Need for Public Funding and Support for CCS
The oil and gas industry, long a proponent of carbon capture and storage (CCS) technology, is urging the EU to establish a “European CCS Bank” to provide financial backing for large-scale implementation of CCS projects. This comes as a deadline looms for the petroleum sector to deploy this technology at an unprecedented scale by 2030, in line with the EU’s decarbonization goals. The European Commission’s Innovation Fund, which allocates public money from the sale of CO2 emissions allowances, is already supporting pilot projects in CO2 capture from industries like cement and steel. However, the industry argues that the current funds are insufficient to meet the ambitious goals set out by the EU’s Net Zero Industry Act (NZIA).
The proposal for the European CCS Bank is aimed at ensuring a stable funding mechanism that would allow for the rapid scaling up of carbon capture infrastructure across Europe. The model would mirror the EU’s hydrogen bank, which channels funding into renewable hydrogen production. The IOGP Europe argues that public support in the form of “Carbon Contracts for Difference” (CCfD) would guarantee a profit for CCS projects during their scaling phase, as these technologies are currently too expensive to be economically viable without subsidies.
Challenges Facing CCS Deployment
One of the major barriers to implementing CCS at scale is the high cost involved. The process of capturing CO2 from industrial facilities, purifying it, transporting it over long distances, and injecting it into permanent storage sites is costly in terms of both energy and finance. For industries such as cement and steel, the cost of installing CCS infrastructure outweighs the benefits, especially when carbon prices are currently too low to make the investment attractive. As a result, many companies opt to purchase emissions allowances rather than investing in capture technology.
There are also technical challenges, as permanent storage sites need to be carefully monitored for decades. The Northern Lights project in Norway, currently Europe’s largest CCS initiative, will only be capable of capturing a fraction of the CO2 required to meet the EU’s storage targets. This highlights the significant gap between the scale of the problem and the current capacity of CCS projects.
The Need for Strategic Investment and Industry Involvement
The IOGP is emphasizing that without a reliable market for CO2 storage, petroleum companies could be investing in an unprofitable “white elephant.” The EU’s NZIA requires oil and gas firms to deploy CCS infrastructure capable of storing up to 50 million tonnes of CO2 annually by 2030, but without demand from industrial sectors willing to pay for storage, these projects may fail to materialize. The European Commission is currently in discussions with member states on how to divide the storage requirement across different industries, but a clear market for CO2 storage is still lacking.
To address this, the IOGP proposes the creation of a CCS bank that could also offer targeted funding for storage operators. This could help create a clear market demand for CO2 storage and incentivize investment in storage infrastructure. However, this proposal is not without controversy. Environmental groups argue that such public funding should not subsidize fossil fuel companies, particularly since CCS technology is often used to extend the life of oil and gas extraction through enhanced oil recovery. Critics contend that CCS might serve as a means for these industries to continue operating as usual rather than transitioning to greener alternatives.
Recent Developments and Industry Movements
Despite the controversies, some progress has been made in CCS deployment across Europe. INEOS, a chemical company, has announced a final investment decision on the Greensand carbon capture project in Denmark, which will store up to 0.4 million tonnes of CO2 annually. This project is heavily subsidized by the Danish government, receiving €1.1 billion in funding as well as a share of the EU’s €40 billion Innovation Fund. Meanwhile, the UK government has committed £4 billion to CCS projects as part of its “North East Cluster” initiative, which aims to create a carbon capture industry in Teesside.
The UK is also exploring the possibility of using CCS to facilitate net-zero power generation from fossil fuels, with projects like Net Zero Teesside Power, a joint venture between BP and Equinor, aiming to be the first gas-fired power station with CCS. However, critics argue that such projects are merely a way for fossil fuel companies to continue their activities while relying on unreliable technologies like CCS, which they believe could lock Europe into a cycle of pollution and dependence on high-carbon industries.
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