CCS – legal framework for the development of carbon capture and storage technologies in Poland and the European Union

December 10, 2024

The European Union has been undertaking a number of industrial decarbonization measures directly affecting businesses in recent years. An example is last year's amendment to the Directive establishing a scheme for greenhouse gas emission allowance trading within the Community (EU ETS Directive). The amendment reduced the cap on emission allowances and tightened the rules for the allocation of free allowances, which may result in the purchase of more allowances than before and an increase in prices. This has an impact on the cost of carrying on business in the sectors covered by the EU ETS.

In response to the new regulations, businesses are reducing production emissions, for example, by implementing new, more advanced technologies. Sometimes, however, such measures are insufficient (e.g. when emissions arise from the decomposition of substances, to some extent regardless of the technology used). In such cases, carbon capture and storage (CCS) become hot topics for discussion.

At the EU level, the legal framework for CCS projects is set by the Directive on the geological storage of carbon dioxide (CCS Directive), implemented into Polish law by the provisions of the Geological and Mining Law. In particular, the above law regulates issues related to obtaining licenses for underground storage of carbon dioxide, issued by the minister responsible for the environment, generally after receipt of the European Commission's opinion. The law also regulates other issues, such as those related to the localisation of CCS projects, the planning and performance of geological works, responsibility for CO2 storage sites, and the obligations of businesses. At the same time, it is worth noting that while the law quite precisely addresses issues related to underground storage of CO2, it does not cover its capture and transport. Capture has generally not been governed in the legislation and is subject to general regulations related to environmental protection, among others. Transportation, on the other hand, is addresses in the Energy Law, which covers, among other things, issues related to connection to the carbon transport network operated by the operator.

For many years, the possibility of implementing CCS projects based on the above regulations was limited, as these projects could only be implemented for demonstration purposes (e.g., to verify the effectiveness and usefulness of the use of CCS technology in reducing CO2 emissions, or to verify its safety for human health and life and the environment). Thus, they could not serve commercial purposes, which, given their high cost, made them almost completely abandoned. Though such a restriction did not arise from the Directive, the Polish legislator decided to implement it, arguing that it was necessary to verify the safety of CCS technology. In the end, however, no demonstration project was implemented (the only two CCS projects in Poland were launched before they were regulated by the Geological and Mining Law).

At the end of October last year, an amendment to the Geological and Mining Law came into force, which lifted the restriction of CCS projects to demonstration purposes and introduced additional incentives for their implementation. For example, it has implemented regulatory facilitation for smaller-scale CO2 storage projects of less than 100 kilotons in total. In addition, it has made it possible to combine the injection of CO2 into the reservoir with the intensification of hydrocarbon extraction by raising reservoir pressure to improve the economic viability of CCS projects. It has also changed the rules for the exploration and recognition of the underground carbon storage complex. Firstly, the obligation to obtain an exploration and recognition license has been replaced by the obligation to obtain a decision approving a geological work project. Secondly, entities that have identified and documented a CO2 underground storage complex have been granted a time-limited exclusive right to apply for a CO2 underground storage license. The idea is to ensure that entrepreneurs incurring expenditures on the exploration and recognition of CO2 complexes are able to conduct underground storage activities on their land.

In addition to the CCS Directive and the Geological and Mining Law, it is worth noting the EU Regulation on establishing a framework of measures for strengthening Europe's net-zero technology products manufacturing ecosystem ("Net Zero Industry Act"), adopted this year. It imposes an obligation to achieve by 2030 an annual injection capacity of at least 50 million tons of CO2 on the territory of the EU, in its exclusive economic zones or on its continental shelf, excluding injection associated with the intensification of hydrocarbon extraction. Oil and gas producers will be required to contribute to this goal, subject to certain exceptions. At the same time, they will not be required to carry out CCS projects on their own - it will be permitted to enter into agreements with third-party implementers to fulfil their obligations.

The Net Zero Industry Act provides for monitoring progress toward the CO2 injection target. On its basis, the Commission will report to the European Parliament and the Council, including, among others, an analysis of the geographic and temporal planning of CO2 storage sites, the main infrastructure needed to transport and store CO2 emissions from industrial installations and an analysis of possible barriers to the development of the CCS market. The reports will be compiled based on data delivered by member states, which are first obliged to announce to the public all areas on their territory where CCS projects could be permitted, and then to report, among others, on projects implemented on their territory and national support measures implemented.

In addition, the Act provides for streamlined administrative processes for carbon-neutral technologies, including CCS. The improvements are to include, among others, designating points of contact responsible for coordinating permitting processes and introducing a maximum duration for these processes (up to 18 months for carbon capture and storage). The Act also requires member states to provide easy and centralized online access to information related to carbon-neutral technology projects.

CCS technology is also subject to other laws. For example, the Renewable Energy Directive (RED) promotes certain types of electricity produced using CO2 capture and storage. The Regulation on guidelines for trans-European energy infrastructure (Regulation TEN-E) recognizes cross-border carbon dioxide networks as a priority energy infrastructure area.

Benefits, opportunities and barriers

In conclusion, carbon capture and storage has both environmental and economic justification. CCS technologies can help reduce CO2 emissions, in particular in those sectors where carbon dioxide is emitted due to the very nature of production processes (e.g., cement, lime, coke, steel, chemicals and oil refining). At the same time, the EU ETS Directive stipulates that carbon dioxide captured and transported to permanent storage is not accounted for under emission allowances, so CCS technologies may lead to reduced spending in this area. As a result, although they require significant investment, down the road they can bring real financial benefits.

In Poland, last year's amendments to the Geological and Mining Law, which allowed implementation of non-demonstration projects, may contribute to the development of CCS projects. However, Polish regulations leave much to be desired. On the one hand, the transport and storage of carbon dioxide are governed by several pieces of legislation. On the other hand, CO2 capture is regulated only by general regulations, such as those related to environmental protection. Finally, to date, implementing regulations specifying some of the detailed conditions for implementing CCS projects have not been adopted. In response to legal barriers, a special act is sometimes proposed, which would address these issues comprehensively.

At the European Union level the Net Zero Industry Act, which aims to achieve the first CO2 injection targets as early as 2030, could play an important role. In the longer term, these targets will be increased, as it is anticipated that up to 550 million tons of CO2 per year may need to be captured in the EU by 2050 in order to achieve the net-zero emissions goal. How many CCS projects ultimately succeed will depend on a number of factors, including geological potential, domestic support measures and the attitude of the public and investors.