In his Competitiveness Report (2024), Mario Draghi recognises that Europe’s energy-intensive industries are already today global leaders in developing innovative technologies – especially in CCS. For Europe to remain competitive, Draghi highlights that we need to address high energy prices and double-down on decarbonisation in a cost-efficient way. CCS has proven to be one of the technologies that can support these objectives in a number of different ways and sectors. This is particularly the case for process emissions, but has other applications in industrial sectors, where CCS can be the most cost-efficient way to decarbonise.
We understand that the Industrial Decarbonisation Accelerator Act (IDAA) seeks to build on these conclusions and address the bottlenecks related to decarbonisation. If designed effectively, the IDAA has the potential to play a pivotal role in strengthening Europe’s energy-intensive industries and unlocking the full potential to develop and deploy CCS technologies.
Access to industrial decarbonisation infrastructure
CCS Europe is encouraged to see that the European Commission recognises the importance of ensuring transparent, fair and non-discriminatory access for all emitters to CCS infrastructure, notably long-distance CO2 pipelines and sinks. Today, most of the CO2 infrastructure required by European industry is still missing. The very nature of these large infrastructure projects (i.e., high upfront capital requirements, economies of scale, and significant barriers to entry) create market structures where a limited number of participants can operate most effectively.
CCS Europe believes that the introduction of infrastructure regulations is key to ensure competition in such markets and improving access to CCS infrastructure (transport and storage). It is also essential to ensuring that the EU creates an integrated network that can accommodate a number of different CCS applications. However, this regulatory framework should not impede the development of a nascent CO2 infrastructure framework. While there are valid concerns regarding the behaviour of a mature market, the corresponding legislative framework should be introduced at an appropriate pace to avoid hindering the market’s development. At that time, CO2 transport could adopt regulatory mechanisms such as regulated Third-Party Access (TPA) to ensure fair and non-discriminatory infrastructure sharing to long-distance CO2 pipelines and storage, regulated tariffs to ensure transparent and cost-based pricing, as well as Regulatory Asset Base (RAB) - but these should not be introduced too early. We therefore call on the Commission to adopt a cautious approach in the development of this regulatory framework and to provide industry with a ramp up period before imposing a regulatory framework fit for a mature market.
The Commission must provide certainty on regulatory frameworks in order to facilitate the permitting of CO2 transport infrastructure projects. In light of that, it should not wait any longer to publish the regulatory framework for CO2 transport, as this is a key piece of the puzzle to unlock the permitting of the CO2 transport network. This is essential for CO2 transport to reduce risks for providers, streamline permitting procedures for CCS and CCU project development, and establish harmonised CO2 specification standards across Europe. It is imperative that the storage obligation in the NZIA delegated act is maintained and strengthened over time to keep storage costs at a sustainable level for industrial companies facing global competition. Additionally, we call on the Commission to pay special attention to ensure geographic balance in available capacity, as this will help avoid regional disparities and support a just transition.
Equally, CCS Europe supports the intent to speed up permitting through legislative measures. However, this should not be at the cost of environmental standards, as well as at the cost of engagement of local communities. Today, CCS technology still suffers reputational challenges. This is due to misunderstandings about the application of CCS, and its impact on European society. Therefore, it is critical for the viability of CCS projects to get the support of local communities. This is a specific education and engagement task that individual project developers are not necessarily well equipped to handle. Therefore, the Commission and Member States must take on a leadership role in developing guidelines to support projects in their engagement through the development of a knowledge sharing platform for Member States and project developers alike. They are in a position to leverage their understanding of the situation on the ground, as well as their expertise of the permitting processes to create effective advice on engagement. This will facilitate the development of a good relationship between project developers and local communities and can even unlock further opportunities for CCS in areas that would have normally been difficult to convince.
Priority projects and clusters
Regarding industrial clusters, CCS Europe supports the approach of identifying priority projects and clusters for decarbonisation. This strategy allows the EU to tackle the most effective decarbonisation projects first, maximising the impact of its investments. Clusters also enable synergies between decarbonisation projects, reducing lead time and costs. However, it's important to note that not all priority projects for CCS will be able to be located in clusters. Some energy-intensive facilities, e.g. lime and cement, distribute their product locally – and are thus dispersed throughout the EU. When appointing priority projects and clusters, the Commission must take these specific conditions into account for CCS projects.
As the Commission considers measures to support the decarbonisation of EU industries, it's imperative to develop solutions that can support CCS deployment and take into account their capital expenditure intensity. Priority projects and clusters can function as test beds for new innovative support measures for CCS, such as de-risking mechanisms and investment guarantees. These measures should include first loss guarantees, grants, subsidies, and tax incentives designed to strengthen the business case for early private-sector investment in CCS infrastructure. Such mechanisms must be comprehensive enough to support both CAPEX and OPEX and extend beyond pilot projects to enable scalable deployment.
Low-carbon products and molecules
Despite encouraging developments surrounding carbon management, one fundamental aspect of industrial decarbonisation has been largely neglected to date: demand-side measures. The EU has long focused on pushing emitters to commit the financial resources required to equip their facilities with CCS technology. However, the costs of building and operating this equipment will have a significant impact on the price of end-products, in the absence of sufficient support. Customers of energy-intensive industries are often unable or unwilling to purchase such products at a premium price. Until today, very little attention has been given to incentives that encourage the use of these low-carbon products and molecules manufactured with CCS (such as low-carbon cement produced in a CCS-equipped facility or low-carbon hydrogen). CCS Europe believes that measures aimed at creating a European lead market for low-carbon products and molecules will leverage the powers of the free market to complement the compliance approach of the EU ETS and would go a long way towards establishing a sustainable business case for the technology.
More specifically, the Commission should take into consideration three main demand-side measures:
- Labelling scheme: Such a scheme provides reliable information to consumers about the carbon-intensity of products. This could be achieved, for example, by requiring the measurement and labelling of embedded carbon on key products throughout the value chain. CCS Europe believes that this scheme must be eventually rolled out to all sectors covered under the EU ETS – and should not just be limited to the steel and cement sectors. The label could be tied to tax breaks, or end-user support programmes for the use of low-carbon products and molecules. We urge the Commission also to consider the introduction of dedicated sectoral targets for low-carbon products and molecules.
- Public procurement measures: CCS Europe supports further consideration of changes that need to be brought to public procurement procedures, through the inclusion of sustainability requirements in public tenders in the IDAA and a further amendment of the public procurement directive in a second stage. These changes are needed in order to incentivise the public purchasing of low-carbon products, in parallel to other support measures. This could take the form of minimum low-carbon product requirements for public procurement or non-price criteria to favour low-carbon products and molecules. Beyond sustainability and resilience criteria, production methods and their climate benefits must also be taken into account.
- Private sector drivers: However, on its own, public purchasing will not be sufficient to cover the needs for a European lead market for low carbon products. For instance, creating a voluntary lead market will be crucial. This could be done by setting specifications to product standards with a requirement of a minimum local content of “Made in EEA”.