With the trilogues in full swing on the Net-Zero Industry Act (NZIA), the European institutions involved in the policy making process have published their respective positions. Of particular interest and focus of Bellona Europa´s work are the three articles (16,17 and 18) that cover Carbon Capture and Storage (CCS) and in particular storage injection capacity development for the permanent storage of carbon dioxide. 

The European Commission reports that nearly 500 million tonnes of CO₂ need to be sequestered in 2050 to meet EU climate objectivesⁱ. Achieving CCS deployment at scale faces many challenges; one such conundrum is the chicken or egg problem. For capture projects from harder to abate industries to kick off, ample storage capacity needs to be available, and for ample storage capacity to be economically viable to develop, capture projects need to be present. To tackle this bottleneck, the European Commission proposed an EU target for storage injection capacity of 50Mt by 2030 (article 16). The obligation to develop such a capacity was placed on EU oil and gas producers (article 18)-an appropriate allocation of responsibility given these entities´ contributions to global warming and their technical know-how and experience regarding subsurface exploration.  Reporting requirements for this obligation are placed on member states to track storage potential as well as progress of both capture and storage projects (article 17). 

The following analysis discusses the positions of the EU institutions on the NZIA and evaluates the different aspects there is agreement and disagreement on, as well as potential and challenges in the ongoing trilogue discussions.  

Article 16 – 50Mt annual EU target by 2030 

By 2030, the target is to establish an annual 50Mt of storage injection capacity to spur a market and provide assurance to first movers. Although not the complete solution, this approach is a good start in tackling the chicken and egg problem, kickstarting the CCS value chain. This target is also aimed at storage sites located in the EU territory.  

The European Parliament text supports and bolsters much of the European Commission text. Firstly, the text adapts the target to be mapped out for 2035, 2040 and 2050 (article 16.3). This secures a successive long-term development of storage capacity. However, the text also opens the possibility to change the pro rata calculated calculations of oil and gas entities if market inadequacies are identified by the Commission (article 16.7). The focus should rather be on tackling said market inadequacies to ensure such minimum targets are met. There are ample capture projects that are lined up in the EU to fill the target storage capacity and beyond. 

A key inclusion is the expansion of the obligation. ENVI suggested amendments would have looked to include the EEA within the target scope. This would have risked diluting the target as well as delaying any implementation of storage capacity development. The final approved text, however, did not have an explicit inclusion of the EEA. Rather, expansion can take place by ensuring that third party involvement would require that the agreements, existing or new, would result in an additional proportionate target for the third country as well (article 16.8). This is an appropriate means of including the wider European potential for storage injection capacity while not diluting existing EU targets. 

The Council does not add much more to the article but ensures that storage sites operate for a minimum of five years in a fair and open access manner. 

Bellona Europa supports the EU institutions’ view on the 50Mt target being a minimum for 2030. This capacity needs to be developed with the EU, and to that any expansion to third countries must establish additional targets as mentioned in the Parliament text. 

Article 17 – Transparent reporting of CO₂ storage capacity data 

The Commission asks member states to report on storage potential within their territory which was requested under the national energy and climate plan updates. The reporting also should cover the production volumes of oil and gas producers within the member state. Apart from this preliminary reporting, the Commission calls for periodic reporting on capture and storage projects as well as national support measures for the same. 

The Parliament establishes the importance of transportation of CO₂ by calling for its inclusion in reporting. The text also calls for specific mapping of transportation opportunities as well as ensuring cross border infrastructure needs. The Council adds little to article 17 but reiterates the reporting on development of cross border infrastructure for CO₂ transportation. 

The parliamentary text also adds a sub article (article 17a) which focuses on infrastructure needs of CO₂ transportation. The text establishes the need for financing for transportation and even calls upon a common strategy from the Commission and Member States for financing the same. This addition is positive in identifying the gaps within CCS deployment beyond sufficient storage capacity.  

Bellona Europa supports the call for including transportation needs within the NZIA as it addresses the wider CCS value chain. Mapping out growing volumes of CO₂ for transportation as well as cross border infrastructure needs is necessary to ensure their timely deployment.  

Article 18 – Obligation of developing injection capacity target placed on Oil and Gas Producers 

The European Commission sets out that the individual contribution of each oil and gas producer towards the EU wide target for storage injection capacity is calculated pro rata on the basis of each entity’s share of EU crude oil and natural gas production from 1^st January 2023 to 31^st December 2023 (article 18.1). This would mean that varying amounts of storage injection capacity are developed proportional to oil and gas production.  

