Summary

All Nordic countries and the EU have set ambitious targets to achieve net-zero and even net-negative greenhouse gas (GHG) emissions. The Nordic countries have set their targets both individually through various national goals and legislation, and jointly through the 2019 Helsinki Declaration on Nordic Carbon Neutrality. The Declaration and EU legislation acknowledge the important role of Carbon Capture and Storage (CCS). CCS has potential to enable rapid and deep reductions of CO₂ emissions from fossil sources where potential alternative mitigation solutions are insufficient. In addition, bioenergy with CCS (BECCS) has the capacity to deliver carbon dioxide removal (CDR) (active removal of CO₂ from the atmosphere), which is of significant importance in relation to net-zero targets, since any country (or region) aiming for a net-zero target will need to counterbalance some “residual” hard-to-abate emissions.

This project aimed to analyse regulatory aspects in relation to CCS (including BECCS and direct air CCS, so-called DACCS) development and deployment that are of relevance for the Nordic context. Specifically, the project considers:

Similarities and differences between the Nordic countries concerning CCS regulation.
Can barriers to CCS and/or BECCS deployment be identified which are caused by current regulatory frameworks?
Are there plans to change regulatory frameworks in order to promote the development of CCS and/or BECCS?
Whether there is a need to develop models for CCS co-operation between the Nordic countries, especially when it comes to co-operation at project level.
The issue of division of responsibilities between actors in CCS projects. Is it clear who in the legal sense is responsible for what at different stages of a cross-border CCS project?
The need to coordinate monitoring, reporting and verification of BECCS mitigation outcomes on a Nordic level.
The need to develop Nordic co-operation on CCS and how increased interaction between the Nordic countries in the CCS area could be promoted.

The main findings of this work are summarised below.

The regulatory environment for CCS in the Nordic countries has developed significantly over the past decade or so. Also, at the international level, significant developments have taken place. For example, the EU has adopted the CCS Directive which regulates responsibility for the environmentally safe storage of CO₂ and contains provisions for CO₂ capture and transportation and included provisions for CCS in the EU ETS (Emission Trading System) Directive.

The ETS Directive sets out that an obligation to surrender allowances shall not arise in respect of emissions verified as captured and transported for permanent storage to a facility for which a permit is in force in accordance with the CCS Directive.

The CCS Directive has subsequently been transposed into national legislation. The International Maritime Organization IMO has adopted a resolution allowing the export/import of CO₂ for the purpose of sub-seabed storage. 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 CCS.

When it is later on transferred from the ship or the truck to a pipeline transport network or directly to a storage site.

The Commission furthermore proposed to extend the provision for CO₂ transport of the EU Emission Trading System (ETS) Directive to other means of transport as part of the ongoing revision of the ETS Directive. Regarding liabilities, the 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. National regulators in Nordic countries are also 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 summarised below. It should, however, first be noted that, in addition to an enabling regulatory environment, sufficient financial incentives must be in place for investments in CCS to actually happen.

International and EU law:

Through an amendment to the London Protocol, the export of CO₂ for sub-seabed storage in another state is permitted, but the amendment has not yet entered into force. Export of CO₂ from one state for sequestration in another state therefore requires a provisional application of the amendment, which in turn requires a bilateral agreement or arrangement between the states concerned. According to the Commission’s interpretation, the CCS Directive and the ETS Directive can act as such arrangement between EU Member States. The EEA treaty together with the incorporation of the two directives concerned in the EEA legal regime provides the necessary arrangement with EEA partners. This implies that 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 of experiences regarding these matters at Nordic level is important.

The Helsinki Convention does not allow storage of CO₂ below the Baltic Sea. Enabling CO₂ storage in the Baltic Sea would increase the potential for CO₂ storage in Nordic Baltic Sea states that have such potentials. That would require that the Helsinki Convention be amended or that a resolution allowing an interpretation that allows storage of CO₂ sub-seabed be adopted. Furthermore, some of the possible Baltic Sea storage locations extend to territory or economic zones outside the Scandinavian countries and potentially also outside the territory of the EU. This poses a problem as geological storage outside the territory of the EEA (European Economic Area) countries is not covered by the EU CCS Directive.

A moratorium in the Convention on Biological Diversity (CBD) does not allow climate-related geo-engineering activities that may affect biodiversity until there is an adequate scientific basis on which to justify such activities. Capture and storage of CO₂ from fossil fuels is expressly exempted from the moratorium. However, this is not the case for 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. Furthermore, tightening sustainability requirements for biomass within the EU could possibly affect the competitiveness of bioenergy and thus the conditions for BECCS.

