Policy regulations: developing the framework for a new industry

A marked-based, technology-neutral pool and stable framework conditions will leapfrog CCUS technology and innovation.

By State of Green | [email protected]

15 November 2022

White Paper: Carbon capture, utilisation, and storage

This article is part of the publication “Carbon capture, utilisation, and storage.

The content of this article was produced in close collaboration with DTU – Danish Technical University and the Danish Ministry of Climate, Energy and Utilities.

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With the Danish Climate Agreement for Energy and Industry of 22 June 2020, the Danish Parliament decided that the capture, utilisation, and storage of CO₂ is an important piece in achieving Denmark’s climate policy goals.

A market-based, technology-neutral pool was established to promote the CCUS. The pool is planned to be phased in from 2024 and ultimately amounts to EUR 109.5 million annually.

With the Climate Agreement, it was decided to establish central framework conditions supporting the development of CO₂ capture, transport, utilisation, and storage in Denmark. At the same time, the agreement helps to ensure a stable framework for a new industry in Denmark, and to ensure that society gets a share in any potential gains when shared resources are used.

A national strategy paves the way for development

In the agreement, it is defined that the two sub-agreements in the national CCUS strategy from June and December 2021 must prepare permits for storing CO₂, from 2025 for Denmark to be a potential international buyer of captured CO₂ in the first disbursement of the incentives.

With the CCUS strategy, the framework is set for disbursing EUR 2.2 billion in public funds. Through the green sub-agreement under the Finance Act, EUR 269 million were also set aside to support CO₂ capture from biogenic sources. In the fund of the Danish Green Tax Reform, EUR 2.4 billion was allocated to CCS.

Vision of CO2 reductions towards 2050 and beyond

With the right political support and societal acceptance, Denmark may contribute to reducing CO2 globally, while at the same time building business potential. Denmark has a massive opportunity to store tonnes of Mtpa CO₂. CCU is still a relatively immature and costly technology. However, ongoing research and development will make it gradually more important as a substantial contributor to the 2050 net-zero target. Denmark has the potential to build a business case on conversion of imported CO₂ into valuable products that can be exported.

Support in two phases

The support will be divided into two phases. The first phase will be implemented in the short term to kick-start the market. The incentives will support the emitters’ investments in developing the facilities to capture the CO₂ they emit.

In connection with the realisation of the CCUS pool in phase two, it will be investigated how the utilisation of CO₂ can contribute to the climate goals. In March 2022, the parliament agreed upon a Power-to-X strategy, which addresses the use of CO₂ for developing green hydrogen based solutions.

Forward-looking framework conditions for CO₂ storage

Increasing demand for CO₂ storage capacity is expected in Northern Europe, and here the Danish underground can contribute significantly to the Danish and European climate goals. To share any future gains from CO₂ storage, the state will become a co-owner of permits for Danish CO₂ storage. At the same time, taxing CO₂ storage, including that which takes place in the Danish part of the North Sea, will become possible.