COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on the Future of Carbon Capture and Storage in Europe
Date: 2013-03-27
Institutions: European Commission
Subjects: atmospheric pollutant, carbon capture and storage, fossil fuel, reduction of gas emissions

EUROPEAN 
COMMISSION 

Brussels, 27.3.2013  
COM(2013) 180 final 

COMMUNICATION FROM THE COMMISSION  TO THE EUROPEAN 
PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL 
COMMITTEE AND THE COMMITTEE OF THE REGIONS 

on the Future of Carbon Capture and Storage in Europe 

EN 

   EN 

 
 
 
 
  
 
 
Consultative Communication on 

The Future of Carbon Capture and Storage in Europe 

Content 

1. 

Introduction ....................................................................................................................... 3 

2.  Fossil fuels in the energy mix and in industrial processes ................................................ 4 

2.1.  The role of fossil fuels in global energy mix.............................................................. 4 

2.2.  The role of fossil fuels in Europe's energy mix .......................................................... 5 

2.2.1.  Coal in Europe's electricity generation................................................................ 7 

2.2.2.  Gas in Europe's electricity generation................................................................. 9 

2.2.3.  Oil in Europe's electricity generation .................................................................. 9 

2.2.4.  The composition and age structure of Europe's electricity generation.............. 10 

2.2.5.  The use of fossil fuels in other industrial processes.......................................... 11 

2.2.6.  Potential of CCS in Europe and globally .......................................................... 11 

2.3.  Potential of industrial use of CO2 ............................................................................. 13 

2.4.  Cost competitiveness of CCS ................................................................................... 14 

2.5.  Cost competitiveness of CCS being retrofitted on to existing installations ............. 15 

3.  The state of play of CCS demonstration in Europe and gap analysis ............................. 16 

3.1.  Lack of business case ............................................................................................... 16 

3.2.  Public awareness and acceptance ............................................................................. 18 

3.3.  Legal framework....................................................................................................... 18 

3.4.  CO2 Storage and Infrastructure................................................................................. 18 

3.5. 

International Cooperation ......................................................................................... 19 

4.  Moving forward............................................................................................................... 19 

5.  Conclusions ..................................................................................................................... 22 

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1.  Introduction 

Currently, more than 80% of global primary energy use is fossil based. Over the last decade 
85%  of  the  increase  in  global  use  of  energy  was  fossil  based.  Estimates  of  future  energy 
consumption based on current policies and developments indicate a continuation of this fossil 
fuel  dependence1.  These  trends  are  not  consistent  with  the  necessary  mitigation  of  climate 
change.  They  could  lead  to  an  average  increase  in  global  temperatures  of  3.6  or  4  degrees 
Celsius according to the International  Energy Agency (IEA) and a report commissioned by 
the  World  Bank  respectively2.  In  the  transition  to  a  fully  low-carbon  economy,  the  Carbon 
Capture and Storage (CCS) technology is one of the key ways to reconcile the rising demand 
for fossil fuels, with the need to reduce greenhouse gas emissions. Globally CCS is likely to 
be a necessity in order to keep the average global temperature rise below 2 degrees3. CCS is 
also vital for meeting the Union’s greenhouse gas reduction targets and it offers potential for 
a low-carbon re-industrialisation of Europe's declining industries. However, this depends on 
whether  CCS  can  be  used  as  a  large  scale  technology  that  can  be  commercially  viable  to 
allow for large scale deployment4. 

The assessments made in the context of the EU's Roadmap for moving to a competitive low 
carbon economy in 2050 and the Energy Roadmap 2050 see CCS, if commercialised, as an 
important  technology  contributing  to  low  carbon  transition    in  the  EU,  with  7%  to  32%  of 
power generation using CCS by 2050, depending on the scenario considered. Furthermore, in 
these  assessments,  by  2035  CCS  starts  to  contribute  on  a  broader  scale  to  reducing  CO2 
emissions from industrial processes in the EU. 

The  EU  is  committed  to  supporting  CCS  both  financially  and  with  regulatory  steps. 
Following  the  European  Council's  decision  back  in  2007  to  support  up  to  12  large-scale 
demonstration  projects  by  2015,  the  Commission  took  a  number  of  steps  to  establish  a 
common regulatory and demonstration support framework. 

The CCS Directive was adopted to provide a legal framework for CO2 capture, transport and 
storage,  with  transposition  deadline  set  at  June  2011 5 .  The  CO2  transport  network  was 
included in Europe's Energy Infrastructure Priorities (EIP) tabled in November 2010 and 
in  the  Commission's  proposal  for  a  regulation  on  "Guidelines  for  Trans  European 
Infrastructure".  CCS  has  also  become  an  integral  part  of  the  EU  R&D  initiatives  -  the 

1 IEA estimates in their World Energy Outlook 2012, that 59% of the demand increase is met by fossil fuels, 
resulting in a share of 75% of the energy mix in 2035.  
2 IEA "World Energy Outlook 2012" page 23, and "Turn down the heat", a report commissioned by the World 
Bank,  available  here:  http://www.worldbank.org/en/news/2012/11/18/new-report-examines-risks-of-degree-
hotter-world-by-end-of-century   
3 The Commission estimated that in 2030 in the "Appropriate global action scenario" 18% of fossil fuel power 
generation  is  with  CCS,  which  illustrate  how  crucial  this  technology  will  be  in  the  future  to  achieve  a 
sustainable carbon emission path at global level, and that large scale demonstration has to commence without 
delay. Estimate is taken from: Towards a comprehensive climate change agreement in Copenhagen. Extensive 
background information and analysis - PART 1 - available here:  
http://ec.europa.eu/clima/policies/international/negotiations/future/docs/sec_2009_101_part1_en.pdf 
4 Low  carbon  transition  can  obviously  also  be  reached  with  more  energy  efficiency,  renewable  energy  and 
carbon free energy sources, but in the case of continued or increasing use of fossil fuels, CCS is crucial as it is 
the only option available. Around 60% of global primary energy at present comes from stationary use of fossil 
fuels.  Other  decarbonisation  options  of  the  energy  system  are  increased  energy  efficiency,  demand  side 
management and other low carbon energy sources such as renewable and nuclear energy. 
5 A detailed report on the transposition of the directive will be published in the course of 2013. 

3 

 
 
                                                 
European  Industrial  Initiative  (EII) on CCS has been established as part of the Strategic 
Energy Technology (SET) Plan. 

Moreover two funding instruments have been set up: the European Energy Programme for 
Recovery  (EEPR)  and  the  NER3006 programme  funded  by  ETS  allowances  to  channel 
substantial EU funding to large scale demonstration projects7.  

Despite these efforts, CCS has not yet taken off in Europe for a variety reasons as briefly set 
out in this Communication. While it is clear that "no action" is not an option and further steps 
need to  be  taken, time  is running out,  especially for those demonstration projects that have 
managed  to  secure  part  of  the  necessary  financing  but  have  not  yet  taken  their  final 
investment decision.  This  Communication  therefore  summarises where we are today taking 
into  account  the  global  context  and  discusses  the  available  options  to  encourage  CCS 
demonstration and deployment, in order to support its long term business case as an integral 
part of the EU's strategy for low carbon transition. 

2.  Fossil fuels in the energy mix and in industrial processes  

Since the European Council's decision on developing CCS back in 2007, the relevance and 
importance of CCS has further increased, at European as well as at global level, as the global 
addiction  to  fossil  fuels  has  intensified.  Meanwhile,  the  time  available  to  mitigate  climate 
change has shortened, making it all the more urgent to deploy CCS.   

2.1.  The role of fossil fuels in global energy mix 

In  2009,  fossil  fuels  met  81%  of  global  primary  energy  demand,  with  two-thirds  of  the 
world’s  power  generation  coming  from  fossil  fuels.  In  the  past  ten  years,  coal,  oil  and  gas 
have  jointly  accounted  for  85%  of  the  increase  in  global  energy  demand,  where  coal  alone 
represents  45%  of  the  increase  in  primary  energy  consumption,  as  can  be  seen  in  figure  1 
below.  These  developments  have  largely  been  driven  by  increased  demand  in  developing 
countries. Consequently, since 1990, coal production worldwide has almost doubled and has 
reached nearly 8,000 million tonnes in 2011. 

6 No CCS projects were selected by the first call of the NER300.  
7 However, the projections of a carbon price of 20 to 30 € per ton did not materialise, which lowered the funds 
available substantially, and also significantly worsened the economics of CCS projects  

4 

 
 
 
                                                 
Figure  1:  Incremental  world  primary  energy  demand  by  fuel,  2001-2011  (Source:  IEA  World  Energy 
Outlook 2012) 

The historical developments seen in the figure above are reflected in the forecasts provided in 
the "New Policies Scenario" in the World Energy Outlook 2012 of the International Energy 
Agency (IEA), shown in figure 2, which show that coal will have an increasing importance in 
power  generation  investments  in  the  coming  decades  in  developing  countries  if  current 
policies are continued, whereas in developed countries the coal capacity starts to decrease. 

