CCS (Carbon Capture & Storage) is part of the approach to climate changes, posing, however, some challenges to undertakings planning to implement the technology.
On Monday 9 March 2020 the Danish Council on Climate Change published a report on Denmark’s climate action towards 2030. In the report CCS is presented as one of the main tools in order to reach CO2 neutrality.
CCS is a technology that comprises collection (capture), transport and geological storage of CO2. CCS consequently contributes to cost-efficient CO2 reductions and is an important tool for reaching climate tagets set at global, EU and national levels.
The CCS potential is particularly great in energy-intensive industries and the energy supply sector which are largely responsible for CO2 emissions in Denmark. By way of the technology, such industries are able to reduce their CO2 emissions and hence contribute considerably to the reduction of CO2 emissions in Denmark and worldwide.
The largest CCS plants are found in the USA. In Norway, several CCS projects have been initiated. In Klemetsrud outside Oslo, work is, for example, performed on a waste-to-energy development project based on a successful pilot project capturing 90% of CO2 emissions from a waste incineration plant, and the Norwegian cement undertaking, Norcem, uses all its efforts to become CO2 neutral in 2030 by capturing CO2 from the undertaking's cement production. In addition, Equinor together with Total and Shell has launched a project investigating the possibilities for CO2 storage in the Norwegian parts of the North Sea as a part of the Northern Lights-project.
According to Geological Survey of Denmark and Greenland (GEUS), several fields exist in the Danish subsoil which may hold large volumes of CO2 and therefore may be suited for storage of captured CO2. In line with this, the Danish Council on Climate Change recommends that possible storage sites are identified onshore and offshore. In 2020, GEUS has been awarded DKK 15m for research purposes, creating a basis for knowledge of the technical CCS potential in Denmark to the effect that a basis is created for establishing a Danish CCS centre in the future.
At present, however, it is not possible to obtain permits for CO2 storage in the Danish subsoil. Denmark has implemented Directive 2009/31/EC on the geological storage of carbon dioxide (the CCS Directive) in the Danish Subsoil Act (undergrundsloven) and by way of Executive Order on geological storage of CO2 (the Executive Order on CCS). The CCS Directive enables Member States to discretionarily decide whether subsoil CO2 storage are to be permitted. So far, Denmark has decided that subsoil CO2 storage is not permitted. The Minister for Climate, Energy and Utilities has, however, acknowledged that the Danish Government is now uncovering the regulatory obstacles to CCS within the sectors in which the technology may be of relevance as part of the climate action plan initiative.
CO2 capture and utilisation
CO2 capture from industrial and energy undertakings is not only relevant for storage in the subsoil. Several research projects investigate the CO2 capture potentials with a view to CO2 utilisation. Capture of CO2 for utilisation purposes are also referred to as Carbon Capture & Utilisation (CCU). DTU is a party to an EU demonstration project, 3D DMXTM in Dunkirk, investigating the possibilities of capturing CO2 in various industrial contexts.
When constructing new electricity supply installations with a capacity of more than 300 MW, one is required to investigate the technical and financial possibilities of re-installing CO2 capturing equipment pursuant to the executive order on power plants (kraftværksbekendtgørelsen). In this context, another duty applies to notify the authorities of whether CO2 storage locations exist and to make an assessment of the possibility of establishing a transport network from the power plant to the storage location.
The construction and operation of CO2 capture plants pose several issues of which undertakings must be aware before establishing such plants.
Such issues relate, for instance, to the EU emissions trading system (EU ETS), inter alia, in relation to the handling of potential leaks from the storage units and how CO2 utilisation is rewarded under the current EU legislation. The EU has several times been criticised for CO2 credits being too inexpensive in relation to investments in CCS and CCU technology.
In addition, sector-specific legislation may apply resulting in requirements as to approval, organisational structure and reporting. It is therefore important to make sure that undertakings have taken all relevant legal issues into consideration prior to the establishment of CO2 capturing plants.
Utility companies should be particularly aware of issues pertaining to financing of the costs of CO2 capturing plants, including whether such costs may be included in the companies' energy prices pursuant to Danish energy supply legislation.
Municipalities, Public Private Partnerships (PPPs) and municipal undertakings must ensure that the legal basis for establishing and operating the plant is available, be aware of the plant's cost efficiency and the framework in the energy supply legislation and the express and implied authority for municipal activities.
In addition, any special direct and indirect tax issues may have to be uncovered.
Even though the technical potential may exist for CO2 capture, the perspectives of establishing a CO2 capturing plant must be specifically assessed on a case by case basis. It is therefore important that the undertakings planning to establish CO2 capturing plants investigate the legal challenges with a view to uncover any potentials and limitations prior to each individual project.
At Bech-Bruun, we are experienced in all legal issues pertaining to energy supply legislation, and we may assist utility companies under private or public ownership in identifying the legal basis for a CCS or CCU project.