Net zero by 2050?

Committing to reaching net zero CO2 emissions by 2050 is one thing, but getting there is something else entirely. While reducing current emissions levels is the first and most urgent step, technologies are also needed to actively remove CO2 from the atmosphere, store it and then utilise it – amongst others, in the chemical and plastics industry.
In the  Industrial Carbon Management Communication adopted in February 2024, details are provided on how carbon capture, utilization and storage (CCUS) technologies could contribute to achieving the admittedly ambitious - but still doable - goals that have been set by the EU. The bloc wants to achieve climate neutrality by 2050 with the support of a comprehensive policy framework to reduce net emissions by at least 55% by 2030.

By 2040, a reduction of 90 percent is targeted, a key milestone en route to net zero by 2050. Hitting these targets will require measures that go well beyond mitigation efforts alone. The EU Emissions Trading System (ETS), which puts a price on CO2 emission will help: the latest reforms call for a reduction in overall by 62 percent by 2030, compared to 2005, instead of the original 43 percent. As well, a new emissions trading system called the EU ETS II is being introduced to cover CO2 emissions from fuel distribution for road transport and buildings, and additional industrial sectors.
In addition, renewable energy, circularity, improved resource efficiency, alternative production processes and material substitution have all been identified as means to offer a major contribution, supported by technologies that enable the reuse of CO2.

With this in mind, the EU is developing an industrial carbon management strategy specifically aimed at reducing and managing the carbon emissions from industrial sectors across the board, especially those that are more difficult or costly to decarbonise. Technologies to remove, capture, store and eventually re-use carbon are the focus of this strategy.

Carbon capture counts
To reach a 90 percent net emissions reduction by 2040 and climate neutrality by 2050, the EU will need to be ready to capture at least 50 million tonnes of CO2 per year by 2030; approximately 280 million tonnes by 2040; and around 450 million tonnes by 2050.
This will only be achieved if CO2 removal from the air is also developed. Nature-based carbon removal solutions will play an essential role in this, but they will not be sufficient, making industrial carbon removals essential in order to reach this goal.
To make this possible, the proposed Net Zero Industry Act  - an initiative under the Green Deal Industrial Plan which aims to scale up the manufacturing of clean technologies in the EU - recognises carbon capture and storage as strategic net-zero technologies and supports project deployment with regulatory measures, including accelerated permitting procedures. The Commission will use its existing instruments to support industrial carbon removal technologies. Specifically, the Horizon Europe programme will focus on stepping up research to improve the efficiency and feasibility of removal technologies, notably direct air capture technologies, as well as their commercialisation and scale-up to market with support from the European Innovation Council.
These are all ambitious goals that can only be fulfilled through a European approach. The Industrial Carbon Management Communication, therefore, sets down the actions needed at the EU and national level to establish a single market for CO2 in Europe, creating a roadmap detailing the technologies and infrastructure required for these ambitions to be fulfilled. Interestingly, the proposed new Act recognises the specific know-how of the oil and gas industry regarding the necessary infrastructure and requires this sector, too, to invest in these initial infrastructures.

The policies supporting industrial carbon management and the projects planned notwithstanding, operational large-scale projects are limited in Europe, the Communication notes. It sums up the main challenges as follows:

• ongoing difficulties in building a viable business case, including because of significant up-front investment capital required, uncertainty of future CO2 prices and the need for extra attention for matching supply and demand for low-carbon products;
• the lack of a comprehensive regulatory framework across the entire value chain, notably for industrial carbon removals and for certain CO2 uses;
• the first businesses involved in building carbon value chains also face CO2-specific cross-value chain risks, such as liability for leakages or the unavailability of transport or storage infrastructure.
• insufficient coordination and planning, especially in cross-border contexts.
• insufficient incentives for private and public investment to proof the business case for industrial carbon management.

A comprehensive strategy
The starting point for all industrial carbon management pathways is the capture of CO2 emissions: carbon capture and storage (CCS), carbon removals and carbon capture and utilisation (CCU). On top of that, CO2 transport infrastructure is needed, as well as the local use and storage of CO2, to enable different pathways to be put in place and to create a single market for CO2 in Europe.

