The European petroleum industry faces a looming 2030 deadline to deploy carbon capture and storage (CCS) infrastructure capable of storing 50 million tonnes of CO2 annually, as mandated by the EU’s Net Zero Industry Act (NZIA). This ambitious target presents a significant challenge, given the nascent stage of CCS technology and its current economic unviability. While the industry has long touted CCS as a climate solution, the high costs associated with capturing, transporting, and storing CO2 make it less appealing than simply purchasing carbon emissions allowances under the current market conditions. This leaves petroleum companies in a precarious position: they are obligated to build expensive infrastructure with no guarantee of sufficient demand from industrial emitters willing to pay for CO2 storage.
The International Association of Oil & Gas Producers Europe (IOGP Europe) acknowledges the economic hurdles and advocates for significant public support. They propose a “European CCS Bank” modeled after the existing “hydrogen bank,” which would utilize the EU’s Innovation Fund to provide financial incentives, potentially through Contracts for Difference (CfDs). These contracts would guarantee profits for CCS projects during the initial scaling-up phase, bridging the gap between high production costs and potentially lower market prices for carbon storage. The IOGP argues that such intervention is crucial to prevent deindustrialization within the EU, emphasizing that without incentivizing CO2 capture, strategic industries will struggle to decarbonize competitively.
The complexity and cost of CCS technology pose substantial challenges. The process involves capturing CO2 emissions from sources like factories, purifying and compressing the gas, transporting it potentially long distances to storage hubs, and finally injecting it into deep geological formations, typically depleted oil or gas fields. These storage sites then require long-term monitoring to ensure the captured CO2 remains securely contained. With the current carbon price at around €60 per tonne, it’s significantly cheaper for industrial emitters to purchase emissions allowances than to invest in CCS, especially given the lack of established infrastructure and the substantial upfront investment required. The success of the Northern Lights project in Norway, while promising, highlights the scale of the challenge. Despite being the largest CCS project in Europe, its initial capacity is only 1.5 million tonnes per year, a fraction of the EU’s 2030 target.
The EU has already begun allocating funding for CCS projects through the Innovation Fund, supporting initiatives like CO2 capture at cement and steel plants. However, the IOGP argues for a more structured approach through a dedicated CCS Bank, providing targeted funding for storage operators in addition to supporting capture technologies. This proposal also includes a “Carbon Contracts for Difference” (CCfD) mechanism to incentivize industrial emitters to adopt carbon capture technology. This direct financial support for storage operators, however, could face opposition from environmental groups who believe the petroleum industry should bear the financial responsibility for implementing a technology meant to address the consequences of fossil fuel use.
Recent developments offer some hope for CCS deployment. INEOS and its partners announced a final investment decision on the Greensand project in Denmark, a heavily subsidized initiative designed to store 0.4 million tonnes of CO2 annually, with the potential for future expansion. Similarly, the UK government has pledged significant funding for a “new carbon capture industry,” including support for a gas-fired power plant with CCS capabilities. These projects, while positive steps, still represent a small fraction of the overall storage capacity required to meet the EU’s 2030 target. The reliance on substantial government subsidies also raises questions about the long-term economic viability of CCS without continued public support.
Despite the renewed political and financial momentum behind CCS, skepticism persists. Critics argue that CCS is a distraction from the necessary transition to renewable energy and a circular economy. They point to a history of failed CCS projects and accuse the fossil fuel industry of using CCS as a justification to continue extracting and burning fossil fuels, particularly through enhanced oil recovery techniques. This debate highlights the tension between the urgency of climate action and the practical challenges of decarbonizing heavy industries. As the European Commission prepares its Clean Industrial Deal initiative, lobbying efforts from both the petroleum industry and environmental groups will intensify, shaping the future of CCS and its role in the EU’s net-zero ambitions.
