CCS Europe submits its response to the European Commission's public consultation on State aid Framework to support the Clean Industrial Deal - CISAF
Some of Europe’s most significant industries will be reliant on Carbon Capture Storage (CCS) technology to curb their emissions and for some such as e.g. cement, lime, aluminium CCS is the only solutions to reach net-zero. CCS is also imperative to decarbonise hydrogen production, as it is highly used as feedstock in industrial sectors.
The EU has set itself a 2030 CO2 storage target of 50mt/year – and estimates that by 2040 around 280 mt of CO2 will need to be captured and stored to reach the expected 90% GHG emission reduction target. Additionally, in his report on the state of the EU’s competitiveness, Mario Draghi identified CCUS technology as being required for the decarbonisation of Energy Intensive Industries.
So far, the deployment of CCS technology as well as infrastructure has been slow, with the first Final Investment Decision (FID) on a full CCS value chain in the EU taken only in 2023 (Project Greensand, located in Denmark). An enabling factor for taking the FID has been the State Aid support scheme for CCS provided by the Danish government.
Any new State Aid Framework in support of the Clean Industrial Deal must enable Member States to provide the needed support for CO2 capture, transport and storage projects.
Equal footing – Maximum Aid (point 80)
CCS must be recognised (and treated) on an equal footing with the other decarbonization pathways, especially like hydrogen. This is particularly relevant when considering the maximum aid threshold for decarbonization technologies (point 80). Carbon capture projects are capped at 30%, while hydrogen projects can receive up to 50%. Given the similarities between the two sectors, notably the high capital expenditure (CAPEX) required and the urgent need to scale up deployment, the maxium intensity should be the same. The threshold for carbon capture projects must therefore be adjusted and account for the high CAPEX intensity to deploy the technology and take into account that for some industries CCS is the only option. The maximum aid amount for CCS should at least be as high as for hydrogen.
Value chain – Support for CO2 Infrastructure
The new State Aid Framework appears to cover only carbon capture facility investments themselves, rather than the entire value chain (including transport and storage) on which these projects depend. CO2 transport projects are crucial for connecting carbon capture initiatives to storage sites and are a significant bottleneck in the development of CCS value chains. Despite requiring CCS projects to be part of a value chain to qualify for aid (point 83), the new State Aid Framework is missing a reference to direct support for transport infrastructure. CO2 transport is capital-intensive and necessitates substantial financial backing. The new State Aid Framework must clearly specify CO2 transport infrastructure projects are also included within the scope of the state aid (point 83 & 84).
Date of entry into operation – CCS projects (point 79a)
The new State Aid Frameworks requires CCS projects to become operational within 36 months of the grant date (point 79a). We understand the importance of having a clear timeline to ensure the effectiveness of the support provided. However, this timeline must be sufficient to allow complex projects like CCUS to develop properly. Currently, the average CCUS project takes 6 to 8 years to become operational, especially when carbon capture projects are reliant on the development of new CO2 transport and storage infrastructure. Having such a strict timeline of 36 months could significantly impact the ability of CCUS projects to benefit from this support today and will be impacting Europe’s ability to deliver on the 2030 carbon storage target. The date of entry into operation criteria in the new State Aid Framework must account for the specific needs of the carbon capture sector – and exempt them from the rule.
Definitions and alignment
This State Aid Framework offers essential guidance to Member States on the types of investments that are supported under EU rules. It is crucial that the Commission maintains a consistent wording and terminology to ensure clarity and coherence across the legislative framework. Terms such as "residual Greenhouse Gas emissions" in the document (point 102 & 115) must align with existing definitions in the European Sustainability Reporting Standards (ESRS) disclosure requirement E1-7, point 60.
Similarly, we noted that the new State Aid Framework requires carbon capture projects to lead to the "avoidance" of emissions from a life-cycle perspective (point 108). However, the Emissions Trading System (ETS) refers to the "reduction" of emissions. Ensuring consistency with the ETS is key to avoiding double counting of value chain emissions (point 99). As long as Europe adheres to the polluter pays principle, as is the case with the ETS, these "indirect emissions" are accounted for under the ETS and should not be subtracted.
Renewable and low-carbon hydrogen (point 82)
CCS Europe recognises the importance of supporting the deployment of renewable hydrogen in the EU as a key tool for the long-term decarbonization of industry. However, at present, the production of renewable hydrogen is far from meeting the pace required to achieve the ambitions set by EU climate policy, requiring low carbon hydrogen to bridge the gap in the short-term.
We propose that the ramp-up requirement for using renewable hydrogen and low-carbon hydrogen be aligned with energy system and decarbonisation infrastructure projections to reach climate targets, rather than solely the renewable electricity mix. If aid is limited to renewable hydrogen only, it could significantly impact the industry's ability to make Final Investment Decisions to switch to hydrogen as an energy source.