Tag Archive for: Climate targets

The EU ETS 2 – pricing emissions in buildings and road transport

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The European Union’s Emissions Trading System (EU ETS) constitutes a cornerstone of the EU’s strategy to combat climate change since its establishment in 2005. The new EU ETS 2, implemented from 2024 covers emissions from buildings, road transport, and additional sectors such as fuel use in small industrial installations. The EU ETS 2 is founded upon the objectives of the EU Climate Law and the Fit-for-55 package and requires the fuel suppliers to monitor and report emissions in their fuels. From 2027 when the EU ETS 2 is fully operational, emission allowances need to be purchased and surrendered based on the emissions in the fuels sold. This new emission trading system adds a further layer of complexity to the regulatory compliance landscape.

Key facts about the EU ETS 2

The EU ETS 2 will be running in parallel to the EU ETS 1 and encompasses areas that were previously excluded, such as the buildings and road transport sectors. The operational principle of the EU ETS 2 is based on a cap-and-trade system, where an annually decreasing cap is set on total emissions and a corresponding number of allowances is auctioned to regulated entities. One allowance needs to be surrendered per ton of CO2 emitted. The EU ETS 2 is designed to reduce emissions by 42% by 2030 in comparison to 2005 levels. In contrast to the EU ETS 1, which regulates emissions at the point of origin, the EU ETS 2 places the compliance burden upstream at the release for consumption of fuels and not at the point where fuels are combusted. Estimates of the EU Commission expect up to 11.400 fuel suppliers, distributers and resellers to be regulated (regulated entities). This new system harmonises national and EU responsibilities, targets and emissions pricing.

To determine emissions under the scope of the EU ETS 2, a comprehensive monitoring, reporting, and verification (MRV) system is implemented at the company-level. To avoid double counting, emissions from fuel combustion under the EU ETS 1 should not be counted in the EU ETS 2. This requires fuel suppliers and their clients to provide proof and documentation in such cases. The EU ETS 2 permits the coexistence of national carbon taxes with the EU ETS 2, allowing EU Member States to exempt companies from EU ETS 2 requirements until 2030 if national measures are more stringent. In Germany the national ETS is only fully integrated into the EU ETS 2 from 2027 onwards, which makes a double reporting of emissions necessary for 2024 – 2026.

First compliance deadlines in 2024

For companies subject to the EU ETS 2, key compliance activities should already be ongoing, and deadlines are approaching soon. Companies must commence monitoring emissions by January 2024 and report those emissions by 30 April 2025. The timeline for compliance is stringent, as Figure 1 indicates.

Figure 1: Timeline of EU ETS 2 compliance obligations. Source: carboneer

To monitor emissions in accordance with the rules of the EU ETS 2, by 31 August 2024 a monitoring plan should be submitted to the competent national authority. Full compliance, especially procuring and surrendering allowances under the EU ETS 2 is required from 2027, and failure to meet these deadlines can result in significant penalties and legal repercussions, making it imperative for companies to commence preparations without delay. The potential consequences of non-compliance include financial penalties and loss of competitiveness.

From 2027 onwards allowances under the EU ETS 2 will be auctioned. An allocation of free allowances such as during the start of the EU ETS 1 and currently still applied to EU industry will not exist. To regulate the supply of allowances and maintain price stability, a market stability reserve will be implemented. The initial allowance cap in 2027 will be determined by applying a 5.1% annual reduction to the 2024 emission level. From 2025 onwards, this linear reduction factor increases to 5.38%. This implies that the total supply of allowances in 2027 will be approximately 1.25 billion, declining to below 800 million by 2030. Figure 2 illustrates the decline in the allowance auction volumes over time, aligned with the EU’s long-term sectoral climate targets.