Figure 2: Change in power generation for selected parts of the world, 2010 – 2035. (Source: IEA, World 
Energy Outlook 2012)  

2.2.  The role of fossil fuels in Europe's energy mix 

In the EU, the share of gas in primary energy consumption has grown over the last ten years 
to  a  level  of  25%  in  20108,  most  of  which  is  imported  since  only  about  35%  of  EU's  gas 

8 Source: EU energy in figures, 2012 Pocketbook, European Commission 

5 

 
 
 
 
                                                 
supply  is  produced  domestically 9 .  Approximately  30%  of  gas  is  used  for  electricity 
generation. 

While our gas imports have doubled over the last two decades, the opposite has happened in 
the US, where significant discoveries and developments of shale gas have both reduced the 
price of gas and made the US less dependent on energy imports. The rapid developments in 
and forecasts for the use of shale gas in the US are shown in figure 3 below. 

Figure 3: Historic and forecasted US oil and gas production (Source: IEA, World Energy Outlook 2012) 

This in turn has put a downward competitive pressure on American coal (as can be seen in 
figure 4 below) leading to the American coal industry seeking new outlets through  increased 
exports  of  coal  that  would  normally  have  been  consumed  within  the  US.  The  current 
indications are that this trend will continue and may be further aggravated.  

Figure 4: Coal prices over 12 months (Source: Platts) 

The  EU  has  been  the  recipient  of  much  of  these  exports  leading  to  increased  coal 
consumption.  Figure  5  below  shows  the  overall  developments  within  the  coal  sector  in  the 
EU over the last 20 years (data includes up to and including May 2012). The recent increase 

9 The three largest producers are UK with 51.5 Mtoe, The Netherlands with 63.5 Mtoe and Germany with 9.7 
Mtoe of natural gas production in 2010. Russia and Norway (22% and 19% of EU's gas supply) are the biggest 
two gas exporters to the EU. 

6 

 
 
 
                                                 
in  coal  consumption10 has  therefore  potentially  halted,  and  to  some  extent  reversed  a  two 
decade long trend of decreasing coal consumption.  

The reasons are multiple, but in particular the lower than expected prices of coal and carbon 
are considered as major contributors. 

Figure 5: Coal consumption developments in the EU over the last 20 years (including May 2012) (Source: 
Eurostat) Note that to the left of the bar are yearly data back to 1990, while monthly data are shown for 
the period after 1/01/2008 to the right.) 

At this low price, together with relatively high gas prices compared to coal, coal has become 
a  new  and  economically  interesting  input  for  power  production  in  the  EU.  The  lifetime  of 
power plants that were expected to close is now being extended and as such the risk related to 
carbon lock in for new fossil fuel developments increases. 

Over the last few years, the impact of the economic crisis has seen GHG emissions decrease 
significantly,  resulting  by  early  2012  in  a  surplus  of  955  million  unused  ETS  allowances. 
Overall  the  structural  surplus  is  rapidly  growing  and    for  most  of  phase  3  could  result  in 
around 2 billion of unused allowances11, resulting in carbon prices rapidly decreasing towards 
€5 and below per ton of CO 2. 

This  renewed  attractiveness  of  coal  in  the  short  run  certainly  has  negative  impacts  on  the 
transition to a low carbon economy.  

2.2.1. 

Coal in Europe's electricity generation 

The coal sector significantly contributes to Europe's security of energy supply given that coal 
is  largely  produced  within  the  EU  -  more  than  73%  of  coal  used  in  the  EU  is  produced 
domestically, as shown in figure 6 below.  

10 Analysing  the  same  data-set  and  comparing  hard  coal  consumption  in  the  first  5  months  of  2010  with  the 
same period in 2011 and 2012, one observes a 7% increase from 2010 to 2011 and a further 6% increase from 
2011 to 2012. Brown coal (lignite) in the same period increased with 8% and 3% respectively. 
11 Source: Report from the Commission: The state of the European carbon market in 2012 

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Figure 6: Coal use in the EU in 2010 (Source: Eurostat) 

The  coal  consumed  in  Europe  is  mainly  used  for  electricity  production.  Overall,  the  use  of 
brown  and  hard  coal  in  the  EU  increased  from  712.8  Mt  in  2010  to  753.2  Mt  in  2011, 
representing around 16% of total energy consumption. Whilst the contribution of coal to EU's 
electricity  generation  had  been  slowly  decreasing  up  to  2010  (when  it  represented  around 
25% of the electricity produced in the EU12), since then it has increased again, as discussed 
above. The main consumers of coal in the EU are shown in the table below.   

Figure 7: Main consumers of coal in the EU for 2010. (Source: Eurostat) 

12 However, there are significant regional differences across Europe. While the share of coal in some Member 
State's electricity mix (e.g. in Sweden, France, Spain, and Italy) is well below 20%, some Member States such 
as Poland (88%), Greece (56%), Czech Republic (56%), Denmark (49%) Bulgaria (49%), Germany (42%) and 
UK  (28%)  rely  heavily  on  coal.  With  the  exception  of  Denmark,  those  are  also  the  Member  States  with  a 
relevant domestic mining industry. 

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Data submitted by Member States indicate that around 10 GW of additional coal capacity is 
being constructed or is planned (in Germany, Netherlands, Greece and Romania). However, 
the figures submitted by Member States are considerably lower than those reported by Platts, 
which  estimate  that  as  much  as  50  GW  of  coal  fired  power  plants  are  proposed,  being 
developed or under construction. In addition, a range of old coal power plants will need to be 
refurbished or closed down, as they are reaching their planned operational life. 

2.2.2. 

Gas in Europe's electricity generation 

The  share  of  gas  in  Europe's  electricity  mix  has  been  steadily  increasing  over  the  past  20 
years  from  9%  in  1990  to  24%  in  201013.  Moreover,  power  generation  based  on  gas  is 
expected by many Member States to increase significantly. Relative to coal, gas power plants 
have several benefits. The greenhouse gas emissions are half those of coal, gas power plants 
have low investments costs and they can be operated in a more flexible way, making them 
suitable to balance out the varying power production from wind and solar energy sources. In 
total  20  GW  of  capacity  has  been  notified  to  the  Commission  as  being  under  construction, 
which is about 2% of today's installed total capacity for electricity production (with a further 
15 GW of additional capacity notified as in planning). The figure below shows the capacity 
of the 32 gas power plants notified to the Commission as under construction. 

Figure 8: Main Member States where gas power plants are under construction (Source: Member States' 
notifications) 

While new gas power plants will reduce emissions compared to using coal power plants, such 
new investments have a significant lifetime, and it is not necessarily cost-effective to retrofit 
gas power plants with CCS. This is particularly the case if the gas power plant is not running 
as base load14. On the other hand, gas power plants have lower capital costs than coal plants, 
implying that the cost effectiveness of the investments is less dependent on a long lifetime.  

2.2.3. 

Oil in Europe's electricity generation 

Oil  is  used  to  a  limited  extent  in  electricity  production,  i.e.  in  niche  applications,  such  as 
isolated  power  systems  -  2.6%  in  the  EU  only,  and  somewhat  more  globally,  but  with  a 

13 Similarly to  coal, there are significant regional differences: in some Member States gas plays a dominant role 
in  electricity  generation,  e.g.  in  Belgium  (32%),  Ireland  (57%),  Spain  (36%),  Italy  (51%),  Latvia  (36%), 
Luxembourg  (62%),  NL  (63%),  UK  (44%),  while  in  many  other  Member  States  (Bulgaria,  Czech  Republic, 
Slovenia, Sweden, France, Cyprus and Malta) gas contributes to less than 5% of the electricity mix. 
14 Running as base load means that it runs most (80%) of the time while as balancing power it runs considerably 
less (10 – 20%) of the time 

9 

 
 
                                                 
declining  trend.  Oil  is  mainly  used  for  transport  purposes  in  combustion  engines,  like 
airplanes, ships and vehicles. Given its limited role for industry and power production, and as 
it is impossible with today's technology to capture carbon efficiently from such small emitters, 
oil is not discussed further.  

2.2.4. 

The composition and age structure of Europe's electricity generation 

Investments  in  power  generation  capacity  in  Europe  have  changed  over  time,  from  mostly 
renewable energies (hydropower) in the early periods of electrification more than a hundred 
years ago, to mainly coal, nuclear and gas power plants in the 1950s and onwards, and back 
to renewables (wind and solar) during the last decade. This development is shown in figure 8 
below.   

Coal power plants 

Gas power plants 

Figure 9: Age structure of Europe's electricity generation (source: Platts) 

Investments made 55 to 30 years ago in coal power plants, as seen in the figure above, imply 
that Europe has a large fleet of old coal power plants that are now reaching the end of their 
lifetime (for gas power plants the situation is the opposite, as most investments were made 
during the last 20 years). This leads to an increasing number of power plants (on average 3-5 
GW per year – equal to around 10 coal power plants) reaching an age where it can be cheaper 
for  investors  to  decommission  the  asset  rather  than  spend  resources  on  refurbishing  it15, 
providing an opportunity to replace them with low carbon alternatives but also increasing the 
risk for renewed carbon lock in if relative energy and carbon prices stay where they are today. 

