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A first look at the EU Industrial Carbon Management Strategy 

February 15, 2024 Work Area: Carbon Capture

The European Commission recently launched the Industrial Carbon Management Strategy, reflecting Europe’s growing focus on carbon capture, removal, use, and storage. This follows a call from European NGOs for an EU carbon capture and storage strategy in 2022, and the report “A Vision for Carbon Capture, Utilisation, and Storage in the EU” by CATF and the Florence School of Regulation, prepared for the Commission’s annual CCUS Forum.  

This Strategy, part of a significant week for EU carbon management policy, aligns with the Commission’s assessment for the 2040 target, that rapid scale-up of carbon capture, removal, and storage is crucial for achieving climate neutrality by 2050. The recently finalised Net Zero Industry Act also supports this by aiming to enhance carbon capture and storage infrastructure by 2030.  

Carbon capture and storage is rapidly gaining momentum, with over 100 proposed projects in Europe. However, this growth is uneven, with most projects under development located in the North Sea region, particularly CO2 storage projects, which CATF has recently begun tracking. 

Figure 1: Announced carbon capture and storage projects 2016-2023 by subsector. Source:  CATF Project Tracker.

Based on the findings of the CCUS Forum Working Groups, the Commission identifies several challenges still hindering the broader expansion of carbon management in the EU, including an inadequate business case, lack of regulatory frameworks, complex project risks, and the need for region-wide planning.  

Here is how the Industrial Carbon Management Strategy intends to address these challenges:   

1. Setting a climate-forward target 

The Strategy lays out an ambitious plan for scaling up CO2 capture, utilisation, and storage to align with the EU’s 2040 climate target, targeting an annual CO2 injection capacity of at least 250 million tonnes per year in the European Economic Area (EEA) by 2040. This comes in addition to the EU-wide target set out in the Net-Zero Industry Act to establish 50 million tons of annual CO2 storage capacity by 2030. It is clear that the decade up to 2040 will need to see remarkable growth of capacity in the EU. 

Figure 2: Volume of CO2 captured for storage and utilisation in the EU1 in the Industrial Carbon Management Strategy 

2. Accelerating carbon storage development  

Achieving these storage capacity targets will depend on a significant increase in efforts to assess and develop Europe’s considerable storage potential. As CATF’s report Unlocking Europe’s CO2 Storage Potential outlined, nearly all European countries have suitable geology to develop domestic CO2 storage sites. However, harnessing this potential and developing commercial sites will require considerable time, effort and resources over the coming years. 

Figure 3: Theoretical storage capacity estimates for each country in Europe . Source: CATF

While storage project announcements are accelerating, the concentration of activity in the North Sea means that the development of storage resources in other regions, as CATF’s carbon capture and storage cost tool highlights, will be critical to reducing the costs of carbon capture and storage and establishing a level playing field for decarbonising industries across the EU.  

Figure 4: Growth in CO₂ storage capacity over time based on current announcements 

The Strategy aims to address the current imbalance by preparing guidance on storage permitting processes, urging Member States to establish transparent permitting processes by 2025, and to support ‘net-zero strategic projects’ for carbon capture and storage. It also plans to establish a new investment atlas of potential CO2 storage sites, which should provide project developers and Member States with clarity on how they can best meet their storage needs. Member States are encouraged to contribute geological data to this effort and – importantly – to acquire new data where necessary.  

3. Enabling a Europe-wide network for CO2 

Linking CO2 sources to storage sites will require new transport links spanning much of Europe. A study from the Commission’s Joint Research Centre (JRC), indicates that this network could span up to 7300 km in 2030 and 19,000 km by 2040. While pipelines are the most economical long-term option, their high capital costs and long lead times make shipping, rail, and road transport viable short-term alternatives. 

Figure 5: The projected CO2 infrastructure network by 2030 (left, NZIA scenario) and 2050 (right) (EU + Norway and UK scenario). Source: Joint Research Centre 

Regulatory certainty is crucial for infrastructure development due to investment risks: Emitters and prospective project developers need clarity on issues such as rights of access to infrastructure, ownership issues and the setting of tariffs. To address these issues, the Commission plans to prepare a potential CO2 transport regulatory package. Despite the commitment’s uncertain language, the issue’s importance is expected to grow, especially for the next Commission.  

