Bridging the gap: improving the economic and policy framework for carbon capture and storage in the European Union

A joint report by the Grantham Research Institute (LSE) and the Grantham Institute
Authors: Samuela Bassi (LSE), Rodney Boyd (LSE), Simon Buckle, Paul Fennell, Niall Mac Dowell, Zen Makuch & Iain Staffell

Headline issue: a gap between CCS ambition and reality

To meet climate change targets, European Union (EU) countries need to significantly increase investment in carbon capture and storage (CCS) and show greater urgency to develop and deploy the technology. Installing 11 GW of CCS electricity generation in the EU by 2030, as envisaged by the EU Energy Roadmap, could cost between €18 and €35 billion. Current policies, including those envisaged by the 2030 framework for climate and energy and the emerging Energy Union, are unlikely to deliver this investment. A new European strategy is needed to increase ambition and accelerate action on CCS.

Key findings: a European strategy for CCS

A European strategy to increase ambition and accelerate action on CCS should deliver the following:

1. Stronger policies to incentivise CCS

The European Union emissions trading system (EU ETS) alone will not provide a sufficient incentive to invest in CCS over the next decade. Complimentary policies will be required, including:

• Increased direct funding for research and development
• A new funding mechanism to finance early stage development projects
• Financial incentives for electricity generation, such as feed-in tariffs or contracts for difference
• Mandatory targets, such as emissions performance standards or intensity targets
• Tailored incentives to support the uptake of industrial CCS

 2. More ambitious and coordinated action

Only a small number of Member States have introduced policies to support CCS. To accelerate action the European Commission and Council should:

• Initiate an assessment by Member States of their potential to capture and store carbon
• Ensure coherence across national policies to support CCS
• Enable shared learning and innovation
• Set milestones against which progress can be measured

 3. Improved legislation on carbon dioxide storage and transport infrastructure

Improvements to legislation that facilitate more equitable risk sharing are required to help stimulate deployment. For example:

• An initial cap on long-term liability for leakage should be considered
• Demonstration projects should receive special treatment through a public liability scheme
• The European Commission should consider relying on the Environmental Liability Directive rather the EU ETS to determine the size of leakage remediation costs