New overall strategy for the development of capture, transportation and storage of CO2 will pave the way for the establishment of full-scale carbon capture and storage in Denmark.

On 14 December 2021, the Danish government introduced the contents of a new political agreement for "A road map for capture, transportation and storage of CO2". The agreement is step 2 in the overall CCS strategy and thus builds on the political agreement on CO2 storage of June 2021.

With step 1 in the CCS strategy of June 2021, it was decided to establish a basis for safe and sustainable storage of CO2 and import/export of CO2 to/from abroad.

Step 2 of the CCS strategy includes initiatives intended to ensure that the first Danish CCS facilities will be operational in 2025.

Clear statutory basis for carbon capture at waste incineration plants
The CCS strategy determines that a clear statutory basis must be established for municipal players such as municipal waste incineration plants and biomass facilities to operate and establish CCS facilities. Consequently, new statutory rules must be drafted, ensuring that the framework for establishing and operating CCS facilities is clear.

In 2022, the government will present a model meant to ensure that costs for CCS facilities are not passed to heating and waste disposal consumers while underpinning a green, efficient and safe utilities sector.

Waste incineration plants have access to CCUS funding from 2022
In 2022, municipal waste incineration plants will have access to apply for funding for the establishment of CCS facilities from the CCUS funds.

Under the CCS strategy, CCUS funding is divided into two stages. In the first stage towards 2025, funds will be realised for CCS operators, who will subsequently buy transportation and storage. Funding in the first stage will be open for application in 2022.

Detailed conditions for eligibility for CCUS funding are not in place. These will be determined in collaboration between relevant ministries in negotiation or market dialogue with interested operators, who will receive the funds.

In connection with the realisation of CCUS funds in the second stage, it will be considered how utilisation of CO2 can contribute to the climate target plan. On 15 December 2021, the Danish government presented a PtX strategy involving the utilisation of CO2 for the development of PtX products.

 

Permitting regimes for CO2 storage must be ready for realisation of storage in 2025
From 1 July 2022, access must be given to apply for permits for pilot and demo projects for CO2 storage (geological storage of CO2 of less than 100 kilotons with a view to research, development or testing of new products and processes, if found responsible with a view to environment and safety).

The Danish Energy Agency has initiated the drafting of new statutory rules to ensure this. In November 2021, the Danish Energy Agency submitted a draft bill for consultation. The draft bill suggests that the Danish Subsoil Act establishes a separate authorisation scheme for geological storage of CO2 of less than 100 kilotons with a view to research, development or testing of new products and processes. This will allow the establishment of a less extensive authorisation procedure for these activities than what follows from the current rules for other geological storage of CO2.

On 10 December 2021, the Danish Energy Agency launched a supplementary consultation process, suggesting the introduction of the possibility that the government or a government-owned enterprise can be party to an authorisation for CO2 storage, as seen with oil and gas licenses in the North Sea.

The draft bills regarding government participation in CO2-storage authorisations and geological storage of CO2 of less than 100 kilotons will be merged into one bill. It is proposed that the bill be considered by the Danish parliament in the spring and then take effect on 1 July 2022.

Financial framework
The CCS strategy sets out some overall guidelines that may be of vast significance for the financial performance CCS projects.

It is determined that CCS will be rolled out on market terms. For instance through duties and expenses for the acquisition of quotas and by including negative emissions in the calculation of the Danish climate effort, regardless of type and where it is stored. However, the furthering of negative emissions through negative duties or funding will be revisited in connection with negotiations for a more uniform CO2 regulation based on recommendations from the expert group for a green tax reform.

Moreover, Denmark will work for the establishment of a common European certification system for carbon capture, which in the long term may be combined with improved incentives through the EU Emissions Trading Scheme.

The specific measures of significance for the financial framework for CCS projects are not in place.