15Under  EU  environmental  law  (the  currently  existing  Large  Combustion  Directive  replaced  by  the  Industrial  Emissions 
Directive from 2013 onwards in case of new plants, and from 2016 onwards in case of existing ones), power plants needs to 
close down if they do not meet the required minimum standards. These directives lay down minimum standards in terms of 
emissions  (emission  limit  values),  requiring  at  the  same  time  that  the  best  available  techniques  (BAT)  be  used  as  the 
reference when setting such limit values and other operating conditions in permits. The Commission regularly adopts BAT 
conclusions in the form of implementing decisions for the activities covered by the scope of the IED. Capture of CO2 is also 
covered, therefore BAT conclusions will be adopted in the future for that activity. 

10 

 
                                                 
2.2.5. 

The use of fossil fuels in other industrial processes 

CO2 capture from several industrial processes is significantly easier than in the power sector 
due to the relatively high concentration of CO2 produced. The application of CCS in certain 
industries  therefore  represents  an  interesting  option  for  the  early  deployment  of  the 
technology.  The  assessment  of  the  Roadmap  2050  for  moving  to  a  competitive  low  carbon 
economy in 2050 indicates that CO2 emissions from the industrial sector need to be reduced 
by 34% to 40% by 2030, and by 83% to 87% by 2050 compared to 1990.  

Recent  studies  by  the  JRC  focusing  on  the  application  of  CCS  in  the  iron  and  steel  and 
cement sectors have shown that the CCS technology can become competitive in the medium-
term,  thus  contributing  to  the  cost  effective  emissions  reduction  from  these  industrial 
sectors16.  Taking  the  steel  sector  as  an  example,  the  potential  application  of  CCS  to  the 
industry  could  result  in  a  dramatic  reduction  of  direct  emissions.  Although  the  energy 
efficiency  of  steel  production  has  improved  dramatically  over  the  last  50  years,  the 
production process of crude steel remains an  energy intensive process. Between 80-90% of 
the CO2 emissions from the steel sector are generated by the coke ovens, blast furnaces and 
basic  oxygen  furnaces  of  integrated  steel  plants.  EU  accounts  for  approximately  15%  of 
global  steel  production,  with  nearly  180  million  tonnes  of  crude  steel  produced  within  the 
EU27 in 201117.   

In  its  2012  Industrial  Policy  Communication  Update,  the  EU  set  an  ambitious  target  of 
boosting the weight of industry in Europe from its current level of around 16 % of GDP to 
20  %  by  2020.  The  application  of  CCS  to  industrial  processes  would  enable  the  Union  to 
reconcile  this  goal  with  its  long-term  climate  objectives.  Nevertheless,  the  significance  of 
technical barriers still to be explored and the scale of R&D efforts still needed, as well as the 
economic  aspects  linked  to  the  international  markets  for  these  commodities,  should  not  be 
overlooked. 

The  deployment  of  CCS  in  industrial  processes  may  also  help  to  increase  public 
understanding and acceptance of the technology given the very visible link between jobs in 
local communities and continued industrial production. 

2.2.6. 

Potential of CCS in Europe and globally 

The  EU  is  committed  to  an  overall  greenhouse  gas  emissions  reduction  of  at  least  80%  by 
2050. Nonetheless, fossil fuels are likely to continue to be used in Europe's power generation 
as well as in industrial processes for decades to come. Therefore, the 2050 target can only be 
achieved  if  the  emissions  from  fossil  fuel  combustion  are  eliminated  from  the  system,  and 
here  CCS  may  have  an  essential  role  to  play,  as  a  technology  that  is  able  to  significantly 
reduce  CO2  emissions  from  the  use  of  fossil  fuels  in  both  the  power  and  industrial  sectors. 
CCS can also be applied in conjunction with the production of transport fuels, particularly for 
the production of alternative fuels18 like hydrogen from fossil sources.  

16 Prospective scenarios on energy efficiency and CO2 emissions in the EU iron & steel industry, EUR 25543 
EN, 2012; Moya & Pardo, Potential for improvements in energy efficiency and CO2 emission in the EU27 iron 
&  steel  industry,  Journal  of  cleaner  production,  2013;  Energy  efficiency  and  CO2  emissions  in  the  cement 
industry,  EUR  24592  EN,  2010;  Vatopoulos  &  Tzimas,  CCS  in  cement  manufacturing  process,  Journal  of 
Cleaner energy production, 32 (2012)251. 
17 See the World Steel Association publications at http://www.worldsteel.org 
18 Proposal for a Directive of the European Parliament and of the Council on the deployment of alternative fuels 
infrastructure,  COM(2013)18  final;  Communication  from  the  Commission  to  the  European  Parliament,  the 
Council,  the  European  Economic  and  Social  Committee  and  the  Committee  of  the  Regions:  Clean  Power  for 
Transport: A European alternative fuels strategy, COM(2013)17 final 

11 

 
                                                 
CCS  is  normally  considered  in  conjunction  with  fossil  fuel  combustion,  but  it  can  also  be 
used  to  capture  biogenic  carbon  from  the  use  of  biomass  (Bio-CCS).  Bio-CCS  application 
can  range  from  capturing  CO2  from  biomass  co-firing  and  biomass-fired  power  plants  to 
biofuel production processes. However, the technical feasibility of biomass-CCS value chain 
has still to be demonstrated on a large scale. 

IEA  analysis  suggests  that  without  CCS,  capital  costs  –  in  the  power  sector  -  to  reach  the 
greenhouse  gas  targets  required  for  a  maximum  2  degree  rise  in  global  temperatures  might 
increase by as much as 40%19. The role of CCS in cost efficient climate mitigation has been 
illustrated in the 2050 Energy Roadmap in which all of the scenarios imply the use of CCS. 
In 3 of the 5 decarbonisation scenarios that were elaborated, CCS was applied to more than 
20% of Europe's electricity mix by 2050, as shown in figure 10 below. 

Figure 10: Share of CCS (%) in power generation towards 2050 in the Energy Roadmap (Source: 2050 
Energy Roadmap) 

The  "diversified  supply  technology  scenario"  of  the  2050  Energy  Roadmap  shows  that  by 
2035 a total of 32 GW of CCS could be installed, rising to around 190 GW by 2050. This is 
potentially  a  significant  opportunity  for  European  industry  within  the  field  of  capture  and 
storage technologies but is, nonetheless, a daunting prospect when viewed from the level at 
which the EU currently stands. Any delay in CCS development in Europe will ultimately also 
affect negatively those business prospects.  

Projections  show  that  under  current  policies,  while  fossil  fuel  use  in  the  EU  continues  to 
decrease, it remains the largest share of the EU energy mix in the decades to come. Even if 
policies are upscaled in order to shift our energy mix further towards lower carbon intensity, 
fossil fuels would still represent more than 50% of the EU energy mix in 2030. 

19 IEA Energy Technology Perspectives 2012 

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Table  1:  Energy  mix  projections,  reference  scenario  representing  current  policies  (Source:  European 
Commission, Impact Assessment Energy Roadmap 2050) 

In the 2050 Energy Roadmap assessments, large scale deployment starts from around 2030, 
with  the  carbon  price  generated  in  the  Emission  Trading  System  (ETS)  being  the  main 
driving force. The development of a 2030 climate and energy framework, with its overall aim 
of setting the EU on track towards its 2050 GHG emissions reduction objective in order to 
keep global temperature increase to below 2 degrees, will influence the deployment of CCS. 

2.3.  Potential of industrial use of CO2 

CO2  is  a  chemical  compound  that  can  be  used  for  the  production  of  synthetic  fuels,  as  a 
working  fluid  (for  example  in  geothermal  plants),  feedstock  in  chemical  processes  and 
biotechnological  applications  or  for  the  manufacture  of  a  wide  range  of  other  products. 
Insofar, CO2 has been successfully utilised for the production of urea, refrigerants, beverages, 
welding  systems,  fire  extinguishers,  water  treatment  processes,  horticulture,  precipitated 
calcium carbonate for the paper industry, as an inert agent for food packaging and many other 
smaller-scale  applications20.  In  addition,  a  number  of  emerging  CO2  utilisation  options  has 
sprung  out  recently,  involving  various  pathways  for  the  production  of  chemicals  (e.g. 
polymers,  organic  acids,  alcohols,  sugars),  or  for  fuel  production  (e.g.  methanol,  biofuels 
from algae, synthetic natural gas). However, most of these technologies are still in the R&D 
phase. Furthermore, there are no clear conclusions regarding their CO2 abatement effects, due 
to  their  specific  mechanism  for  temporary  or  permanent  CO2  storage,  and  they  might  not 
present  the  sufficient  volumes  of  CO2  needed.  Irrespective  of  their  potential  to  reduce  CO2 
emissions,  CO2 utilisation  paths  represent  a  direct  near-term  potential  to  produce  revenues. 
Hence, CO2 would not be regarded anymore as a waste product but as a commodity, which 
could also help addressing public acceptance issues of CCS. 

