Legislative framework

Industrial Carbon Management (ICM) will play an important part in achieving the Commission’s long-term strategy for climate neutrality, which was made legally binding by the European Climate Law. According to the Law, the EU must reach net-zero greenhouse gas emissions (GHG) by 2050. This means that Europe's emissions will need to be reduced drastically by mid-century, and that any remaining CO₂ will have to be removed from the atmosphere. To this end, the recent Commission Communication on the EU’s climate target for 2040 highlighted the need for 450 million tonnes of CO₂ per year to be captured and either stored or utilised by 2050.

The ICM Strategy, which was published on 6 February 2024, is an important step towards a more homogenous deployment of Carbon Capture and Storage (CCS), Carbon Capture and Utilisation (CCU) and carbon removals in Europe.

The main goal of the ICM Strategy is to establish a single market for CO₂ transport and storage services throughout Europe by 2030. This would facilitate the development of ICM solutions to support carbon-neutral industrial processes and the emerging carbon removal industry. The approach to ICM set out in the Strategy builds on already established technologies such as CCS and CCU, while also paving the way for pioneering technologies like Bio-Energy Carbon Captur­e and Storage (BECSS) or Direct Air Carbon Capture and Storage (DACCS). As a result, the ICM Strategy will foster both emission reductions and carbon removals, contributing to the EU’s 2050 climate target.

• Discover the EU’s Industrial Carbon Management Communication

The Directive on the Geological Storage of CO₂ (known as the "CCS Directive"), together with its guidance documents, provides a clear regulatory framework for CCS and support to competent authorities and storage site operators so that CO₂ can be safely stored underground. Before projects receive any construction and operation permits, it is compulsory to conduct an Environmental Impact Assessment (EIA) addressing all environmental concerns, as well as a detailed assessment of the site selection. It is also mandatory to develop monitoring systems, corrective measures, and post-closure plans addressing all possible leakage risks.

The Renewable Energy Directive, together with its delegated acts, encourages the deployment of CCU-based fuels to replace fossil fuels in key industrial sectors while ensuring that the required minimum GHG emission savings are achieved. The delegated acts of the Renewable Energy Directive cover:

• The conditions for hydrogen, hydrogen-based fuels or other energy carriers to be considered as renewable fuels of non-biological origin (RFNBOs) – see Delegated Regulation (EU) 2023/1185
• The methodology for calculating life-cycle greenhouse gas emissions for RFNBOs – see Delegated Regulation (EU) 2023/1184

The ReFuelEU Aviation Regulation require synthetic fuels produced with renewable energy through CCU to also be considered as RFNBOs, starting from 2030. According to the EU Emissions Trading System (ETS) Regulation, up to 20 million allowances will be allocated for free to aircraft operators between 2024 and 2030 to cover the remaining cost-difference for the deployment of RFNBOs in Europe.

Similarly, the FuelEU Maritime Regulation puts in place a special incentive regime to support the uptake of RFNBOs. The use of such CCU-based fuels will also be recognised in the upcoming review of the EU ETS in 2026, to avoid double counting the embodied CO₂ emissions.

On 10 April 2024, the European Parliament adopted the provisional agreement on the Carbon Removals and Carbon Farming (CRCF) Regulation, which created the first EU-wide voluntary framework for certifying carbon removals, carbon farming and carbon storage in products across Europe.

The framework outlines criteria to define high-quality carbon removals and sets out the process to monitor, report and verify their authenticity. The aims of the framework are:

• Fostering the deployment of ICM in Europe;
• Creating a European market for CO₂ removed from the atmosphere;
• Increasing the circularity of CO₂, in accordance with the EU’s biodiversity objectives.

To learn more, visit our Carbon Removals and Carbon Farming webpage.

On 29 June 2024, the Net-Zero Industry Act (NZIA) regulation entered into force to establish a Union market for CO₂ storage services, increasingd availability of CO₂ storage sites and support for ICM technology projects across Europe..

