In a Nutshell

In February 2024, the European Commission presented a Communication entitled “Securing our future: Europe’s 2040 climate target and path to climate neutrality by 2050, building a sustainable, just and prosperous society”, recommending a net reduction of 90% greenhouse gas (GHG) emissions by 2040 compared to 1990 levels.

As part of the European Green Deal, the EU has set out legally binding climate objectives to (1) cut domestic GHG emissions by at least 55% by 2030 and to (2) reach climate neutrality by 2050. The European Climate Law provides the legal framework to support these objectives and requires the European Commission to propose an intermediary 2040 climate target for the EU in the first half of 2024, accompanied by an indicative EU GHG budget for the period 2030-2050.

In its 2040 target communication, the Commission breaks down the 90% emission reduction target into twin targets, suggesting that by 2040, the EU should have less than 850 MtCO2 remaining emissions (so-called “residual emissions”) with a maximum of 400 MtCO2 removed through industrial and land-based solutions. However, it does not go as far as proposing a percentage target for removed carbon at this stage, nor does it clearly specify how much different types of removals should contribute to the overarching amount of removals. The Communication also considers the role of carbon capture and storage (CCS) and carbon capture and utilisation (CCU) in decarbonising the economy towards 2040.

Whilst the Communication does not impose any legally binding obligations on the EU, it will serve as the basis for a forthcoming Commission proposal to amend the European Climate Law as part of the post-2030 climate policy agenda. The Communication outlines eight building blocks necessary to achieve the 2040 target, which represent the recommended focus areas for the next Commission’s legislative mandate.

The 2040 climate target is closely linked to the Industrial Carbon Management Strategy, which elaborates on the Communication’s vision for how so-called ‘industrial carbon removal’ (iCDR, defined as BECCS, DACCS and biogenic carbon), CCS and CCU can help deliver climate neutrality in the EU by 2050, and net negative emissions thereafter.

What's on the Horizon?

The publication of the Communication is the first step towards coming to an agreement on the climate targets for 2040, which will result in the adoption of an amended European Climate Law with a new binding 2040 target and an accompanying package of proposals for sectoral policies from the European Commission.

  • Following the publication of the Communication, the Commission’s services (at Directorate General level) will kick off the work on the legislative proposal to revise the European Climate Law and enshrine the 2040 target, with DG CLIMA leading this file. The proposal is expected to be adopted by the Commission in the first quarter of 2025.
  • Member states in the Council will have a first exchange of views during the Environment Council on 25 March 2024, followed by a policy debate on 17 June 2024.
  • The European Parliament will form a lead committee responsible for the file and appoint a rapporteur, with the Committee on Environment, Public Health and Food Safety (ENVI) likely to be named in charge.
  • Following the June 2024 elections, the new European Parliament and the Council will both propose amendments to the Commission’s proposal and negotiate the final text.
  • Once approved, the 2040 target will serve as the basis for the EU’s updated Nationally Determined Contributions (NDC) under the Paris Agreement. The NDC will need to be submitted ahead of COP30, in November 2025. Therefore, the EU will strive to find an agreement by that date, although the revised Climate Law will likely be finalised in early 2026.
  • The adoption of the revised European Climate Law serves as the foundation for a new package of legislative proposals, aimed at realising the EU’s 2040 climate target.

Deep Dive

Understanding the targets

The proposed target does not yet have any binding effect on the EU or its member states. It serves to initiate a political debate that will inform the revision of the European Climate Law during the next legislative term. The preparatory process is expected to be challenging, as the 2040 target will need to strike a balance between climate ambition and pragmatism, given a changing political landscape with less focus on climate policy combined with a growing focus on industrial competitiveness and cost of living.

In the Communication and the accompanying Impact Assessment, the Commission considered three scenarios varying in ambition, taking the input from the public consultation and the advice of the European Scientific Advisory Board on Climate Change (ESABCC) into consideration:

  • Scenario 1: GHG reduction up to 80%
  • Scenario 2: GHG reduction between 85-90%
  • Scenario 3: GHG reduction between 90-95%.

The recommended -90% target, thus, falls between scenarios 2 and 3 and sets a floor for remaining emissions (850 MtCO2e) and a ceiling for removals (400 MtCO2) by 2040. The ESABCC recommendation was to adopt a target in keeping with scenario 3 of 90-95% emission reductions by 2040. The Communication’s focus on carbon management aligns more with Scenario 3, which requires early deployment of CDR, CCS and CCU technologies. The maximum target of 400 MtCO2 to be removed through industrial and land-based solutions effectively limits the extent to which the EU can rely on carbon removals to reach the 2040 target. Depending on its final level and design, the target could also potentially affect the ability of different CDR methods to scale and effectively contribute to reaching climate neutrality and net negative emissions thereafter.

Apart from those estimations, no other quantified CDR-related projections were included in the Communication. The Commission Impact Assessment does provide projections for removals under all three scenarios. Scenario 3, the most ambitious of all three, projects 391 MtCO2 to be removed from the atmosphere by 2040, amounting to -75 and -317 MtCO2 of industrial and land removals respectively. This falls short of the 400 MtCO2 to be removed according to the Commission Communication. The fact that the total amount of removals is not broken down into separate sub targets for industrial and land removals is incompatible with the like-for-like principle, according to which fossil emissions can only be compensated by permanent CDR.

