5. Concluding remarks and recommendations

This work has analysed regulatory aspects in relation to CCS (including BECCS and DACCS) development and deployment that are of relevance for the Nordic context. This section compiles observations that have been made that are of relevance for the project objectives:

5.1 An emerging enabling regulatory environment

The regulatory environment that applies to CCS activities in the Nordic countries has developed significantly over the past decade or so. For example, the EU has adopted the CCS Directive which regulates responsibility for the environmentally safe storage of CO₂and contains provisions for CO₂ capture and transportation. The CCS Directive has subsequently been transposed into national legislation. The International Maritime Organization IMO has adopted a resolution allowing the export of CO₂ for the purpose of sub-seabed storage, the UN climate panel IPCC has clarified that BECCS can and should be recorded as a “negative emission” and the European Commission has made it clear that they interpret EU regulations as meaning that the transportation of CO₂ by ship and truck is to be regarded as equivalent to pipeline transport and thus compatible with provisions for CCS in the ETS Directive. Regarding liabilities, the European Commission has clarified that the liability for emissions caused by the operation of CO₂ capture, transport or storage in the CCS value-chain is transferred from one ETS installation to the other, without regard to the EEA country they are located in. Any leakage from storage is thus accounted as an emission by the storage operator, and also reported by the country where the storage site is located, in its national GHG inventory. The trend in EU politics is to develop the regulatory system in a more permissive direction, in support of CCS. Regulators are working to remove regulatory gaps and lower barriers. Regulatory obstacles and barriers do, however, remain and the most significant ones identified in this study are discussed below.

It should also be noted that, in addition to an enabling regulatory environment, sufficient financial incentives must be in place for investments in CCS to actually happen. This is also largely up to regulators but has not been within the scope of this project to analyse. The current regulatory design of the EU ETS, the union’s flagship economic instrument to incentivise climate change mitigation, has included CCS applied to emissions from fossil fuels among technologies that can be rewarded. The EU has so-far, however, not introduced any policy instrument that drives investments into carbon removals through BECCS or DACCS. Some national initiatives in Nordic countries, such as Norway, Denmark and Sweden have been implemented, or are being prepared, to enable CCS investments in CCS (including, depending on the national context, DACCS and/or BECCS).

5.2 Significant barriers in international law

The analysis of the regulatory environment for CCS presented in this report has identified a number of barriers that risk slowing down CCS deployment in the Nordics.

Transboundary transport: Through an amendment to the London Protocol, the transport of CO₂ for sub-seabed storage in another state is permitted, but the amendment has not yet entered into force. Transport of CO₂ therefore requires a provisional application of the amendment, which in turn requires a bilateral agreements or arrangements between the states concerned. The European Commission has concluded that the CCS Directive and the ETS Directive can act as such arrangement between EU states and that the EEA treaty together with the incorporation of the two directives concerned in the EEA legal regime provides the necessary arrangement with EEA partners. The Commission furthermore concluded that states that are party to the London protocol could conclude additional bilateral arrangements with other EU Member States and EEA partner countries only on issues that are not covered by the directives. These additional bilateral arrangements should be strictly limited to the residual issues not covered by EU law and they should not refer to the subject matters covered by EU rules. Further knowledge building and exchange regarding these matters would be desirable.
CO₂ storage in the Baltic Sea: Currently, the Helsinki Convention does not allow the storage of CO₂ in the Baltic Sea. Enabling CO₂ storage in the Baltic Sea would increase the potential for CO₂ storage in Denmark, Finland and Sweden. In order to enable the storage of CO₂ in the Baltic Sea, it is required that the Helsinki Convention be amended or that a resolution allowing an interpretation that allows storage of CO₂ sub-seabed be adopted.
Some of the possible Baltic Sea storage locations extend to territory or economic zones outside Scandinavian countries and potentially also outside the territory of the EU. This poses a problem as geological storage outside the territory of the EU is not covered by the CCS Directive.
Deployment of BECCS: A moratorium in the Convention on Biological Diversity (CBD) does not allow climate-related geo-engineering activities that may affect biodiversity. Capture and storage of CO₂ from fossil fuels is expressly exempted from the moratorium, but not CCS applied to biogenic CO₂, which may therefore constitute an obstacle for BECCS. If and how BECCS is compatible with the moratorium is ultimately subject to interpretation by the individual Parties to the CBD. Such processes are ongoing in Denmark and Sweden in order to reduce uncertainties.

