Capture, store, utilise - Where to go with CO2?

Hard to abate sectors -where it is difficult or impossible to reduce or avoid CO2 emissions - particularly depend on technologies that remove CO2. The main options here are the permanent storage of carbon dioxide in deep geological layers (Carbon Capture and Storage - CCS) and the use of the captured carbon dioxide as a raw material for building materials (Carbon Capture and Utilisation - CCU).

Forecasts assume that up to 85% of the CO2 produced can be permanently kept out of the atmosphere through capture in the combustion process and subsequent storage. Whether these forecasts will be correct remains to be seen, as does the solution for the additional energy requirements for the use of CCS technology. Possible risks for people and nature must also be considered.

After the storage of CO2 in Germany was considered politically undesirable for a long time, a current draft law now provides for the offshore storage of CO2 to be made possible in future.

Background

The current legal framework in the Carbon Dioxide Storage Act (“Kohlendioxid-Speicherungsgesetz”, “KSpG”) only permits the storage of CO2 for the purposes of researching, testing and demonstrating the technology. In addition, the federal states have an opt-out option and can exclude parts of their territories from the application of the law. It was essentially a law to ban the storage of carbon dioxide in Germany.

The draft law to amend the Carbon Dioxide Storage Act (BT-Drs. 20/11900 dated 21 June 2024 (in German)) is now intended to initially extend the scope of application to commercially used offshore storage facilities on an industrial scale. The draft thus utilises the (already existing) EU law based national legislative leeway granted to Member States by Directive 2009/31/EC.

The new rules are limited to the authorisation of the construction and operation of storage sites and transport pipelines. The construction and operation of CO2 capture plants in the combustion process require an emission control licence.

The innovations at a glance

In addition to extending the scope of application to carbon dioxide storage in the continental shelf area and the Exclusive Economic Zone, the amendment is intended to make the storage of carbon dioxide legally possible. To this end, the amendment also aims to establish a standardised authorisation regime for carbon dioxide pipelines.

Onshore storage is not covered, but the Länder (federal states) shall be allowed to authorise such storage on their territory.

Carbon dioxide transport

Both construction and operation of carbon dioxide pipelines and carbon dioxide storage facilities require planning approval. The relevant regulations for the pipelines are based on the provisions of Sections 43 et seq. Energy Industry Act (“Energiewirtschaftsgesetz”, “EnWG”) for electricity and gas pipelines.

However, in contrast to the existing rules for onshore power planning approvals, no overriding interest is ascribed to the construction of the CO2 pipeline as part of the balancing process and decision by the authority. Construction and operation should (merely) be in the public interest and the significance for climate protection and carbon dioxide reduction must be considered in the decision.

Similar to existing onshore planning approval rules, the construction of CO2 pipelines in or directly next to existing hydrogen pipeline routes should be assumed to have no additional negative impact on other interests. However, the Bundesrat criticised this provision as inappropriate in its last statement (BR-Drs. 266/24 (Beschluss) of 05.07.2024 (in German)) and suggested to delete it.

Details of the planning approval procedure and planning requirements can be laid down in an ordinance.

The rededication of natural gas pipelines for the transport of carbon dioxide shall also be facilitated by applying the provisions of the EnWG for the conversion of natural gas pipelines to hydrogen.

Carbon dioxide storage

A prerequisite for the construction of permanent storage facilities shall be the analysis and assessment of the potential. This will continue to be carried out by the Federal Ministry for Economic Affairs and Climate Action (“BMWK”). What is new is that the nature conservation principles required for this assessment are to be developed by the Federal Agency for Nature Conservation, on the basis of a catalogue of points specified in an annex to the draft act.

A further step before the actual application for the construction of a storage facility is the authorisation to examine the subsurface for its suitability for permanent storage. The current time limit for investigation permits until 31 December 2015 is also to be abolished. In this respect, the draft stipulates that authorisation require agreement with the Federal Maritime and Hydrographic Agency (“Bundesamt für Seeschifffahrt und Hydrographie”). It is also clarified that the investigation may also include drilling and injection tests.

In principle, storage facilities may not be built in or directly adjacent to protected marine areas. Further requirements for carbon dioxide storage facilities are to be laid down in an ordinance by the BMWK.

To continue to drive forward the expansion of renewable energies and the hydrogen economy, and not incentivise electricity generation from coal combustion, the draft bill stipulates that the carbon dioxide pipelines/grids should not be used to transport carbon dioxide from coal-fired power generation. This means that a quantitatively significant opportunity to reduce CO2 emissions is not being utilised.

Outlook

The changes envisaged in the draft law are a massive shift in German CO2 policy and a key component of the overall concept to enable climate neutrality. They are an expression of the recently adopted key points of the German government's carbon management strategy (in German).

The draft bill has been introduced into the parliamentary process, but still must pass Bundestag and Bundesrat. In this context, the Federal Government asks in its growth initiative (dated 5 July 2024, item 40 (in German)) for the procedure to be completed swiftly.

It remains to be seen whether there will be any changes to the draft and whether and to what extent use will be made of the storage options available after the parliamentary procedure has been completed.

Our team will be happy to advise you on the possible effects of the regulations in your business context. Please feel free to contact our experts.