Delivering on the 2040 targets: the role of carbon removal

  1. Asserting that the path towards climate neutrality ought to be complemented with a sustainable and competitive economy able to withstand geopolitical risks, the Commission outlines eight building blocks of the future policy agenda. These building blocks could incorporate CDR in various ways.
    1. A resilient and decarbonised energy system aims at phasing out fossil fuels and building clean supply chains and will require a broad portfolio of zero-/low-carbon technologies Here, iCDR can help balance residual emissions from hard-to-abate sectors like heavy industry and transport, as well as compensate for the last tons of fossil emissions in the power sector, enabling the transition to net-zero.
    2. An industrial revolution with competitiveness seeks to make Europe an attractive destination for investments, which could mean increased capital flows and efforts to de-risk investments in early-stage CDR projects.
    3. Infrastructure to deliver, transport and store CO2 will be essential for industrial decarbonisation and will also help scale up certain industrial carbon removal technologies like Direct Air Carbon Capture and Storage (DACCS) and Bioenergy with Carbon Capture and Storage (BECCS). Such a scale up of CO2 infrastructure will require significant investments accompanied by a non-discriminatory regulatory framework that is favourable to iCDR.
    4. Enhanced emissions reduction in agriculture could promote sustainable agricultural practices and carbon farming activities.
    5. Climate policy as investment policy is expected to create a stronger business case for zero- and low-carbon technologies and direct public investments towards sectors where high investment risks jeopardise commercial viability, which could help scale up and decrease the costs of DACCS/BECCS.
    6. Fairness, solidarity and social policies could ease the burden and costs of the clean transition with a growing CDR sector offering job opportunities for those previously employed by fossil fuels companies, whilst carbon farming practices provide an additional income stream for forest and land managers.

    EU climate diplomacy and partnerships should help the EU continue pushing for global climate ambition, promote successful EU policies and accelerate the work being done under Article 6 of the Paris Agreement.

  2. Risk management and resilience will see the EU develop a comprehensive climate adaptation strategy. In this context, land-based CDR can provide additional benefits for biodiversity and ecosystem restoration.

Room for improvement: integrating CDR in the 2040 climate framework

The publication of the 2040 Communication is a positive development for CDR in the EU, as it recognises the role of CDR in delivering climate neutrality and calls for their early deployment. In order for CDR to truly be a part of the solution to climate change, several improvements should be made.

  • The 90% net GHG emissions target for 2040 should be split into quantified “twin” targets for gross emissions reduction and CDR, both expressed as minimum contributions. This will provide clarity regarding each component’s contribution while safeguarding against over-reliance on removals.
  • The 2040 removal targets should be further split into sub targets for permanent and land-based removals, thereby ensuring clarity and visibility and providing the necessary investment incentives. Importantly, it will also recognise the difference between their contributions in line with the like-for-like principle and reduce the risks of mitigation deterrence.
  • The European Climate Law should adopt the notion of “permanent” rather than “industrial” removals in line with the Carbon Removal Certification Framework. Currently, the 2040 communication and the Impact Assessment differentiate between land removals and “iCDR”, defined as DACCS, BECCS and biogenic carbon. Such distinction fails to consider other promising methods, such as enhanced rock weathering. Only developing a future-proof diverse portfolio of CDR methods can ensure the EU meets its climate targets.

To address these points, the European Commission should produce a strategy solely dedicated to CDR.

 

Read more about Carbon Gap’s position on CDR under the 2040 climate framework here.

Timeline

29 July 2021
6 February 2024
Q1 2025
November 2025
29 July 2021

Enforcement of the European Climate Law

6 February 2024

Publication of the 2040 Communication

Q1 2025

Commission proposal to revise the European Climate Law

November 2025

Deadline to submit updated NDCs

Official Document

Year

2024

Unofficial Title

2040 targets

In a Nutshell

The European Commission’s strategy on Industrial Carbon Management (ICMS) lays out what role industrial carbon management technologies, including certain carbon dioxide removal methods referred to as ‘industrial carbon removal’ (BECCS, DACCS and biogenic carbon), can play in decarbonising the EU’s economy. It also introduces measures needed to develop and scale up these technologies. As a Commission communication, the content of the ICMS is not legally binding but introduces an outline and a guide for future EU policy initiatives.

Given the current lack of a comprehensive policy framework around industrial carbon management, the ICMS is a crucial first step in creating the right conditions for the development and deployment of industrial CDR and CCS technologies. The ICMS is closely linked with the European Commission’s 2040 climate target communication, which sets out a 90% net greenhouse gas (GHG) emission reduction target by 2040, as well as twin targets for emission reductions and carbon removal.

The ICMS contains separate sections covering which measures are needed to scale CCS, CCU, industrial CDR, and CO2 transport and storage infrastructure. The measures relevant to CDR include considerations on developing a separate carbon removal trading scheme, introducing Important Projects of Common European Interest (ICPEIs) for CO2 transport and storage infrastructure, and boosting research, innovation and early-of-a-kind demonstration for novel industrial technologies for carbon removal.

The strategy also provides a dedicated section on public awareness, which appears to signal that the Commission recognises the importance of involving and engaging stakeholders and the public in the scale-up of industrial carbon management technologies.

However, the strategy does not clearly distinguish between CDR, CCS, and CCU, and fails to set dedicated targets for each of these. It narrowly focuses on types of CDR considered ‘industrial CDR’, namely direct air carbon capture and storage (DACCS), bioenergy with carbon capture and storage (BECCS) and biogenic carbon.

