Insights and Commentaries

EU Industrial Carbon Management Strategy: GCCSI Perspective

Insights on the European Commission's plan to stimulate carbon management deployment in the EU and suggestions for the way forward

12th April 2024

Topic(s): Europe, Policy

The European Union’s goal of reaching net-zero emissions by mid-century has brought carbon management technologies including Carbon Capture and Storage (CCS), Carbon Capture and Utilisation (CCU) and Carbon Dioxide Removal (CDR) firmly in focus, accelerating their deployment across the region.

The Global CCS Institute (GCCSI) is now tracking more than 100 commercial-scale CCS and engineered CDR projects at various stages of development in Europe, driven by strong policy support at both EU and national levels[1].

However, if the EU is to achieve its decarbonisation ambitions, there is a pressing need to ramp up the deployment of carbon management solutions.

To this end, the Institute welcomes the release of the long-awaited EU Industrial Carbon Management (ICM) Strategy[2] and the new momentum the EU is building around carbon management technologies, which are now described as indispensable to decarbonising a wide range of sectors our economy relies on.

In particular, the EU-wide strategy on industrial carbon management proposed by the Commission presents CCS, CCU and CDR as pathways able to contribute to the success of the EU’s decarbonisation efforts and outlines an ambitious vision to scale up carbon management solutions in the EU.

According to the European Commission’s projections, around 280 million tonnes per annum (Mtpa) of fossil, biogenic and atmospheric CO₂ should be captured by 2040 and around 450 Mtpa by 2050.

The Commission also anticipates that, by 2040, close to half of the CO₂ that is captured annually  might be biogenic and atmospheric and, by 2050, the EU could need carbon removals to balance out around 400 million tonnes CO₂ equivalent of residual emissions in hard-to-abate sectors.

Finally, the Commission predicts that the annual CO₂ injection capacity for geological storage should also increase to reach at least 250 Mtpa of CO₂ in 2040 in the European Economic Area (EEA).

Figure 1: Volume of CO₂ captured for storage and utilisation in the EU (above chart)
and share of the CO₂ captured by origin (below chart). Source: European Commission

Meeting the Commission’s estimations will require a massive scale up of carbon management deployment in Europe, as well as a comprehensive approach at the EU level able to set clear guidance for Member States.

To this end, the Institute is pleased to see that the European Commission is planning to undertake several concrete measures to overcome existing bottlenecks to the deployment of a well-functioning CO₂ market in the EU[3], including:

• Laying the groundwork for a possible future CO₂transport regulatory package, as well as establishing an EU-wide CO₂ transport infrastructure planning mechanism and minimum standards for CO₂ streams;
• Building an investment atlas of potential CO₂storage sites and, in collaboration with Member States, developing step-by-step guidance for permitting processes for net-zero strategic projects for CO₂ storage;
• Facilitating industrial carbon management investments up to 2040 and 2050 and other actions aimed at funding the clean carbon transition, such as financing CCS and CCU projects via the European Investment Bank, and assessing alternative market-based funding mechanisms.
• Bolstering industrial carbon removals via policy and support mechanisms as well as enhancing EU research, innovation and early-of-a-kind demonstration in this field under Horizon Europe and the Innovation Fund.
• Supporting a knowledge-sharing platform dedicated to CCUS projects.
• Working alongside Member States and industry to increase public awareness and understanding of industrial carbon management technologies.
• Taking steps towards harmonised reporting and accounting of industrial carbon management activities under the UNFCCC transparency framework.

Our key takeaways on the EU ICM strategy, as well as our recommendations on the next steps to make this strategy more impactful for the widescale deployment of carbon management in Europe, are presented below.

A holistic approach to carbon management driving further momentum for CCS in the region

Released alongside the European Commission’s proposal of a new intermediate EU 2040 climate target, and the provisionally agreed Net-Zero Industry Act (NZIA), the strategy is the result of a holistic and coordinated approach that the EU is undertaking to shape the future of climate mitigation in Europe.

As supportive policies represent a key driver for the deployment of carbon management, the comprehensive approach proposed by the Commission will be pivotal for addressing current key issues related to the CO₂ value chain and creating an enabling environment for the growth of the carbon management industry across the Union.

