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 Renewable Energy Directive (RED) aims to increase the share of renewable energy sources (RES) within the European Union’s final energy consumption. It establishes a common framework for the development of renewable energy capacity in the European Union and sets a binding target for the share that renewable energy represents within the EU’s final energy consumption.

In its 2021 revision, the Commission proposed increasing the target minimum share of RES in the EU’s final energy consumption to 40% in 2030 (RED III), an increase of 8 percentage points compared to its 2018 recast (RED II), which had established a minimum RES share of 32% of final energy consumption in 2030. Since the 2021 proposal, the binding renewable target has been raised to a 42.5% RES share in 2030 as part of the RePower EU Package (RED IV). RePower EU follows the Russian invasion of Ukraine and an increasing need to reduce dependency on Russian gas.

The Directive is particularly relevant for bioenergy with carbon capture and storage (BECCS), as it regulates the use of biomass and biofuels for energy generation, affecting the feasibility of introducing BECCS in the EU, and its potential scale. RED is also highly relevant to carbon dioxide removal (CDR) methods that rely on a stable supply of renewable and lowemissions energy, such as direct air carbon capture and storage (DACCS).

The RED also impacts biomass-based CDR methods beyond BECCS. Due to the high expected demand and relatively limited supply of eligible types of biomass, competition may arise between actors proposing different potential uses for biomass. Biomass use also affects carbon storage in biogenic carbon sinks. For example, forests can be a biogenic carbon sink, provide timber, and provide residual harvest biomass for bioenergy production.

What's on the Horizon?

  • A tentative political agreement on RED III was reached between the EU Parliament and the EU Council on 30 March 2023. This agreement was due to be formally approved on 17 May, but a last-minute disagreement over the role of low-carbon hydrogen produced using nuclear energy in the EU’s decarbonisation targets led to the process being postponed.
  • On 19 June, the EU Council reached an agreement on RED III. The European Parliament Committee responsible for the file approved the text on 28 June. A plenary vote in the European Parliament took place on 12 September, during which the EP voted in favour of the revision. The Council adopted the final text on 9 October 2023. The text was published in the Official Journal of the EU on 31 October 2023 and entered into force on 20 November 2023.
  • The energy policy framework for the post-2030 period is under discussion.

Deep Dive

Making sense of the Renewable Energy Directive

To help deliver on the EU’s increasing climate ambitions, including the EU-wide 55% emissions reduction target by 2030 and the target to achieve net neutrality by 2050, the targets set by the RED have been repeatedly increased. As a result, the RED has evolved from RED I to its latest version, RED IV. Starting from a target of 20% RES as a share of total final energy consumption by 2020 set in 2009, RED I was revised as part of the “Clean energy for all Europeans” package in 2018 to include a target of a 32% RES share by 2030, thereby becoming RED II.

In July 2021, as part of the “Fit-for-55” package, RED III was proposed and the target was raised to 40% by 2030. Following the Russian aggression against Ukraine, the Commission proposed a first amendment (RED IV) with a target of 45% as part of its “REPowerEU” plan. In November 2022, the Commission proposed a second amendment for a Council regulation to accelerate RES deployment.

In March 2023, the EU Parliament and the Council reached a tentative agreement to raise the target to a 42.5% RES share by 2030. Member states will need to increase their national contributions in their integrated National Energy and Climate Plans (NECP), which are due to be updated in 2023 and 2024, to collectively achieve the target. Achieving the target would bring EU member states’ total renewable energy generation capacity to 1236 GW by 2030.

RES considered within the RED’s scope include wind, solar, hydro, tidal, geothermal, and biomass. The binding target is supported by differentiated targets for a variety of sectors, such as heating and cooling, industry, and transport. The provisional agreement under RePowerEU also aims to remove barriers to the scale-up of renewable energy generation by making permitting processes for renewable energy installations quicker and easier. To this end, member states will define regions (so-called ‘go-to areas’) with limited environmental risks and high renewable energy generation capability, in which the permitting procedure shall be simplified. 

