The H2 plain text on the energy transition: Carbon management in the right?

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November 08, 2024

The specialist article by Cäcilia Gätsch and Benita Stahlmann provides current insights into carbon management.

Germany has enshrined the goal of net greenhouse gas neutrality by 2045 in its Federal Climate Protection Act. After 2050, even negative greenhouse gas emissions are to be achieved, meaning that more emissions should be removed from the atmosphere than emitted. Despite all efforts, there will still be emissions after 2045 that cannot be avoided using currently available or developing technologies.

On February 26, 2024, the federal government presented key points for a Carbon Management Strategy (CMS), prioritizing the future application areas of CCSU technologies and indicating the necessary legislative changes and funding opportunities required for implementation. It is clarified that the ramp-up of CCSU technologies must align with the greenhouse gas reduction goals of the German Climate Protection Act and achieving greenhouse gas neutrality by 2045, which includes avoiding fossil lock-in effects (i.e., artificially maintaining fossil structures) and reducing methane emissions from production and transportation.

The identified and eligible application areas are primarily industries with unavoidable emissions, such as the cement and lime industries, certain sectors of basic chemicals, and thermal waste incineration. Additionally, other difficult-to-avoid process emissions are to be addressed, provided that the switch to electrification or hydrogen is foreseeably uneconomical.

Due to the funding opportunity, investing in CCSU technologies in the mentioned areas is also likely to be of business interest. It should also be noted that under the European Emissions Trading Scheme, there is no obligation to pay for greenhouse gas emissions that are captured and permanently stored chemically in a product. This provides an incentive for affected companies to switch to CCU.

Proposed Changes in the Legal Framework

The capture of CO₂ is primarily regulated by the Federal Immission Control Act, while the transport and storage are governed by the Carbon Dioxide Storage Act (KSpG). Legislative changes are planned concerning the transport and storage of CO2. Commercial CO2 storage was effectively prohibited in Germany until recently. On May 29, 2024, the Federal Cabinet approved a draft law to amend the Carbon Dioxide Storage Act. However, the draft still needs to go through the parliamentary process before the legal amendment can come into force. The amendment aims to create the legal framework for building a CO2 pipeline infrastructure and offshore storage. The amendment is intended to enable the permanent storage of CO2 in underground rock formations on the continental shelf and the exclusive economic zone for commercial purposes on an industrial scale. Additionally, individual states should be allowed to permit permanent CO2 storage on their territory.

The most significant changes are in the area of offshore storage, including:

Allowing the exploration of offshore storage sites in the exclusive economic zone or on the continental shelf and their use if site suitability is proven, considering safety standards, ecological criteria, and spatial planning determinations.
Specification of marine environmental protection regulations and mandatory environmental impact assessments.
Exclusion of CO2 storage in marine protected areas and a buffer zone of eight kilometers wide from the outer boundary.
Empowering the federal government to regulate storage below marine protected areas.

To enable the timely construction of a privately-built transport infrastructure, a uniform approval regime for CO2 pipelines and instruments to accelerate procedures for building new and repurposing existing gas pipelines will be introduced, regardless of whether they lead to a CO2 storage facility. While pipeline transport was previously limited to lines to CO2 storage for permanent geological storage, the amendment will also allow pipeline transport for other purposes. Acceleration instruments include shortened administrative deadlines and first-instance jurisdiction of higher administrative courts. Emissions from coal-based energy production (i.e., power and heating plants) will be excluded from access to these pipelines and CO2 storage facilities.

Besides domestic transport, CO2 export and storage abroad will also be enabled. Currently, Article 6 of the London Protocol prohibits CO2 export but not its storage in the sub-seabed outside Germany. To resolve this contradiction, the contracting parties, including Germany, have agreed to amend Article 6. This amendment will be transposed into national law with the CO2 Export Facilitation Act.

Conclusion

With the key points for the CMS and the proposed changes to the legal framework, the political groundwork for the application of CCS and CCU in Germany is laid. However, not everything is set in stone yet. Investment decisions for building the first CO2 pipelines and storage facilities in Germany are expected only after the KSpG amendment is passed. It is unclear whether the proposed changes will be adopted as is: While there was mostly positive feedback from the industry, environmental groups expressed massive criticism during the consultation process. They mainly criticized that the scope for CCS and CCU in both the CMS key points and the KSpG draft was "extended far beyond the necessary measure." To minimize the risks associated with the technology and avoid continuing fossil dependencies, CCS and CCU must be limited to application areas where there is no alternative, such as using renewable energy or material substitution with hydrogen. How such justified objections will be addressed in the upcoming parliamentary process remains to be seen.