The Net Zero Industry Act takes steps towards facilitating and kick-starting industrial decarbonisation through CCS. Bellona Europa has observed that the process has been surrounded by unsubstantiated claims that lack understanding of the important role of CCS, jeopardising EU climate ambition. Luckily, the European Parliament took an important step in supporting the CCS chapters of the NZIA through the vote in ITRE on the file on the 25th of October. Read more on this in our press release.  

One unsubstantiated claim that has been circulating; is that the 50 Mtpa storage injection capacity is too ambitious. In addition to not ringing true, it can easily stand in the way of the necessary build-up of available CO2 storage, as well as be used to weaken the unprecedented and crucial responsibility placed on Oil and Gas producers to ensure the development of this target. Another claim: the need for an extension of current storage capacity targets of 50mt  from an EU target to an EEA target, without a substantial and proportionate increase in target or with ensured EEA implementation. Such an expansion into the EEA, without the target being substantially increased and EEA implementation being confirmed, would dilute and delay EU climate action in a crucial decade. Finally, lack of planning for Europe’s transportation needs is a missing piece of the CCS value chain if necessary changes are not incorporated into the NZIA.  

1. Article 18 and the responsibility of oil and gas producers need to stay in the NZIA 

The NZIA attempts to tackle a key bottleneck standing in the way of CCS deployment in the EU: the lack of available CO2 storage. The NZIA is unprecedented in that it places the responsibility of developing 50 Mtpa CO2 injection capacity by 2030 on oil and gas producers in the EU.  As outlined by Bellona Europa in its consultation response to the European Commission on the NZIA,  this is an appropriate allocation of responsibility, ensuring that important know-how and competence from the oil and gas producers are taken advantage of in the development of a European CO2 storage. We outline the need for such an obligation to ensure the timely development of crucial storage capacity in our Op-Ed in EnergyMonitor. The obligation for storage site development placed on oil and gas producers needs to be cemented in policy to ensure clarity and predictability for the market. This needs to be accompanied by relevant penalties to ensure the obligation is met as suggested and passed in ITRE committee compromise amendments under Article 18 (7ba) and in the ENVI committee under Article 18(7). 

In fact, several oil and gas companies have come out in support of the obligation introduced as part of the NZIA – of note see a recent letter signed by ZEP, IOGP, Bellona, CCSA, SINTEF and CATF, highlighting the importance of keeping Article 18 in the NZIA. Yet too many stakeholders still question the need for an obligation. 

Keeping with the 2030 timeline, the target is a necessary step in turning EU climate ambition into action.  Any unforeseen delays in the development of storage sites to meet the target should be handled by means of additional injection capacity corresponding to a number of years of delay, and could only be justified by consultation with the European Commission. 

2. The 50mt annual storage injection capacity target must remain an EU target 

The 50mtpa injection capacity target for CO2 by 2030 is introduced as an EU target in the NZIA. This is of crucial importance. Some stakeholders have called for an EEA expansion from the start, such an expansion would include the more mature storage site development capacity of EEA states such as Norway. The potential time lags present in implementing EU laws into the EEA would bring with it additional uncertainty further delaying Final Investment Decisions on CO2 storage projects in the EU we so desperately need. Already, we see a concentration of storage capacity development in the North Sea, while this is to be expected, we must ensure that the EU takes part in the development of storage capacity, not overly relying on EEA states such as Norway. It is also not clear if the mandate placed on Oil and Gas producers in the EU would automatically also fall on EEA producers ahead of EEA implementation. Bringing with it loopholes on how the responsibility of development is shared between different actors in the EU and the EEA.  Relying on storage capacity where the EU does not have a mandate to ensure proper market functions, could result in unfair price setting and in the long run disrupt the development of a competitive storage capacity market. 

The market development for CCS must be firmly based on its climate change mitigation purpose, in line with its function as a public good and the public support mechanisms needed for market development.  As such, a degree of market regulation is needed to ensure that early movers are not trapped in what could likely become natural monopolies brought on by public support mechanisms as outlined in our recent Op-Ed in Euractiv.  