The Commission also plans to propose “an EU-wide CO2 transport infrastructure planning mechanism” in cooperation with Member States and the CCUS Forum stakeholder platform. This will help ensure deployment that harnesses economies of scale and anticipates future network needs, avoiding fragmented or undersized infrastructure. 

For project developers, a key issue particularly in the early phase of scaling up Europe’s carbon capture and storage market is obtaining sufficient transparency and clarity about how other projects in the value chain are advancing, where they are located and what capacity they intend to capture, transport or store. In line with CATF’s recommendations, the Commission plans to develop a platform for demand assessment and aggregation for CO2 transport or storage services with Member States by 2026. 

Figure 6: Illustrative depiction of an aggregation platform for CO2 capture and storage. Source: CATF.

4. Unlocking investment in carbon capture and storage 

Scaling up carbon capture and storage requires significant investment, with the NZIA target requiring an estimated €3 billion for storage capacity alone by 2030, and the JRC’s network analysis indicating transport network costs of €12.2 billion and EUR €16 billion by 2030 and 2040 respectively. The Vision paper estimated a €10 billion funding gap for capture and storage projects announced as of early 2022. 

The Strategy highlights existing EU funding for carbon management, including the Innovation Fund and Connecting Europe Facility, and encourages incentives at the Member State level such as carbon contracts for difference.  Notably, by the end of 2024, the Commission plans to collaborate with Member States to design a possible Important Project of Common European Interest for CO2 transport and storage, which could help unlock and coordinate Member State funding for this vital infrastructure. The Commission will also engage with the European Investment Bank on financing carbon capture and storage, which is already included within the Bank’s €45 billion funding package under the Green Deal Industrial Plan. Furthermore, the Commission plans to assess by 2025 the maturity of CO2 capture technology in key sectors such as cement and lime production. This evaluation will help to inform a potential transition from grant-based support to more market-based mechanisms such, as competitive bidding auctions under the Innovation Fund; the funding for this kind of ‘auction as a service’ support would be expected to come from national budgets.    

5. Scaling up industrial carbon removals 

There is no path to climate neutrality and subsequent net-negative emissions without carbon removals. Industrial carbon removals, are those delivered by technologies such as bio-energy with carbon capture and storage (BECCS) and direct air carbon capture and storage (DACCS), and are recognised by the Strategy as playing a key role in supporting nature-based carbon removals to remove 400 million tonnes of CO2 per year by 2040. The share of this target that will be achieved through industrial carbon removals is unclear, as the target is undifferentiated.  

The Strategy acknowledges the significant challenges in scaling up and deploying these technologies in time to reach necessary levels of deployment. The Commission’s Carbon Removal Certification Framework (CRCF), which is currently in the final stage of Trilogue negotiations, should support deployment by bringing much needed standardisation to the monitoring and reporting of carbon removals in the EU. In the Strategy, the Commission presents policy options for industrial carbon removals, including support mechanisms and potential integration into the EU ETS – a topic which is the focus of a collaborative research project recently launched by CATF and Concito. Additionally, the Strategy aims to boost EU research, innovation, and early-of-a-kind demonstration for novel technologies to remove CO2 under Horizon Europe and the Innovation Fund.  

The Industrial Carbon Management Strategy is a landmark moment for climate action in the EU, setting out a vision for the development of a carbon management ecosystem that would deliver hundreds of millions of tonnes of emissions reductions, as well as enabling permanent carbon removals to achieve climate neutrality and ‘net negative’ emissions post 2050. The Strategy will provide a clear signal to Member States that carbon capture and storage can and should be a key tool in their decarbonisation plans.  

The challenge now is to make sure that the Strategy’s vision can be realised within a rapidly diminishing window of time. It will be for the next Commission to ensure that this plan of action is implemented in full and on schedule, providing a framework that should drive investment into essential infrastructure for carbon management.   

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