Enhanced  oil  (and  in  some  cases  gas)  gas  recovery  is  on  the  other  hand  able  to  store 
significant amounts of CO2, while at the same time increasing oil production by on average 
13%21,  which  has  a  significant  economic  value.  Moreover, oil  and gas reservoirs  are prime 
candidates  for  CO2  storage  for  several  reasons.  First,  the  oil  and  gas  that  originally 
accumulated in traps did not escape, demonstrating the safety and reliability of such storage 
sites, provided that their structural integrity was not compromised as a result of exploration 
and extraction processes. Second, the geological structure and physical properties of most oil 
and gas fields have been extensively studied and characterized. Third, existing fields' geology 

20 Source: Chapter 7.3 of Carbon Dioxide Capture and Storage - IPCC, 2005 - Bert Metz, Ogunlade Davidson, 
Heleen de Coninck, Manuela Loos and Leo Meyer (Eds.) 
21 Source: Chapter 5.3.2 of Carbon Dioxide Capture and Storage - IPCC, 2005 - Bert Metz, Ogunlade Davidson, 
Heleen de Coninck, Manuela Loos and Leo Meyer (Eds.) 

13 

 
                                                 
and  characteristics  are  well  known  to  the  oil  and  gas  industry  to  predict  the  movement, 
displacement  behaviour  and  trapping  of  gases  and  liquids.  Nevertheless,  the  precautionary 
principle needs to be applied, as recently highlighted by the European Environmental Agency 
in  its  report  on  “Late  lessons  from  early  warnings”  (2013)22.  Furthermore,  the  potential  of 
EOR in Europe is limited23.  

2.4.  Cost competitiveness of CCS 

Globally,  more  than  20  demonstration  scale  CCS  projects  are  successfully  operating,  of 
which 2 are in Europe (Norway)24. Most of them are industrial applications, such as oil and 
gas processing or chemical production, which capture CO2 for commercial reasons. Eight of 
the projects have the full CCS chain (capture, transport and storage), five of which are made 
economically  feasible  through  enhanced  oil  recovery,  where  the  carbon  is  used  to  increase 
the extraction of crude oil (more details about the projects are set out in Annex 1).  
According to the Commission's 2050 Energy Roadmap and the IEA's  assessment25, CCS is 
expected to become a competitive low carbon transition technology. Cost estimates of CCS 
vary,  depending  on  the  fuel,  technology  and  storage  type,  but  most  calculations  for  current 
costs  fall  in  the  range  of  €30  to  €100/tCO 2  stored.  According  to  Cost  and  Performance  of 
Carbon  Dioxide  Capture  from  Power  Generation  by  the  IEA  (see  footnote  29  for  full 
reference), which is based on existing technical engineering studies, the current cost of CCS 
is in the order of 40 €/ton CO 2 avoided26 for coal power plants and 80 €/ton CO 2 avoided for 
natural  gas  power  plants.  In  addition  the  costs  of  transport  and  storage  must  be  taken  into 
account. However, costs are expected to decrease in the future.  
According  to  assessments  done  by  the  JRC27,  the  first  generation  CCS  coal  or  natural  gas 
power plants are expected to be significantly more expensive than similar conventional plants 
without  CCS.  Once  CCS  power  plants  start  being  deployed,  costs  will  decrease  benefiting 
from R&D activities and the building of economies of scale.  

Given persistently high oil prices, CCS may in some cases be cost competitive for the oil and 
gas  extraction  industry,  where  economic  margins  are  considerable  higher  than  in  power 
production  and  other  sectors  involved  in  consumption  or  supply  of  fossil  fuels.  This  is 
exemplified by the only two full scale CCS projects in operation in Europe today. These are 
located  in  Norway,  where  the  oil  and  gas  producers  face  a  tax  of  around  25  €/ton  of  CO 2 

22 http://www.eea.europa.eu/publications/late-lessons-2/late-lessons-2-full-report 
23 A JRC study that assessed the CO2-EOR potential in the North Sea concluded that although the process can 
increase considerably the European oil production and hence improve the security of energy supply, the impact 
on  reducing  CO2  emissions  will  be  limited  to  CO2  sources  in  the  vicinity  of  oil  fields.  The  main  barrier  to 
implementation  in  Europe  is  the  high  cost  of  the  associated  offshore  operations,  including  the  necessary 
modifications to the existing infrastructure and the unfavourable geology 
24 Source: ZEROs CCS project database; keeping track on the development and deployment of CCS globally.  
http://www.zeroco2.no/projects  and  GSSCI,  The  Global  Status  of  CCS:  2012  An  overview  of  large-scale 
integrated CCS projects: http://www.globalccsinstitute.com/publications/global-status-ccs-2012/online/47981  
25 World Energy Outlook 2012, IEA 2012 and; Cost and Performance of Carbon Dioxide Capture from Power 
Generation 
here: 
http://www.iea.org/publications/freepublications/publication/costperf_ccs_powergen-1.pdf, 
and;  A  policy 
strategy for carbon capture and storage Information paper IEA 2012 
26 This  assumes  a  pulverized  coal  plant  operating  as  base  load.  The  cost  in  USD  is  55.  Assumed  currency 
exchange  rate  of  1$  being  equivalent  to  1.298  €.  The  55  USD/ton  estimate  is  in  line  with  estimates  by  the 
European  Technology  Platform  for  Zero  Emission  Fossil  Fuel  Power  Plants,  which  estimated  a  range  of  30- 
€40/tCO 2 avoided cost. Natural gas CCS would need a carbon price of around 90€/ tCO2. 
27 Source: The Joint Research Centre (JRC) The cost of CCS, EUR 24125 EN, 2009 

available 

working 

Edition: 

2011, 

paper 

IEA 

14 

 
                                                 
emitted28. This tax, which is specific for gas and oil producers on the continental shelf, has 
led  to  the  commercial  development  of  CCS  at  Snøhvit  and  Sleipner  (see  Annex  I  for  more 
details).   

2.5.  Cost competitiveness of CCS being retrofitted on to existing power plants 

If  the  global  expansion  of  fossil  fuel  power  plants  is  not  reversed,  CCS  retrofit  will  be  a 
necessity  for  limiting  global  warming  to  below  2°C.  However,  the  International  Panel  on 
Climate  Change  (IPCC) 29  states  that  "Retrofitting  existing  plants  with  CO2  capture  is 
expected to lead to higher costs and significantly reduced overall efficiencies than for newly 
built power plants with capture. The cost disadvantages of retrofitting may be reduced in the 
case  of  some  relatively  new  and  highly  efficient  existing  plants  or  where  a  plant  is 
substantially  upgraded  or  rebuilt”.  Most  subsequent  studies  agree  with  the  findings  of  the 
IPCC. The main reasons for the higher costs are: 

•  Higher  investments  cost  as  the  existing  plant  configuration  and  space  constraints 

could make adaptation to CCS more difficult than for a new build.  

•  Shorter  lifespan, as the power plant is already operating. This implies that the CCS 
retrofit investment would need to be repaid over a shorter timespan than the CCS of a 
new built.  

•  Efficiency  penalty,  as  a  retrofit  is  difficult  to  optimally  integrate  to  maximise  the 

energy efficiency of the capturing process, leading to lower output.  

•  Stand still cost, as the existing installation that is being retrofitted would need to be 

taken out of production while the building works takes place. 

In order to minimise site specific constraints, and thereby the costs, it has been suggested to 
require new installations to be “CCS ready” 30, which could avoid further "locking in” of CO2 
emissions from new installations31.  

Under  Art.  33  of  the  CCS  Directive,  Member  States  have  to  ensure  that  operators  of  all 
combustion plants with a rated electrical output of 300 MW or more have assessed whether 
the conditions of 1) availability of suitable storage sites; 2) economic and technical feasibility 
of  transport  facilities  and  of  3)  retrofit  for  CO2  capture  are  met 32.  If  so,  the  competent 
authorities shall ensure that suitable space on the installation site for the equipment necessary 
to  capture  and  compress  CO2  is  set  aside.  The  number  of  plants  that  have  been  already 
designed “CCS ready” is, however, very low.  

An  assessment  of  the  measures  which  have  been  taken  by  Member  States  to  ensure  that 
Art.33 of the CCS Directive is implemented will be provided in the upcoming analysis of the 
CCS Directive transposition and implementation in the Member States. 

28 The tax is 0.47 NOK per litre of oil and per Sm3 of gas 
29 IPCC,  2005  -  Bert  Metz,  Ogunlade  Davidson,  Heleen  de  Coninck,  Manuela  Loos  and  Leo  Meyer  (Eds.)  - 
Cambridge University Press, UK, p 431. Available here:  
http://www.ipcc.ch/publications_and_data/publications_and_data_reports.shtml  
30 CCS ready means that the plant can be retrofitted with CCS at a later stage 
31 The "Clean Air Act" in the US effectively forces new coal power plants to be "CCS ready" (see also text box 
1)  as  the  emissions  performance  standard  is  allowed  to  be  met  over  a  30  year  period.  The  proposed  rule  is 
available here: http://www.gpo.gov/fdsys/pkg/FR-2012-04-13/pdf/2012-7820.pdf  
32 By this provision, the Large Combustion Plant Directive has been amended and it currently appears as Article 
36 of Industrial Emission Directive 

15 

 
                                                 
3.  The state of play of CCS demonstration in Europe and gap analysis 

The role of CCS is recognised in a future low carbon energy mix. This is inter alia the result 
of the European Union's commitment to take the vital step of advancing CCS from pilot scale 
research  projects  to  commercial  scale  demonstration  projects 33  that  can  reduce  costs, 
demonstrate  the  safe  geological  storage  of  carbon  dioxide  (CO2),  generate  transferrable 
knowledge about the potential of CCS, and de-risk the technologies for investors.  