The role of carbon management technologies in meeting EU’s climate targets

Under the Europe’s Climate Law and Fit-for-55 package, the EU has set climate targets to reach a 55% reduction of greenhouse gas (GHG) emissions by 2030, and ultimately achieve climate neutrality by 2050. In February 2024, the Commission also released a Communication recommending a 90% net GHG emission reduction by 2040 compared to 1990 levels.

Quantifiable and verifiable milestones are key to ensuring that the Paris Agreement’s objective of limiting global warming to 1.5°C stays within reach.

The ICM strategy reconfirms once again the key role carbon management technologies like CCS, CCU and CDR are expected to play in the transition towards a green economy alongside renewables and other key climate mitigation options, particularly as they offer valuable solutions for decarbonising the European economy while also ensuring key industries remain competitive.

However, if the EU is to reach its climate goals and align with the Commission’s assessment of the amount of CO₂ that would need to be captured by 2040 and 2050, the deployment of carbon management technologies must move forward to unlock their potential and fully reap the benefits they can provide during the green transition.

In particular, as setting clear targets can promote predictability and further drive investment decisions, the CO₂ capture projections outlined in the strategy must be translated promptly into concrete legislative targets.

Defining separate targets for CCS and CDR could be useful to properly track emission reductions and industrial carbon removals separately, as well as monitor how these activities are contributing individually to the EU’s climate goals.

The Commission’s aspiration outlined in the strategy to bolster industrial carbon removal via policy and support mechanisms, as well as enhance  EU research, innovation and early-of-a-kind demonstration in this field under Horizon Europe and the Innovation Fund, represents a step in the right direction. However, more work needs to be done to create the proper enabling conditions for industrial carbon removal technologies to reach the required scale and meet the assigned targets.

Benefits of CCS and CCU across different applications

As two of the carbon management pathways outlined in the Strategy, CCS and CCU are essential and versatile climate mitigation solutions able to decarbonise a wide range of sectors our modern society relies on.

Over the last years, these technologies have been supporting net-zero ambitions and found a key role to play in an increasing and diverse number of industries.

In particular, CCS has been applied in many sectors across hard-to-abate industries in Europe such as cement, steel, and chemicals, as well as in power generation, fertilisers, hydrogen production and waste management.

While the EU's ICM strategy highlights the crucial role carbon management technologies will play in hard-to-abate industries, it does not limit the application of CCS and CCU to specific economic sectors but leaves Member States with the prerogative to decide on their energy mix and the appropriate applications of these technologies in the framework of their national decarbonisation strategies.

The Institute encourages the application of CCS to all sectors covered by the EU Emissions Trading System (EU ETS).

In particular, CCS represents a crucial climate solution not only for energy-intensive industries with limited or no alternative options to decarbonise their emissions, but also for those countries with an existing fossil-based fleet of power plants that aren’t ready for retirement and that would otherwise continue emitting CO₂ at unsustainable rates.

As there is still ongoing construction of gas power plants in some EU Member States, potentially remaining operational by 2040, it is important to consider CCS for the abatement of fossil fuels in power generation.

Leveraging CCS in the power sector enables power grids to decarbonise while maintaining their reliability and resilience, and ensures there are dispatchable sources in the power mix to complement the variable nature of renewables like solar and wind generation.

EU-wide CO₂ transport and storage infrastructure

Establishing a functioning single market for industrial carbon management will require the timely development of CO₂ transport and storage infrastructure in the EU, as well as a fit-for-purpose EU-wide CO₂ infrastructure regulatory framework to complement the existing legislation on CO₂ transport and storage.

CO₂ Transport

Although some regulatory considerations around CO₂ transport have been included in the EU CCS Directive and revised TEN-E Regulation, the EU is currently lacking a dedicated regulatory framework applicable to the movement of CO₂.

As a result, some Member States have started to develop CO₂ transport regulations at the national/regional level[4]. However, establishing a harmonised approach across the EU will be vital to promote the development of an integrated cross-border CO₂ market.

