The future regulatory framework applicable to carbon capture and storage infrastructure : issues for discussion

The basic objective of the European Commission’s Carbon Capture Use and Storage Communication in Q1 2024 must, of course, be to catalyse the rapid development of carbon capture and storage (‘CCS’) – which is essentially just infrastructure – both to serve as a transition technology to decarbonise certain hard to abate sectors and to lay the foundations for large scale permanent storage of ‘negative emission CO2’ from biogenic and direct air capture sources in the run up to 2050. European Commission modelling, and many other studies, concur that CCS will need to play a major role to enable the EU to meet its 2050 net zero target, as well as globally, and indeed in the US and China we see a similar push to accelerate this technology and infrastructure. It is equally clear that catalysing investment at scale in a new CCS grid and storage is urgent. Not least, due the introduction of the Carbon Border Adjustment Mechanism (‘CBAM’), the EU will phase-out free ETS allowances for inter alia the steel, cement and fertiliser industries, staring already in 2026, with full application of the ETS by 2036. At the same time, the EU is restricting the issue of free allowances to all energy intensive industries under the ETS reform, even when not covered by the CBAM.