Despite  considerable  efforts  to  take  the  lead  on  CCS  development  in  the  EU,  out  of  eight 
operating  full  size 34  demonstration  projects  with  complete  CCS  (capture,  transport  and 
storage  –  see  details  in  Annex  I),  none  of  them  are  located  in  the  EU,  and  even  the  most 
promising EU projects are facing major delays due to a number of reasons outlined below. 

3.1.  Lack of business case 

At  current  ETS  prices  well  below  €40/tCO 2,  and  without  any  other  legal  constraint  or 
incentive,  there  is  no  rationale  for  economic  operators  to  invest  in  CCS.  When  the 
Commission  proposed  the  Climate  and  Energy  Package  in  2008,  carbon  prices  were 
temporarily as high as €30. Expect ations were that, when the targets under the climate change 
and  energy  package  were  implemented,  such  price  levels  would  be  reached  for  2020,  and 
would continue to increase afterward. It was recognised that this might still not be sufficient 
to allow even demonstration plants to be commissioned. In addition to the establishment of 
the legal framework (the CCS Directive), the NER300 funding programme was introduced to 
finance  CCS  commercial  scale  demonstration,  together  with  innovative  renewables  energy 
projects,  alongside  the  European  Energy  Programme  for  Recovery  (EEPR)  focusing  on  6 
CCS demo projects. At carbon prices of €30, tota l support could have been as high € 9 billion. 
Together,  the  carbon  price  incentive  and  additional  financial  support  through  the  NER300 
and  the  EEPR  were  seen  as  adequate  to  ensure  construction  of  a  number  of  CCS 
demonstration plants in the EU. 

Today, with carbon prices closer to €5, and re venues from the NER300 significantly below 
initial  expectations,  it  is  clear  that  no  rationale  exists  for  economic  operators  to  invest  in 
demonstration CCS, as the additional investment and operational costs are not covered by the 
revenue accrued from the reduced emissions, through having to buy considerably fewer ETS 
allowances.  

The  completed  Front  End  Engineering  Studies  (FEED)  for  the  CCS  projects  show  that  the 
initial  cost  assumptions  for  the  capital  costs  for  CCS  were  realistic.  However,  the  business 
case significantly worsened as of 2009 because of the economic crisis resulting in a low ETS 
carbon  price.  Most  of  the  projects  based  their  calculations  on  a  carbon  price  of  at  least 
€20/ton  CO 2.  Assuming  a  10  year  operational  period  (as  requested  under  NER300)  with  1 
million ton CO2 stored per annum, a price difference of €10/ton CO 2 would effectively lead 
to  additional  operating  costs  of  approximately  €100  million.  Compared  to  the  €30  price 
expectation when the climate and energy package was proposed, the additional cost to cover 
is up to €200 million.  

These  additional  costs  would  at  present  need  to  be  covered  either  by  industry  or  by  public 
funds.  Enhanced  Oil  Recovery  (EOR)  may  help  some  projects,  but  unlike  in  the  US  and 
China, EOR has not been a driver for CCS deployment in Europe. While industry declared in 

33 the integrated full chain of CO2 capture, transport and storage at scales of over 250 MWe – or at least 500 
ktCO2/year for industrial applications 
34 All 8  are  as  large  or  larger than  an  equivalent  250  MW gas power  CCS  project, while  3  are  larger than  an 
equivalent 250 MW coal power CCS project 

16 

 
                                                 
2008 that it was willing to invest more than €12bn in CCS, the actual financial commitments 
made so far are not in line with this commitment. In fact, for most projects, industry is now 
limiting its funding to approx. 10% of the additional costs for CCS. Also, at Member State 
level,  the  financial  and  political  circumstances  which  prevailed  in  2008  are  presently  very 
different. 

In  the  current  economic  situation,  and  even  with  additional  funding  through  the  European 
Economic Recovery Programme which allocated around € 1 billion to CCS demonstration 35, 
the  structural  surplus  in  the  ETS  of  around  2  billion  allowances  and  subsequent  prolonged 
low carbon prices and lower than anticipated funding through the NER300, industry simply 
does  not  have  the  incentives  to  make  CCS  demonstration  viable,  affecting  negatively  the 
potential  for  large  scale  deployment.  In  the  absence  of  a  policy  strategy  that  makes  CCS 
commercially  viable  or  made  mandatory,  industry  is  likely  to  not  to  engage  in  large  scale 
CCS.  

This  was  underlined  recently  in  the  Award  Decision  of  the  first  call  of  the  NER300 
programme36.  The  original  goal  was  to  fund  8  CCS  demonstration  projects  of  commercial 
size together with 34 innovative renewable energy projects. 13 CCS projects were submitted 
to  the  NER300  call,  2  of  which  were  CCS  projects  in  industrial  applications  and  11  in  the 
power  generation  sector,  covering  7  Member  States.  3  projects  were  withdrawn  during  the 
competition. By July 2012, the Commission had identified 8 top-ranked CCS projects and 2 
reserve projects still running in the competition37. In the end no CCS projects were awarded 
funds  as,  at  the  last  stage  of  reconfirmation  of  the  projects,  Member  States  were  unable  to 
confirm  their  CCS  projects.  The  reasons  for  non-confirmation  include:  funding  gaps  in  the 
national and/or private funding contribution38, but also delays with the permitting procedures 
or, in one case, an on-going national funding competition, which did not allow the Member 
State concerned to confirm according to the requirements of the NER300 Decision.   

The  majority  of  CCS  projects  sought  NER300  funding  well  in  excess  of  €337  million  (the 
level at which the funding cap was set in light of the revenues raised from the monetisation of 
NER  allowances).  In  fact,  as  much  as  half  of  all  CCS  projects  sought  total  NER300 
contribution in excess of €500 million. The lower  than expected funding cap therefore placed 
additional pressure on Member States and private operators to cover the shortfall. Even for 
those  projects  whose  funding  requests  from  NER300  were  only  slightly  higher  than  the 
funding  cap,  funding  gaps  remained  a  key  challenge  and  a  determining  factor  in  their  non-
confirmation.  

Another  important  point  is  that  private  operators  putting  forward  applications  in  NER300 
appeared  little  willing  to  contribute  to  the  costs  themselves.  Instead,  a  majority  of  CCS 
operators put forward applications that relied almost entirely on public funding, while the rest 
of  the  applicants  proposed  to  contribute  with  a  relatively  small  share.  One  could  draw  a 
conclusion  that,  as  long  as  the  expected  carbon  price  will  be  low,  the  private  sector  will 
expect the CCS development to be co-financed on a large co-share by public funds, which is 
a proof of the ongoing challenges in the sector,  

35 For  details  regarding  the  status  of  the  6  demonstration  projects  funded  under  the  EU  EEPR,  programme, 
Annex II provides details.  
36 Available here: http://ec.europa.eu/clima/news/docs/draft_award_decision_ner300_first_call_en.pdf  
37 Commission  Staff  Working  Document  'NER300  -  Moving  towards  a  low  carbon  economy  and  boosting 
innovation, growth and employment across the EU' 
38 The NER300 programme offers to cover 50% of the additional cost associated with investment and operation 
of CCS plants. The rest should be covered by contributions of either the private sector or through public funding.  

17 

 
                                                 
Both  utilities  that  use  fossil  fuel  as  an  input  in  their  production  and  fossil  fuel  providers 
should  have  a  strong  interest  in  successful  development  of  CCS  for  their  future  economic 
prospects. Without CCS they face an uncertain future.     

3.2.  Public awareness and acceptance 

Some projects that envisage onshore storage face strong public opposition. This is especially 
true for projects in Poland and Germany. In Germany, lack of public acceptance was the main 
reason  for  the  delayed  transposition  of  the  CCS  directive.  The  EEPR-supported  project  in 
Spain – after a dedicated information and engagement campaign – successfully overcame the 
public  opposition.  The  projects  that  aim  at  offshore  storage  in  the  UK,  NL  and  Italy  have 
equally found public acceptance. A recent Eurobarometer survey39 shows that the European 
population  is  unaware  of  CCS  and  its  potential  contribution  to  mitigating  climate  change. 
However,  those  who  are  informed  are  more  likely  to  support  the  technology.  This  shows 
clearly that more needs to be done to introduce CCS into the debate on Europe's and Member 
States  efforts  to  combat  climate  change,  that  potential  health  and  environmental  risks 
(associated  with  leakage  of  stored  CO2)  need  to  be  further  explored,  and  that  public 
acceptance should not be assumed without prior assessment.   

3.3.  Legal framework  

The CCS directive provides a comprehensive legal framework for capturing, transporting and 
storing CCS. By the transposition deadline in June 2011 only a few Member States reported 
full  or  partial  transposition.  The  situation  has  substantially  improved  in  the  meanwhile  and 
currently only one Member State has not notified any transposition measures of the Directive 
to the Commission. While the majority of Member States with proposed CCS demonstration 
projects  have  completed  the  transposition  of  the  Directive,  several  Member  States  are 
banning or restricting storage of CO2 on their territories.  