Figure 2: Approximate EU ETS 2 allowance supply. Source: carboneer

Challenges and complexity

The EU ETS 2 presents a significant challenge for companies as they need to develop comprehensive emission monitoring plans, detailing their activities, fuel types, and emission calculation methodologies to comply with their obligations. Especially the calculation of the emissions can be a complex undertaking. First, a scope factor needs to be established to determine the portion of a company’s fuel sales that lie within the regulated activities, such as buildings and road transport. The scope factor ranges from 0 (no fuel in scope) to 1 (all fuel in scope). This ensures only relevant emissions are counted. Using the correct emission factor for different fuels along with the quantity of fuels, the total CO2-emissions can be calculated.

To ensure data quality, the MRV follows a tier system that categorises data accuracy from Tier 1 (least accurate) to Tier 4 (most accurate). Higher tiers, used for companies with more larger fuel streams and thus higher emissions, require more precise data, ensuring reliable results. Importantly, emissions from fuels based on biomass can be zero-rated if they fulfil the criteria on biomass under the Renewable Energy Directive (RED) II and the upcoming RED III.

Monitoring plans must gain approval from the competent national authority, underscoring the importance of early and thorough preparation. The emission reporting for 2024 is due 30 April 2025, with third-party verification becoming mandatory from the 2025 emission report on. The introduction of the EU ETS 2 pricing can result in significant cost increases, which will have an impact on both operational expenses and consumer prices. Figure 3 displays price forecasts for the allowances in the EU ETS from different sources. As prices are determined through demand and supply, they can be expected to exhibit significant volatility, with forecasts ranging from €48 to €340 per tCO2 by 2030. Companies ought to manage cost risk via tailored procurement strategies for EU ETS 2 allowances.

Figure 3: Forecast of EU ETS 2 allowances prices in 2030. Data Source: UBA, 2024, Source: carboneer


The Social Climate Fund plays a crucial role in mitigating the financial impact on vulnerable consumers in the EU. Its objective is to support vulnerable households and micro-enterprises that are impacted by the transition to a low-carbon economy. The fund, financed by revenues from the auctioning of allowances, provides financial assistance for measures that reduce emissions and energy costs. One example is the provision of subsidies to enhance the energy efficiency of residential properties such as improvements to insulation and the installation of more efficient heating systems. This dual focus on households and businesses ensures a broader impact, promoting social equity and economic resilience, and helps to offset some of the financial burdens and operational challenges posed by the EU ETS 2.

To understand the potential impact of the rising allowance prices, Figure 4 illustrates how different fuel types are being impacted by different allowance prices.

Figure 4: Price impact on different fuels under varying EU ETS 2 allowance prices. Source: carboneer

What should an EU ETS strategy entail?

Due to the complexity of the EU ETS 2 and its stringent timeline, a sound EU ETS 2 strategy is essential. But what does a company need to prepare for?

MRV details and compliance cycle

  • Development of comprehensive monitoring plans that cover all relevant activities, fuel types, and emission calculation methodologies
  • Monitoring plans must be approved by national authorities
  • Verification of emissions

Compliance obligations:

  • Detailed understanding of the EU ETS 2 rules and associated regulation
  • Build capacity, assign responsibilities, internal and external communication
  • Access to registries and EU ETS 2 allowances

Financial impact assessment:

  • Assessment of EU ETS 2 exposure and cost forecasts
  • Implementation of strategies to manage costs and pass on costs to consumers
  • Risk management and allowance procurement strategies to reduce financial exposure

Conclusion

The EU ETS 2 is a crucial tool in the European Union’s strategy to combat climate change by establishing a new cap-and-trade system for fuels in sectors such as buildings and road transport. It aims to reduce emissions by 42% by 2030 compared to 2005 levels. The system introduces complex obligation for companies that require planning and a compliance strategy, including stringent monitoring, reporting, and verification processes starting from 2024. With allowance prices expected to rise significantly, the financial implications are substantial and necessitate robust risk management and hedging strategies. Companies should act now to understand and navigate these new regulations, ensuring compliance and maintaining competitiveness.

Authors: Florian Schlennert and Simon Göß.

Sources: UBA, 2024, Supply and Demand in the ETS 2, URL: https://www.umweltbundesamt.de/publikationen/supply-demand-in-the-ets-2

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.