2024) < https://climate.mit.edu/ask-mit/what-risk-co2-stored-underground-after-carbon-capture-will-escape-again> accessed 17 May 2024.

[7] Johannes M. Miocic, Stuart M. V. Gilfillan, Norbert Frank, Andrea Schroeder-Ritzrau, Neil M. Burnside, R. Stuart Haszeldine, ‘420,000 Year Assessment of Fault Leakage Rates Shows Geological Carbon Storage Is Secure’ (2019) Nature Scientific Reports <https://www.nature.com/articles/s41598-018-36974-0> accessed 17 May 2024.

[8] Ibid.

[9] Hang Deng, Jeffrey M. Bielicki, Michael Oppenheimer, Jeffrey P. Fitts, Cahterine A. Peters, ‘Leakage Risks of Gelogic CO2 Storage and the Impacts on the Global Energy System and Climate Change Mitigation’ (2017) Climatic Change <https://link.springer.com/article/10.1007/s10584-017-2035-8> accessed 17 May 2024.

[10] Ibid.

[11] PR 14/2024, Article 45 paragraph (1).

[12] Ibid, Article 45 paragraph (2).

[13] Ibid, Article 47 paragraph (3).

[14] Deep Trouble: The Risks of Offshore Carbon Capture and Storage, Center for International Environmental Law (CIEL), November 2023, p 17.

[15] Ibid., p 17-19.

[16] United Nations Convention on the Law of the Sea, Annex VIII, Article 1.

[17] UNCLOS, Article 287.

[18] Statute of ITLOS, Article 21.

[19] Statute of ITLOS, Article 24-33.

[20] Statute of ICJ, Article 36.

[21] Statute of ICJ, Article 34 and Article 59.

[22] Statute of ICJ, Article 65.

[23] International Court of Justice, ‘How the Court Works’ < https://www.icj-cij.org/how-the-court-works > accessed 14 June 2024.

 

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