The RED and its impacts on biomass use

Biomass is considered a RES within the provisional agreement, provided that its use meets several sustainability criteria. These include requirements that woody biomass used in energy generation follows the cascading principle – ensuring that biomass of higher quality should serve purposes demanding higher-quality biomass first – and that forest biomass may not be harvested from areas with particular significance with regard to carbon stocks or biodiversity. Furthermore, no financial support shall be granted when energy facilities use stumps and roots for energy generation (as they are considered important, for example, to protect soil carbon stocks) or when they use high-quality biomass that should be reserved for other use cases under the cascading principle, such as industrial-grade roundwood, veneer logs, and saw logs.

The provisional agreement sets out a new binding combined target of 5.5% for advanced biofuels, generally derived from non-food-based feedstocks, and renewable fuels of non-biological origin, mostly renewable hydrogen and hydrogen-based synthetic fuels, in the share of renewable energy supplied to the transport sector. The increasing need for advanced biofuels that use biomass as a feedstock may conflict with the demand for the lower-quality biomass upon which several CDR methods rely, such as BECCS and biochar.

Where does BECCS fit in?

The recognition of biomass as a renewable energy source affects the feasibility and potential scale of BECCS. BECCS can both provide renewable energy and remove carbon dioxide from the atmosphere. The 2021 proposal states that member states should not support electricity production from installations producing only electricity, as opposed to, for example, installations producing both heat and power), unless these installations are located in regions included in the Just Transition Plan, or if the installations used CCS technologies to capture and store the associated (biogenic) CO2 emissions.

Currently, negative emissions stemming from BECCS cannot contribute towards targets set under any of the three main legislative pillars of EU climate action, namely the EU Emissions Trading System (EU ETS), the Effort Sharing Regulation (ESR), and the LULUCF Regulation.

The RED: Are sustainability criteria enough to ensure the sustainable use of biomass?

The role of biomass within the RED is important. While sustainability criteria exist to prevent the misuse of biomass for energy generation, the demand for biomass may increasingly exceed supply. Some communities might be adversely impacted, especially in terms of resource use and food security. It is therefore critical that future revisions of the RED take these concerns into consideration.

Timeline

1997
2001
2003
2009
2018
2021
2022
30 March 2023
17 May 2023
19 June 2023
12 September 2023
9 October 2023
31 October 2023
20 November 2023
1997

Energy for the future: renewable sources of energy, indicative EU target of 12% renewables by 2010.

2001
2003
2009

RED I: EU target of 20% renewables by 2020 and national binding targets

2018

RED II: 32% renewables target for 2030 – This is the piece of legislation that is currently in force

2021

RED III: EU Green Deal: EC proposal to raise target for 2030 to 40%

2022

RED IV: REPowerEU Plan: EC proposal to raise target for 2030 to 45% (voted as part of RED III)

  • Parliamentary position agreed & endorsed 14/09/2022 
  • Council general approach agreed on 29/06/2022. 
30 March 2023

Council and Parliament reach provisional agreement on the revision

17 May 2023

A last-minute objection postponed the adoption of the revision of the Directive

19 June 2023

The Council reached an agreement on its position

12 September 2023

The EU Parliament voted in favour of the revision

9 October 2023

The Council adopted the final text

31 October 2023

The Directive was published in the Official Journal of the EU

20 November 2023

Entry into force of RED III

Status

Year

1997

Unofficial Title

RED

Official Document

Last Updated

19/06/2023

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 Net Zero Industry Act (NZIA) is a legislative proposal from the European Commission from March 2023 that aims to provide a stable and simplified regulatory environment to support the scale-up of net zero technologies. The NZIA aims to reach a goal of at least 40% manufacturing capacity of strategic net zero technologies in the EU according to annual deployment needs.

