CO2 management is part of the economic and climate equation for the Industry in Europe

As a world leader in gases, technologies, and services for industry and healthcare, Air Liquide develops and operates CO2 capture technologies to help decarbonise the processes of its clients, as well as its own hydrogen production. Air Liquide is committed to absolute CO2 emission reduction of 33% by 2035 (compared to 2020) on its path to carbon neutrality by 2050. Through our technology portfolio and expertise we moreover have the opportunity to contribute to decarbonisation of a variety of industries. Indeed, Air Liquide is a trusted partner in several CC(U)S projects to decarbonise heavy industry plants, with the support of the EU Commission.

As the European Union moves toward its ambitious climate targets, Carbon Capture and Storage (CCS) has become an industrial need. For cement and lime where process emissions are unavoidable, but also for other hard-to-abate industries such as chemicals, steel or existing hydrogen production, CCS represents the most viable pathway to deep decarbonisation. For Europe to keep its critical industries on its ground, the EU needs to address decarbonisation in a pragmatic way. CCS has proven to be one of the technologies that can support these objectives in a number of different ways and sectors.

Air Liquide is already at the forefront of this transition, deploying mature, scalable technologies across the continent for over a decade. However, for these technologies to fulfill their potential, the European CO2 market must overcome critical hurdles in access to storage, financing and regulatory certainty.

Access to CO2 storage sites based on balanced terms and conditions

The European CO2 storage market is currently in its infancy, characterized by a concentration of storage sites in the North Sea and a limited number of operators. At the same time, it must be noted that affordable, open, transparent and timely access to CO2 sinks, based on balanced terms and conditions, is key for the development of the market.

Opening new storage sites will play a critical role in the development of a functioning CO2 market, especially since CO2 sources are dispersed and storage locations seem rather concentrated in a single region. Against this background, the development of onshore capacity will be key, also since it has a clear competitive advantage compared to offshore sites, mainly because onshore storage offers the possibility to store CO2 closer to emission sources.

Another viable option would be to fully take advantage of CO2 emissions captured and transported for storage in a facility in a non-EU/non-EEA country such as the United Kingdom. Therefore, in order to facilitate and speed up the access to CO2 sinks, it is essential that an EU wide agreement with the UK ensures mutual recognition of storage of CO2 under the ETS.

A fit regulatory framework to allow the creation of CCS market

While regulatory certainty regarding open access is essential for high-investment, cross-border CO2 pipelines that serve large numbers of emitters, it is equally vital to avoid regulating local infrastructure and industrial hubs where market-based competition is already thriving. In these concentrated hubs, CO2 transport is short-distance and driven by diverse technologies, meaning heavy regulation would only stifle the specialized technical expertise that operators need to remain agile and competitive.

At the same time, it needs to be recognized that pipeline transport is only one part of the solution. To reach storage sites, the EU must provide full regulatory recognition for non-pipeline transport, including ships, barges, trucks, and rail. Independent shipping solutions are particularly vital to ensure that the transport and storage businesses remain unbundled, fostering a competitive market.

Another key piece of the puzzle will be to ensure that the currently ‘early mover CCS projects’ reach Final Investment Decisions (FIDs) without delay. Based on the current carbon price, the ETS incentive, even if topped up with Innovation Fund and CEF support, is not enough to launch a well-functioning CCS Market. Other tools, such as CCfDs will be needed. Also, the EU must address the “double-penalty risk” that these industrial frontrunners are facing. Any disruption in the nascent CO2 transport or storage chain could force emitters to vent captured CO2, leaving them to bear both the sunk cost of their capture technology and the sudden ETS compliance costs. Implementing a de-risking mechanism, such as a dedicated fund to cover unexpected ETS exposure, is essential to protect early movers from these vulnerabilities and provide the security needed to decarbonise.

Air Liquide is one of four industrial launching customers for the Porthos project, designed for CO₂ reduction in Rotterdam, the largest industrial port in Europe .Construction of the project started in early 2024 for completion in 2026.

It is moreover important the CO2 specifications/standards for CO2 transport & storage are developed. While adhering to the safety and operational considerations, the CO2 specification should be technically feasible without imposing an unreasonable (financial) burden and take into account the specific possibilities of the respective steps in the CCS chain.The transport and storage site’s specification must reflect a well-balanced effort across the entire value-chain.

Incentivise Low-carbon value chains in Europe

Decarbonising industry and transport will require a portfolio of technological solutions that can be implemented as effectively as possible, given the economic (capital intensity of projects that companies cannot afford on their own) and climatic context. Such solutions should of course be based on strict carbon intensity criteria. Rather than favouring certain technological solutions, the EU should leverage the diversity of available and mature solutions. All mature technologies that effectively decarbonise industry should thus be equally supported and incentivized.

This is particularly important with the expected publication of the Industrial Accelerator Act (IAA) in mind. Supporting lead markets is key to sustainable growth. Capitalizing on low-carbon products solutions will be crucial. For example, given the climate ambition of the EU and the pace of development of renewable energies, low-carbon hydrogen must be developed simultaneously with renewable hydrogen. Such low-carbon hydrogen can be produced either from Natural Gas reforming with Carbon Capture and Storage or via electrolysis using low-carbon electricity, e.g. nuclear based. Without low carbon hydrogen, it will be close to impossible to reach 2030 decarbonisation targets due to scarcity of renewables and cost of RFNBO.

Moreover, to further mitigate the risks of decarbonisation projects especially during the early stages of market development, the EU must aim to provide regulatory certainty for investment decisions but also enhance the flexibility of combining different state aid and funding schemes for the uptake of emerging markets (e.g. CCS).

Therefore, the decarbonisation of Europe would benefit from availability of both renewable and low-carbon hydrogen, and thus from dedicated targets and (financial) support mechanisms for the uptake of low-carbon hydrogen and low-carbon end products. We urge the European Commission to fully implement and recognize these needs in the upcoming publication of IAA.

Mind existing merchant CO2 applications

Apart from capturing CO2 waste for the purpose of sequestration, CO2 is also used in the industrial gas market for numerous applications. Merchant CO2 is used in agri-food and pharmaceutical industry applications (food, vaccines, carbonated drinks, slaughterhouses etc.), as well as in other industrial uses (fire extinguishers, semiconductors, water treatment, etc). The volumes of CO2 used as industrial gas represent merely 0.1% of total emissions in Europe.

Currently, the EU ETS guarantees the “zero-rated” accounting status for emissions that are captured and sequestered through CCS technologies. However, in the case of CO2 usage, such benefits are limited to CO2 that is permanently chemically bound in a product and does not re-enter the atmosphere while used. Nevertheless, it will be important to also include in ETS additional CO2 usage applications that can qualify for “zero-rated” emissions, particularly in cases of essential existing applications of CO2, such as in medical or food & bev sectors. To this aim, alternative frameworks should be explored within the ETS that assess a CCU application’s eligibility for “zero-rated” emissions status based on the criticality of its end-use and the effective duration of the carbon storage. Shortage of this merchant CO2 has happened in the recent past with severe impacts on relevant value chains. As this specific CO2 is genuinely a byproduct of the fertilizer industry, also dedicated support to the EU’s domestic ammonia/fertiliser industry is needed to mitigate potential CO2 shortages.

In addition, CCU applications can demonstrate clear climate benefits. The ability to re-use CO2 captured from an industrial process as feedstock for the production of chemicals, fuels or materials can lead to the avoidance of additional emissions. Effectively, this recycled CO2 substitutes for virgin fossil carbon that would otherwise be emitted. Therefore, if climate benefits are proven, it should be ensured that such CCU applications are accordingly recognized.