Also related to BECCS deployment, tightening sustainability requirements for biomass within the EU could possibly affect the competitiveness of bioenergy and thus the conditions for BECCS.

5.3 Evolving national legislation is adapted to national contexts

Concerning national legislation of relevance for CCS in the Nordic countries, all the countries have implemented the CCS Directive. The implementations of the CCS Directive have been accepted by the EU and have in other words been deemed correct. Whether or not the national CCS regulations, in part the implementation of the CCS Directive, have been found to be barriers when carrying out CCS activity is yet difficult to determine as CCS activity is in its infancy.

With regard to differences in national legislation the perhaps most distinct difference that has been identified in this study is that Finland uses the possibility (of the CCS Directive) not to permit geological storage of CO₂ in their territory (due to lack of known geological formations suitable for storage of CO₂) while it is allowed in the remaining four Nordic countries. Iceland originally prohibited CO₂ storage with the exception of projects for research, development or testing purposes where the intention is to store less than a total of 100 kilotonnes of CO₂. After revisions of legislation in the most recent years industrial scale geological storage of CO₂ is now, however, permitted. Legislation in Denmark has been changed in the most recent years to enable exemptions from a prohibition against geological CO₂ storage below the seabed. Denmark, furthermore, adopted legislation introducing a less comprehensive approval process for geological storage of CO₂ of less than 100 kilotonnes to promote the necessary research and development in the field.

Differences in the national legislations on a more general level seem in part to depend on how far the country has come in planning and building up infrastructure for CCS activities but also national circumstances. As an example, Norway has come far in planning and building infrastructure for CCS activities and to elaborate on the detail in the legislation. This is partly due their oil and gas industry and the early introduction of economic incentives for CCS. An example of how legislation is gradually adapted to national contexts as CCS moves closer to deployment is the recent Danish legislative changes in order to allow companies regulated within utility laws for power and heat to commit financially to CCUS. The Icelandic implementation of the CCS Directive has been innovative in the sense that it’s adopted to Iceland’s unique geology and permits mineral storage of CO₂ whereby captured CO₂ is dissolved in water and injected into basaltic formations underground where it transforms to stone, while the CCS Directive has been developed with the intention of geological storage of CO₂ in a supercritical state.

It is hard to indicate barriers in the CCS relevant national legislation in the Nordic countries as CCS activity is in its infancy and there is limited practical testing of the legislation. Romson & Steen (2021)

Romson, Å., Steen, L. (2021).

discuss permitting processes in a Swedish context and observe that CCS is new technology (for actors in the value chain and for regulators) and conclude that complications are likely to arise when the first permitting processes are initialised. The authors also argue that the processes are likely to become more predictable as experience accumulates and that one way of easing the process may be guidelines issued by responsible authorities at an early stage of the development.

5.4 A need for robust MRV and accounting frameworks

Monitoring, Reporting, and Verification (MRV) and accounting for CCS includes activity-level, national-level and, in some cases also EU-level and cross-boundary considerations. Robust and aligned activity-level MRV and national inventory methodologies for CCS are key for designing policies and incentives for CCS, since governments have an interest in incentivising activities that demonstrably help them to meet their targets. Robust and aligned MRV and accounting are particularly important for the effectiveness and integrity of results-based incentives, including market-based approaches. A key aspect of robust MRV and accounting for CCS is ensuring long-term durability of storage. This is a methodological and legal challenge since most actors and institutions cannot guarantee monitoring for, e.g., 100 years.

