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Carbon markets: Which role does biomass play?

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Although compliance and voluntary carbon markets vary in scope, mechanisms and participants, biomass occupies a unique place. In compliance carbon markets such as the EU ETS, participants are obliged to monitor and report their emissions and ultimately pay for them. Using biomass in industrial facilities can allow for reduced financial burdens. Regulators set rules around biomass use and sustainability criteria to comply with. A large part of voluntary carbon market credits is generated by nature-based solutions, including forestry and other biomass-related projects. These projects are however under intense scrutiny due to issues regarding transparency and associated climate claims. Novel carbon removal solutions with biomass as feedstock show promising development and renewed regulatory oversight could restore trust.

Which CO2 and which carbon markets?

To assess the relevance of carbon markets for biomass and vice versa, requires an understanding of different types of emissions and how carbon markets account for them. The sources of CO2 emissions and their final sink can be categorized into four main pathways (Figure 1).

  • Unabated carbon emissions from fossil sources add emissions to the atmosphere (grey and black)
  • Abated emissions from fossil sources through carbon capture and storage (CCS) with long-term storage might not add additional GHG emissions to the atmosphere (purple)
  • Negative emissions through nature-based or technological carbon dioxide removal (CDR) solutions taking CO2 out of the atmosphere and storing it durably (green)
  • Utilisation of CO2 through carbon capture and utilisation (CCU) technologies, where the ultimate source of the CO2 (atmospheric or fossil) and the final product into which the CO2-molecules has been transformed determine the climate impact (blue)

Detailed analysis of the technological pathways, supply-chain emissions, and substitution effects is required to establish emission reduction potentials of these solutions.

Figure 1: Different pathways of CO2: fossil emission, CCS, CCU and carbon dioxide removal. Source: carboneer

Compliance and voluntary carbon markets both incentivise emission reduction or carbon removal, however each from a different angle. Compliance carbon markets aim to fulfill national or regional climate targets. By putting a price tag on emissions and they incentivise compliant actors to reduce their emissions in a cost-efficient way. The mechanics of voluntary carbon markets (VCM) aim at financially supporting projects that either reduce emissions or provide negative emissions through CDR. Private actors can purchase carbon credits from project developers to offset or neutralise their corporate emissions.

The EU ETS: zero rating for biomass

The EU ETS is one of the largest and most mature compliance carbon markets. Since its inception in 2005, the EU ETS has been a cornerstone of EU climate policy, covering 35-40% of the region’s emissions. Large industrial facilities, such as steel mills, chemical plants, cement kilns, and power plants as well as aviation and maritime transport operators need to monitor and report their annual emissions. For each ton of CO2-eq emitted, the compliant entity must surrender an emission allowance. The price of this allowance is determined at the market. Currently, many industrial facilities still receive free allowances. To prevent carbon-leakage while facing out this free allocation, the Carbon Border Adjustment Mechanism (CBAM) requires importers of certain goods from non-EU countries to report the embedded carbon emissions in imports and from 2026 onwards also to pay the same carbon price as EU-based industry. Most emissions from buildings and road transport in the EU are not yet subject to a carbon price. This changes with the new EU ETS 2 covering another 35-40% of the EU’s GHG emissions. Since 2024, suppliers of liquid, gaseous or solid fuels are required to monitor and report emissions released by their fuels at the end-user. Pricing in the EU ETS 2 starts in 2027.

Carbon in biomass ultimately comes from the atmosphere. When combusted, only CO2 stored in the biomass is released back to the atmosphere. However, for a comprehensive life cycle assessment, factors such as land-use emissions due to biomass harvesting or emissions along the value chain need to be considered. According to current regulations, emissions from biomass and biofuels in the EU ETS 1, CBAM and EU ETS 2 can generally be counted as zero, thus reducing the number of allowances to be purchased by compliant entities and reducing their costs (Figure 2). Depending on the type of biomass and its utilisation, compliance with the Renewable Energy Directive for sustainability or GHG saving criteria needs to be achieved.