What's on the Horizon?

In the ICMS, the Commission foresees several actions, laid out over an indicative timeline.

While no clear timeline is provided for industrial CDR (iCDR), the Commission needs to assess by 2026 if and how CDR could be accounted for in the EU Emission Trading System (ETS), or a potential removal trading system. In parallel, it also raises the need to boost dedicated funding under the EU RD&I under Horizon Europe and the Innovation Fund.

For CO2 transport and storage infrastructure, the strategy mentions that, as of 2024, the Commission:

  • should initiate preparatory work in view of a proposal for a possible future CO2 transport regulatory package, as well as working towards proposing an EU-wide CO2 transport infrastructure planning mechanism;
  • will work with member states on exploring a possible Important Project of Common European Interest (IPCEI) for CO2 transport and storage infrastructure.

Carbon Gap unveiled its CDR Strategy for Europe in March 2024, and presented key recommendations that are intended to complement the actions foreseen in the ICM strategy to scale CDR.

Deep Dive

The origins of the ICM strategy

The EU Green Deal and the latest version of the EU Climate Law, in which the ambition of the Union’s climate targets for 2030 has been raised, both stress the importance of carbon dioxide removal and carbon capture and storage technologies in EU climate action. The Commission’s communication on Sustainable Carbon Cycles published in 2021 further underscored the importance of industrial carbon management. The communication included an aspirational target of 5MtCO2 of industrial carbon removal per year by 2030. To deliver on this target, it set out key actions to support industrial carbon management and CDR more broadly, foreseeing the need for a certification framework for carbon removal, and calling for the creation of an annually recurring CCUS Forum. Since its establishment in 2021, the CCUS Forum has informed the work on the ICMS, including through several reports from working groups focusing on CO2 infrastructure and standards, industrial partnership for CCUS, and public perception.

 

Scaling up industrial CDR

The ICM strategy acknowledges the key role CDR will play in reaching climate neutrality by indicating that it will be needed to compensate for approximately 400MtCO2e of residual emissions by 2050. This figure comprises both land-based and industrial CDR (iCDR). The ICM also states that around 280MtCO2 and 450MtCO2 would need to be captured by 2040 and 2050, respectively, without clearly specifying which share would be stored and used, and which share would be CDR.

The strategy identifies key policy gaps holding back the scaling up of iCDR, including a lack of incentives, the lack of recognition of iCDR in the current EU legislative framework and the high costs associated with various iCDR methods. The Commission presents three main actions to address these gaps:

  • Assess overall objectives for CDR in line with the 2040 targets and the goal of climate neutrality by 2050, and negative emissions thereafter.
  • Develop policy options and support mechanisms for industrial carbon removals, including if and how to account for them in the EU ETS.
  • In parallel, boost EU RD&I and early-of-a-kind demonstration for novel iCDR under Horizon Europe and the Innovation Fund.

 

Role of CCS and CCU

The ICMS lacks concrete targets for CCS and CCU beyond the 50MtCO2 yearly injection capacity target by 2030 set in the Net-Zero Industry Act (NZIA). Some projections are included, but these do not clearly show how much CO2 would be used for storage, and how much would come from CCS as distinct from CDR. Furthermore, these projections are not presented as actual targets for CO2 storage.

Regarding CCS, the ICM strategy presents an extensive package of policy actions it plans to undertake, including the development of a platform for demand assessment and aggregation for CO2 transport and storage services. The strategy also calls on member states to take several measures, such as the inclusion in their national energy and climate plans (NECPs) of an assessment of their CCS needs and identified actions to support the deployment of a CCS value chain.

Regarding CCU, the ICM mentions that over time, biogenic and atmospheric CO2 will be increasingly used for CCU. It also lays out broad policy actions, such as the creation of a knowledge-sharing platform for industrial CCUS projects.

 

CO2 infrastructure as a key enabler

The Commission highlights the need to develop non-discriminatory, open-access, cross-border CO2 transport and storage infrastructure. The strategy proposes a comprehensive plan, with the ambition to develop a single market for CO2 in Europe.

From 2024, the Commission will initiate preparatory work in view of a proposal for a possible future CO2 transport regulatory package. It will also work towards proposing an EU-wide CO2 transport infrastructure planning mechanism.

Finally, the possibility of creating an Important Project of Common European Interest around CO2 transport and storage infrastructure will be explored with member states throughout 2024.

 

Room for improvement of the Industrial Carbon Management strategy

The definition of industrial CDR should be open to all safe and effective high-durability CDR methods. Currently, the ICMS unnecessarily restricts iCDR to solely DACCS, BECCS and biogenic carbon, failing to consider other promising methods, such as enhanced rock weathering.

Clear and quantifiable targets for the role industrial carbon removal should play to reach the EU 2040 target are necessary for at least two reasons. Firstly, to ensure the EU reaches durable net zero by 2050, namely a state where the remaining hard-to-abate fossil emissions are only compensated by high-durability carbon dioxide removal (CDR). Secondly, to provide visibility and predictability to the industry, considering that CDR must be scaled considerably across Europe. Furthermore, the fluidity and ambiguity between CCS, CCU and CDR should be addressed across the board and in future policy texts, clearly distinguishing each different role and climate benefits.

Clear and targeted support measures for scaling up CDR should be introduced. The current measures outlined for iCDR are a good first step, but they are not enough. Deployment incentives are essential in the scaling up of iCDR, bridging the gap between R&D funding and a potential integration into EU compliance markets.

