On May 30, 2024, the council of ministers of the German Federal Government adopted a draft bill (Bundesrats-Drucksache 266/24) allowing permanent storage of carbon dioxide (Gesetz zur Demonstration der dauerhaften Speicherung von Kohlendioxid – Kohlendioxid-Speicherungsgesetz – KSpG). The bill would amend a 2012 law that only provided means to test (“demonstrate”) various technologies of carbon capture and storage. By contrast, the draft bill at hand seeks to enable CCS on an industrial scale, particularly focusing on permanent offshore storage, potentially becoming the long-sought game changer in the German government’s stance toward carbon capture and storage (CCS) and carbon capture and utilization (CCU). The draft bill was published along with a communiqué outlining the cornerstones (“Eckpunkte”) of Germany’s Carbon Management Strategy as well as a FAQ.
Key Aspects of Germany’s Carbon Management
The documents highlight the importance of CCS/CCU technologies in mitigating emissions from industries where alternative forms of decarbonization may be neither feasible nor cost-effective, such as the cement or limestone industry, steel, dispatchable power, basic chemicals and waste incineration. These industries face additional pressures to decarbonize due to the decrease of freely allocated EU emissions allowances, whilst CCS would relieve the relevant emitter from the obligation to surrender ETS allowances for the emissions captured and stored. The document states that in order to achieve climate neutrality by 2045, CO2 must begin to be captured and stored in relevant quantities as early as 2030.
The existing legal hurdles to the use of CCS/CCU in Germany – no permissibility of carbon storage, no regulatory framework for CO2 transportation infrastructure – are to be removed and guidelines for its use are to be established.
Allowing Offshore CO2 Storage
An important element of the the KSpG bill is a new legal basis for the administrative approval and operation of offshore facilities for the permanent storage of carbon dioxide in underground rock strata. The bill allows exploration for offshore storage sites in the German exclusive economic zone and the continental shelf. The currently envisaged regime includes extensive environmental controls – including relating to specific elements of biodiversity within the German EEZ – that will likely limit search areas for potential CO2 storage space and would need to be carefully analysed by potential developers.
The permissibility of long-term CO2 storage remains limited to offshore locations, but it is intended to introduce an opt‑in mechanism for the states without undermining laws regulating the search for a permanent storage for nuclear waste (Gesetz zur Suche und Auswahl eines Standortes für ein Endlager für hochradioaktive Abfälle – StandAG). This is because the StandAG stipulates that the search for a suitable site for the final disposal of highly radioactive waste has, generally, priority over any other onshore uses of subterranean spaces.
Allowing Pipeline Contruction using synergies with the Hydrogen core network
The KSpG bill also provides a regulatory framework for the (accelerated) administrative approval and operation of CO2 pipelines and (domestic) CO2 transportation to be constructed and operated by the private sector.
The German government has identified potential opportunities arising from the overlapping interests of CO2 pipeline and hydrogen core network operators and subjects both to comparable administrative procedures. The rededication of CO2 pipelines to hydrogen pipelines is explicitly mentioned in the explanatory remarks to the draft bill.
Financial IncentivIZation
State aid for CCS/CCU shall be limited to the capture of emissions that are difficult or impossible to avoid. However, there is a noteworthy reference to carbon contracts for difference (Klimaschutzverträge), which are being explored by the German government as a policy tool to incentivize decarbonisation of other heavily emitting industries. The FAQ holds out the prospect that CCS/CCU may also be promoted in future via such carbon contracts for difference, although the details have not yet been published.
Next steps
Next, the German Bundesrat – the second chamber of the German legislature representing its 16 federal states – will discuss the draft law. Due to the controversial reception of CCS/CCU by parts of the German population and conservation lobbyists, it remains to be seen whether the bill will be watered down in the course of the legislative process.