Capturing CO2 and recycling it to produce advanced synthetic fuels, chemicals, polymers or minerals contributes to the circular economy model. The production of chemicals and materials is still heavily reliant on fossil-based feedstocks – but is due to be gradually substituted by alternative feedstocks, like sustainable biomass, recycled waste and captured CO2 in the future. By replacing fossil-based feedstocks, CCU can contribute to emission reduction, as well as feedstock and  energy security and autonomy for the EU.
According to the Communication, CCU also promotes industrial symbiosis and better integration of processes within industrial clusters. To this end, CCU related infrastructure should be implemented in a decentralised way, connecting sources of industrial emissions to production sites across value chains at local level, without necessarily requiring large CO2 transport infrastructure.

Access to hydrogen is also needed to enable CCU technologies. Therefore, synergies between CCU applications and hydrogen networks can play a key role to boost decarbonisation. However, the benefits of these CO2 utilisation technologies are not yet fully recognised, nor is their capacity to provide an alternative source of carbon to replace fossil carbon in specific sectors of the EU economy that are carbon dependent. The assessment of the full climate benefit of each CCU application as an alternative to a fossil-based product will have to take into account the energy consumption to power this energy-intensive process.  It is noteworthy that the NZIC currently does not include provisions to support European manufacturers with operational costs, unlike the IRA in the US, or the heavily subsidised Chinese market.

Yet, it is crucial to promote sustainable carbon cycles and significantly decrease the reliance of the chemical industry on fossil feedstocks by making use of sustainable carbon sources in those sectors where they are most needed and can achieve the highest climate benefit. To do so,  circular models should be supported, while stimulating the use of captured CO2 as a new carbon resource. To play a significant role in the EU economy, existing structural challenges and regulatory barriers to the deployment of CCU technologies need to be identified and addressed. There needs to be a framework for CCU that tracks the source, transport and use of several hundred million tonnes of CO2. It should ensure environmental integrity, including liabilities for CO2 leakage, and create a price incentive that accurately reflects the climate benefit of a solution across the industrial carbon management value chain. To provide an efficient and effective incentive, this framework must build on a robust and transparent accounting system that gives every operator in the value chain a clear and direct incentive for action that is not dependent on the actions of other upstream or downstream operators.

The Net Zero Industry Act
Making Europe an industrial base for net-zero technologies and increasing the EU’s manufacturing capacity is essential if the EU is to meet its ambitious climate and energy targets. The EU is currently a net importer of several net-zero technologies and components that are key to achieving this objective. The Commission has therefore proposed the Net-Zero Industry Act as part of the Green Deal Industrial Plan to further the EU’s self-reliance and to avoid having the green transition put at risk by strategic dependencies. To that end, it will create a simpler and more predictable legal framework for net-zero industries. Learning from the lessons of the Covid-19 pandemic and the energy crisis, the Act will make sure that supply chains no longer face disruptions and that the clean-energy transition will be underpinned by the domestic manufacturing capacity that is needed. This means increasing the EU’s manufacturing capacity for technologies that support the clean energy transition and release extremely low, zero or negative greenhouse gas emissions when they operate.

The proposed NZIA target of 50 million tonnes of annual CO2 storage capacity by 2030 requires approximately €3 billion io be invested in carbon storage facilities, depending on the locations and capacity of the geological storage sites.  The Commission also estimates investment needs for the transport infrastructure of pipelines and ships associated with the NZIA target at between about €6.2 and 9.2 billion by 2030.  Finally, the capture costs from point sources are estimated to range from €13/t and €103/t of CO2 depending on the industry, capture technology and CO2 concentration. A report prepared by industry stakeholders for the CCUS Forum predicts a funding shortfall of cumulatively €10 billion by 2030 for currently announced CCS projects – but also sees  a commercially viable market taking shape after 2030, where investors can earn a competitive return on invested capital based on the EU carbon price, underpinned by  the introduction of tariffs, new financing instruments, guarantees and risk instruments.

This can be offset by the estimated extrapolated theoretical market potential of captured CO2 in the EU of between 360 and 790 million tonnes of CO2, which could generate between €45 billion and €100 billion in total economic value of the future CO2 value chain in the EU from 2030 onwards and help create between 75 000 and 170 000 jobs.