Figure 2: Criteria for biomass utilisation in the EU ETS 1. Source: carboneer

VCM: Carbon removal with biomass

Forests, mangroves, biochar kilns and waste-to-energy plants with CCS all have in common that they are examples of biomass-based project on the VCM. Private entities purchase carbon credits from project developers to offset or neutralise their (hard-to-abate) emissions. These projects either reduce emissions or remove CO2 from the atmosphere and must follow certain standards and methodologies for project set-up and emission calculation. Third-party verification of the projects’ climate effects is needed to create trust and transparency in voluntary carbon markets where regulatory oversight is only rudimentary.

While a wide range of VCM methodologies and projects exist, biomass-based projects are ubiquitous and particularly divers. Many biomass VCM projects potentially create negative emissions (to stay within the targets of the Paris Agreement, estimates for the required global carbon removal capacity range from 5-10 Gt/year or 5-20% of today’s total emissions). While trees might store atmospheric carbon for decades, technological solutions, such as pyrolysis with biochar or bioenergy with CCS remove carbon for hundreds or thousands of years. Project developers and buyers of credits on the VCM need to navigate complexities arising from cost considerations, project types and quality, and applicable methodologies and standards (Figure 3).

Figure 3: Carbon removal solutions and considerations for VCM projects. Source: carboneer

To reduce the lack of credibility that has plagued the VCM and associated climate claims of credit buyers, the EU currently develops its own methodologies under the Carbon Removal Certification Framework. As corporates are increasingly under pressure to develop credible climate strategies, carbon removal solutions utilising biomass have their role to play. Several announcements of large-scale credit purchases by corporates from biochar and bioenergy with CCS project developers underscores that point.

Biomass and carbon markets: the take-aways

CO2 is not CO2: The ultimate origin of the molecule matters. Compliance and voluntary carbon markets assess emissions from different perspectives and objectives. Due to the wide array of biomass applications, rules on eligibility as well as on emission accounting in compliance and voluntary carbon market differ. Biomass use in the ETS can reduce costs for industrials and allow for decarbonisation at the same time. Biomass enables carbon removal solutions, but stakeholders need to navigate the murky waters of voluntary carbon markets. Finally, interactions between the EU ETS and the VCM might be restored against the backdrop of industrial carbon management policies, the need to scale carbon removal and to provide market stability in the ETS. Complexities abound when biomass meets carbon markets.

This article appeared first in Bioenergy International No 1-2024

Carbon management in Germany (II): emissions, potentials, and costs for CCUS

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In this second article of the series on carbon capture, use and storage (CCUS) in Germany, carboneer analyses the emission profiles of German industries and associated CCS potentials and costs. Review the first article on the developments around carbon management in Germany from a political and climate perspective here. Follow carboneer to access all articles, covering the general historical and political context of the topic, and highlighting developments and implications for the sectors steel, cement, lime, chemicals, and waste incineration.

Focus on industrial emissions

The energy sector, specifically electricity generation in coal and gas power plants, will most likely be excluded from any CCUS activities as the Carbon Management Strategy (CMS) of Germany is geared towards residual (hard-to-abate) and process-related emissions in the industrial sector. Still, the energy sector is the largest contributor to German CO2 emissions: In 2021 the energy sector emitted 238 Mt of CO2, accounting for 35% of total CO2 emissions. Most of the emissions from existing coal and gas power plants are however expected to be replaced by renewable sources or green hydrogen utilization, therefore limiting the scope for CCUS applications. Some potential however remains, mostly through CCUS applications in waste and biomass power plants.

The focus for CCUS activities will thus be on the industrial sector, the second largest contributor to CO2 emissions in Germany. In 2021, industrial facilities were responsible for 168 Mt of CO2 emissions, accounting for 25% of total CO2 emissions. The largest share of industrial emissions originates from large installations that are subject to the EU Emission Trading System as well as from waste incineration facilities. These installations emitted a total of 137.8 Mt CO2 in 2021 (cf. Figure 1), with largest contributions from steel production (31.5 Mt), waste incineration (23.3 Mt), cement production (20.1 Mt), the production of chemicals (16.9 Mt), and lime (6.4 Mt).