At the activity level, MRV covers the monitoring, reporting and verification of emissions and removals associated with specific activities. If an activity wishes to generate carbon credits that represent additional mitigation outcomes (emission reductions or removals), it needs to apply methodologies and procedures developed specifically for carbon crediting, including additionality demonstration, baseline setting and MRV. Such methodologies exist for many CCS activity types, including BECCS and DACCS, and further methodologies are under development. Methodologies developed under carbon crediting programmes are designed to be “market-grade”, i.e. enabling the generation of tradable carbon credits that can mobilise private finance from voluntary and compliance carbon markets and other climate policies (e.g. use for reducing tax liability or accessing subsidy). The proposed EU framework for certification of carbon removals is expected to develop EU-wide approaches to ensuring the integrity of certified carbon removal units, which could potentially be used to access carbon markets and/or subsidies.

To promote the effective and transparent use of scarce resources, the interplay between different incentives accessed by the activity, such as subsidies and voluntary carbon markets, needs to be carefully considered. This includes ensuring additionality, avoiding double claiming across various sources of support, and promoting transparent and credible claims related to CCS-related support.

At the national level, emissions and removals are monitored and reported through national GHG inventories. Current IPCC inventory guidelines enable the inclusion of CCS, including BECCS, in national GHG inventories. BECCS-related removals have yet not been reported by any country and it is yet to be determined how BECCS is to be reported by EU Member States. It is unclear whether and how DACCS could be included in national GHG inventories. Inclusion of CCS in the national inventory enables the design of policies, including market-based instruments, to incentivise CCS and BECCS, if this is what national governments wish to do. Some governments are already considering incentives for BECCS. CCS may include cross-border cooperation and some (including Nordic) governments are already piloting inter-governmental agreements on cross-border cooperation on CCS activities, including for DACCS. These agreements can include provisions for MRV and accounting, including for long-term monitoring and reporting as well as liability in case of leakage. Such cross-border piloting is much-needed and can help to develop universal guidance on how mitigation outcomes from cross-border cooperation should be accounted for at national level.

The national inventory serves as the basis for the emissions balance, which is used for tracking progress towards and achievement of national mitigation targets. Countries must adjust their emissions balances for any transfers or acquisitions of mitigation outcomes relating to market-based cooperation, in line with guidance relating to Article 6.2 of the Paris Agreement. Applying corresponding adjustments would prevent double claiming in the context of mitigation outcomes that are used by non-state actors for voluntary offsetting.

The current EU regulation is not fully aligned with the Paris Agreement, for example with regard to corresponding adjustments in line with Article 6.2 of the Paris Agreement. Furthermore, it is not yet fully clear how and where Member States should report and account for removals from BECCS and DACCS at the EU level.

In Nordic countries and the EU, key policies and incentives, such as the EU ETS, currently focus on emissions and incentives for emission reductions, including through CCS. A robust MRV and accounting framework for CCS has been key in incentivising CCS activities. By contrast, there are currently very few incentives for enhancing removals through BECCS and DACCS, besides some planned subsidies. Robust and consistent MRV and accounting are key for designing effective and transparent incentives also for removals. Making use of existing and forthcoming methodologies, voluntary carbon markets provide a potential and readily available source of funding for BECCS and DACCS. However, new national and EU regulation would be needed to ensure the credible and transparent voluntary use of carbon credits that avoids double claiming, e.g., through corresponding adjustments (in case of use voluntary offsetting claims) or mitigation contribution claims. Furthermore, as noted above, the roles of and interactions between different incentives, such as subsidies and voluntary carbon markets, would need to be carefully considered. MRV and accounting can help to attribute climate benefits transparently between different sources of support.

5.5 Timely development of the components of the CCS value chain

Finally, it is important to underline that the attainment of Nordic countries’ individual and joint ambitions to reach net-zero GHG emissions may require very significant CCS deployment within a couple of decades. This would require build-up of large infrastructures for the integrated CCS value chain by multiple actors with incentives that are not always aligned (Karlsson, 2022)

Karlsson, S. (2022). ”CO₂ transportation infrastructure and biomass supply systems for carbon capture and storage”, Chalmers University of Technology.

