An update on the state of CCS regulation from Europe

As for many New Year resolutions, January 2012 seems a good time for assessing how the transposition process of the EU CO₂ Storage Directive is going, and identify the next key steps during this year.

All Member States were required to fully implement (‘transpose’ in legal jargon) the obligations included in the directive into their national legislation by 25 June 2011. As it often happens, almost no one managed to complete such process by the deadline. The only exception is Spain, which fully implemented the directive by December 2010 (Ley 40/2010). The extent to, and speed at which Member States were complying with their obligations to transpose have varied quite considerably as a result of a series of factors, including:

• public opposition to the technology (Germany and Netherlands);
• complex division of powers between regions and central government (UK and Germany);
• technical unfeasibility of CO₂  storage in their territory (Finland); and
• decision to quickly start the demonstration process (Spain and Romania) or complicated internal legal procedures (Poland).

The European Commission enjoys enforcement powers through infringement procedures against Member States failing to comply with their obligation to implement EU law. The Commission has discretion as to when, and whether to start the procedure, but the flexibility of negotiation is normally preferred over the burden of a formal infringement procedure. However, when no national legislation is received by the deadline required, the standard procedure is for the Commission to automatically initiate the first stage of infringements proceedings – the sending of a formal letter to the Member State. Often the procedure needs go no further since this alone puts sufficient pressure on the Member State concerned.

This has indeed been the case with the CCS directive. As of July, the Commission had already initiated 25 infringement procedures for failure to communicate national transposition measures. Only Spain was considered to have fully transposed and Romania required a more careful assessment (and eventually was added to the list).

In January 2012, the status of the transposition has seen some developments.

Of the 25 infringement procedures launched last July, seven have already been closed (Denmark, the Netherlands, Italy, France, Lithuania, Malta and Slovenia), as the Member States have rushed to submit their national measures to the Commission. This means that a total of eight Member States (including Spain) have now fully communicated their transposition mechanisms to the Commission. And this is certainly good news. But 19 cases are still open and under assessment, which is less encouraging.

It seems difficult to evaluate the current efforts in the transposition process of this directive in isolation from past experiences. While such progress might seem rather slow and frustrating to those less familiar with EU law, the transposition of this directive appears in effect to be faster than for other environmental directives (e.g. Water Framework Directive, Renewable Energy Directive).

The Commission’s immediate action in launching the infringement procedures might have played a role in accelerating the process. But, while this might be true for those Member States that are often behind with legal implementation but generally supportive of CCS, it does not seem to apply to those Member States that have substantive concerns with CCS, like Germany.

The German CCS legislation is still stuck in Parliament and the voice of Brussels does not seem to have been heard. Some have suggested that, if the German Government decided not to allow CCS in its territory (which is possible under Article 2 of the Directive), there is no need to transpose the directive all together. The Commission is clear in refusing this argument; Member States have an obligation to transpose the directive under Article 4.3 of the Treaty on the European Union. If they then do not want to allow the technology in their territory, they are entitled to do so, but the legal framework must be in place. The following months are crucial to assess how Germany will act, which is critical for CCS deployment in Europe as a whole.

Another important question is what happens beyond the formal transposition. It is not enough for a Member State to have a legal framework on CCS in place to exhaust their obligations under the treaty. The national law must not only be passed by the deadlines in the directive, but it must also faithfully reflect the requirements of the directive. Checking that this has been done is a much more complex and time-consuming task for the Commission, which has now launched a much deeper study of the actual provisions that Member States claim implement the directive. If the Commission judges the national measures to be incorrect or incomplete, it can also initiate infringement procedures, though in practice it is likely to start with informal negotiation.

Correct transposition is not only fundamental from a mere legal point of view, but it is also an essential requirement for Member States to access funding under the NER300 process. In this context, the European Investment Bank was due to conclude its due diligence assessment of the projects on 9 February 2012. From there, a list of projects will be released and negotiations with Member States will start. At the current stage, it seems that everything is on track to enable final investment decisions by the end of 2012 and that the transposition process is going as expected (or even faster than expected). What remains to be seen is the development of the cases still open and the result of the transposition check.

Differences between national legal cultures, administrative structure and tensions between government departments can influence the transposition process. These are only some of the factors analysed in a series of reports published by the University College London Carbon Capture Legal Programme (CCLP) on the transposition of the directive in selected Member States (UK, Spain, Romania and Germany). A report on Norway was also presented by the CCLP, looking at the challenges of implementing the directive within the European Economic Area (EEA) Agreement. The reports aim to go beyond the mere technicalities of the transposition process to highlight challenges, drivers, tensions and, ultimately, whether the Directive constitutes a more difficult piece of legislation that other EU laws.

This question mainly stems from the analysis of the wide scope left in this directive for Member States’ discretion in the implementation of some of its provisions and of the ambiguities embedded in some elements of the European framework (e.g. financial security, financial contribution, liability, conflicting uses of the storage site).

The reports are available on the CCLP research page and are going to be updated in the following months. New reports are intended to be launched on other Member States during the year.