The  full  analysis  of  the  CCS  Directive  transposition  and  implementation  in  the  Member 
States will also look at this in detail.  

3.4.  CO2 Storage and Infrastructure 
According to the EU GeoCapacity project40, the estimated overall availability of permanent 
geological  storage  capacity  in  Europe  is  equivalent  to  over  300  Giga  tonnes  (Gt)  of  CO2, 
whereas the conservative storage capacity is estimated at 117 Gt CO2. Total CO2 emissions 
from  EU  power  generation  and  industry  are  around  2.2  GtCO2  annually  and  hence  would 
allow for storage of all the CO2 captured in the EU for decades to come, even if taking into 
account  the  conservative  estimates.  Storage  capacity  in  the  North  Sea  alone  has  been 
estimated at over 200  GtCO2.  A  coherent approach to using this  capacity should be further 
explored.  

While  sufficient  storage  capacity  exists  in  Europe  not  all  capacity  is  accessible  or  located 
close to CO2 emitters. Hence a cross border transport infrastructure is necessary to efficiently 
connect CO2 sources to sinks. This is reflected in the Commission's proposal to include CO2 
transport  infrastructure  in  its  proposal  for  a  regulation  on  "Guidelines  for  Trans  European 
Infrastructure".  Under  this  regulation,  CO2  transport  infrastructure  projects  can  qualify  to 
become  projects  of  European  Common  Interest  and  can  eventually  be  eligible  for  funding. 
Nevertheless, initially CCS projects will most often explore CO2 storage sinks in the vicinity 
of capture points, hence infrastructure will first have to be developed at national level. Such 

39 Available here: http://ec.europa.eu/public_opinion/archives/ebs/ebs_364_en.pdf  
40 More information available here: http://www.geology.cz/geocapacity  

18 

 
                                                 
national infrastructure needs will have to be properly addressed by Member States, in order to 
then advance to cross-border networks.  

3.5.  International Cooperation 

Climate change will only be successfully tackled if addressed globally. Leading action by the 
EU can drive the necessary international cooperation, but there is additionally a clear policy 
rationale for promoting the use of mitigation technologies in countries that will need them to 
reorient their expanding economies to a low carbon pathway. This undoubtedly includes CCS, 
for which the non-EU market is likely to be much bigger than the internal market.  

For  example  Chinese  coal  consumption  grew  by  10%  in  2010  and  now  represents  48%  of 
global coal use. A significant part of the 300GW of coal-fired power plants currently under 
construction or planned in China are likely to still be operational in 2050. Unless new plants 
in  China  and  around  the  world  can  be  equipped  with  CCS  and  existing  plants  retrofitted,  a 
large proportion of the world's emissions between 2030 and 2050 are already 'locked-in'. The 
European  Commission  therefore  engages  actively  with  third  countries,  including  emerging 
economies,  and  industry.  It  aims  at  further  internationalising  knowledge  sharing  activities 
among CCS projects in the context of the European CCS Demonstration Project Network, as 
well as through its membership in the Carbon Sequestration Leadership Forum (CSLF) and 
as a collaborating participant in the Global CCS Institute (GCCSI). 

4.  Moving forward  

The second call of the NER300, which will be launched in April 2013, is a second chance for 
European  industry  and  Member  States  to  improve  the  current  prospects  for  CCS.  But 
considering the clear delays in the CCS demonstration programme, it is time to re-assess the 
objectives set by the European Council and re-orient our policy goals and instruments.  

The  need  for  large  scale  demonstration  and  deployment  of  CCS,  in  view  of  its 
commercialisation, has not receded and has only become more urgent. It is in our longer term 
competitive  interest  that  our  energy  and  industrial  sectors  gain  experience  in  progressing 
CCS  to  commercial  scale  roll-out41 that  can  reduce  costs,  demonstrate  the  safe  geological 
storage of CO2, generate transferrable knowledge about the potential of CCS, and de-risk the 
technologies for investors.  

CCS  will  always  incur  higher  costs  than  unabated  fossil  fuel  combustion,  and  would  thus 
require a corresponding compensation, as combustion of fuels without capture requires less 
investment  and  less  energy.  The  compensation  can  be  made  through  various  policy 
interventions.  Today  we  already  have  the  ETS,  which  gives  direct  incentives  for  CCS  by 
pricing carbon, although at a much too low level. In addition, the use of some of the revenues 
from  the  auctioning  of  carbon  allowances  (the  NER300  programme)  provides  potential 
funding for CCS, as well as renewable energy projects.  

The  current  price  expectation  for  CO2  allowances  is  well  below  the  2008  assessment  for  the 
Climate  and  Energy  Package,  which  projected  2020  prices  in  the  order  of  €30  (2005  prices) 42. 
Today's price signal in the EU ETS does not incentivise fuel switching from coal to gas and 
increases    financing  costs  for  low  carbon  investments  as  these  increase  with  the  perceived 
risks associated with the low carbon investment. A survey of 363 EU ETS operators confirms 

41 the integrated full chain of CO2 capture, transport and storage at scales of over 250 MWe – or at least 500 
ktCO2/year for industrial applications 
42 See also section 4.3 of the Staff Working Document on the functioning of the carbon market.   

19 

 
                                                 
that  the  price  of  European  carbon  allowances  has  recently  become  less  important  for 
investment decisions43. 

A  structural  ETS  reform  may  provide  increasing  prices  and  can  confirm  to  the  market  that 
also over the long term the ETS will be providing a sufficiently strong carbon price signal to 
drive the deployment of CCS. Accordingly, the Commission has launched a Carbon Market 
Report, together with a public consultation, that looks at a number of possible options to do 
so. For driving CCS deployment without any other incentives, significant ETS price increases 
(or expectations thereof), of 40 € or more, would be necessary 44.  

The IEA highlights that a CCS strategy needs to take into account the shifting needs of the 
technology  as  it  matures,  from  more  specific  measures  in  the  early  stages  to  more  neutral 
measures  to  ensure  CCS  becomes  competitive  with  other  abatement  opportunities  as  it 
approaches  commercialization45.  Following  this  and  regardless  of  the  final  outcome  of  the 
discussions  of  a  structural  reform  of  the  ETS,  it  is  important  that  CCS  deployment  is 
adequately prepared by a robust demonstration process. Policy options therefore need to be 
taken into consideration in order to enable as soon as possible large scale demonstration with 
a view on further deployment and roll-out.  

Under  the  climate  change  and  energy  package  it  was  recognised  demonstration  would 
probably not only come through the carbon price signal. Additional incentives were foreseen 
through  the  NER300  and  the  EEPR  financial  package,  as  well  as  through  the  CCS  legal 
framework.  The  current  ETS  foresees,  through  the  second  call  of  NER300,  that  CCS  and 
innovative  renewable  energy  projects  could  be supported.  Expanding  this  type  of  financing 
could be considered also for the period towards 2030. Such financing could address some of 
the  objectives  of  the  SET  plan,  and  could  also  explicitly  focus  on  innovation  in  energy 
intensive  industries  as  CCS  is  a  key  technology  that  is  applicable  to  both  the  energy  and 
industrial sectors. Furthermore by using the format of a competition, it allows a level playing 
field across all EU business, ensuring smart use of limited funds.  

In  addition,  taking  into  consideration  developments  that  have  been  explored  and/or 
implemented  in  a  number  of  countries,  several  policy  options  that  go  beyond  the  existing 
measures could be taken into consideration. Such options are briefly presented below.  

It is evident that, while carbon price is not at a sufficient level, there is still a need to develop 
CCS  infrastructure,  skills  and  knowledge  through  the  deployment  of  a  limited  amount  of 
CCS projects. Any measures to promote demonstration could be limited in scope, containing 
costs  to  the  overall  economy  while  at  the  same  time  providing  the  necessary  investor 
certainty,  allowing  for  the  benefits  of  early  deployment  to  be  reaped.  The  demonstration 
process would also provide clearer perspectives for the future need for CCS, especially in a 
situation in the short to mid-term where the carbon price is not at a sufficiently high level to 
provide for investments in CCS.  

43 Long  term  carbon  prices  remain  for  38%  of  respondents  the  decisive  factor  and  for  a  further  55%  of 
respondents an influencing factor. However, for the first time since 2009, the share of those actually not taking 
carbon prices at all into account has almost doubled to reach 7% in the 2012 survey. Thomson Reuters Point 
Carbon, Carbon 2012, 21 March 2012, http://www.pointcarbon.com/news/1.1804940    
44 It is not expected that such levels of the carbon price will be reached any time soon, and it is therefore not 
likely  that  industry  will  commit  the  appropriate  investments  to  CCS  projects  on  the  basis  of  the  carbon  price 
alone. This is further reinforced in a context of lack of clear policy framework and incentives at national level, 
compounded by public resistance, unless actions are undertaken at European and Member State level to change 
the negative prospects. 
45 IEA (2012), ‘A Policy Strategy for Carbon Capture and Storage’. 