 

To address these points, the European Commission should produce a strategy solely dedicated to CDR.

Timeline

11 Oct 2021
15 December 2021
27-28 October 2022
30 November 2022
16 March 2023
27-28 November 2023
6 February 2024
11 Oct 2021

First CCUS Forum in Brussels

15 December 2021
27-28 October 2022
30 November 2022

Commission adoption of the CRCF proposal

16 March 2023

Commission adoption of the NZIA proposal

27-28 November 2023

Third CCUS Forum in Aalborg

6 February 2024

Commission adoption of the ICMS and 2040 climate target communications

Further reading

Carbon Gap’s comments on the ICMS public consultation

Carbon Gap’s response to the 2040 target and ICM communications

Official Document

Year

2024

Unofficial Title

ICMS

In a Nutshell

The London Protocol prohibits all forms of marine dumping unless explicitly permitted to control marine pollution.

The London Protocol was introduced in 1996 to modernise and eventually replace the “Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, 1972″, also known as the London Convention. The Protocol was developed and agreed to by the International Maritime Organisation (IMO) and entered into force in 2006. It introduced a ‘reverse list’ approach, which outlines wastes and other matters that can be considered for dumping. Carbon dioxide used to be excluded from this list.

The London Protocol is of high significance for carbon dioxide removal, as it provides the international legal basis for sub-seabed geological storage of CO2 and for transboundary CO2 transport in international marine environments. The London Protocol also regulates marine geoengineering, which includes ocean fertilisation.

As the result of an amendment to the Protocol adopted in 2006, carbon dioxide is one of the wastes that can be considered for dumping in marine environments under specific conditions. This amendment provided the legal basis in international law for CO2 sequestration in sub-seabed geological formations and entered into force in 2007.

Until recently, the transboundary transport of CO2 for the purposes of sub-seabed geological storage was prohibited by the Protocol. A legal solution was found in 2019, allowing individual parties to the Protocol to opt in and get permission to conduct such activities, following an amendment adopted in 2009 still pending entry into force.

What's on the Horizon?

The first bilateral arrangement regarding the transborder transport of CO2 for geological storage under Article 6 of the London Protocol was signed between Belgium and Denmark on 26 September 2022. Several other European countries have signalled their willingness to adopt such arrangements and have already engaged in bilateral processes, such as Norway, the Netherlands, Finland, Sweden and Switzerland.

Deep Dive

Background on the London Convention and the London Protocol

The London Convention, established under the International Maritime Organisation, was adopted in 1972 and entered into force in 1975. It consisted of a grey list of substances that could be considered for dumping under strict control and a black list of substances that were prohibited under any condition. All other substances could be dumped after a permit had been issued.

Adopted in 1996, the London Protocol replaces the Convention and is built around the precautionary principle. Except for the substances listed in its reverse list in Annex 1, the dumping of any substance is strictly prohibited. When it entered into force in March 2006, the list comprised seven substances, including sewage sludge and dredged material.

Inclusion of CO2 in the reverse list

A 2006 amendment included CO2 streams from carbon dioxide capture and sequestration in waste and other forms of dumping materials.  It stipulates that levels of radioactivity shall not be greater than those specified in the Protocol, the CO2 captured must be disposed of in sub-seabed geological formations, the stream must consist overwhelmingly of CO2, and no wastes or other matters can be added for the purpose of disposing.

Transborder transport of CO2

In the initial text of the Protocol, Article 6 prohibited the export to other countries of all substances for dumping or incineration at sea. In 2009, Norway submitted an amendment proposal to allow the export of CO2 streams for disposal in sub-seabed geological formations, provided that an agreement or arrangement is made between the countries concerned. This amendment was adopted in late 2009. However, it has yet to enter into force as of August 2023, as fewer than two-thirds of the parties to the Protocol have ratified it so far. The countries that have ratified it are Norway, the UK, the Netherlands, Iran, Finland, Estonia, Sweden, Belgium, Denmark and the Republic of Korea. Germany and France are in the process of ratifying the amendment.

To avoid this legislative roadblock, Norway and the Netherlands co-filed a resolution to allow the provisional application of the 2009 amendment. They claimed that the EU CCS Directive provided sufficiently strong protection for human health and environmental safety. This resolution was adopted in 2019, meaning that two countries or more can now export CO2 for sub-seabed geological storage, provided that they have ratified the Article 6 amendment and submitted a formal declaration of provisional application to the IMO. The first bilateral arrangement was signed between Belgium and Denmark on 26 September, 2022. Several other European countries have signalled their willingness to adopt such arrangements, such as Norway, the Netherlands, Finland and Switzerland.

Marine geoengineering within the London Protocol

The London Protocol provides one of the few international legal frameworks around marine geoengineering, defined as “a deliberate intervention in the marine environment to manipulate natural processes, including to counteract anthropogenic climate change and/or its impacts, and that has the potential to result in deleterious effects, especially where those effects may be widespread, long-lasting or severe”.