To this end, the Institute welcomes the European Commission’s intention to lay the groundwork for a possible future CO₂ transport regulatory package, as well as establish an EU-wide CO₂ transport infrastructure planning mechanism in cooperation with Member States and the CCUS Forum stakeholder platform.

According to the European Commission’s estimates outlined in the ICM strategy, building the future CO₂ transport network in Europe might require up to 7,300 km of pipelines and shipping routes by 2030, potentially rising to 19,000 km by 2040.

Considering that the development and construction of CO₂ transport projects from planning to operation can take several years, there is an urgent need to translate the Commission’s ambition of establishing an EU-wide CO₂ transport regulatory framework to action in the immediate future to stay on track with Europe’s pressing climate targets.

It is therefore critical for the next Commission to prioritise the development and implementation of such a regulatory package to remove current bottlenecks, including those related to liabilities of CO₂ infrastructure, tariffs, and standards.

In particular, the regulatory package should address transboundary CO₂ transport considerations to facilitate operations and risk management, as well as the allocation of liabilities.  Unpacking issues related to the ownership of CO₂, the applicable dispute resolution mechanisms in the context of CO₂ transport, as well as the responsibility of Member States, could also be beneficial to establish a clear and harmonised framework applicable to the transboundary movement of CO₂.

Finally, the Institute also supports the Commission’s intention to work with European standardisation bodies to establish minimum standards for CO₂ streams.

Defining consistent standards will enable the effective cost-efficient deployment of CCS in Europe in compliance with emerging regulatory frameworks. A European set of standards for CO₂ purity can contribute to the safety of CCS operations and should be developed together with the industry.

CO₂ Storage

The mapping of potential storage capacity and opportunities in the EU and the EEA will be instrumental in building the necessary CO₂ storage infrastructure across Europe.

With new offshore opportunities for CO₂ storage sites emerging in Bulgaria, Croatia, Greece and Italy, as well as countries like Denmark and Poland considering onshore storage opportunities, it is crucial to ensure that the development of CO₂ storage capacity is spread across Europe.

The Institute welcomes the European Commission’s plan to create an investment atlas of potential CO₂ storage sites, building on the work of and data already collected by European geological surveys, including the European CO₂ Storage Atlas developed in 2013 by the CO₂ Storage Potential in Europe Project (CO₂StoP project).

However, it is important to clarify the added value that this new atlas would bring and how this tool is expected to complement the obligations set under the existing and future regulatory environment.

EU Member States are already required to assess their storage potential under the EU CCS Directive[5] and, once the NZIA is formally approved and enters into force, will have to make available data on all areas where CO₂ storage sites could be permitted on their territory[6].

While building this investment atlas of potential CO₂ storage, the Commission and Member States should ensure that all suitable geological formations for permanent and safe underground CO₂ storage are taken into account. This includes, for example, depleted hydrocarbon fields and saline aquifers.

In addition to updating existing data, the European Commission should leverage the atlas to stimulate data transparency and showcase fact-based public information on the potential of CO₂ storage for Europe. Such information could facilitate future exploration activities and investments, as well as generate more positive public perceptions around the role of carbon management technologies. This includes, for example, harmonised information on the CO₂ storage activities happening at a local level with a direct impact on communities living in those areas, the risk management systems in place to ensure the safety of CO₂ storage sites, and the positive contribution CO₂ storage can bring to the local economy by safeguarding existing jobs.

Finally, the Institute welcomes the Commission’s plan to develop, with Member States, step-by-step guidance for permitting processes for net-zero strategic projects for CO₂ storage.

Once the NZIA enters into force, Member States will be able to develop regulatory sandboxes at the national level for net-zero strategic projects. CO₂ storage projects with net-zero strategic project status will have multiple advantages, including streamlined and efficient permitting procedures and priority status at the national level.

While flexibility and streamlined permitting can help reduce administrative burden and accelerate deployment, the step-by-step guidance proposed by the Commission should be developed to ensure that exemptions granted to project developers are managed in accordance with the highest environmental, social and safety requirements.