NZIA sets an EU-wide CO₂ storage objective to make 50 million tonnes of annual CO₂ injection capacity available by 2030. Companies that hold an oil and gas production license under the Hydrocarbon Directive must contribute to this storage objective. The contribution of oil and gas companies can be achieved directly, through the development of CO₂ storage sites.

However, oil and gas companies can also enter into agreements with other storage developers and contribute either financially or through other means. As demand grows, CO₂ storage capacity needs to be rapidly developed. In this sense, oil and gas companies have both the geological knowledge and necessary means to boost the development of this sector in the required timeframe.

At the same time, NZIA will also simplify and streamline permitting procedures for net–zero projects with strict deadlines and a single national level contact point (known as “one-stop shop”). Member States must recognise the value of strategic net-zero projects for CO₂ storage and support them by speeding up their permitting procedures.

• Discover how the Commission is ensuring the safety of CCS in Europe in our dedicated brochure available in all EU languages.

The CCS Directive, adopted in 2009, establishes a legal framework for the safe geological storage of CO₂. The Directive covers all CO₂ storage in geological formations across the EU and the entire lifetime of storage sites. It also contains provisions on the capture and transport components of CCS, although these activities are mainly covered by existing EU environmental legislation such as the Environmental Impact Assessment (EIA) Directive. All emissions captured, transported and stored in accordance with the CCS Directive will contribute to the EU's emissions reduction efforts.

The EU ETS Directive mentions CCS explicitly in its Annex I. With a fast-declining cap on emissions covered under the EU ETS, industries will have to bring down their emissions levels to avoid increased costs. Where emission reductions are too costly or not possible, CCS can be the solution: emissions allowances under the EU ETS do not have to be surrendered if CO₂ is successfully captured and stored.

The EU ETS and CCS Directives compose the applicable legal framework in place in the European Economic Area (EEA) for the capture, cross-border transport, and safe geological storage of CO₂. This legal framework constitutes a relevant arrangement between Parties under art. 6(2) of the London Protocol, as amended in 2009. Accordingly, any operator of CO₂ transport networks and/or CO₂ storage sites can fully benefit from the EU legal framework to import and/or export captured CO₂ without bilateral agreements. However, parties may use bilateral arrangements to agree on residual issues that are not covered by EU law, such as cooperation between the responsible permitting authorities. For further information, please consult the Commission services analysis paper on this matter.

CCS is one of the pillars of the EU’s ICM Strategy. To help develop a market for capture and permanent storage of CO₂, the Commission will provide guidance on project permitting processes and set up an atlas of potential storage sites. In cooperation with EU Member States, the Commission will also develop an aggregation tool to match CO₂ suppliers with transport and storage operators as well as CO₂ off-takers or traders.

Preventing risks to health or the environment

The CCS Directive lays down extensive requirements for the selection of CO₂ storage sites. A site can only be selected if a prior analysis shows that, under the proposed conditions of use, there is no significant risk of leakage or damage to human health or the environment. No geological storage of CO₂ is possible without a storage permit.

Site selection is the crucial stage in designing a storage project. EU Member States have the right to determine which areas of their territory are suitable for CO₂ storage, as well as which areas require an exploration permit prior to the issuance of a storage authorisation. When exploration is required to provide the necessary information, relevant permits must be issued on a non-discriminatory basis. Such permits will be valid for two years, with the possibility of an extension.

According to criteria specified in Annex I of the CCS Directive, a detailed analysis of the potential storage complex (i.e., the storage site and surrounding geological area) must be carried out by the CO₂ storage permit applicant. This practice, known as characterisation, includes modelling the expected behaviour of CO₂ once it is injected. The site can only be used for storage if this analysis shows that there is no significant risk of leakage under the proposed conditions of use, and that no significant health or environmental impacts are likely to occur.

The initial analysis of the site is done by the potential operator, who then submits the documentation to the Member State’s competent authority in the permit application. The competent authority reviews the information and, if all conditions are met, issues a draft permit decision. For early storage projects, the Directive includes additional safety measures. To ensure consistent application of the Directive across Europe, as well as to raise awareness about CCS, the draft permits are reviewed by the Commission. The Commission's Opinions on draft storage permits are public, while the final permitting decision remains with the national competent authority according to the subsidiarity principle.