This implies a challenge since CCS at scale would require that the different components along the value chain be developed (and incentivized through policy) jointly to avoid cross-chain risks (i.e. that a failure of one of the components in the value chain affects operations in other parts of the chain). A given industrial actor is unlikely to want to invest heavily in capture equipment before knowing that there is a suitable, reasonably priced storage with sufficient capacity available. Conversely, a storage operator is unlikely to want to invest heavily in CO₂ storage and injection capacities without knowing that there will be capture plants that will want to pay for using storage capacity. Such considerations are crucial for achieving the ramp-up required to work towards meeting the ambitious mitigation targets that have been adopted on national, Nordic and international level and the contributions from CCS that will in all likelihood be necessary for the attainment of those targets. Efficient co-ordination across the Nordic countries may be very important to address a potential “hold-up” or “commitment” problem and that it could also bring cost savings through facilitating more rational infrastructure configurations (e.g., SEA (2010); Rootzen, et al. (2018); Möllersten et al., (2021); Lefvert (2022)).

SEA (2010), ”Systemstudie av möjligheter att etablera en infrastruktur för CCS i Östersjöregionen”; Rootzen, et al. (2018), ”Deployment of BECCS in basic industry - a Swedish case study”; Möllersten et al, (2021), “Policies for the promotion of

BECCS in the Nordic countries”; Lefvert (2022), “Capture and storage – the chicken and egg of CCS”.

5.6 Recommendations

While the Nordic countries have somewhat different entry points in CCS, there are several shared ambitions. Issues where it may be useful for the Nordic countries to coordinate positions in order to have stronger impact on policy development, not least in the EU, include:

The CCS Directive and further actions to build certainty related to the treatment of other modes of CO₂ transport than pipeline.
Where and how Member States should report and account for removals from BECCS and DACCS at the EU level.
Policy in relation to energy use of biomass waste and residues from sustainable forest management and its implications for the potential of BECCS.
The further development of the emerging EU carbon removal certification framework.
Interpretations of the moratorium on geo-engineering in the CBD and its implications for implementation of BECCS in Nordic contexts.
Initiatives to address the Helsinki Convention prohibition against the storage of CO₂ below the Baltic Sea.
How to address storage locations, e.g., in the Baltic Sea region, that extend to territory or economic zones outside the EU where CO₂ storage would be geologically appropriate.
Explore opportunities for market-based solutions involving international transfers of mitigation outcomes from activities in the Nordic countries that may facilitate enhanced CCS deployment and mitigation ambition.

It is recommended that the Nordic countries intensify their cooperation and dialogue, providing for joint efforts to build knowledge, sharing of Nordic experience and lessons learned coordinated through a Nordic forum for collaboration on CCS.

A Nordic forum could, for example, build on the Existing Networking Group on CCUS (NGCCUS) under Nordic Energy Research that already facilitates knowledge sharing.

Some stakeholders see the need for a more formal working group that would hold meetings more frequently than the current biannual meetings of the NGCCUS.

Areas that may initially be considered for prioritisation include:

Establish Nordic-level technical work to coordinate CCS-relevant approaches to (i) activity-level Monitoring, Reporting, and Verification and (ii) national GHG inventories and accounting, including:
- Development of optimal and consistent Measuring, Reporting and Verification (MRV) protocols for the whole value chain, from CO₂ capture to storage, including for cross-border projects.
- Prepare for relevant competent authorities’ exchange of emissions monitoring plans and reports of relevant ETS installations.
- Prepare for information exchanges between the inventory compilers of the respective (CO₂ import and export) countries to allow for alignment of the respective amounts and to avoid cross-border double-counting.
Ensuring the credible and transparent voluntary use of carbon credits based on activities in the Nordic countries, that safeguards environmental integrity, including issues related to the avoidance of double claiming and the ownership of mitigation outcomes that go beyond national GHG mitigation targets.
Strengthen the capacity for long-term strategic planning/optimization of CCS infrastructure in the context of, inter alia, what may be required for attainment of the 2035–2050 Nordic national net-zero targets.

Regular Nordic-level sessions could be arranged for exchange of information between governments and other stakeholders, including special sessions dedicated to specific themes, dedicated brainstorming sessions etc.

5. Concluding remarks and recommen­dations