It is imperative that EU Member States take decisive action to support innovation and commercialization of technologies to decarbonize, particularly in difficult-to-electrify sectors. Carbon management technologies have been identified as one area which could, among other things, support the decarbonization of steel and cement-making and has been widely recognized as essential to the EU’s decarbonization.
The tremendous impact of the COVID-19 pandemic forced the European Union to push through an urgent and coordinated response to provide major public investment and economic stimulus in the form of the Recovery and Resiliency Facility. With over €700 billion being made available in the form of grant and loan support to Member States, considerable resources have been offered by the EU. Moreover, with 37% of Member States’ plans ringfenced for investment to tackle climate change, this presented an excellent opportunity to fund the agenda of the European Green Deal, ensuring the recovery would be very much a green one.
In recent years, there has been resurgence of projects to develop European carbon management, which Clean Air Task Force continues to track. Despite this flurry of development, only 11 EU Member States, as well as Iceland, Norway and the United Kingdom, currently have carbon management projects in operation or planning.
Given the importance of government action among Member States to support carbon capture’s development, Clean Air Task Force sought to understand whether Member States took the opportunity afforded by the Recovery and Resiliency Facility to support carbon capture and storage technologies. Among the 27 EU Member States, 22 have had their submissions approved by the EU Commission. Of these, seven Member States made grants which also included carbon management.
Belgium’s Recovery and Resilience plan includes various measures to invest in the development of carbon capture technologies. The most significant development is a €95 million grant for the construction (or where possible, repurposing) and operation of 150 kilometres of pipeline capable of transporting hydrogen and CO2. The ‘Backbone for H2 and CO2’ investment will provide critical infrastructure to realise the development of a hydrogen and CO2 transport network, the primary focus of which is on Flemish industrial sources and Brussels, potentially expanding to international interconnections and projects such as the Northern Lights project.
As well as the ‘Backbone for H2 and CO2’ investment, the Belgian government has also committed €50 million for the development of low-carbon industry in the Walloon region, for processes including the capture of CO2 from ammonia production to be utilised as a feedstock or to be stored. Finally, the Belgian Recovery and Resiliency Plan includes €26.45 million for a research platform for the energy transition involving several universities to research various technologies including carbon capture.
Croatia has included investments into two specific projects as part of its Recovery and Resilience plan. The first investment is a €12.7 million grant for a pilot project by Petrokemija Kutina, an ammonia production facility in Kutina, Croatia, which would capture CO2 and transport it by the existing gas pipeline (which needs to be repurposed and renovated) to depleted oil and gas fields in Ivanić Grad, Croatia. The project aims to capture 190,000 tons of CO2 per year, leading to a total of 5 Mt of CO2 to be stored over the lifetime of the project. The second investment is a €33.2 million grant for a CCS installation to be included as part of an ethanol refinery project in Sisak, Croatia. The project aims to capture 55,000 tons of CO2 per year, which will be transported to depleted gas fields approximately 40 kilometres away from the site.
The pilot projects are the first in Croatia and according to the Croatian government, carbon capture is an important technology to develop in Croatia, particularly because Croatia has considerable potential to geologically store CO2 as well as industry which must innovate in order to reduce its emissions.
As part of its Recovery and Resilience plan, Denmark is proposing a subsidy worth approximately €274 million in total to be distributed between 2021-2025, designed to increase energy efficiency in buildings and in industry, green heating as well as carbon capture and storage. Of this, almost €27 million has been allocated for a subsidy scheme to support the development and demonstration of one or more CO2 storage sites in depleted oil and gas fields in the Danish part of the North Sea. It should also be noted this initiative is separate from the existing CCS support scheme provided under the Action Plan for Energy and Industry.
Carbon management has been identified as an important part of Denmark’s climate strategy, with the Danish 2020 Climate Plan estimating between 4-9 Mt/year of CO2 to be captured by 2030. Indeed, Denmark is particularly well suited to play a major role in the development of carbon capture across Europe. A recent study commissioned by Clean Air Task Force and the Geological Survey of Denmark and Greenland found that Denmark has the potential to store between 12 – 25 Gt of CO2.
Finland has provided €156 million in its Recovery and Resiliency plan for developing clean hydrogen and carbon capture in its industry. The Finnish government aims to develop carbon capture both for utilisation and storage, as well as negative emissions technologies such as bio-energy carbon capture and storage.
Germany’s Recovery and Resilience plan provides for over €1 billion in funding for two initiatives which will support carbon capture development as part of the broader industrial decarbonisation effort. The first provides almost €449 million for a support program to enable, promote and advance the market launch of climate-neutral technologies, designed to decarbonise industry. Under this scheme, businesses energy-intensive industries covered under the EU emissions trading system which are difficult to electrify, such as steel-, and cement-making, will be supported in their decarbonisation efforts in the form of subsidies to assist financing their decarbonisation efforts. The second initiative provides €550 million in funding for a Carbon Contracts for Difference Pilot Program, aimed primarily at companies in the steel, chemical and building materials industry. The pilot program is therefore intended to promote the higher operating costs of decarbonization technologies, which could potentially include carbon capture or hydrogen.