3. A CO2 injection capacity of 50 mtpa by 2030 is a minimum requirement  

As mentioned by the IEA, global storage capacity development is currently lagging behind the development of CO2 captureⁱ. There are a multitude of projects that have shown eagerness to tackle their emissions via CCS as only 5 CCS projects were funded of the more than 100 projects relevant to energy-intensive industries under the Innovation Fundⁱⁱ. CO2 volume in Europe alone amount to 94 Mt by 2030 according to the IEAⁱⁱⁱ. Closing the gap on such a lag and meeting the growing volumes of capture projects is precisely why the obligation is required, to ensure sufficient storage capacity is built up in a timely manner. Considering the significant volumes of emissions from harder-to-abate industries and no other viable decarbonisation pathways, storage capacity must keep abreast, as by 2050 the EU Commission foresees 550 million tonnes of CO2 to be stored^iv.   

Delivering such targets by 2030 is feasible. To this end, efficient regulation can cut lead times for storage site development to 4-10 years^v. This requires faster permitting, something which the NZIA tackles and is only positively complemented by the technical know-how and decades-spanning experience with subsurface exploration and drilling by oil and gas entities.  

4. Where it stands with the NZIA 

Currently, both Committee’s in the European Parliament (ITRE and ENVI), which have shared competency on the relevant articles for CCS in the NZIA, have voted on their positions, the focus now turns to the Council where, as outlined in our Op-Ed, vocal support for the importance of CCS seems to be lacking. On the relevant points raised in this article, the Parliaments positions reflect the following: 

1. The responsibility placed on oil and gas entities in Article 18 has not only stayed in both positions but has been carried forward by placing appropriate sanctions and penalties on entities failing to comply. Both committees have recognised the role the obligation of such entities can play in the timely deployment of CO2 storage. 
2. The extension of said obligation to all oil and gas “sellers” in the Union as approved by today´s ITRE vote, as opposed to the original “producers” is unfortunately too unclear in determining on whom the responsibility actually falls. Moving forward along the legislative process, this will require clarification to prevent uncertainties which could in practise water down the obligation.  
3. The ITRE Committee has ensured the storage injection capacity target remains focused on the EU and the inclusion of neighbouring countries requires a robust agreement alongside an additional appropriate target for the third country. The ENVI committee however includes the EEA region with only a 10 Mt addition to the target, missing the mark on ensuring EEA implementation does not delay storage development. 
4. Although both Committees have stated 50 Mt target as a minimum, proposed amendments suggest revisions to the target based on market sufficiency via delegated acts to come. However, as highlighted above, there are ample amounts of CO2 to be stored. Moving forward, mapping and realising viable transport options for these volumes will ensure adequate volumes reach storage sites within the stated timelines.  
5. Both Committees have also rightly pointed to the need for CO2 transportation legislation in order to close the gap, recognising the vital role transportation will play along the CCS value chain and for the market as a whole.  

These parliament votes help set societal terms for the development of crucial CO2 storage for the EU industry, instead of leaving it to the petroleum industry alone. The ball is now in the Council’s court, where it is crucial that widespread support is ensured for an EU target for storage injection capacity build-up with a firm obligation placed on the oil and gas entities, crucial to EU climate ambition. 

The European Commission’s proposal for the Net Zero Industry Act (NZIA) promotes net-zero technologies at climate-relevant timelines. Carbon capture and storage (CCS), as one of these proposed technologies,  is set to play a crucial role in EU decarbonisation efforts. As outlined by Bellona Europa in its “CCS Explainer”, while not a silver bullet, CCS is crucial for industrial decarbonisation and nearly all climate change modelling scenarios highlight that CCS play an important role in reaching climate neutrality at both the EU and global levels.   

Endnotes

ⁱhttps://iea.blob.core.windows.net/assets/42d294af-ce07-44c7-9c96-166f855088e8/CO2storageresourcesandtheirdevelopment-AnIEACCUSHandbook.pdf

ⁱⁱ https://climate.ec.europa.eu/news-your-voice/news/innovation-fund-239-applications-competing-eur-3-billion-third-call-large-scale-projects-2023-03-28_en

ⁱⁱⁱ IEA, Status of CO2 storage infrastructure in development vs. planned capture capacity by region, 2023, IEA, Paris https://www.iea.org/data-and-statistics/charts/status-of-co2-storage-infrastructure-in-development-vs-planned-capture-capacity-by-region-2023, IEA. Licence: CC BY 4.0

^iv In-depth analysis in support of the Commission Communication (2018/773) A Clean Planet for All. A European long-term strategic vision for a prosperous, modern, competitive and climate-neutral economy

^v https://www.iea.org/energy-system/carbon-capture-utilisation-and-storage/co2-transport-and-storage