In 2008, parties to the Protocol adopted a resolution to regulate ocean fertilisation, deciding that such activities are against the aims of the Convention and the Protocol unless conducted for legitimate scientific purposes. It also called for the creation of a framework to assess scientific research proposals. In 2013, parties to the Protocol adopted another resolution to provide a regulatory framework not only for ocean fertilisation but for other marine geoengineering activities, such as alkalinity enhancement, seabed rocks mineralisation or deposition of crop wastes on the seabed. Eligible activities are listed in Annex 4 of the resolution, and it currently only consists of ocean mineralisation. Therefore, other types of marine geoengineering are currently prohibited under the London Protocol. It is to be noted that this resolution is non-binding, meaning that parties could choose not to respect it without clear consequences.

Timeline

1972
1975
1996
March 2006
November 2006
2007
2009
2013
2019
26 September 2022
1972

Adoption of the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter

1975

Entry into force of the London Convention

1996

Adoption of the London Protocol to update and eventually replace the London Convention

March 2006

Entry into force of the London Protocol

November 2006

Adoption of an amendment to the Protocol to allow sub-seabed geological storage of CO2

2007

Entry into force of the November 2006 amendment to the London Protocol

2009

Amendment to the London Protocol to allow transboundary CO2 transport

2013

Amendment to the Protocol to regulate marine geoengineering, including ocean fertilisation

2019

Permission of provisional application of the 2009 CO2 transport amendment through bilateral arrangements

26 September 2022

Denmark and Belgium signed the first bilateral agreement on cross-border transportation of CO2 for the purpose of permanent geological storage

Unofficial Title

The London Protocol

Year

1996

In a Nutshell

The National Energy and Climate Plans (NECPs) outline the EU member states’ 2021-2030 strategy to meet the EU 2030 energy and climate targets. The Regulation on the governance of the energy union and climate action (EU) 2018/1999, requires member states to regularly submit NECPs and update them. It also outlines how the European Commission should review the plans.

In their NECPs, member states outline their plans for delivering on 2030 targets across five dimensions: decarbonisation, energy efficiency, energy security, internal energy market and research, development and innovation (RD&I). Member states use a template when outlining their plans to facilitate transborder collaboration and efficiency gains. So far, the 2030 climate and energy targets aim for at least 55% greenhouse gas emissions reductions, 32% of the total energy production coming from renewable energy, and a 32.5% improvement in energy efficiency. The Fit-for-55 package called for more ambitious targets, some of which are still under review, including raising the share of renewable energy within the Renewable Energy Directive to 42.5% by 2030.

Out of the 26 draft updated NECPs that have been submitted by member states – noting that Austria’s draft was submitted but later withdrawn -, only seven submissions include some sort of target for removals. These are either legally enshrined, such as in Portugal, or indicative targets based on the modelling of residual emissions, such as in the Netherlands. Furthermore, only ten NECPs mention novel CDR methods, such as Direct Air Capture and Carbon Storage (DACCS) and biochar. These technologies are predominantly mentioned as part of countries’ RD&I needs.

Several countries have also signalled that their submitted drafts are incomplete and are expected to change substantially as part of the final updated NECPs.

What's on the Horizon?

As required by the  Regulation on the Governance of the Energy Union and Climate Action, member states must have submitted an updated draft of their NECPs by 30 June 2023, and the final version by 30 June 2024.

The Regulation also requires that by 1 January 2029 and every ten years thereafter, member states will need to submit a new final NECP covering ten years, with draft NECPs due one year prior.

Deep Dive

Assessment of the drafts by the Commission

Most of the draft updated NECPs were submitted late. By 3 July 2023, only six countries had submitted their draft updated NECPs: Spain, Croatia, Slovenia, Finland, Denmark and Italy. On 18 December 2023, the European Commission published its general assessment of the 20 out of 27 drafts submitted thus far, as well as a detailed assessment of each draft plan. It found that the measures presented in the drafts would only result in a net 51% emissions reductions by 2030, falling short of the 55% net emissions reductions target. The measures foreseen in the submitted NECPs would also fail to deliver the 40% emissions reductions target in the sectors covered by the Effort Sharing Regulation, resulting only in emissions reductions of 33.8%.

The assessment also showed that the LULUCF net removals target of 310MtCO2e set in the LULUCF Regulation would be missed by 40 to 50Mt with the current measures, showing a significant gap between the target and the actual measures in place to deliver on the target. The 8th Environment Action Programme Mid-Term Review further underscored the presence of such a gap, stressing that maintaining and enhancing the capacity of Europe’s natural sinks should be a top priority in the final updated NECPs, alongside increasing the sinks’ resilience to climate change.

 

Current versions versus draft updated versions

The current versions of the NECPs in force, which were submitted at the end of 2019, fail to consider the role of carbon dioxide removal (CDR) in reaching national and EU climate targets. None of the 27 plans include targets for CDR, nor do they take into consideration novel carbon removal methods. Even conventional CDR methods such as afforestation or soil carbon sequestration are insufficiently addressed in the majority of NECPs.

Compared to the current versions, the draft updated NECPs submitted by member states show improvements on several fronts when it comes to CDR. Over half of current NECPs discuss the role of CCS and CCU in achieving national 2030 climate targets; yet almost all new draft NECPs now consider these technologies. Yet, despite some overlaps, CCS, CCU and CDR vary in terms of their climate benefit and CDR must be distinguished as a separate suite of methods. Specific to CDR, more than half of member states included at least one measure that would be relevant specifically to its research, development and innovation. Moreover, more than a third of member states now include some sort of removal target, compared to zero in the current versions, and several other NECPs mention novel CDR methods. Finally, close to half of the NECPs include some considerations around the need to develop CO2 transport and storage infrastructure.