20 

 
                                                 
A mandatory CCS certificate system could require carbon emitters (above a certain size) or 
suppliers  of  fossil  fuels  to  buy  CCS  certificates  equivalent  to  certain  amount  of  their 
emissions  or  embedded  emissions  (in  case  the  commitment  is  placed  on  the  fossil  fuel 
suppliers).  Certificates  could  be  given  to  the  oil  and  gas  industry,  ensuring  that  the 
knowledge  already  contained  in  these  sectors  regarding  geology  and  field  expertise  is 
contributing to identifying the best suited storage sites, including the possibility for enhanced 
oil and gas recovery, in so far as this ensures permanent CO2 storage.  

Box 1: CCS obligation currently in operation 

Starting in 2015, electric power utilities in the state of Illinois in the USA are required to 
source  5%  of  their  electricity  from  a  clean  coal  power  source,  with  a  target  of  25%  by 
2025. Plants operating before 2016 qualify as clean coal as long as at least 50% of CO2 
emissions  are  captured  and  sequestered.  This  requirement  rises  to  70%  for  coal  power 
plants expected to commence operating in 2016 or 2017, and to 90% thereafter. 

Such a system could work with the ETS, provided the volume of CCS certificates that would 
be  required  would  have  its  equivalent  in  ETS  allowances,  which  would  have  to  be 
permanently  withdrawn  from  the  market  (the  quantity  of  carbon  reductions  through  CCS 
certificates is known, so that a swift integration with the ETS system would be possible by 
reducing the amounts of ETS allowances with the same number). Such a system could define 
how much CCS needs to be developed and delivered. If targeted in scope, the impact on the 
functioning  of  the  ETS  could  be  limited  whilst  still  allowing  the  flexibility  to  business  to 
meet the cap.  

Emission performance standards could be a targeted solution which could consist of creating 
mandatory  emissions  performance  standards  either  on  new  investments  only  or  on  all 
emitters  in  a  sector,  by  limiting  firms  or  installations  to  no  more  than  a  fixed  amount  of 
emissions per unit of production.  

Box 2: Emissions performance standards currently in operation 

An emissions performance standard  (EPS), as  a  long term support policy,  is  currently in 
place  in  California,  where  a  non‐tradable  emissions  performance  standard  of  500g 
CO2/kWh  on  new  electricity  generating  plants  has  been  instigated1.  The  US  is  also 
considering on the federal level an emissions performance standard through the Clean Air 
Act implemented by the EPA, which effectively forces new investments in coal power to 
be "CCS ready" and retrofitted at a later stage. This is ensured by allowing the emissions 
performance  standard  to  be  met  on  average  over  a  30  years  period.  Another  example  is 
Norway, where no gas power plant can be built without CCS. 

Emission performance standards raise a number of methodological questions. They give no 
guarantee that plants would be built with CCS, and could rather shift investments simply to 
energy  sources  with  a  lower  carbon  content  as  determined  by  the  EPS.  Furthermore,  if 
rigorously implemented, the scheme would de facto replace the carbon price signal from the 
ETS as an incentive to decarbonise, without allowing the sectors concerned the flexibility as 
foreseen  under  the  ETS.  Therefore  any  Emission  Performance  standard  would  need  further 
consideration on how it would impact the ETS and the sectors concerned46.  

46 See for instance http://ec.europa.eu/clima/policies/lowcarbon/ccs/docs/impacts_en.pdf  

21 

 
                                                 
Furthermore national governments also have a role to play in demonstration. Member States 
could for instance set up systems that ensure a minimum return on any CCS investment made, 
similar  to  feed-in  tariffs  often  employed  to  ensure  demonstration  and  penetration  of 
renewable  technologies.  If  designed  in  a  flexible  manner,  to  avoid  windfall  profits,  and  if 
limited  to  demonstration  only,  such  schemes  could  prove  effective,  and  have  no  undue 
negative impact on the functioning of the ETS or the internal market. 

5.  Conclusions 
The Energy Roadmap 2050 as well as global developments and reports47 make it evident that 
fossil fuels will stay in the global and European energy mix and will continue to be used in 
many industrial processes. CCS is at present one of the key available technologies that can 
help to reduce CO2 emissions in the power generation sector. In order to realise its potential 
CCS needs to become a cost-competitive technology, so that it could start to be commercially 
deployed and thus contribute to the low-carbon transition of the European economy.  

But CCS is now at a crossroads.  

All aspects of CCS have already been demonstrated outside the EU, where its application for 
gas processing is commercial and around 20 full scale industrial projects are expected to be in 
operation  by  2020.  Despite much effort and significant EU support, CCS  commercial scale 
demonstration projects in the EU are delayed and available funding is not sufficient. In fact, 
efforts need to be increased to realise at least those few projects that have been awarded EU 
funding.  Delays  of  CCS  on  coal  and  gas-fired  power  will  likely  lead  to  greater  costs  for 
decarbonising  the  electricity  sector  in  the  longer  term,  especially  for  those  Member  States 
that rely heavily on fossil fuels.  

An  urgent  policy  response  to  the  prime  challenge  of  stimulating  investment  in  CCS 
demonstration  is  required  to  test  whether  the  subsequent  deployment  and  construction  of 
CO2 infrastructure is feasible. The first step on this path is therefore to ensure a successful 
commercial-scale demonstration of CCS in Europe that would confirm CCS's technical and 
economic viability as a cost effective measure to mitigate GHG in the power and industrial 
sector. 

CCS  is  also  on  the  longer  term  necessary  to  be  able  to  reduce  emissions  in  industries  with 
process emissions that cannot be avoided. Further delays may ultimately result in the need of 
the European industry to purchase CCS technology from non EU countries in the future.  

Given  the  complexities  explained  above,  and  in  the  light  of  the  work  started  on  the  2030 
energy and climate framework and the need for an informed debate, including the issue of the 
determining factors for successful CCS deployment, the Commission invites contributions on 
the role of CCS in Europe, particularly: 

1)  Should Member States that currently have a high share of coal and gas in their energy 
mix as well as in industrial processes, and that have not yet done so, be required to: 

a.  develop  a  clear  roadmap  on  how  to  restructure  their  electricity  generation 
sector towards non-carbon emitting fuels (nuclear or renewables) by 2050, 

b.  develop a national strategy to prepare for the deployment of CCS technology. 

47 IEA – World Energy Outlook 2012 estimates that fossil fuels represent 80% of global energy use today, while 
it will represent 75% in 2035 in the "new policies" scenario. 

22 

 
                                                 
2)  How  should  the  ETS  be  re-structured,  so  that  it  could  also  provide  meaningful 
incentives for CCS deployment? Should this be complemented by using instruments 
based on auctioning revenues, similar to NER300?   

3)  Should  the  Commission  propose  other  means  of  support  or  consider  other  policy 

measures to pave the road towards early deployment, by: 

a.  support through auctioning recycling or other funding approaches48 

b.  an Emission Performance Standard 

c.  a CCS certificate system  

d.  another type of policy measure 

4)  Should energy utilities henceforth be required to install CCS-ready equipment for all 
new  investments  (coal  and  potentially  also  gas)  in  order  to  facilitate  the  necessary 
CCS retrofit?  

5)  Should fossil fuel providers contribute to CCS demonstration and deployment through 

specific measures that ensure additional financing?  

6)  What are the main obstacles to ensuring sufficient demonstration of CCS in the EU? 

7)  How can public acceptance for CCS be increased? 

Based  on  the  responses  to  this  consultation  and  the  full  analysis  of  the  CCS  Directive 
transposition  and  implementation  in  the  Member  States,  the  Commission  will  consider  the 
need to prepare proposals, if appropriate, in the context of its work on the 2030 Energy and 
Climate Framework. 

48 Taking into account complementarity with the European Structural and Investment Funds (ESI), as set out in 
the Common Strategic Framework annexed to the Commission proposal for a Common provisions regulation of 
the ESI Funds  

23 

 
 
                                                 
Annex I – Full scale CCS projects 
CCS  projects  currently  under  operation49.  The  projects  marked  with  a  *  are  projects  with 
complete  CCS  (capture,  transport  and  storage).  More  details  on  the  business  case  are 
provided below the table.  

