Although Germany’s federal and state governments have been sceptical of carbon capture technologies for a long time, it is now clear that CCS and CCU will be needed in order for Germany and the EU to achieve their climate goals. The Federal Ministry for Economic Affairs and Climate Action’s recent key proposals for a carbon management strategy and a revision of the Carbon Dioxide Storage Act consequently aim to create a legal framework for future use of CCS and CCU technologies.
Recent studies show that for Germany to achieve its goal of climate neutrality by 2045, carbon capture and storage (“CCS”) and carbon capture and utilisation (“CCU”) already need to be used to a substantial degree in emission-intensive sectors by 2030. The need for these technologies has already been recognised at European level: in February 2024, the EU published its Industrial Carbon Management Strategy, which also aims to boost the use of CCS and CCU. The key proposals by the Federal Ministry for Economic Affairs and Climate Action (Bundesministerium für Wirtschaft und Klimaschutz, “BMWK”) for a carbon management strategy, published on 26 February 2024, indicate how these technologies might be used in Germany in future. The Ministry simultaneously presented a draft revision of the main statute, the Carbon Dioxide Storage Act (Kohlendioxid-Speicherungsgesetz, “KSpG”), which to date has prevented storage or utilisation of CO2. These measures are intended to ensure that the relevant systems and infrastructure will be ready to go by 2030.
Where CCS and CCU will be used
CCS and CCU technologies are used to capture CO2 and store it underground or offshore (CCS) or use it for some other purpose (CCU). CCS and CCU can be used both to capture industrial or power plant emissions as well as, potentially, for direct air carbon capture and storage (DACCS). Germany intends to use these technologies chiefly where emissions are hard or impossible to abate (for example in lime or cement production, or in thermal waste treatment). The proposals do not limit CCS/CCU use to these applications, but also make it possible for power plants that run on gaseous fuels or biomass to use these technologies as well. The only emissions to be banned from CO2 pipelines are those from coal-fired electricity generation, as this would otherwise put the planned phase-out of coal at risk.
The key proposals repeatedly stress that CCS and CCU approval in no way calls into question the higher goals of minimising emissions and completing the fossil fuel phase-out. However, critics fear that the option of using these technologies to capture avoidable emissions may delay that phase-out. The proposals address these concerns by concentrating public funding for CCS and CCU use on hard- or impossible-to-abate emissions, though this is the only measure mentioned in this regard.
Public funding
By deeming CCS-captured and permanently-stored emissions to have not been emitted, EU emissions trading has already created incentives to use CCS and CCU. Even if allowance trading has put cost pressure on industry to reduce its emissions, the CO2 price remains too low for CCS and CCU to be cheaper than emission-intensive production.
Public funding is therefore needed to accelerate the growth of these technologies. The Funding Guideline for Federal Funding for Industry and Climate Action (Förderrichtlinie Bundesförderung Industrie und Klimaschutz) is aimed at supporting CCU or CCS projects in industry and waste management, where hard-to-abate CO2 emissions are prevalent. This includes both capture installations themselves as well as research, development and innovation projects.
CCS and CCU have already been included in the BMWK’s Carbon Contracts for Difference (CCfD) programme as technologies that qualify for funding. The CCfD concept provides that companies in emission-intensive industries be compensated for the additional costs they incur when setting up and operating installations that are more climate-friendly than those with the best technology currently available (article of 13 March 2024, German only).
The new legal framework for a pipeline network
The key proposals envisage a pipeline infrastructure operated by the private sector for the transportation of CO2. As well as new pipelines, the proposals provide for existing gas pipelines to be repurposed. The KSpG’s current provisions are to be amended because they remain rudimentary and fail to account for the instruments in place for expediting approval procedures.
The draft revision provides for the KSpG to be renamed the Carbon Dioxide Storage and Transport Act (Kohlendioxid-Speicherungs-und-Transportgesetz, “KSpTG”), establishing a secure legal framework for both the transport and storage of CO2. This will standardise approval procedures and considerably simplify the process for public administrators and project developers. The proposed references in section 4(2) KSpTG to Germany’s Energy Industry Act (Energiewirtschaftsgesetz, “EnWG”) aim to expedite planning and approval procedures, for example by allowing empty conduits to be laid for later use when CO2 pipelines are built (section 43j EnWG) or enabling existing gas pipelines to be repurposed for CO2 transport without requiring an additional procedure (section 43l (4) to (7) EnWG). All the same, the draft revision does not fully harmonise the KSpTG’s approval procedure with the one laid down in the EnWG. It does not adopt certain elements which would significantly expedite planning and approval, such as dropping the requirement for an environmental impact assessment or curtailing the legal process.
Finally, the draft revision aims to simplify approvals for pipelines transporting CO2 from Germany into EU Member States. Existing obligations to verify the other Member State’s compliance with EU rules are to be abolished in order to facilitate cross-border expansion of the pipeline network. This includes an amendment to the London Protocol with regard to pipeline connections to storage facilities in other EU countries. The key proposals also stress the importance of connections to storage capacity in other Member States, as capacity is expected to become available in some of them earlier than in Germany.
Changes to the KSpG allowing exploration and development of offshore storage sites
Whereas the current KSpG limits offshore storage of CO2 to research, testing and demonstration, the draft revision will enable such storage in the continental shelf and exclusive economic zone across the board in future, legislators now being persuaded that it is sufficiently safe. The draft therefore provides for an approval procedure for “facilities for the permanent storage of carbon dioxide in underground rock strata”, enabling commercial storage of carbon dioxide on an industrial scale and opening up the sector to private investors and providers.
Before such projects can be approved, however, it will be necessary to explore suitable sites, which has previously been prevented by conflicting provisions in Germany’s northernmost federal states. The draft revision limits potentially suitable sites by prohibiting storage within marine protected areas or where current or future wind energy installations might be impaired, prioritising the expansion of renewable energies. In order to take sufficient account of competing usage in the exclusive economic zone, the key proposals provide that CO2 storage sites be integrated into future marine spatial planning.
At the current time, underground onshore storage on the mainland is not to be permitted, but the proposals leave open the possibility of adding a further provision to the KSpTG allowing the federal states to legislate for onshore storage if they so wish.
Outlook
Since both the key proposals and the draft revision of the KSpG were authored by the BMWK, they have not been agreed with either the Federal Government as a whole or with further decision-makers. How these drafts will be amended, as well as the final form the Federal Government’s carbon management strategy takes, therefore remain to be seen. One point of contention is likely to be the sectors in which CCS and CCU can be used for abatable emissions. Furthermore, not only the KSpG but also other laws will need to be amended. European provisions on CCS and CCU can also be expected, now the European Industrial Carbon Management Strategy has been published. At the same time, there is time pressure to create a stable legal framework that will enable CCS and CCU to be used, to a significant extent, in Germany by 2030, given the whole new infrastructure that needs to be established.
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