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At the end of last month, the European Commission unveiled the Clean Industrial Deal (“CID”), a collaborative roadmap for competitiveness and decarbonisation within the EU. The CID calls on all Member States and stakeholders to fully engage in reducing energy costs and fostering a genuine Energy Union. It highlights the importance of clean-tech manufacturing and aims to protect the competitiveness of energy-intensive industries amidst high energy costs and unfair global competition, using a technology-neutral approach to leverage all available solutions. Reflecting the Draghi report's recommendations for accelerating carbon capture and storage infrastructure, the CID prioritises creating lead markets for clean technologies, including through the Industrial Carbon Management Strategy. This strategy seeks to establish a lead market for captured carbon, enabling emissions offsets for sectors difficult to decarbonise. This blog explores the current EU regulatory framework for industrial carbon management, the technologies for capturing, storing, transporting, and utilising CO2 emissions from industrial and energy production, as well as atmospheric CO2 removal, gives a brief overview of what is expected in the near future, and concludes with some key investment considerations.
The adoption of the European Green Deal, the European Climate Law and the subsequent proposals to increase energy and climate targets for 2030 have made carbon management technologies an important part of the EU decarbonisation effort.
With Carbon Capture and Utilisation (“CCU”) technology being regulated under the Renewable Energy Directive (EU/2018/2001), promoting renewable fuels of non-biological origin, and among others, fuels produced from captured CO2, the Carbon Storage Directive (2009/31/EC) forms the cornerstone of the regulatory framework for carbon capture and storage (“CCS”) across the EU and its member states. Essentially, this directive mandates that operators acquire permits for both exploring storage sites and injecting CO2, complying with the prescribed minimum conditions and requirements. During operations, operators must continuously oversee facilities, storage complexes, and adjacent environments for any irregularities, particularly involving CO2 migration or leakage. They must also submit reports detailing these activities and the characteristics of injected CO2 to the relevant authorities. Infrastructure access must remain open, transparent, and non-discriminatory.
In case of leaks or significant issues, operators must promptly inform authorities and implement corrective actions, ensuring financial security measures cover related obligations. Liability, including civil and criminal aspects, primarily adheres to jurisdiction-specific frameworks. Closure of storage sites occurs upon either fulfilling permit conditions or following a closure request by the operator or authority. The directive defines protocols for decommissioning and post-closure duties, which include continuous monitoring, reporting, and any necessary corrective measures.
Despite its foundational role, the Carbon Storage Directive has a limited scope, as it only marginally addresses CO2 capture and transport while allowing considerable discretion in its implementation, resulting in minimal harmonisation across the jurisdictions.
To further boost innovative industrial carbon removal technologies, such as bioenergy with carbon capture and storage or direct air carbon capture and storage, the Commission adapted back in 2022 a proposal of an EU-wide voluntary framework to certify carbon removals (COM/2022/672) which in the meantime has been transformed into Regulation (EU) 2024/3012 of the European Parliament and of the Council of 27 November 2024 establishing a Union certification framework for permanent carbon removals, carbon farming and carbon storage in products.
The next regulatory puzzle is the Net Zero Industry act (“NZIA”) which aims to enable the development of EU supply chains and storage infrastructure across Europe. It seeks to achieve 50 million tonnes of CO2 injection capacity in geological storage sites by 2030 and proposes the establishment of 'Acceleration Valleys' to encourage member states to cluster net zero technology manufacturing and administer streamlined processes. The NZIA also prioritises permitting for CO2 storage and associated transportation infrastructure, aiming for all necessary permits to be secured within 18 months. To ensure available CO2 storage capacity, the NZIA obligates oil and gas producers to contribute to the 2030 storage objective, with contributions proportional to their production from 2020 to 2023. Obligated entities must submit plans to meet their contributions by June 2025. A derogation is possible by 2027 for member states if storage capacity exceeds production. Specific details of these obligations will be clarified through delegated acts by the European Commission, which will address topics such as identifying contributing entities, incorporating third-party investments, and progress reporting. These acts will require approval from the European Parliament or the European Council to take effect.
Other regulations relevant to CCUS include the Trans-European Networks for Energy (“TEN-E”) Regulation, which establishes a framework for supporting projects of common and mutual interest (“PCI/PMI”), such as those related to CO2 transport and storage. The EU Taxonomy Regulation also plays a role, recognising that CCUS projects substantially contribute to climate change mitigation. Additionally, several EU-level funding initiatives support CCUS, including the EU Innovation Fund, which utilises revenue from the EU Emission Trading System (“ETS”) to support CCS projects, the European Interconnection Mechanism, which aids in developing cross-border energy and transport infrastructure projects, and financing from the European Investment Bank to back the Green Deal Industrial Plan. The Commission also enables EU member states to support CCUS technologies through state aid under certain conditions.
Moreover, the Industrial Carbon Management Strategy (COM/2024/62) was adopted by the Commission on 6 February 2024 with the goal to present a comprehensive approach for the EU to scale up carbon management. The strategy identifies a set of actions to be taken, at EU and national level, to establish a single market for CO2 in Europe and to create a more attractive environment for investments in industrial carbon management technologies.
Furthermore, In her efforts to actively support industrial carbon management projects the European Climate Infrastructure and Environment Executive Agency (“CINEA”) launched in February 2024 a web tool presenting a portfolio of interactive industrial carbon management (“ICM”) projects. Around the same time the Commission’ Joint Research Centre (“JRC”) also published a study on the future CO2 transport networks for Europe and related investment needs. Finally, the Commission supports the CCUS Zero Emission Network (“ZEN”), which took over the activities of the previously supported CCUS Project Network (2018-2023). It aims to build a coherent ecosystem of CCUS actors capable of decarbonising Europe’s industry and delivering the EU’s climate target plan.
While the inclusion of CCUS in the CID underscores the European Commission's acknowledgment of these technologies' pivotal role, further detail is needed on the commitments regarding their commercial deployment. In this regard, greater clarity is necessary concerning the Industrial Carbon Management Strategy's implementation. Furthermore, questions might be raised about whether the Carbon Capture Directive is suitable given the technological advancements necessary to make this technology competitive.
Moreover, the CID makes reference to the Industrial Decarbonisation Accelerator Act which is a legislative initiative and estimated to be adopted in Q4 of 2025. The main aim is to (i) speed up the permitting process for industrial access to energy and industrial decarbonisation (e.g., modernisation of steel production sites); (ii) establish a low-carbon product label, first in the steel sector and then in the cement sector and (iii) apply/introduce sustainability, resilience and minimum EU content requirements in public and private procurement in strategic sectors to ensure lead markets in the EU for low-carbon products.
Furthermore, as to funding, the European Commission will propose an Industrial Decarbonisation Bank aiming for EUR 100 billion in funding based on funds in the Innovation Fund, additional revenues resulting from parts of the ETS and revision of InvestEU.
Under this final section we will give our view on some key investment considerations in the framework of CCUS projects which serves as a guidance for future policies and regulatory landscape:
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