National legislation:

All the Nordic countries have implemented the CCS Directive and the implementations have been accepted by the EU. The most distinct difference between national legislations that has been identified is that while Finland has no known geological formations appropriate for geological CO₂ storage and, therefore, uses the possibility (of the CCS Directive) not to permit geological storage of CO₂ in their territory, it is allowed (to varying extent) in the remaining four Nordic countries. Denmark and Iceland have made recent changes to national regulations/legislation to enable permissions for industrial scale CO₂ storage. 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. 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 is adapted to Iceland’s unique geology and permits “mineral storage” of CO_{2 ,}while the CCS Directive has been developed with the intention of geological storage of CO₂ in a supercritical state.

It is difficult to identify 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. CCS is new technology (for actors in the value chain and for regulators) and complications are likely to arise when the first permitting processes are initialised in a specific national context.

Monitoring, Reporting, and Verification and Accounting for CCS:

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 hundreds of 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, covering, inter alia, additionality demonstration, baseline setting, permanence, and MRV. Such methodologies exist for many CCS activity types, including BECCS and DACCS, and further methodologies are under development. The proposed EU framework for certification of carbon removals is expected to develop EU-wide approaches for ensuring high quality of certified carbon removal units, which can potentially be used to access carbon markets and/or subsidies.

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. It is unclear whether and how DACCS could be included in national GHG inventories. Current EU regulation, including the newly adopted regulations and decisions on the ESR, LULUCF and the EU ETS, does not provide guidance concerning where and how BECCS and DACCS should be accounted. It is likely that the role of BECCS and DACCS will feature more prominently in upcoming negotiations on targets and architecture for the EU's climate policy after 2030.

CCS may include cross-border cooperation and some (including Nordic) governments are already piloting inter-governmental agreements on cross-border cooperation on CCS activities. 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 make “corresponding adjustments” to their emissions balances for any transfers or acquisitions of authorised mitigation outcomes relating to market-based cooperation, in line with guidance relating to Article 6.2 of the Paris Agreement. Corresponding adjustments would prevent double-claiming also for any 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. In this context, it would be valuable to identify changes and updates to legislation and other policy commitments that are needed at the national level and more generally on EU level, in the short and long term.

Nordic coordination of infrastructure investment:

Scaling CCS commensurate with the delivery of the ambitious Nordic mitigation targets would require complex CO₂ networks to evolve. Such networks would feature multiple sources connecting to multiple sinks, and installations owned by different operators with incentives and obligations that are not always aligned. Investors will not develop one part of the chain without mitigation of “cross-chain” risk, where failures in other parts of the chain affect their revenue. It has been suggested by various stakeholders in the debate on CCS development in the Nordic region that potential coordination failures need to be addressed to facilitate investment and prevent sub-optimisation.

Recommendations:

Finally, a number of issues are identified 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. These include:

The CCS Directive and further actions to reduce uncertainties surrounding 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 certification of carbon dioxide removals framework.
Interpretations of the moratorium on geo-engineering in the CBD and its implications for implementation of BECCS in Nordic contexts, and
Initiatives to address the Helsinki Convention prohibition against the storage of CO₂ below the Baltic Sea.

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, e.g., a working group, for collaboration on CCS that could build on experience from existing networks. Areas that may initially be considered for prioritisation include:

Nordic-level technical work to coordinate CCS-relevant approaches to (a) activity-level Monitoring, Reporting, and Verification and (b) national GHG inventories and accounting.
Explore opportunities for market-based solutions involving international transfers of mitigation outcomes that may facilitate enhanced CCS deployment and mitigation ambition. This includes issues related to the credible and transparent voluntary use of carbon credits, based on activities in the Nordic countries, that avoids double claiming, and
Strengthening the capacity for long-term strategic planning/optimization of CCS infrastructure in the context of, inter alia, the 2035–2050 Nordic national net-zero targets.

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

This report addresses CCS technologies which can potentially make significant contributions to abate emissions from fossil fuels and, as a part of CDR methods, to remove CO₂ from the atmosphere. As a final remark, the authors wish to underline that the experience of deploying CCS at scale is quite limited and uncertainties are considerable, in particular concerning CDR applications. The potential future role of CCS does not justify reduced efforts to pursue full mitigation by means that do not rely on CCS, where feasible.