Designing and implementing Industrial Carbon Management projects

Investing in ICM projects can be a challenging process. The cost of Carbon Capture and Storage (CCS) and Carbon Capture and Utilisation (CCU) involves:

• The capital investment on equipment to capture, utilise, transport or store CO₂;
• The cost of operating such equipment. This includes factors such as the energy required to capture, transport and use or inject CO₂.

At current prices, the upfront investment and operational costs for industrial facilities equipped for CCS are about 30-70% greater than those for standard plants, amounting to several hundred million euros per plant. This high percentage variation is due to costs depending on the source, location and transportation mode of CO₂. The capture component is a particularly expensive part of the process.

The European Commission has implemented various mechanisms to support ICM projects and mitigate the associated investment challenge.

Incentives through the EU ETS

By putting a price on emissions, the EU Emissions Trading System (ETS) gives companies an incentive to capture and store emissions instead of emitting them. Companies can not only reduce their costs by avoiding to surrender emission allowances, but also earn money by selling allowances that they hold and do not need to surrender.

Member State support

In their early stages, ICM demonstration projects require additional finance beyond the incentives provided by the EU ETS. This is because the current cost of the technology is substantially higher than the price of CO₂. To attract this additional investment, decisive financial commitment from industry is crucial, and support measures from Member States plays a major role. As ICM solutions need to be rapidly deployed across the EU and some of them may require public funding, the Environmental State Aid Guidelines enable the use of State aid to fund ICM projects.

According to the EU ETS Directive, Member States must use their auction revenues to finance climate action. To this end, approximately 530 million allowances, as well as any unspent funds from the NER300 programme, are being made available until 2030 under the Innovation Fund to support low-carbon technologies, including CCS and CCU.

Funding programmes at EU and EEA level

As shown below, several EU funding schemes are available to support CCS and CCU projects.

• The Innovation Fund supports breakthrough CCUS technologies among other solutions to decarbonise European industries.
• The Connecting Europe Facility (CEF) finances cross-border CO₂ transport networks with project of Common Interest (PCI) status.
• The Recovery and Resilience Facility (RRF) aims to mitigate the economic and social impact of the COVID-19 pandemic through investments in key areas such as renewables and clean technologies, including CCS and CCU.
• The Just Transition Fund (JTF) targets regions facing serious socio-economic challenges arising from the transition towards climate neutrality, and can thus support CCS and CCU technologies.
• The Horizon Europe programme supports research, pilots and small-scale demonstration projects related to CCUS.
• The LIFE Programme can also support innovative pilot projects and the implementation of best practices in CCS and CCU.

While contributing to achievement of the EU’s climate targets, ICM projects offer other potential benefits. These include:

• Modernising existing economic structures, enabling the creation of employment;
• Providing economic support to communities that are suffering from the closure of an established industry, preventing local citizens from having to relocate;
• Promoting municipalities and regions as environmental and technological leaders, supporting the development of new industrial activities in those areas.

To successfully launch net-zero investments in Europe, thorough public discussions are needed. A national dialogue should take place before, during, and after the policymaking and project implementation processes. Advancement in technological research and geological assessment of potential CO₂ storage sites can increase the acceptance of this technology.

Projects currently under operation

Two commercial CO₂ storage projects are already ongoing in Europe: the Sleipner project in the North Sea, and the Snøhvit project in the Barents Sea. Both projects involve removing CO₂ from natural gas – a process which is carried out before the gas can be sold – and storing it in underground geological formations.

Industrial Carbon Management projects supported by the EU

More than 80 European ICM projects covering all parts of the value chain are currently benefiting from EU funding, under three programmes: the Connecting Europe Facility for Energy, the Innovation Fund and Horizon Europe. To showcase the synergies between these EU programmes, the European Climate, Infrastructure and Environment Executive Agency (CINEA) has launched an interactive online tool allowing users to discover how EU funding is being distributed across the ICM sector.

Innovation Fund projects under development

The Innovation Fund currently supports 26 ICM projects that have successfully applied to one of the 3 Large Scale Calls organised since 2020. Check out all selected applications that are currently benefiting from Innovation Fund grants.

EU legislation

For more information on the CCS Directive and its implementation, please contact CLIMA-CCS-DIRECTIVEec [dot] europa [dot] eu (CLIMA-CCS-DIRECTIVE[at]ec[dot]europa[dot]eu).