On 19 May 2022, the Danish Parliament adopted an amendment to the Danish Subsoil Act (undergrundsloven) according to which a separate licence scheme may be set up for CO2 storage pilot and demonstration projects. An opportunity was also introduced for governmental participation in carbon storage licences.

So far, no CO2 storage operators have been granted a licence to establish CO2 storage facilities in Denmark.

According to GEUS (Geological Survey of Denmark and Greenland), ample opportunity exists for storing CO2 in the Danish subsoil, including in the Danish hydrocarbon fields in the North Sea. Carbon Capture and Storage (CCS) is also assessed to be important for reaching Denmark's climate goal to reduce greenhouse gas emissions by 70 percent by 2030 as compared to the level in 1990 and to obtain climate neutrality by 2050 at the latest.

Since the North Sea Agreement of 3 December 2020 put a stop to additional extraction of oil and gas in the Danish North Sea, several political agreements have been concluded to boost CCS in Denmark.

A political decision has been made that all CO2 storage licence regimes must be ready in time for Danish storage to be possible in 2025, to the effect that Danish storage capacity may be a potential recipient of captured CO2 in the first implementation of the CCUS subsidy pool. The first tender round for the CCUS subsidy pool was launched on 3 May 2022 and is expected to be completed in December 2022.

We give you a general overview and current status of the CO2 storage licence regimes in Denmark.

Licences for CCS pilot and demonstration projects
Adopting the Bill L 137 on 19 May 2022, a provision will be inserted in s. 23 x of the Danish Subsoil Act, authorising the Minister for Climate, Energy and Utilities to lay down rules on a separate licence scheme for geological CO2 storage of less than 100 kt for the purpose of research, development or testing of new products and processes.

The new provision in s. 23 x of the Subsoil Act will come into force on 1 July 2022, according to which the Minister may set out rules by executive order on licences for CCS pilot and demonstration projects.

A draft executive order on CCS pilot and demonstration projects has been subject to public consultation until 22 April 2022.

The draft executive order on CCS pilot and demonstration projects determines that the Danish Energy Agency may grant licences for a two-year period within the geographical area of the North Sea, outlined in appendix 1 to the executive order. Areas for CO2 storage have been laid out in Denmark's maritime spatial plan, and CO2 storage licences may be granted only where it is not contrary to maritime spatial plan or draft maritime spatial plan.

The draft executive order on CCS pilot and demonstration projects contains, among other things, rules on application requirements, permitting requirements and the terms and conditions to which the licence is subject. The terms and conditions may pertain to:

  1. the term of the licence,
  2. provision and maintenance of financial security or the like,
  3. supervision of, for example, the injection systems, the storage part, etc., for the duration of the project,
  4. compliance with environmental and safety requirements,
  5. reporting on the progress of the activity, results and evaluation, etc., potentially to be used for publication
  6. operation and closure of the CO2 storage facility, including criteria and procedure for receipt of CO2 streams,
  7. phasing out of the facilities and installations, etc., subject to the licence,
  8. assignment of liability, and
  9. supervision of the terms and conditions laid down.

The Danish Energy Agency may lay down terms and conditions in the licence other than the ones mentioned in the executive order to the extent necessary considering the project at hand.

When may an application be filed?
An environmental assessment must be made of the executive order on CCS pilot and demonstration projects according to the Danish Environmental Assessment Act (miljøvurderingsloven) prior to the executive order coming into force. The environmental assessment was put out to consultation on 18 March 2022 and until 27 April 2022.

In a written response to the Climate, Energy and Utilities Committee of the Danish Parliament in April 2022, the Minister for Climate, Energy and Utilities stated that the immediate expectation is that the executive order and the related environmental report will be adopted in August 2022. The executive order may enter into force hereafter and applications may be filed for licences for CO2 demonstration project in the North Sea.

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Licences for full-scale CCS projects
Full-scale CO2 storage is subject to licence under s. 23 of the Subsoil Act. Full-scale carbon storage means in this context CO2 storage other than storage of less than 100 kt CO2 with a view to research, development or testing of new products and processes.

CO2 storage is subject to the rules laid down in parts 6 and 6a of the Subsoil Act. In addition, the CCS Executive Order (Executive Order 1425/2016 as amended by Executive Order 162/2017) includes rules on, among other things, application, grant of licences, operation of the CO2 storage facility, supervision and closure of the CO2 storage facility. 

Licence to investigate and use the subsoil for CO2storage will be granted to a further defined area following tender procedures according to the rules of s. 23 b of the Subsoil Act.

The Danish Energy Agency has drafted a plan for inviting tenders for areas for CO2 storage in the North Sea which, together with a related environmental report, was put out to consultation in the period from 18 March 2022 to 27 April 2022. The consultation took place at the same time as the environmental assessment of the executive order on CCS pilot and demonstration projects.

When the plan for inviting tenders for areas for CO2 storage including related environmental report has been approved, a tender procedure may be initiated for the grant of licences for full-scale carbon storage in the Danish North Sea.

Governmental participation in CO2 storage licences
Adopting the Bill L 137 on 19 May 2022, a provision will be inserted in s. 23 y of the Subsoil Act, according to which the Government or an undertaking owned by the Government may be granted CO2 storage licences under s. 23 of the Subsoil Act or rules issued under s. 23 x of the Subsoil Act (CCS pilot and demonstration projects).

No political decision has yet been made as to whether the Danish Government will participate in CO2 storage licences and, if so, on which terms and conditions. The Danish Government and the parties to the agreement on the second part of the CCS strategy (An action plan for carbon capture, transport and storage of 14 December 2021) decided that political negotiations should be conducted on the Government's participation in carbon storage projects.

In a written response to the Climate, Energy and Utilities Committee of the Danish Parliament in April 2022, the Minister stated that he expects to convene negotiations before the summer and before applications are invited for CO2 storage licences.

The uncertainty as to governmental participation particularly affects any ongoing projects in respect of which the participants have already incurred considerable costs for the projects before the grant of licences and any intervention by the Danish Government.

Two CCS projects have been announced for the Danish part of the North Sea, i.e. Project Bifrost and Project Greensand. Both projects have received subsidies for the development and demonstration of CO2 storage in obsolete Danish oil fields in the North Sea via the Energy Technology Development and Demonstration Programme (EUDP).

Advisory services related to CCS projects
The energy department of Bech-Bruun renders advice on CCS projects. Our specialists have in-depth knowledge of regulatory issues within the CCS value chain based on, inter alia, our experience from CCS-related projects and particularly carbon capture projects. 

We offer advice on the regulatory framework for CCS, including requirements for constructions and operation of carbon capture facilities and CO2 storage facilities, environmental law regulation, agreements on purchase of captured CO2 and other commercial agreements in the CCS value chain. 

Bech-Bruun is among the leading advisers in the area of renewable energy. Our specialists are internationally recognised for their significant industry knowledge and advise on all legal aspects of the energy area. With our long-standing experience from major utility projects, complex transactions in the solar and wind industries and extensive contracts, we have built unique market insight to the benefit of our clients' businesses. And with our position at the cutting-edge of the green transition, including multiple carbon capture projects, we provide advice to our clients on the green solutions of the future.