Figure 1: Sectoral shares of German industry (EU ETS facilities) and waste incineration CO2 emissions in 2021 (source: carboneer, data sources: DEHSt (2022), EEA (2022))

The CCS potential in the industrial sector in Germany

Three quarters of emissions in the industry are related to energy use and are to be abated using renewable energy. Approximately one quarter of the industrial emissions are process-related and originate from the utilization of carbon-containing materials in production. Process-related emissions are difficult to avoid and the five major climate neutrality studies for Germany (see part I) highlight the significant role of CCUS for emission mitigation or CO2-recycling in industry.

When calculating the CCS potential, it is important to notice that not all process-related emissions can be captured. Depending on industry and the dispersion of emission sources, the share of capturable emissions ranges from 45% in the chemical industry to 90% for waste incineration facilities. Following this methodology, the amount of technically capturable CO2 emissions from large industrial and waste incineration facilities in Germany amounts to 44.2 Mt (cf. Figure 2).

Figure 2: CCS potential in selected industrial sectors in Germany (source: carboneer)

Considering economic feasibility and alternative technological pathways for decarbonization, the ultimately relevant CCUS potential shrinks even further. While lime, cement, and waste incineration will need to capture CO2 due to a lack of technological alternatives, the use of green hydrogen may be the primary decarbonization route for steel production. The chemical industry will continue to depend on carbon-containing materials to produce basic chemicals, but might shift from fossil to biogenic and atmospheric sources, or build on recycled carbon from other industrial sectors. A more detailed analysis of the different sectors and their CCUS readiness will follow in future articles of this series.

Infrastructure and costs

To enable the transport of captured CO2 to potential storage sites or consumers, suitable infrastructure is necessary. The development of CO2 transport infrastructure is critical for the success of carbon management, and the pace of its development can significantly influence the entire progress of CCUS applications. By 2030, first large-scale CO2 transport infrastructures in Germany are necessary, where the mode of transport will depend on the scale and intended use of the CO2. Rail, trucks, ships, and pipelines can all be viable options. A pipeline connection is particularly useful for large industrial sites and CCUS clusters that generate significant amounts of CO2 to be transported over longer distances to storage facilities. However, for decentralized sites such as lime and cement plants, the most efficient handling of captured CO2 has yet to be identified. Local production of synthetic fuels is one of the possible options. A country-wide CO2 pipeline system connecting all major point sources is unlikely to develop, but pipelines for large industrial clusters will be necessary in the medium to long term. Furthermore, some oil and gas companies are already working on developing pipelines for exporting CO2 generated in Germany to storage sites in the North Sea.

While CCS costs (including capture, transportation, and storage) are relatively homogeneous across sectors, the current unavailability of storage capacity within Germany makes pure CCS implementation relatively expensive (cf. Figure 3) when compared to a country such as the United Kingdom, which has better access to storage sites (e.g. the North Sea). High costs of approximately 200 EUR/t CO2 for CCS applications in Germany already point at the need for incentive and support mechanisms to bring carbon management to an industrial scale.  

Figure 3: Average CCS cost in EUR/t CO2 in Germany and the UK (source: carboneer, data source: CATF, 2022)

Policymakers in Germany have to make the decision whether depleted natural gas reservoirs and saline aquifers in northern Germany and under the German North Sea are suitable CO2 storage sites, or if exporting CO2 through international collaborations and storing it in the North Sea and Norwegian Sea is a more politically acceptable option.

In the upcoming articles of this series, we investigate the attractiveness and readiness of the above industrial sectors for CCS applications based on indicators such as the regulatory framework, competing decarbonization options and other sector specific characteristics.

This article is based on a study by carboneer for the Trade Commissioner Service of the Canadian Embassy to Germany.