Once the CO₂ storage permit is granted and the titleholder starts operating on the storage site, the Member State authority is responsible for carrying out routine annual inspections. Competent authorities in Member States must ensure that inspections are carried out to verify that the provisions of the Directive are observed. Routine inspections must be carried out at least once a year, involving the examination of the injection and monitoring facilities as well as the full range of environmental impacts the storage complex can produce.

Safety of the transport network and storage sites

The captured substances to be stored must consist primarily of CO₂ to prevent any damage to the security of the transport network or the storage site. The site operation must be closely monitored, and corrective measures must be taken in case of leakage. Closure and post-closure obligations are covered by the Directive, which also sets out criteria for the transfer of responsibility from the site operator to the Member State. Additionally, the operator must provide proof of financial security of the project before the injection of CO₂ starts, ensuring that the requirements of the CCS Directive and the EU ETS Directive can be met.

Addressing potential leakage

Apart from routine inspections carried out by competent authorities in Member States, ad-hoc inspections must be carried out if any leakage is detected or if the operator's annual report to the competent authority shows that the installation is not compliant with the CCS Directive.

If, despite the precautions taken in the initial selection procedure, the site is found to be leaking, corrective measures must be taken to address the situation and ensure that the site can continue to operate safely. Since CCS is covered by the EU ETS Directive, allowances must be surrendered for any leaked CO₂ to compensate for the fact that the stored emissions were initially credited as “not emitted”. Additionally, in case of leakage, the requirements established by the Environmental Liability Directive regarding local damage to the environment will apply. Liability for damage to health and property is left for regulation at Member State level.

Post-closure monitoring of CO₂ storage sites

Once injection is finished and the storage site is closed, the post-closure monitoring period begins. After 20 years, the private operator can request transfer of responsibility to the Member State. This can be done in less than 20 years if operations cease earlier and the site is operationally and environmentally stable, with all safety measures in place.

As their lifespan extends over much longer periods than average commercial storage facilities, the long-term stewardship of underground storage sites must be ensured. The Directive allows the responsibility of the site to be transferred to Member State control in the long term. However, the polluter pays principle requires the operator to remain responsible for a storage site while it presents a significant risk of leakage. Additionally, The CCS Directive puts forward rules to ensure that no distortion of competition arises from the different approaches implemented by Member States.

Under the Directive, the responsibility for a storage site must be transferred to the Member State when:

• All available evidence indicates that CO₂ will be safely stored in the long term;
• A minimum period before transfer of responsibility, which is determined by the competent authority, has elapsed;
• A financial contribution for the post-transfer period, covering monitoring costs for at least 30 years, has been made;
• The site has been sealed and the injection facilities have been removed.

As this is the second key decision in the lifecycle of a storage site (the first being the decision to issue a use permit), a Commission review is also required at this stage.

CCS Directive Guidance Documents

Four guidance documents were published in 2011 to:

• Provide a comprehensive methodological approach for implementing the key provisions of the CCS Directive;
• Help ensure the environmental safety of geological storage of CO₂ across the EU.

The first guidance document outlines a risk management framework for the lifecycle of CO₂ storage.

The other three documents address in more detail issues such as:

• Storage complex characterisation;
• CO₂ stream composition;
• Monitoring and corrective measures;
• Criteria for transfer of responsibility to Member States;
• Financial security.

The documents are mainly addressed to the competent authorities and relevant stakeholders and have been discussed with experts from Member States and key stakeholders, including industry, researchers and NGOs.

From 2023 until early 2024, the Commission gathered input from competent authorities, prospective storage operators and other interested parties on a technical update of the four Guidance Documents. The goal of the update is to provide operators and Competent Authorities with best possible support on the practical implementation of permitting procedures, in line with the Directive. The revised versions will address technical and market developments, as well as clarify aspects such as the transition from hydrocarbon production to CO₂ storage or financial security requirements. The updated Guidance Documents will be published mid-2024.