The Act sets out enabling conditions, streamlined permitting processes, and one-stop shops for net zero technology manufacturing projects. It differentiates between ‘net zero technologies’ (at least TRL 8) and ‘innovative net zero technologies’ (lower TRL, and can benefit from regulatory sandboxes to foster innovation). It proposes a list of eight strategic net zero technologies that would benefit from even faster permitting process within what are defined as “net zero strategic projects”:

  • Solar photovoltaic and solar thermal technologies,
  • Onshore wind and offshore renewables,
  • Battery/storage,
  • Heat pumps and geothermal energy,
  • Electrolysers and fuel cells,
  • Sustainable biogas/biomethane technologies,
  • Carbon capture and storage (CCS),
  • Grid technologies.

The Act establishes an annual EU CO2 injection capacity goal of 50 million tonnes. This goal will be adjusted when the regulation is incorporated into the EEA Agreement to account for additional capacity in Norway and Iceland and is expected to grow post-2030; according to the Commission’s estimates, the EU could need to capture up to 550 million tonnes of CO2 annually by 2050 to meet the net zero objective, including for carbon removals.

In one of the world’s firsts, oil and gas producers are subject to an individual contribution to this target, making them directly responsible for building and operating the newly mandated CO2 injection capacity. The contributions will be calculated based on a “pro-rata” basis, accounting for their share of oil and gas production within the EU during 2020-2023.

The Act also aims to facilitate access to markets through public procurement, auctions, and support for private demand. It focuses on ensuring the availability of skilled workforce and foresees net zero industrial partnerships with third countries.

What's on the Horizon?

The Parliament plenary adopted the text on 25 April. The Council will need to formally adopt it, likely on 27 May 2024, before it is published in the Official Journal of the EU and becomes EU law.  

To provide dedicated funding support to scale up clean technologies, the Commission was set to propose a European Sovereignty Fund by Summer 2023 within the context of the multi-annual financial framework (MFF). On 20 June, the Commission proposed, instead, to establish a ‘Strategic Technologies for Europe Platform’ (STEP), to provide an immediately available tool to member states. A provisional agreement on the STEP was reached on 7 February.

By the end of 2028, the Commission must assess the balance between CO2 capture, transport and storage capacity. Member states may be able to ask for adjustments in their contributions in case of an imbalance. The Commission must also propose a potential CO2 injection capacity by 31 December 2028.

A market assessment for captured CO2 will be conducted after three years of entry into force, potentially leading to legislative proposals to address shortcomings, especially for hard-to-abate emissions.

Four years after the entry into force, the Commission also needs to assess the possibility of including other technologies in the list of net-zero technologies, opening a window of opportunity for CDR. The evaluation will take into account: (1) updates to the National Energy and Climate Plans, (2) the Strategic Energy Technology (SET) Plan and (3) the State of the Energy Union Report.

Deep Dive

As one pillar of a larger Green Deal Industrial Plan, the NZIA is meant to strengthen and support the EU’s capacity to reach its climate goals. It ensures Europe seizes the potential to be a world leader in the global net zero industry in the context of strong support for net zero technologies coming from different parts of the world, such as the United States’ IRA.

(Strategic) net zero technologies

The NZIA proposes key developments for net zero technologies. Two main aspects of the definition are particularly relevant: (1) the definition is not technology-neutral, it identifies key areas to be addressed, and further lists a family of eight strategic net-zero technologies, which benefit from even faster permitting, priority status, and in some circumstance of overriding public interest, and (2) net zero technologies must be at least Technology Readiness Level (TRL)  8. CDR is not explicitly listed as a strategic net zero technology, and the TRL 8 requirement would exclude most CDR methods. However, if based on TRL only, some could fall under the definition of ‘innovative net zero technologies’, e.g., some forms of direct air capture are considered TRL 7. This flaw of the proposal could be addressed by co-legislators by adding carbon removal in the definition of net zero technologies and in the related annex.