 

 

Rating of all draft updated NECPs

We have rated all draft NECPs based on a previous report from the Ecologic Institute.

Denmark has produced the strongest submission when it comes to CDR, including provisions such as:

  • It includes indicative targets for CCUS and bio-CCS for 2030;
  • It provides details about national deployment incentives for CDR (through its NECCS and CCUS funds);
  • It explores the role that several novel CDR methods could play, such as bio-CCS and biochar;
  • It gives a clear overview of potential CO2 storage capacities, as well as the projects currently being developed.

 

However, the Danish submission leaves room for improvement. The Danish draft lacks measures to increase net LULUCF removals, which is especially concerning since the LULUCF sector is currently a net emitter in Denmark. The NECP also lacks a clear RD&I plan to develop CDR technologies. By addressing these missing elements in its final NECP, Denmark would stand out as a champion of CDR in the EU.

Other countries are on the right path to producing a coherent NECP when it comes to CDR. For example, Sweden and Germany score well in some of the seven criteria. In general, deployment incentives and CDR targets are the least addressed criteria.

 

Why all types of CDR should be considered as part of the NECPs

As highlighted by the European Commission in the Sustainable Carbon Cycles communication, the EU should aim for a minimum annual capacity of 5MtCO2 of permanent removals by 2030. Following the publication of the European Commission 2040 Target and ICMS communications, it is clear that the EU will need to develop large permanent CDR capacities to reach its 2040 climate goals and a state of climate neutrality by 2050. Reaching these ambitious goals in time requires urgent action to develop and start to deploy permanent CDR already today.

 

Recommendations for the final updated NECPs

To align their updated NECP to the 2030 climate targets and the EU-wide objective of climate neutrality by 2050, member states should consider the following aspects in their final updated versions:

  1. National (binding) twin targets for emissions reductions and CDR, and separate CDR targets for LULUCF and permanent removals;
  2. A plan for restoring and maintaining LULUCF sinks;
  3. Dedicated research, development and innovation funding for CDR;
  4. The needs and the potential to transport and store CO2.

Timeline

24 December 2018
31 December 2018
June 2019
31 December 2019
17 September 2020
30 June 2023
18 December 2023
30 June 2024
1 January 2028
1 January 2029
31 December 2018

Deadline for member states to submit their draft NECPs for the period 2021-2030

June 2019

EU Commission communicated an overall assessment and country-specific recommendations

31 December 2019

Deadline for member states to submit their final NECPs

17 September 2020

EU Commission published a detailed EU-wide assessment of the final NECPs. Later on, it also published individual assessments.

30 June 2023

Deadline for member states to submit draft updated versions of their NECPs

18 December 2023

The EU Commission published its assessment of EU member states’ draft updated NECP

30 June 2024

Deadline for member states to submit final updated versions of the NECPs

1 January 2028

Deadline for member states to submit draft NECPs covering the period 2031-2040

1 January 2029

Deadline for member states to submit final NECPs covering the period 2031-2040

Status

Policy Type

Year

2018

Unofficial Title

NECPs

Last Updated

23/06/2023

In a Nutshell

The Innovation Fund (IF) is one of the world’s largest funding programmes for the commercial demonstration of innovative low-carbon technologies. It is also the EU’s key funding instrument for financing the green transition and promoting European industrial leadership in clean technologies.

The Fund’s goal is to create financial incentives for investment in first-of-a-kind clean technologies by sharing the risk with project promoters. This should help attract additional public and private resources.

The revenues for the IF are raised via the EU ETS and the auctioning of its 450 million allowances. As such, it depends on the carbon price – at EUR 75 /tCO2, it is set to provide around EUR 38 billion from 2020 to 2030. As part of the latest revision of the ETS, the free allowances which were allocated to certain energy-intensive sectors to avoid carbon leakage will be phased out due to the introduction of the Carbon Border Adjustment Mechanism. These allowances will instead be added to the IF, increasing the financial support available.

The IF uses a competitive selection process to choose the best projects to invest in. There are regular calls for proposals targeting four areas:

  1. innovative low-carbon technologies and processes in energy-intensive industries
  2. carbon capture and storage (CCS)
  3. innovative renewable energy generation
  4. energy storage technologies

While carbon dioxide removal (CDR) is not explicitly listed as a targeted area, the Fund does finance certain carbon removal projects. However, these projects are evaluated in the CCS category and based on methodologies developed for those technologies because there is no separate CDR category. This severely limits the type of CDR methods that can apply for IF funding and increases the complexity of their application processes.

The IF aims to finance varied projects across all member states, Norway and Iceland. There are no Technology Readiness Level (TRL) requirements for applications, but projects need to be sufficiently mature for first commercial examples and large-scale demonstrations. Projects are selected based on criteria specified in calls for proposals, covering degree of innovation, effectiveness of greenhouse gas emissions avoidance, maturity, scalability, and cost efficiency.

What's on the Horizon?

In December 2022, a political agreement was reached on the revision of the EU ETS Directive, which established the Innovation Fund, introducing two key changes to the Fund:

  • increase in the budget by bringing additional sectors (maritime, aviation, buildings and road transport) in the scope of the Fund;
  • new financing mechanisms whereby projects are selected based on an auction and are supported through fixed premium contracts, contracts for difference or carbon contracts for difference (CCfDs).

This will allow the IF to take the form of a production subsidy to cover 100% of the funding gap for scaling up clean tech. The Commission is now in the process of implementing these changes by revising its Delegated Regulation, which sets out the rules on the operation of the Fund.

