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 will unveil its CDR Strategy for Europe in March 2024, and present 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 2030 energy and climate targets. The Regulation on the governance of the energy union and climate action (EU) 2018/1999, adopted in 2018, requires member states to regularly submit NECPs and update them. It also sets the EU Commission review process of the plans.

Member states outline how they will address energy efficiency, renewables, greenhouse gas emissions reductions, interconnections, and research and innovation in their NECP. A common template is used to facilitate transborder collaboration and efficiency gains.

So far, the 2030 climate and energy targets aim for at least 55% of greenhouse gas emissions reductions, 32% of renewable energy within the total energy production mix and 32.5% improvement in energy efficiency. The Fit-for-55 package called for more ambitious targets, some of which are still under review, including a 42.5% share of renewable energy within the Renewable Energy Directive.

The current versions of the NECPs, submitted at the end of 2019, massively overlook the role of carbon dioxide removal (CDR) in their ability to achieve their 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 not properly addressed in the majority of NECPs.

This is concerning. To reach the scale of removals needed to reach net zero emissions by 2050, CDR capacities must be scaled up now. Member states should seize the opportunity to include CDR in their NECPs. In parallel, the inclusion of CDR in the 2040 targets would set the course until 2050.

What's on the Horizon?

  • As set 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 unless they can justify that the current plan remains valid.
  • On 1 January 2029 and every ten years thereafter, member states will need to submit a new final NECP covering each ten-year period, and a draft one year prior.
  • On 3 July, only eight countries submitted their draft updated NECPs: Spain, Croatia, Slovenia, Finland, Denmark, Italy, Portugal and the Netherlands. We will keep monitoring this space as member states submit their NECPs and a more detailed analysis will follow accordingly.

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 NZIA proposal by the European Commission has entered ordinary legislative procedure to reach a formal adoption by the European Parliament and the Council. The European Parliament Environment Committee (ENVI) voted its opinion on the file in September, followed by the Industry Committee’s (ITRE) deliberation on its position on 25 October. The Parliament adopted its position on 21 November 2023. The Council adopted its general approach on 7 December 2023. After three trilogue meetings, the co-legislators reached a provisional agreement on 6 February. Over the next weeks, the agreed text will be voted on first by the European Parliament Industry Committee, then by the whole Parliament and by EU Ministers to formally adopt it. It will then become EU law once it is published in the Official Journal of the EU.  

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.

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
22 April 2024 (TBC)
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

22 April 2024 (TBC)

Indicative plenary vote on the provisional agreement

Status

Unofficial Title

NZIA

Year

2023

Official Document

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

In a Nutshell

The Effort Sharing Regulation (ESR) is one of the three central pillars of EU climate policy, together with the LULUCF Regulation and the EU ETS. The ESR primarily governs greenhouse gas emissions (GHG) from sectors currently not covered by the EU ETS, including transport, buildings, agriculture, and non-ETS industry and waste, which generate nearly 60% of total EU GHG emissions. It spans all EU Member States, as well as Iceland and Norway.

The original ESR, adopted in 2018, foresaw overall emissions reductions across all EU member states in the covered sectors by 30% in 2030 below 2005 levels. The 2021 proposed revision is part of the ‘Fit for 55′ package, which aims to reduce EU-wide net GHG emissions by 55% in 2030 below 1990 levels and to decrease GHG emissions in the sectors covered by ESR to 40% by 2030 below 2005 levels (compared with the existing target of a 29% emission reduction).

The Regulation establishes binding emissions reduction targets for member states, which differ from country to country, primarily depending on the countries’ GDP per capita (spanning from 10% to 50%). The new proposal aims to establish more ambitious national targets for 2023-2030. Together with the LULUCF Regulation and the ETS, the ESR allows for flexibilities in net emissions reductions among the three policies to achieve climate change mitigation goals more efficiently.

While the ESR is not primarily concerned with carbon removals, it allows countries to make use of excess carbon removals achieved in the LULUCF sector to reach their ESR targets. The EU-wide maximum for carbon removals, which may be used to reach the 55% emissions reduction goal, is limited to net 225 million tons of CO2e until 2030.

What's on the Horizon?

The provisional political agreement reached between the European Parliament and Council in December 2022 needs to be formally adopted before the Regulation can enter into force: 

Agreed changes compared to the Commission proposal include eliminating an initially proposed additional voluntary reserve of unused LULUCF removal credits that would have been allowed to count towards Member States’ 2030 ESR target.

Deep Dive

Together with the ETS and LULUCF, the ESR is one of the three central pieces of EU climate legislation, which steer efforts to reduce total greenhouse gas emissions by 55% in 2030 below 1990 levels as outlined in the European Climate Law. All three have been revised to increase ambition and ratchet up the 2030 target through the ‘Fit for 55’ package and negative emissions will potentially be able to play a role in each of them.

A key aspect of the ESR is the flexibilities of countries to reach their targets more efficiently. These flexibilities are intended to decrease a country’s burden, and give the ESR some characteristics of a carbon market:

1.Temporal and international flexibilities:

  • Banking: If a country’s GHG emissions are lower than its annual allocation under the ESR, it may use part of its surplus in the following years and until 2030;
  • Borrowing: If a country’s GHG emissions are higher than its annual allocation under the ESR, it may borrow from the following year’s allocation (up to 7.5% of the annual allocations from 2021 to 2025 and up to 5% from 2026 to 2030);
  • Trading: Countries may buy or sell allocations to meet their annual targets (up to 10% of their annual allocations from 2021 to 2025 and 15% from 2026 to 2030).

2. Sectoral flexibilities:

  • ETS and ESR: Nine member states’ allowances (with national reduction targets above the EU average and their cost-efficient reduction potential) may make use of a limited percentage of ETS emissions to reach their ESR reduction targets;
  • LULUCF and ESR: Countries may use a constrained number of net carbon removals in the LULUCF sector to meet their emission reduction targets under the ETS.

Under the proposed amendment of the ESR, the total net carbon removals which may be considered for reaching ESR targets, may not exceed 225 Mt CO2e across all member states. Previously the maximum was 280 Mt CO2e. The quantity of net carbon removal was also determined and limited for each member state individually. To avoid emissions reduction deterrence, the new proposal also foresees additionally capping the use of carbon removals under the ESR in two time periods, the maximum allowance equally split between 2021-2025 and 2026-2030.

Timeline

30 May 2018
16 December 2018
14 July 2021
8 November 2022
17 May 2023
30 May 2018

Entry into force of the original Effort Sharing Regulation

16 December 2018

Commission Implementing Decision setting out annual emission allocations of the Member States for 2021- 2030

14 July 2021

Proposal to revise the Effort Sharing Regulation as part of the Fit for 55 package

8 November 2022

Provisional political agreement between co-legislators on the revised Effort Sharing Regulation

17 May 2023
Revised regulation enters into force

Status

Year

2021

Official Document

Last Updated

24/04/2023