Financing the carbon management pathways

 Alongside legal certainty, financial incentives and supporting funding mechanisms are also essential to scale up carbon management technologies in the EU and ensure that projects are economically viable in the first phase of deployment.

The Institute welcomes the measures the Commission is planning to undertake to incentivise investment in carbon management technologies. This includes, for example, the intention to:

• Engage with the European Investment Bank to identify financial avenues for CCS and CCU projects,
• Facilitate industrial carbon management investments up to 2040 and 2050, and
• Assess the possibility for economically viable CCS and CCU projects to move from project-based grant support to market-based funding mechanisms.

However, driving carbon management deployment across the region at the necessary scale will require the adoption of a comprehensive policy approach able to create greater coordination and synergies between EU funds, national subsidies, private investments and enhanced demand for green products that could be leveraged by the carbon management value chain.

We therefore encourage the Commission and the Member States to improve coordination of financial support between the different funding options available for carbon management in Europe to get more projects off the ground.

The Net-Zero Europe Platform that will be operational following the entry into force of the NZIA presents a unique opportunity for the European Commission and Member States to explore existing funding opportunities for net-zero strategic projects and build potential synergies between them.

As the first step of the process is to outline clearly and comprehensively the different sources of funding available to the industrial carbon management value chain, the Institute recently published a report, in partnership with Ciaotech-PNO Group, which provides a detailed overview of EU funding for CCS and how to access it[7].

Knowledge-Sharing initiatives

Creating opportunities for industry, government institutions and relevant stakeholders to share lessons learned and good practices from the implementation of carbon management projects like CCS/CCU can be crucial to further accelerate the widescale development of these technologies across the region.

As a result of this, the Commission’s support for a knowledge-sharing platform dedicated to CCUS projects will offer a space for project developers to come together and discuss challenges and opportunities emerging during the implementation of projects, including regulatory, financial and technological barriers.

However, moving a step forward and establishing a dedicated partnership in the form of a European Industry Alliance could offer the opportunity to build a stronger CCUS industry in the EU.

Such an alliance would go beyond the scope of the knowledge-sharing platform, limited to sharing lessons learned from CCUS projects, and provide actors interested and involved in CCUS with an opportunity to strengthen their cooperation and work towards implementing more broad EU policy objectives for the successful deployment of CCUS in the EU.

An Industrial Alliance would also ensure a level playing field between CCUS and other strategic net-zero technologies that already benefit from their own alliances, such as the European Clean Hydrogen Alliance, the Raw Materials Alliance, the European Batteries Alliance and the European Solar PV Industry Alliance.

Improving public perception around carbon management in collaboration with Member States and industry

Public perception and stakeholder engagement are also among the key factors influencing the successful deployment and implementation of carbon management technologies.

The Institute supports the European Commission’s intention to work alongside Member States and industry to increase engagement and public understanding of industrial carbon management technologies.

The Commission could leverage its position and put forward more specific actions and instruments aimed at broadly communicating the role of carbon management technologies in the energy transition, their risk management profile and their contribution to safeguarding industrial jobs.

The potential actions the Commission could consider include:

• Running a digital communication campaign to raise awareness and enhance understanding among EU citizens of the industrial carbon management value chain;
• Launching a dedicated website providing reliable and fact-based information on the three pathways envisaged in the strategy (CCS, CDR and CCU), and
• Creating a catalogue of best practices and lessons learned from the implementation of projects in the framework of carbon management that future project developers could use as a reference.

Boosting industrial carbon management via international cooperation

With the emergence of new markets and commercial opportunities for carbon management technologies beyond national boundaries, the transboundary movement of captured CO₂ is becoming more prominent, requiring project proponents, policymakers and regulators to take into account the legal implications of the cross-border movement of CO₂ and the establishment of international value chains.

To this end, the Institute welcomes the Commission’s plan to take steps towards the harmonised reporting and accounting of industrial carbon management activities, in line with the framework set by the UNFCCC.

This will be crucial to ensure that Parties to the Paris Agreement will avoid double counting when measuring and reporting progress on their emission reduction targets.