The first auctions opened on 23 November 2023 and are on green hydrogen production. Winners will receive a fixed premium for each kg of renewable hydrogen produced over a period of 10 years. CCfDs, which could deliver a direct deployment incentive to different types of carbon management projects, including CDR, should follow shortly thereafter.

The Innovation Fund Call for 2023 opened on 23 November 2023 with a total budget of EUR 4 billion. It has five different sub-calls, namely for large, medium, and small-scale projects, cleantech manufacturing and pilot projects.

Deep Dive

While the Innovation Fund has benefitted CCS and Carbon Capture and Use (CCU), it has failed to recognise the specificities of CDR and the fact that it is, alongside emissions reductions, a vital tool for reaching Europe’s climate goals.

Certain carbon removal projects can benefit from IF funding but CDR is not explicitly listed as a targeted area. This omission severely limits the type of CDR methods that can apply for funding, primarily to projects such as direct air capture and storage (DACCS) and bioenergy with carbon capture and storage (BECCS). These projects are also evaluated in the CCS category, obliging them to adapt to CCS methodologies and increasing their administrative burdens.

Consequently, support for projects related to carbon removal within the IF has been significantly lower than for CCU and CCS. When CDR projects receive IF grants, they are labelled as CCS, making it difficult to keep track of CDR funding. Out of 37 projects in 2021, seven were categorised as CCUS, while within these, only two related to CDR, accounting for around 6% of IF’s total grants. Stockholm Exergi’s BECCS Stockholm project was awarded an IF grant of EUR 180 million and Carbfix’s Silverstone project was awarded EUR 3.8 million. In 2022, out of 16 projects, nine were CCUS-related and only one related to CDR (Coda Terminal by Carbfix was awarded a EUR 115 million grant, or 3.79% of IF’s grants).

Ringfencing CDR support

As with any nascent technology with elevated investment costs, CDR needs innovation funding and support for commercial deployment. To remedy the current funding gap, there needs to be increased internal understanding of the differences between CCS and CDR within the Innovation Fund as well as internal tracking of support for these different technologies.

The upcoming Delegated Act in which the Commission revisits the operation of the Fund provides an opportunity for the Fund to explicitly feature carbon removal as a key enabler of net zero and provide the corresponding targeted support.  As a second necessary step, the Fund should also consider the specifics of CDR in future calls for proposals and associated methodologies. This step would lead to dedicated higher and direct funding to carbon removal projects and contribute to strengthening the CDR ecosystem in Europe.

Beyond BECCS and DACCS

Due to the current structure of the Fund, most of the CDR projects funded so far have been related to DACCS and BECCS. Explicitly featuring carbon removal in the scope of the IF would also open a door to supporting a wider range of carbon removal solutions, beyond DACCS and BECCS, to include various carbon farming and ocean-based approaches, enhanced weathering, or mineralisation, for example.

Timeline

26 February 2019
3 July 2020
26 October 2021
29 August 2022
03 November 2022
11 May 2023
13 July 2023
7 August 2023
30 August 2023
19 September 2023
Q3 2023
23 November 2023
8 February 2024
9 April 2024
26 February 2019

Commission Delegated Regulation 2019/856 providing the overall framework for the Fund’s operation

3 July 2020

First call for large-scale projects

26 October 2021

Second call for large-scale projects

29 August 2022
03 November 2022

Third call for large-scale projects was launched.

11 May 2023

Deadline to submit feedback to the draft terms and conditions for the pilot auction – a new tool for funding innovative low-carbon technologies under the Innovation Fund

13 July 2023

The results of the third call for large-scale projects were published.

7 August 2023

Draft Commission Delegated Regulation implementing the changes to the Innovation Fund agreed in the ETS revision, notably the use of competitive bidding, is open for feedback until 7 August 2023.

30 August 2023

Publication by the European Commissions of the Terms and Conditions of its first auction dedicated to the production of renewable hydrogen production in Europe

19 September 2023

Deadline to submit projects to the third call for small-scale projects

Q3 2023

Second Innovation Fund progress report expected

23 November 2023

Opening of the first Innovation Fund auctions dedicated to renewable hydrogen, as well as a new call for projects

8 February 2024

Tentative closure of the first round of auctions for renewable hydrogen

9 April 2024

Closure of the call for projects. Successful applicants will be notified in the fourth quarter of 2024

Status

Policy Type

Year

2019

Last Updated

24/04/2023

In a Nutshell

The Directive on the geological storage of CO2 (CCS Directive) establishes a regulatory framework for the safe and responsible development and operation of geological carbon dioxide (CO2) storage in the EU. It applies to commercial scale facilities with a capacity of 100 kilotonnes per year (ktCO2/yr) or more.

One of the key elements of the Directive is a permit regime for CO2 storage. The rules set out minimum requirements for selecting CO2 storage sites to ensure there is no significant risk of reversal or damage to health or the environment. Operators are required to demonstrate financial security prior to injecting CO2 to cover potential liabilities and must closely monitor the sites during the operational phase to ensure long-term integrity and containment of stored CO2.

The Directive also introduces a liability mechanism in case of a reversal of CO2 out of storage, where the operator must take corrective measures. It also integrates CO2 storage into existing EU legislation. Environmental Liability Directive provides liability rules for environmental damage, and operators are included in the Emission Trading Scheme (ETS). If emissions are captured, transported, and stored in compliance with the CCS Directive, they are considered as not emitted under the ETS. In the case of reversal, ETS allowances must be surrendered. Liability for damage to health and property is left for regulation at member state level.

