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Freshfields Transactions

| 2 minute read

More certainty for CCS value chain – European Commission will oblige oil and gas producers to develop storage sites

Based on the current trajectory, the EU Emission Trading Scheme (EU ETS) is likely to reach zero allowances for covered sectors around 2040, requiring industry to be decarbonised at that point. As regulation currently stands, carbon capture and storage (CCS) is often the only viable option for hard-to-abate sectors to fully decarbonise. In Europe, CCS value chains are developing but uncertainties and coordination issues remain, rendering it difficult for companies to make financial investment decisions and realise decarbonisation projects on the ground. By obliging hydrocarbon producers to provide CCS capacity, the European Commission is now making a move to bring more predictability into the CCS market.

Storage obligations under NZIA

The Net Zero Industry Act (NZIA) is the EU’s flagship regulation for accelerating European industrial transition towards net zero emissions. The NZIA, which entered into force in June 2024, mandates an annual CO2 storage capacity of at least 50 million tonnes in the EU by 2030 and defines obligations for certain hydrocarbon producers to contribute to the target. Hydrocarbon producers are considered by the European Commission to have the necessary expertise and resources to develop storage sites. Based on rules established in a Delegated Act, the European Commission has now put forward a list of oil and gas producers setting out their individual contributions in reaching the EU’s 2030 storage target. Companies have been selected based on their share of the EU’s crude oil and natural gas production between 2020 and 2023. The list will enter into force alongside the Delegated Act which is currently subject to a two-month scrutiny from the EU’s Member States and the European Parliament - provided no objection is made. These companies are obliged to submit a plan to the European Commission by the end of June 2025 detailing how they intend to realise their specific contribution to the storage target. From 30 June 2026, producers must annually report on their progress. The European Commission’s decision is designed to increase planning and investment certainty for other actors in the CCS value chain, especially industrial emitters and CO2 transport operators, while respecting the rights of the identified members of the oil and gas industry. 

Maturing regulatory framework for CCS

Beyond storage obligations, further regulatory measures are advancing to accelerate CCS deployment. Provisions in the NZIA not only mandate the construction of storage sites but also allow for accelerating permitting procedures. Member States are increasingly working on changing their national permitting rules to enable the development of storage sites. The last few years have seen bilateral agreements between Member States facilitating cross-border transportation and storage of CO2. In this regard, the potential linking of the EU’s und UK’s emission trading schemes may open up further opportunities for storing CO2 for emitters in continental Europe. In addition, the planned 2026 EU ETS revision could result in negative emissions being integrated in the ETS thereby enhancing the business case for CCS. As part of the revision, the European Commission is expected to propose an Industrial Decarbonisation Bank which is likely to focus on scaling-up decarbonisation technologies and address operational expenditures through instruments like carbon contracts for difference. 2026 will also see the European Commission publish a CO2 transport package designed to roll out CO2 transport infrastructure across the EU. The European Commission will present a legislative proposal in Q4 of 2025 for an Industrial Decarbonisation Accelerator Act aiming to create markets for CO2-reduced or decarbonised products from energy-intensive industries and to give manufacturers greater certainty on returns for their investments.

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esg and sustainability