The Institute also echoes the Commission’s acknowledgement that the alignment of the EU legal framework with the 1996 Protocol to the London Convention is critical for facilitating the seamless import and export of captured CO₂ across borders.

As the EU legal framework currently provides the relevant ‘arrangement’ between the Parties in the meaning of Article 6(2) of the London protocol, the Commission could consider publishing guidance for the implementation of the EU CCS Directive’s obligations within bilateral agreements to conduct cross-border CO₂ transport. Such guidance could contribute to establishing best practices and help project operators navigate their obligations.

To drive further investment in the carbon management value chain across the whole region, strengthening coordination and collaboration across EU and non-EU jurisdictions will also be needed to take advantage of economies of scale and reduced cost.

The United Kingdom has been a frontrunner in the growth of the carbon management market in Europe over the past few years and currently aspires to capture 20-30 Mtpa of CO₂ by 2030.

Creating the necessary conditions to enable Pan-European cooperation and providing EU companies with additional market opportunities to export their CO₂ emissions for permanent storage in third countries will be crucial to further drive the development of carbon management regionally and, ultimately, meet global climate targets.

Conclusions

The EU Industrial Carbon Management (ICM) strategy represents a landmark step towards the widescale deployment of carbon management in Europe and the success of the EU’s decarbonisation efforts.

With the upcoming European elections in June 2024, the strategy sends a clear signal to policymakers, industries and stakeholders active in the carbon management sector that technologies like CCS, CCU and CDR are part of the toolbox of solutions that need to be deployed widely and punctually across Europe to reach climate neutrality by 2050. It also offers an opportunity to put carbon management technologies at the core of the EU’s strategic agenda for 2024-2029.

The Institute looks forward to working with the next European Commission and all relevant stakeholders to support the implementation of the strategy and promote efficient deployment of carbon management to achieve Europe’s climate targets cost-effectively.

[1] Global CCS Institute (2023) Global status of CCS 2023. Available at: https://status23.globalccsinstitute.com/

[2] Communication from the Commission to the European Parliament, the Council, the European Economic and Social Committee and the committee of the regions, Towards an ambitious Industrial Carbon Management for the EU, COM/2024/62 final. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2024%3A62%3AFIN&qid=1707312980822

[3] See COM/2024/62 for more details about the actions the European Commission is foreseeing to undertake as part of the Industrial Carbon Management Strategy. Available at: https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=COM%3A2024%3A62%3AFIN&qid=1707312980822

[4] In April 2023 the Flemish government approved the first version of its regulatory framework for CO₂ transport, laying down rules on the management of the future CO₂ networks. The decree was submitted to the Flemish parliament in February 2024. France is also planning to develop a regulatory framework for CO₂ transport, as part of the aims outlined in its draft CCUS strategy.

[5] According to Article 4.2. of the EU CCS Directive: “Member States which intend to allow geological storage of CO₂ in their territory shall undertake an assessment of the storage capacity available in parts or in the whole of their territory, including by allowing exploration pursuant to Article 5.”

[6] See Article 17 of the compromise text agreed by the co-legislations during the interinstitutional negotiations on the Proposal for a Regulation of the European Parliament and of The Council on establishing a framework of measures for strengthening Europe’s net-zero technology products manufacturing ecosystem (Net-Zero Industry Act) available at https://data.consilium.europa.eu/doc/document/ST-6269-2024-INIT/en/pdf

[7] Blanchard, M., Kostoula, C., Rausa, A. (2024), From Proposals To Reality: How Eu Funds Can Help Jump-Start CCS Projects. Global CCS Institute, Ciaotech-PNO Group. Available at https://www.globalccsinstitute.com/wp-content/uploads/2024/02/From-Proposals-to-Reality-How-EU-Funds-Can-Help-Jump-Start-CCS-Projects-GCCSI.pdf

The lead author of this piece is Daniela Peta, Public Affairs Lead with the Global CCS Institute. Valuable contributions were provided by the Institute's Guloren Turan (Chief Impact Officer), Mathilde Blanchard (Senior Policy Lead, Knowledge and Analysis), Nabeela Raji (Legal and Regulatory Lead) and Ellina Levina (Head of Public Affairs). 

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