Skip to main content


Carbon Capture – The Current State of Play in the European Union

Carbon capture and storage (CCS) is the process of capturing carbon dioxide (CO2) either from the air or from the combustion of fossil fuels or biomass, transporting it to a geological storage and injecting it there. Carbon capture and utilisation (CCU) means that the captured CO2 is processed into a permanent chemical bond or into an e-fuel. CCS and CCU are seen as key net-zero technologies, especially for hard-to-abate industries (eg cement, lime, steel), for peak load generation in gas- and biomass-fired power plants, and for the production of e-fuels to be used in aircrafts, ships and trucks.

The market alone does not provide sufficient incentives for the development and deployment of CCS and CCU. However, there are a number of drivers arising from the EU regulatory framework:

  • Avoiding CO2 emissions through CCS or CCU will save operators of industrial plants, power plants and aircrafts, as well as (in future) shipping companies and fuel suppliers EU Emissions Trading Scheme (ETS) costs they would otherwise incur. While the EU ETS price was €3 per tonne of CO2 equivalent in January 2013, it exceeded €100 for the first time in February 2023 as the cap on ETS allowances had been reduced. The cost savings from the ETS exemption for CCS and CCU will therefore partly – and later probably fully – offset the abatement costs of developing and deploying this technology.
  • As from 2026, emissions embedded in certain goods imported from third countries (such as cement, steel and ammonia) will be subject to a price linked to the ETS price in the form of a Carbon Border Adjustment Mechanism (CBAM). This will not be the case if the CO2 released in the production of these goods is not emitted, but captured and stored or permanently bound in a chemical. CBAM will therefore be a driver for the deployment of CCS and CCS in third countries.
  • For the transport sector in particular, the draft revision of the Directive (EU) 2018/2001 (Renewable Energy Directive II – RED II) and various specific rules for aviation and maritime impose obligations to reduce greenhouse gas emission intensity or to meet certain renewable energy quotas, especially with
    target dates of 2030 and beyond. These provisions have the potential to create an additional incentive for the use of e-fuels in the transport sector, particularly in aviation.
  • CCS and CCU projects that meet certain conditions are eligible for government funding at both EU and Member State level.
  • The draft Net Zero Industry Act provides for an obligation on authorised oil and gas producers to develop 50 million tonnes of annual operational CO2 injection capacity by 2030, although the compatibility of this obligation with the EU Treaties, the Charter of Fundamental Rights and the Energy Charter is questionable.
  • Subject to conditions, the development and deployment of CCS and CCU qualify under the sustainability requirements of the EU Taxonomy Regulation and could therefore benefit from a sustainability premium rewarded in equity, bond and consumer markets.

However, there are also a number of regulatory-related obstacles to the development and deployment of CCS and CCU:

  • The future ETS price is subject to volatility risks and could be relaxed by a political decision to lift the ETS cap.
  • There appears to be a lack of government funding for large-scale projects.
  • In several Member States, such as Germany and Austria, CCS is prohibited. However, a lifting of the CCS ban is under discussion.
  • The permitting for CCS and CCU projects is at risk of being significantly delayed by third-party legal challenges.
  • The construction and operation of geological storage is subject to civil liability risks, sometimes with particularly plaintiff-friendly rules on the burden of proof.
  • The maritime conventions OSCAR and the London Protocol set high standards for the protection of the marine environment for seabed storage.
  • There are regulatory barriers to the use of CCU-based e-fuels in the transport sector, particularly for cars and also for trucks.

This briefing explains the EU regulatory framework for carbon capture, utilisation, and storage relevant for companies and investors looking to get involved in the sector.


To download our briefing please click the link below.

Freshfields - Briefing - CCS and CCU in the EU
(PDF - 283.2 KB)

Download PDF