As part of Greece’s Recovery and Resilience plan, €300 million has been allocated to develop the country’s first carbon capture facility. The project will involve the production of blue hydrogen by Energean, with the captured CO2 being stored in the Prinos field off the coast, which has the capability to store 50 million tons of CO2.
Sweden has included an Industrial Transition Fund with €2.9 billion in funding as part of its Recovery and Resilience Plan. Designed to support Sweden’s industrial decarbonisation effort, such as its steel, cement, pulp and paper and chemicals production facilities, the Swedish government estimates the fund to achieve long-term emission reductions of 10 million tonnes of CO2 per year. The Industrial Transition Fund is open to various technologies, including carbon capture, which features in the Swedish government’s climate strategy. For example, by 2030 the Swedish government has set a target of 1.8 Mt of CO2/year to be captured and stored from bio energy facilities by 2030, rising to between 3-10 Mt of CO2/year by 2045.
What this can tell us about European carbon management policy
The inclusion of carbon capture in various Recovery and Resilience plans indicates that carbon capture development is beginning to move, and Member States are willing to take decisive action to achieve this, despite the shortcomings in current EU carbon capture policy. A clear point, echoed by several Member States, is that the current policy framework, not just to develop carbon capture, but various technologies which can reduce greenhouse gas emissions, is not sufficient.
As the Swedish Recovery and Resilience Plan emphasizes: “Investments leading to zero or negative emissions often require entirely new technologies that are expensive, high-tech and not available on the commercial market today. The EU Emissions Trading System is not enough to incentivize this.” Although other mechanisms at the EU-level, such as TEN-E and the Innovation Fund, also function to incentivize carbon capture technologies, it is unclear what sort of role Member States should play and how the responsibility to incentivize these technologies between the EU and the Member States should be allocated. . Nevertheless, the inclusion of carbon capture in several of the Recovery and Resilience plans of Member States has thus sent a positive signal that at least some Member States are willing to do more to develop climate technologies like carbon capture. In addition, two key aspects of the inclusion of carbon capture in the Recovery and Resilience plans can be seen:
1) Carbon management is not confined solely to northern Europe
Until now, the development of carbon capture has been primarily focused on northern Europe and in particular, countries on the North Sea, like Norway, the Netherlands, the United Kingdom and Germany. While the economic profile, energy mix, as well as significant potential to store CO2 in this region has made it the primary target for first-mover projects to contribute to scaling up carbon capture technologies, other European regions, which contain high-emitting industries as well as a sound geological profile to store CO2, have not received similar attention. However, the decision by the Croatian and Greek governments to include carbon capture in their Recovery and Resilience plans signals that this might be about to change. Furthermore, the development of carbon capture could also be an important factor in ensuring economic growth in some of Europe’s most deprived areas. According to the Commission, the Sisak – Moslavina region, where these two pilot projects are to be developed, is among the least developed regions in the country and has suffered from emigration in recent years. Developing technologies such as carbon capture, which can deliver jobs as well as reducing greenhouse gas emissions in industrial regions such as Sisak – Moslavina will be crucial to ensuring a just transition is maintained while meeting Europe’s climate targets.
2) A clear European strategy for carbon management technologies is needed
Although the Recovery and Resilience plans demonstrate a positive development that EU Member States are willing to support carbon capture, the array of different forms of policy instruments and decisions used to support carbon capture makes it difficult for potential project developers to navigate the complexity of different policy and regulatory regimes to receive the supports necessary to fund potential carbon capture projects, creating potential barriers and delays in project development. More broadly, it illustrates a clear lack of strategy to develop carbon capture at the EU level.
Under the Recovery and Resilience plans, no less than 6 Member States provided funding for carbon capture technologies but with no clear, unifying vision as to how carbon capture should be developed within the Union. For example, while Germany and Sweden opted to design transition funds amounting to over €4 billion combined which would apply to various forms of technologies to reduce industrial greenhouse emissions, other Member States such as Greece and Croatia opted to finance specific, individual projects. Indeed, the other Member States which provided funding for carbon capture, Denmark and Belgium, opted for completely different policy options, with Denmark focusing on research and demonstration projects to store CO2 offshore while Belgium opted to focus exclusively on the transport of CO2 and hydrogen. In fact, Belgium was the only Member State which referenced cross-border co-operation in the transport and storage of CO2 in their Recovery and Resilience plan, a crucial aspect to decarbonising Europe’s industry, since several Member States have neither the means to transport, nor the geological capacity to store CO2 within their jurisdiction.
The various patchwork of different policy measures aimed at different parts of the carbon capture value chain creates inefficiencies in optimising the scaling of carbon management technologies, and indicates a lack of a clear, united vision across the EU Member States. Currently, carbon capture does not have a clear strategy published by the European Commission, unlike other technologies crucial to Europe’s decarbonisation effort, such as Hydrogen and Offshore Wind. A clear pathway, with set targets, deadlines and measures to assist meeting those goals, would send a clear message from the EU to its Member States that carbon capture is necessary to decarbonising Europe’s economy. This can only be achieved when Member States work together.