CO2 injection capacity target to incentivise CO2 storage infrastructure

The NZIA proposes a 50 million tonnes per year of CO2 injection capacity in the EU by 2030. The act rightly identifies the lack of storage capacity as one of the largest bottlenecks for CO2 capture investments. One of the key aspects of the act is the transparency of CO2 storage capacity, including the obligation for member states to make publicly available data on sites that can be permitted on their territory, as well as reporting on CO2 capture projects in progress, and their needs for injection and storage capacity. The NZIA clarifies that CO2 injection capacity will also be available to accommodate CDR, but provisions are not proposed to ensure the shared CO2 infrastructure can efficiently be used to accommodate both CCS and CDR methods. A comprehensive and coordinated approach to carbon management that considers both CCS and CDR is needed to ensure that limited CO2 storage capacity is used effectively to reach the EU’s climate neutrality targets. The target will need to be continuously reassessed to meet the storage needs in the EU, especially beyond 2030. Furthermore, separate provisions to ensure adequate transport infrastructure should be foreseen. The European Commission estimates that about 550 million tonnes of CO2 may need to be captured annually by 2050 to meet the net zero objective.

Oil and gas producers’ responsibility to develop the EU CO2 injection capacity has the potential to be a world-leading initiative

The NZIA Article 18 introduces an innovative obligation on oil and gas producers to take responsibility for building EU CO2 storage infrastructure subject to the EU’s injection capacity target. This obligation could introduce an element of producer responsibility for fossil fuel producers in a similar way as producers of packaging, car tires, and other products are required by law to take responsibility for the environmental footprint of end-of-life disposal. If confirmed, this provision would also allow the development of open carbon storage sources by mapping and hosting transparent, open data on carbon storage resources, much of which is held today by private companies. Critical details of this obligation, such as how different sources of CO2 for storage are prioritised or barred, which entities, beyond oil and gas producers, are required to build the CO2 infrastructure, and the procedures to determine their location remain open and need further attention.

Fresh funding is needed

The proposal establishes new initiatives, such as the “Net Zero Europe Platform”, that will discuss the financial needs of the net zero strategic projects and could be key in advising how the financing of these projects can be achieved. Beyond this, the NZIA is anchored in already existing funding mechanisms such as Innovation Fund, InvestEU, Horizon Europe, Important Projects of Common European Interest (IPCEI), the Recovery and Resilience Facility, and Cohesion Policy programmes. Clarity on new and additional funding will be key, as bigger goals will require bigger means that can support the variety of CDR methods at different TRL stages.

Timeline

1 February 2023
16 March 2023
26 May 2023
13 June 2023
19 June 2023
27 June 2023
20 September 2023
25 October 2023
21 November 2023
7 December 2023
13 December 2023
22 January 2024
6 February 2024
22 February 2024
25 April 2024
27 May 2024 (TBC)
31 December 2028
1 February 2023

The Green Deal Industrial Plan Communication

16 March 2023
26 May 2023

Publication of Draft Report by MEP Christian Ehler

13 June 2023

Deadline for submission of amendments – ENVI Committee

19 June 2023

Deadline for submission of amendments – ITRE Committee

27 June 2023

Deadline to provide feedback to the Commission on the NZIA proposal

20 September 2023

ENVI Committee adopts draft opinion

25 October 2023

ITRE Committee vote

21 November 2023

EU Parliament plenary adopted the parliament’s report

7 December 2023

The Council adopted its general approach

13 December 2023

First trilogue on the file

22 January 2024

Second trilogue on the file

6 February 2024

Third trilogue on the file. The EU Parliament and the Council reached a provisional agreement.

22 February 2024

ITRE Committee adopted the provisional agreement

25 April 2024

The EU Parliament plenary adopted the provisional agreement

27 May 2024 (TBC)

The Council is to adopt the provisional agreement

31 December 2028

Deadline for the Commission to potentially propose a CO2 injection capacity target for 2040

Unofficial Title

NZIA

Year

2023

Official Document

Last Updated

24/04/2023