CO2 storage: Keeping the bar high for the oil and gas industry

As EU policymakers enter final negotiations on the Net-Zero Industry Act, they should secure ambitious provisions for CO2 storage. Article 18 must be safeguarded to ensure oil and gas producers are held accountable for developing carbon storage, writes Matteo Guidi.

Matteo Guidi is a senior policy analyst at Carbon Gap, a European environmental NGO focused on responsibly scaling up carbon dioxide removal as an important complement to emission reductions.

The main focus of the Net-Zero Industry Act (NZIA), proposed by the European Commission in March 2023, is to scale up the manufacturing of clean technologies in the EU. The proposal also contains a chapter on the need to accelerate the delivery of CO2 injection capacity across the Union.

Developing CO2 storage at scale is essential for the EU’s efforts to deploy carbon management technologies such as carbon dioxide removal (CDR) and carbon capture and storage (CCS). Both these families of technologies are required if Europe is to reach climate neutrality by 2050, according to leading scientific bodies, including the European Scientific Advisory Board on Climate Change.

Importantly, the European Parliament added CDR to the net-zero technologies supported by the NZIA, filling a significant gap in the Commission’s proposal.

The Act introduces an EU-level target of 50 million tonnes (Mt) of CO2 storage capacity per year to be reached by 2030. Geological storage will be highly needed for the upcoming carbon management projects, which are expected to be developed across member states in the next years and decades. The European Commission estimates the annual EU geological storage needs to be 80–298 MtCO2 by 2050.

Importantly, Article 18 puts the responsibility for developing such storage on EU-based oil and gas producers according to their respective production levels between 2020-2023. The oil and gas industry is well placed to deliver carbon storage, as their production sites can often be converted into carbon sinks (for example, with depleted oil and gas fields). The industry can also rally its existing expertise and substantial financial resources to shoulder the responsibility it holds for the negative climate impact of its products.

With the Council adopting its position last Thursday, negotiations with the Parliament and the Commission (trilogues) will kick off this week with a tight schedule. It is vital that the co-legislators keep the proposal’s ambition on the CO2 storage capacity and even strengthen the obligation on oil and gas producers, as was recently called for by leading European NGOs.

The European Parliament’s position, adopted in November, confirms the 50Mt storage target and the related obligation on the oil and gas sector proposed by the Commission, extending it to cover producers and all suppliers in the EU. While the concrete implementation of such an extension needs further clarification, it sends a clear signal to the industry and would be a positive development from a producer-responsibility perspective.

Notably, the Parliament also introduced the possibility of applying dissuasive penalties or fines in case of non-compliance by the oil and gas entities.

Unfortunately, member states in the Council did not have the same approach to the provisions on CO2 storage, especially Article 18. Some member states, such as Denmark, The Netherlands and Romania, first called for a complete rejection of that article and then asked for exemptions to be added to the text. The Council’s general approach confirms such ad-hoc exemptions, including the possibility for a member state to request a derogation for oil and gas companies under the condition that the storage target is already being met through other means.

Although it is prudent to allow a degree of flexibility to member states when implementing Article 18, adding too many exemptions risks diluting the strength of the obligation and undermining the goal of the whole CO2 storage chapter of NZIA.

To be effective in CO2 storage, the Net-Zero Industry Act must set a clear target by 2030 and identify who will be responsible for meeting it in time. In addition, it should clarify who will ultimately foot the bill for the storage and related infrastructure. Given the recent record profits made by the oil and gas industry, they should explicitly be made financially accountable for developing the full CO2 storage value chain.

As COP28 is underway, the role of fossil fuel companies in the fight against climate change remains limited purely to pledges. The EU should not let this industry off the hook by diluting Article 18. A strong NZIA Article 18 would pave the way for an innovative and just approach to developing carbon management technologies.