Sources

CATF (2022) The cost of carbon capture and storage in Europe. Available at: https://​www.catf.us​/​ccs-​cost-​tool/​ (Accessed: 27 March 2023).

DEHSt (2022) Treibhausgasemissionen 2021: Emissionshandelspflichtige stationäre Anlagen und Luftverkehr in Deutschland (VET-Bericht 2021). Available at: https://​www.dehst.de​/​SharedDocs/​downloads/​DE/​publikationen/​VET-​Bericht-​2021.pdf​?​__blob=​publicationFile&​v=​7 (Accessed: 27 March 2023).

EEA (2022) Industrial Reporting database, May 2022, 7 March. Available at: https://​www.eea.europa.eu​/​data-​and-​maps/​data/​industrial-​reporting-​under-​the-​industrial-​6 (Accessed: 27 March 2023).

Carbon management in Germany (I): from zero to climate and industrial necessity

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This is the first article of a series on the potential of carbon capture, use and storage in Germany that will be published by carboneer over the coming weeks.

In this article, we look at the implications of a climate neutral Germany in 2045 on the demand for carbon management and carbon capture use and storage (CCUS). The topic has long been neglected in public debates but experiences a recent revival. CCUS can serve the dual purpose of (i) supporting the decarbonization of industrial facilities, and (ii) supplying especially the chemical sectors with CO2 as a resource for the production of primary products.

A brief history of carbon capture policy in Germany

While research on large-scale underground CO2 storage started in 2004 at the Ketzin pilot site close to Berlin, industrial carbon management activities (carbon capture, utilization and storage – CCUS) are virtually absent in Germany to the present. The European Union’s Carbon Capture and Storage Directive from 2009 provided its Member States with a framework to implement corresponding national legislation. The German Carbon Dioxide Storage Act (Kohlendioxid-Speicherungsgesetz – KSpG) came into force in August 2012 (cf. figure 1) but failed to establish favourable conditions for CCUS applications.

The storage discussion at that time in Germany was closely linked to the continuation of coal power generation and met strong public resistance. The expansion of renewable energy generation was at the center of potential mitigation pathways and CCUS applications were considered risky especially with regards to cost and safety criteria. Giving in to the general scepticism, the KSpG only allowed for applications with storage capacities below 1.3 million tons of CO2, and most states prohibited underground CO2 storage. No single storage project has been developed until the legal deadline for project submissions by the end of 2016. Currently it is therefore not possible to store CO2 underground in Germany and only a limited amount of capture and utilization projects are operative.

Carbon management has reemerged in the political arena in Germany only recently. The northwestern industrial state of North Rhine-Westphalia published its Carbon Management Strategy in 2021 and the National Carbon Management Strategy is currently being developed by the Federal Ministry for Economic Affairs and Climate Action (BMWK). We covered the national German Carbon Management Strategy in detail in this article.

Figure 1: Timeline and relevant events on carbon management in Germany (source: carboneer)

Carbon Management is a central component of climate neutrality

With tightening climate targets at EU and German level, it is becoming increasingly clear that climate neutrality by mid-century or even 2045 will not be achieved without large-scale capture, utilization and long-term storage of CO2. 

While CCUS experienced a slow uptake in German policymaking, academic research unanimously concludes that carbon management, including carbon capture, utilization and storage, as well as atmospheric carbon removal are necessary to reach climate targets. Since the electricity sector can be largely decarbonised through the expansion of renewables, the focus of carbon management in Germany lies on the industrial sector. Especially process-related emissions are hard to abate and might only be reduced through carbon capture solutions. Figure 2 shows the projections of five research projects on the sources of the CO2 that will be captured in 2045, at the time when Germany seeks to achieve climate neutrality.

