Germany: Act to enable commercial CCS and CCU now in force

What do I need to know?

The adopted version of the KSpTG largely reflects the initial draft law presented by the Federal Government (cf. our summary: Germany: Federal government presents draft bill to accelerate the transition to climate-neutral heat supply | Eversheds Sutherland). The key aspects of the Act include the following:

• commercial offshore CO₂ storage is now permitted in the German exclusive economic zone (EEZ) and continental shelf (excluding marine protected areas and their buffer zones), while onshore CO₂ storage is still subject to an opt-in by the Federal States
• operators of decommissioned sites for oil and natural gas exploration are obliged to provide geological data for potential use for CO₂ storage if they have not applied for a permit to explore CO₂ storage on the respective site themselves
• the transport and storage of CO₂ from natural gas-fired power plants is permitted whilst transporting and storing CO₂ from coal-based power plants is not allowed
• the construction of new CO₂ pipelines is classified as infrastructure of overriding public interest
• the export of CO₂ to third countries by sea (via ships and pipelines) is subject, first to ratification under the 1996 Protocol to the Convention on the Prevention of Marine Pollution by Dumping of Wastes and Other Matter, 1972 (London Protocol) and, second to bilateral agreements with the respective countries. The first step, ratification, is currently under consideration in the First Chamber of German Parliament (Bundestag). A decision can be expected in the next few weeks or months.

Why is this important for stakeholders?

The German roadmap on CCS and CCU is taking shape. For CO₂ emitters falling under the EU ETS, the KSpTG provides an option to decarbonize via the use of CCS or CCU and reduce the number of CO₂ certificates they would otherwise be required to deliver. In this context, support schemes are likely to be of particular interest to many emitters because, given the current market price of CO₂ certificates and the transport and storage price per ton of CO₂, CCS may only be financially viable with the support of funding at the current stage.

Furthermore, there are doubts as to whether the German EEZ and continental shelf are capable of storing significant amounts of CO₂ and whether CCS infrastructure might conflict with offshore wind energy infrastructure, which takes precedence over CO₂ storage. Therefore, the export of CO₂ may become crucial.

What should I do next?

Emitters, namely in the cement, chemical, limestone, steel and waste incineration industries, should consider whether CCS is a viable option to reduce their CO₂ emissions. In this context, it should be noted that two national funding schemes are planned that include support for projects using CCS or CCUS. These are the climate protection contracts (Klimaschutzverträge), which are construed as Carbon Contracts for Difference (CCfDs), and the Federal Funding Industry and Climate Protection program (Förderrichtlinie Bundesförderung Industrie und Klimaschutz – BIK). These schemes may be relevant not only to emitters but also to companies transporting and storing CO₂, as those emitters constitute potential customers.

In addition, several provisions under the current KSpTG empower Federal Ministries to enact ordinances. Such ordinances will specify, for example, the requirements for CO₂ storage and the obligations of certain oil and gas exploration companies under Art. 23 of the Regulation (EU) 2024/1735 (Net-Zero Industry Act -NZIA). No such ordinances have been issued to date, but affected players should closely monitor these developments.