 Project 
name  

 Country

*Shute Creek  USA 

*Century Plant  USA 

 Project 
type  

Capture 
Storage 

Capture 
Storage 

 Industry  

 Scale  

 Status 

 Year  of 
operation 

Size  [ton 
CO2/yr] 

Oil  and  gas 
processing 

Oil  and  gas 
processing 

Large 

Operative  1986 

7,000,000 

Large 

Operative  2010 

5,000,000 

*Great  Plains 
Synfuels Plant 

USA 

Capture 

Coal to liquid Large 

Operative 

1984 
(plant) 
CO2 
injections 
since 2000

3,000,000 

*Val 
natural 
plants 

Verde 
gas 

USA 

 *Sleipner 
West 

Norway 

*In Salah 

Algeria 

*Snøhvit 

Norway 

*Enid 
Fertiliser Plant 

USA 

Capture 
Storage 

Capture 
Storage 

Capture 
Storage 

Capture 
Storage 

Capture 
Storage 

Oil  and  gas 
processing 

Oil  and  gas 
processing 

Oil  and  gas 
processing 

Oil  and  gas 
processing 

Chemical 
products 

Large 

Operative  1972 

1,300,000 

Large 

Operative  1996 

1,000,000 

Large 

Operative  2004 

1,000,000 

Large 

Operative  2008 

700,000 

Medium Operative  2003 

680,000 

Mt. 
Sandstone 

Simon 

Searles  Valley 
Minerals 

Aonla 
plant 

Phulpur 
plant 

urea 

urea 

Husky  Energy 
CO2  Capture 
and 

USA 

Storage site  Biofuel 

Medium Operative 

 2011 

330,000 

USA 

Capture 

Other 

Medium Operative  1976 

270,000 

India 

Capture 

India 

Capture 

Chemical 
products 

Chemical 
products 

Canada 

Capture 
Storage 

Ethanol 
production 

Large 

Operative  2006 

150,000 

Large 

Operative  2006 

150,000 

Large 

Operative  2012 

100,000 

49 Source: ZEROs CCS project database; keeping track on the development and deployment of CCS globally. 
http://www.zeroco2.no/projects and;  

GSSCI,  The  Global  Status  of  CCS:  20122.1  An  overview  of  large-scale  integrated  CCS  projects: 
http://www.globalccsinstitute.com/publications/global-status-ccs-2012/online/47981   

24 

 
 
  
 
 
 
                                                 
Liquefaction 
Project 

CO2  Recovery 
Plant  to  Urea 
production 
in 
Abu Dhabi 

United 
Arab 
Emirates 

 Plant  Barry 
CCS Demo 

USA 

Salt 
EOR 

Creek 

USA 

Capture 

Capture 
Storage 

Capture 
Storage 

Chemical 
products 

Coal  Power 
Plant 

Oil  and  gas 
processing 

Large 

Operative  2009 

100,000 

Large 

Operative  2011 

100,000 

Large 

Operative  2003 

100,000 

SECARB 
- 
Cranfield  and 
Citronelle 

Luzhou 
Natural  Gas 
Chemicals 

Jagdishpur 
India. 
plant 

- 
Urea 

Sumitomo 
Chemicals 
Plant -  Chiba  - 
Japan 

USA 

Storage 

Large 

Operative 

2009  and 
2012 

100,000 

China 

Capture 

Chemical 
products 

Large 

Operative 

50,000 

India 

Capture 

Large 

Operative  1988 

50,000 

Japan 

Capture 

Oil  and  gas 
processing 

Large 

Operative  1994 

50,000 

Details on the 8 commercial full scale projects:  

Project 

Business case 

Shute Creek 

Century Plant 

EOR  (enhanced  oil  recovery).  ExxonMobil's  Shute  Creek  gas  processing 
plant  near  LaBarge,  Wyoming,  is  currently  capturing  around  7  million 
tonnes per annum of CO2 that is used for enhanced oil recovery. 

EOR (enhanced oil recovery). Around 5 million tonnes per annum of CO2 
are  currently  being  captured  from  the  first  train  of  the  plant.  This  is 
expected  to  increase  to  around  8.5  million  tonnes  per  annum  when  the 
second train, now under construction, becomes operational. 

Great 
Synfuels Plant 

Plains 

EOR (enhanced oil recovery). Sequestration began in 2000 and the project 
continues to inject around 3 million tonnes of CO2 a year. 

EOR (enhanced oil recovery). Five separate gas processing facilities in the 
Val Verde area of Texas, USA, capture around 1.3 million tonnes of CO2 
annually for use in enhanced oil recovery operations at the Sharon Ridge 
oilfield. 

The specification (quality) of the natural gas that is sold requires that the 
level of CO2 content in the gas is lower than 2.5%. The capture of the CO2 
is commercially viable due to the CO2 tax applied on the continental shelf 
of Norway. 

Val  Verde  natural 
gas plants 

Sleipner West 

25 

 
  
  
  
 
In Salah 

The specification (quality) of the natural gas that is sold requires that the 
level of CO2 content in the gas is lower than 2.5%. The project applied for 
CDM credits.  

Snøhvit 

Same as for Sleipner West 

Enid Fertiliser Plant 

EOR (enhanced oil recovery). CO2 needs to be removed in the production 
of  fertilizer.  Instead  of  venting  the  gas,  the  Enid  Fertiliser  Plant  captures 
the gas and uses it for enhanced oil recovery at an oil field almost 200 km 
away.   

26 

 
 
Annex II – Status of European full-scale demonstration projects under the EEPR 

The  EEPR  programme  could  finance  6  CCS  demonstration  plants  with  up  to  €180  million 
each. However, none of them have taken the final investment decision.  

Main Achievements 

The  EEPR  enabled  a  fast  start  of  six  projects  (in  Germany,  the  United  Kingdom,  Italy,  the 
Netherlands, Poland and Spain). For one of these (ROAD in NL) the EEPR was instrumental 
in leveraging national funding. In the area of permitting, the EEPR has triggered a targeted 
dialogue and cooperation with authorities and local populations. 

Some  projects  have  also  helped  in  structuring  the  actual  implementation  at  Member  State 
level  of  the  CCS  Directive.  Furthermore,  the  detailed  engineering  studies  performed  so  far 
have allowed utilities to gain insight know-how on the future operation of an integrated CCS 
facility. The characterisation work on specific geological storage locations has also led to the 
identification of suitable sites for the permanent and safe storage of CO2. 

The  CCS  sub-programme  includes  an  obligation  for  projects  to  exchange  experiences  and 
best practices, which was made operational by the establishment of the CCS Project Network. 
It  is  the  first  such  knowledge-sharing  network  worldwide  and  the  6  members  are  working 
together  to  inter  alia  produce  common  'good  practice'  guides;  this  is  unprecedented 
cooperation in a new energy technology area. The Network furthermore published reports of 
the  lessons  learned  by  projects  on  CO2  storage,  public  engagement  and  permitting.  It  also 
aims at leading the development of a global knowledge sharing framework. 

Critical issues 

The  CCS  sub-programme  as  a  whole  is  facing  some  major  regulatory  and  economic 
uncertainties  that  risk  undermining  its  successful  implementation.  The  fact  that  none  of  the 
projects  have  yet  adopted  the  final  investment  decision  (FID)  illustrates  the  on-going 
difficulties. This milestone has been delayed for a variety of reasons, including: permits have 
not yet been secured completely; characterisation of the storage sites has not been finalised; 
financial  structure  has  yet  to  be  completed.  Furthermore,  the  low  carbon  price  under  the 
Emissions Trading System (ETS) renders the short and medium-term business cases for CCS 
unattractive.  Finally,  due  to  the  current  economic  context,  projects  are  facing  increasing 
difficulties with access to financing. 

In  early  2012  the  EEPR  project  in  Germany,  Jaenschwalde,  was  terminated.  In  addition  to 
facing public opposition in the potential storage locations, the promoters concluded that the 
substantial  delays  in  the  German  transposition  of  the  CCS  Directive  would  not  allow  the 
necessary CO2 storage permits to be obtained within the project timeframe.  

Outlook 

The remaining 5 projects face different challenges, as briefly explained below: 

•  ROAD  (NL):  The  project  has  successfully  completed  all  the  preliminary  technical  and 
regulatory  works.  It  is  hence  ready  for  the  adoption  of  the  final  investment  decision.  
Despite being ready for FID since mid-2012, the worsening of the business case for CCS, 
i.e.  CO2  price  projections,  opened  a  funding  gap  of  €130m  which  has  postponed  the 
decision.    The  FID  is  subject  to  closing  the  financing  gap.  Discussions  with  additional 
investors  are  on-going.  A  decision  is  expected  in  Q2-Q3  2013.  The  integrated  CCS 
demonstration project is scheduled to be operational in 2016. 

•  Don  Valley  (UK): The recent decision of the UK not to support the project is a serious 
setback. After having consulted its key private partners and investors (including Samsung, 
BOC), the promoters (2Co, National Grid Carbon) are however committed to go ahead, 
but  potentially  with  a  smaller  project  and  with  focus  on  the  planned  "Contract  for 

27 

 
Difference"  (CfD)  scheme  which  was  on  29  November  2012  proposed  by  the  UK 
government  as  part  of  the  Energy  Bill.  The  Commission  is  currently  discussing  a 
restructuring plan with the beneficiaries.  If the plan is approved by the Commission, FID 
could take place in 2015. 

•  Porto Tolle (IT) faces severe delays due to the revocation of the environmental permit of 
the  base  power  plant.  In  May  2013  the  promoters  will  complete  the  Front  End 
Engineering Studies. The way forward will be conditional on meeting a key milestone in 
Q2 2013: the capacity to mitigate significantly the permitting and financial risks. 

•  Compostilla  (ES)  will  successfully  complete  the  pilot  phase  within  2013  but  lacks  the 
necessary financing for the demonstration phase.  The next phase would also require that 
Spain adopts legislation for planning and building the CO2 transport corridor.  

•  Belchatow  (PL):  the  project  did  not  receive  NER300  funding  and  has  a  significant 
financing  gap.  In  addition  Poland  still  has  to  transpose  the  CCS  directive  and  adopt 
legislation for planning and building the CO2 transport corridor. Against this background, 
the promoter decided to start termination of the project in March 2013. 

28