Figure 2: CO2-capture according to application and source in 2045 (2050 for BMWK) (source: carboneer, data sources: Agora: Prognos, Öko-Institut, Wuppertal-Institut (2021), BDI: BCG (2021), dena: Deutsche Energie-Agentur (2021), BMWK: Fraunhofer ISI et al. (2022), Ariadne: Luderer, Kost and Sörgel (2021))

Building up the capacity to capture between 35 and 70 Mt of CO2 from different industries, or 5-10% of current German GHG emissions, requires targeted and substantial investments over the coming two decades. Investments will only materialize if determined policy making creates an enabling investment environment and delivers clear rules and guidelines on topics such as:

  • Incentive mechanisms for capture, utilization and storage
  • Transport and storage infrastructure provision and regulation
  • Regulation of CO2 imports and exports
  • GHG accounting (especially in utilization projects)

From waste to resource: how much storage is actually needed?

While we will take a deep dive into different industrial sector’s CCUS conditions and dynamics in upcoming articles of this series, we already want to draw your attention to some insights from our latest analysis. The technical potential across German industries predestined for CCS applications (steel, cement, lime, chemicals, waste incineration) amounts to 40-50 Mt CO2. Here we consider process-related emissions only, as other emission can and must be decarbonised through other solutions, such as renewable energy, electrification, or green hydrogen.

On the other side, the demand for carbon in the chemical industry in Germany in 2045 is estimated to be approximately 50 Mt CO2. This already points to a new paradigm and an industrial ecosystem, where CO2 will not necessarily be sequestered and stored underground in northern Germany, under the North Sea or even being exported to Norway, Denmark, or the Netherlands. Quite the opposite, CO2 might become a scarce a raw material in the industrial carbon cycle pushing the demand for CCU applications. Furthermore, the updated regulation on the EU Emission Trading System allows regulated entities to use CCUS instead of surrendering emission allowances. Undoubtedly, this option further increases the demand for CCUS applications.

Consideration of policy interactions and emerging new industrial paradigms are crucial for a successful carbon management at the national and EU level. Topics that require further analysis are amongst others:

  • Necessary CO2 transport capacity within Germany and Europe
  • Ultimate storage capacities needed across Europe
  • Quality criteria of CO2 for transport and utilization
  • Build-up of capture, transport and storage capacities in sync
  • Development of industrial carbon management clusters

The next article in this series on carbon management in Germany will deal with the current industrial emissions, the CCS potential in those industries and cost estimates for capture, transport, and storage. In the meantime, feel free to reach out with feedback and questions, which we are happy to discuss.

This article is based on a study by carboneer for the Trade Commissioner Service of the Canadian Embassy to Germany.

Sources:

BCG (2021) Klimapfade 2.0: Ein Wirtschaftsprogramm für Klima und Zukunft, Gutachten für den BDI. Available at: https://​web-assets.bcg.com​/​58/​57/​2042392542079ff8c9ee2cb74278/​klimapfade-​study-​german.pdf (Accessed: 25 March 2023).

Bundesregierung (2022) Evaluierungsbericht der Bundesregierung zum Kohlendioxid-Speicherungsgesetz: Drucksache 20/5145. Available at: https://​dserver.bundestag.de​/​btd/​20/​051/​2005145.pdf.

Deutsche Energie-Agentur (2021) dena-Leitstudie Aufbruch Klimaneutralität: Eine gesamtgesellschaftliche Aufgabe. Available at: https://​www.dena.de​/​fileadmin/​dena/​Publikationen/​PDFs/​2021/​Abschlussbericht_​dena-​Leitstudie_​Aufbruch_​Klimaneutralitaet.pdf (Accessed: 27 March 2023).

Fraunhofer ISI, Consentec and ifeu (2022) Langfristszenarien für die Transformation des Energiesystems in Deutschland: Modul 3: Referenzszenario und Basisszenario, Studie im Auftrag des Bundesministeriums für Wirtschaft und Energie. Available at: https://​www.langfristszenarien.de​/​enertile-​explorer-​en/​ (Accessed: 25 March 2023).