The entire lifetime of storage sites is another key element. The Directive prescribes the decommissioning requirements for sites at and after closure and provides for the transfer of liabilities from the storage operator to the member state 20 years after closure of sites.

While the CCS Directive was introduced to provide an enabling framework for carbon capture and storage (CCS), it governs any instance of geological storage of CO2. This includes the storage portion of any carbon dioxide removal (CDR) activities which store pure gaseous/supercritical CO2, e.g. bioenergy with carbon capture and storage (BECCS) and direct air capture with carbon storage (DACCS).

A diagram explaining the difference between carbon capture and storage (CO2 captured at the source and stored), carbon capture and utilisation (carbon captured and the source and reused), and carbon dioxide removal (captured from the air and stored)

What's on the Horizon?

2023: The Commission is reviewing the CCS Directive’s implementation guidance documents to address the latest technical and market developments and remove the ambiguities identified during the implementation of the first CCS deployments.

2023: The Commission is expected to share the results of two studies on CO2 infrastructure, one analysing an outline of the CO2 transport and storage infrastructure in 2030 and 2040 and the other analysing the regulatory environment, which will inform the upcoming Communication on industrial carbon management.

June 2023: National Energy and Climate Plans (NECP) expected. The Commission has requested that member states include a dedicated chapter on geological storage of CO2, addressing the need for CO2 capture in hard-to-abate industrial sectors, but also considering ongoing or planned biogenic carbon and direct air capture projects.

Q3-Q4 2023: Member states need to report to the European Commission on the implementation of the Directive by April 2023, which will be followed by the Commission’s fourth Implementation Report.

Q4 2023: A Communication on industrial carbon management is expected from the Commission in Q4, preceded by a public consultation (timing tbd). The strategy will address the prevailing lack of CO2 infrastructure development in Europe and, as such, may intersect with the CCS Directive.

Deep Dive

The CCS Directive was originally designed to assist the EU in meeting its CO2 reduction obligations through capture and geological storage of CO2. It is an essential tool to enable the activities for CO2 management and, as such, an important tool in the CDR regulatory toolkit.

The CCS Directive governs the geological formations in which carbon can be stored. Member states are required to cooperate with the Commission to establish maps of existing, potential, and closed geological storage sites. The Directive also requires operators and competent authorities to establish 3D dynamic models of storage complexes, including protected natural areas. These data offer a critical resource for developing Europe’s carbon management plans, including CDR.

Transborder CO2 movement

The Directive also includes provisions for the transport of CO2 across borders and for storage reservoirs which span multiple countries. This is an important base on which to develop a modular CDR ecosystem where facilities employing CO2 capture and storage sites might be located across Europe with CO2 transported across national borders.

The recent revision (2022) of the Trans-European Networks for Energy (TEN-E) Regulation, which identifies priority corridors and priority thematic areas to develop and interconnect, updated the infrastructure categories eligible for support allowing CO2 transport infrastructure to qualify as a Project of Common Interest (PCI). Fourteen such projects have already been submitted to the PCI selection.

Implementation

The implementation of the Directive varies across Europe. In addition to the restrictions allowing CO2 storage only in geological formations which are permanently unsuitable for other purposes (see the EU’s Water Policy), member states retain the right to not allow geological storage in parts or all of their territory (for example, Germany currently limits the amount of CO2 that can be geologically stored annually to 4 million tonnes and does not allow new demonstration projects to be approved, meaning there is no underground geological storage of CO2 taking place). CDR operators dependent on geological storage will have to navigate this fragmented regulatory landscape.

The information on the practical application of the Directive is limited, despite it being in force for more than 10 years. The uptake of CCS in Europe has been slower than predicted and the rules have not had the chance to demonstrate their effectiveness. The lack of CCS projects has largely been due to the low carbon price and absence of policy support measures to enable the deployment of CCS. Still, the Directive requires a rigorous reviewing process prior to permitting, which makes for intensive work on both storage applicants’ and the national authorities’ side. In any event, the European Commission’s upcoming strategic vision for CCS and CCU might yet provide the necessary fuel to jumpstart the industry and stress test the CCS Directive.

Timeline

23 April 2009
23 April 2009
30 May 2018
2023
2023
April 2023
June 2023
Q3 - Q4 2023
Q4 2023
23 April 2009

CCS Directive signed into law  

23 April 2009

Directive 2009/29/EC amends the EU ETS to include carbon capture and storage, linking ETS with the CCS Directive

30 May 2018

Decision 2018/853 empowers the Commission to amend the Annexes of the CCS Directive via delegated acts to adapt to technical and scientific progress

2023

Revision of the CCS Directive implementation guidance documents

2023

Results expected from two studies on the CO2 transport and storage infrastructure and the regulatory environment, to inform the upcoming Communication on CCS and CCU

April 2023

Member States will report to the Commission on the implementation of the CCS Directive

June 2023

Member States will update National Energy and Climate Plans (NECP), with a dedicated chapter on geological storage of CO2

Q3 - Q4 2023

Fourth CCS Directive Implementation Report from the Commission

Q4 2023

Expected publication of the Communication on CCS and CCU

Status

Year

2009

Official Document

Last Updated

24/04/2023