This first-of-a-kind obligation is crucial to a timely deployment of storage capacity within the EU. Although the obligation is rightly placed on oil and gas producers, it doesn’t have teeth. The obligation provides multiple means of contributing to storage capacity development (article 18.5) but establishes no penalty for failing to do so.  

The European Parliament, in its position provides some authority to the obligation via “dissuasive and proportionate sanctions and penalties” (article 18.7ba). The text ensures that entities unable to meet their contributions due to lack of infrastructure and capture activities would have their contributions reduced only to be recovered within the next 5 years. 

The Parliament text shifts the responsibility to oil and gas “sellers” from “producers”. Although the intention stands well in extending the obligation, the lack of clarity with such a nomenclature is problematic as it could result in delays in action on storage capacity development. 

There is even a separate sub article (article 18a) that calls upon a regulatory framework for CO₂ transportation, to ensure open and fair access among other standards. This push comes from the possibility that entities other than oil and gas could be interested in storage site development in certain member states, such as Denmark and the Netherlands.  

While the Council text is for the most part similar to the Commission proposal, the major change is regarding the obligation. The Council places the obligation on oil and gas producers as proposed by the Commission but allows for exemption in particular cases (article 18.6a). Oil and gas producers are exempt from their individual contributions if other entities have an overall injection capacity within the member state in question exceeding that of the obligation. This needs to be supported by final investment decisions by 2027 to ensure such an exemption can be carried out.  

Bellona Europa supports this first-of-a-kind obligation, and the efforts to ensure there are consequences to a lack of compliance via penalties and sanctions. The text is better suited to place the responsibility on producers so as to form a clear line of responsibility and subsequent action.  

Bellona recommendations for the trilogue  

As the NZIA moves into trilogue discussions, there are three key points that need to be addressed on the topic: 

1. The EU storage injection capacity target must be at least 50 million tonnes per annum 

There are sufficient industry stakeholders interested in CCS and requiring CCS to fully decarbonise to fulfill the target and beyond. As CCS is a crucial decarbonisation pathway to ensure EU stays in line with its climate ambition, storage injection capacity must remain at least 50 million tonnes by 2030.  

Both the Parliament and Council have taken positive positions that ensure that the target indeed is a minimum via the text: “at least 50 million tonnes of CO₂ shall be achieved by 2030”. We support the wording of (article16.1) which ensures the suggested 50Mtpa target is a minimum.  

2. The target must be an EU specific target 

As highlighted in our Op-Ed in Euractiv titled “Breaking Europe’s emerging CO₂ storage monopoly published on 17^th October, expanding the target to EEA before regulatory inclusion risks diluting targets and potential delays in storage development. The EU Commission’s intention for the target to an EU specific one must be maintained.  

The Council’s position is in line with the Commission’s by supporting the text referring to “in storage sites located in the territory of the European Union, its exclusive economic zones or on its continental shelf” (article16.1).  

The Parliament’s amendment looks at a possible inclusion of third countries via “new agreements” and ensures that such developments do not dilute EU targets. Rather, via these agreements it looks to encourage the inclusion of the proposed obligation and further matching targets additional to the EU target of 50MT by 2030, in the third countries itself (article 16.8). 

While the Parliament’s position is a good step towards the expansion of such a target to aid climate ambition across Europe, both the Parliament and Council’s positions ensure that the target focuses on the EU. We strongly support both positions’ ensuring that the 50Mtpa target remains an EU specific one. 

3. The obligation on oil and gas producers must stay 

The NZIA obligation is the first of its kind and is crucial to ensure the timely development of CO₂ storage injection capacity within the EU, enabling decarbonisation efforts. As highlighted in our Op-Ed published in energymonitor on 11^th October, the proposed obligation is an important first step in tackling disparity between oil and gas sector promises and lack of action with regards to CCS.  

The Council reiterates the Commission’s position in ensuring that the obligation is placed on oil and gas producers based on their production over a three-year period (article 18.1). 

The Parliaments position however looks at placing the obligation on “sellers” as opposed to “producers”. While we support the intention of also extending the obligation to importers, the term “sellers” is too unclear and risk introducing uncertainties which could increase investment risk when the aim of the NZIA is to reduce them.  

We therefore urge that the obligation is indeed placed on “producers” in the NZIA, while not excluding other future avenues for extending such obligations, as it is a more appropriate and clear allocation of responsibility with such a short time frame.