Luderer, G., Kost, C. and Sörgel, D. (2021) Deutschland auf dem Weg zur Klimaneutralität 2045 – Szenarien und Pfade im Modellvergleich: PIK: Potsdam-Institut fur Klimafolgenforschung. Available at: https://​policycommons.net​/​artifacts/​1860013/​deutschland-​auf-​dem-​weg-​zur-​klimaneutralitat-​2045/​2607518/​ (Accessed: 28 March 2023).

Prognos, Öko-Institut, Wuppertal-Institut (2021) Klimaneutrales Deutschland 2045. Wie Deutschland seine Klimaziele schon vor 2050 erreichen kann: Zusammenfassung im Auftrag von Stiftung Klimaneutralität, Agora Energiewende und Agora Verkehrswende. Available at: https://​www.agora-energiewende.de​/​veroeffentlichungen/​klimaneutrales-​deutschland-​2045 (Accessed: 25 March 2023).

Carbon Management and CCU/S in Germany

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The German government is currently developing a Carbon Management Strategy for CO2 storage and utilisation. Because, one thing is indisputable: Without the capture, use and storage of CO2 from industrial processes (CCU/S) and the atmosphere, Germany can hardly become climate neutral by 2045. The basis for the Carbon Management Strategy is the new evaluation report on the Carbon Dioxide Storage Act. In this article, we explain the key points and principles of such a strategy.  

The CCU/S nomenclature

For the purposes of consistent nomenclature, we use the term carbon management below as an umbrella term for carbon management that includes CO2 capture, transport, and use (CCU) or storage (CCS) from fossil as well as biological or atmospheric sources as negative emissions or carbon dioxide removal (BECCS and DACCS). Likewise, dealing with other nature-based solutions to remove and reduce greenhouse gas emissions from the atmosphere is part of carbon management (see Figure 1).

Diagram Description automatically generated
Figure 1: Sources and sinks of CO2 emissions of the different components of carbon management (source: carboneer).

The impact on the climate and the technical and economic details of the different technologies and options are complex and require detailed analysis. Feel free to contact us for more information.

Carbon management necessary for climate neutrality

In early January 2023, German Economics Minister Robert Habeck travelled to Norway to explore further cooperation in the field of energy and climate. Among other things, the topic of CO2 capture, transport and storage is to become an important part of the cooperation with Norway. With tightening climate targets at EU and German level, it is becoming increasingly clear that greenhouse gas or climate neutrality by mid-century will not be achieved without large-scale capture, utilisation and, above all, long-term storage of CO2. 

At the same time, the German Federal Ministry of Economics and Climate Protection (BMWK) published the German government’s evaluation report on the Carbon Dioxide Storage Act (KSpG) in December 2022. The KSpG came into force in August 2012 and was intended to test the first demonstration projects for the long-term storage of CO2 in the ground in Germany. Acceptance of CO2 storage in Germany has always been very low in the past, especially as the discourse was strongly linked to the use of CO2 capture at coal-fired power plants and the continued operation of coal power plants. However, by the end of the application deadline for approval of new underground CO2 storage facilities (end of 2016), only one demonstration project had been applied for and been built in Germany. Since no new applications can be submitted after the end of 2016, underground CO2 storage is de facto not possible throughout Germany.

CO2 capture for residual emissions in industry

In the future, the use of CCS at coal-fired power plants in Germany is not expected to play a role due to the planned phase-out of coal. Capture, utilisation or storage of CO2 will however be needed primarily for a climate-neutral industry. Even after the use of renewable energies or electrification, large quantities of process-related CO2 emissions will still be produced, for example in the lime and cement industries or in the steel industry. Carbon is also the starting point for many other important products in the chemical industry and is therefore also needed as a raw material. The long-term scenarios project assumes that around 30 million metric tons of CO2 will have to be captured, transported, reused or disposed of in final storage by industrial plants in Germany even after climate neutrality has been achieved in 2045. Possible locations of capture plants and transport pipelines for CO2 are shown in Figure 2. 

Figure 2: Possible CO2 sinks, sources and transport pipelines in Germany in 2045 (source: Langfristszenarien)

Here, it is noticeable that clusters of CCU/S sites are located in the core areas of German basic and heavy industry. This clustering is mainly due to economic economies of scale for infrastructures for capture, transport but also the potential reuse of CO2. Accordingly, the focus of the German Carbon Management Strategy will be primarily on the industrial sector and not on capture in coal-fired power generation.

In addition to the capture of CO2 at industrial sources, however, the use of carbon removal solutions, i.e., the physical removal of CO2 emissions from the atmosphere, must also be developed. Carbon removal is the only way to offset the greenhouse gas emissions that will continue to occur in 2045, for example from agriculture. At 45-80 million metric tons of CO2, the negative emissions required are actually at a higher level than CO2 emissions to be captured from industrial processes. We have presented the details here and here.

Key principles of the German carbon management strategy

The use of CCU/S in industry will play a role as a decarbonisation option, alongside energy and resource efficiency and the use of green energy sources and electrification of processes. Key findings from the latest climate neutrality studies for Germany (Klimaneutrales Deutschland 2045, Klimapfade 2.0, dena-Leitstudie Aufbruch Klimaneutralität, Langfristszenarien) allow the following assessments:

  • Increase in ambition level of climate targets leads to increased use of CCU/S
  • CO2 capture in the million metric ton range necessary as early as 2030
  • Use of CCS mainly in industry and waste sector
  • Negative emissions from carbon dioxide removal must be scaled up from 2030 at the latest
  • Permanence of CO2 removal and storage by nature-based methods is uncertain and therefore makes technical solutions necessary as well
  • Fossil CCU/S and technical carbon dioxide removal can use the same infrastructures and should be considered in an integrated way
  • Transparent and continuous dialogue needed to ensure societal acceptance for ramp-up of CCU/S
  • Significant amounts of CO2 capture at global level (6-12 Gt/year depending on scenario) also driven by CCS at fossil power plants 

The recently published evaluation report on the KSpG provides the following key recommendations to the German government for revision: Examination and adjustment of regulations of the (cross-border) transport of CO2 and regarding German final storage sites for CO2, the further integration of CCU/S into the European Emissions Trading System (EU ETS), and the development of a clear framework for accounting of negative emissions. The details are to be elaborated in a German Carbon Management Strategy (Figure 3) by the German government, which will be presented during 2023. 

Figure 3: Basic pillars for carbon management in Germany (source: German government, adjusted by carboneer).

Which issues need to be clarified?

The German Carbon Management Strategy first aims to spell out a prioritisation of CCU/S applications. Questions must be answered for which industries and which emissions CCU/S measures are most important in order to use available resources in an appropriate manner. This should go hand in hand with the adaptation of the relevant regulatory framework, for example for approval procedures and the development and financing of (transport) infrastructures. Measures and funding programs in special application areas are also to be developed.

Methodologies for monitoring, reporting and verification (MRV) for CCU/S need to be developed. For example, the accounting of CCU/S in the EU ETS and the accounting for the use of CO2 from different sources (fossil, industrial cycle, biogenic, from the atmosphere) in the chemical industry and in the production of synthetic fuels must be clarified.

In particular, the possibility of transboundary CO2 transport will play a major role across the EU. In this regard, the Norwegian government has already made offers to the EU industry for accommodating their CO2 in underground storages in Norway. The design of pipeline and ship capacities as well as questions of EU network regulation and financing are important issues. The synergy effects of CCU/S clusters between industries as sources and sinks of CO2 must be elicited to find the most efficient solutions when planning infrastructures.

For possible CO2 storage facilities to become a reality also on German territory (probably rather under the seabed than under the mainland), social acceptance for CO2 capture and final storage must be built up. This can only happen through clear and transparent communication regarding the necessity of CCU/S for a climate neutral Europe and Germany.  

We will keep you up to date on the latest developments regarding the German Carbon Management Strategy. Please feel free to contact us if you have any questions on this topic.