March 24, 2023

Making good on the “net” in net zero: the Net-Zero Industry Act must support carbon removal

Carbon Gap's reaction to the Net-Zero Industry Act

Key Takeaways

  • The NZIA offers a timely lifeline to the European net zero ecosystem but misses crucial support for carbon removals (CDR). The Carbon Capture and Storage (CCS) category must be expanded to also explicitly include CDR as a (strategic) family of net zero technologies.
  • The NZIA includes a first-of-its-kind producer responsibility clause, directly holding fossil fuel extractors responsible for cleaning up their mess and obliging them to build EU’s strategically crucial, open-source CO2 storage network – but this should cover the entirety of fossil fuel supply, not just production.
A lone windmill in the clouds

Following the Green Deal Industrial Plan Communication (GDIP), the Commission has presented a legislative proposal for a Net-Zero Industry Act (NZIA), laying out its plan to support the manufacturing and scale-up of net-zero technologies.  

The GDIP set big expectations; the NZIA was promised to allow for a stable and simplified regulatory environment for net-zero technologies. The question of which net-zero technologies would be considered of strategic importance remained open. The relevance of carbon dioxide removal (CDR) for the EU and the much-needed support to scale up technological CDR made it a very strong candidate for the NZIA. 

The GDIP and NZIA also serve another purpose: shoring up the EU’s competitiveness as a cradle of cleantech innovation and as host to what will soon be a booming net zero industry, in response to sweeping incentives in the USA. 

Carbon Gap welcomes the Commission’s proposal and committed efforts to strengthen Europe’s net zero ecosystem. The NZIA represents significant advances for the sector, especially for the 8 strategic technologies that have been listed.  

But the Act risks missing a critical opportunity to provide full support to other technologies, such as carbon dioxide removal (CDR), which are key to delivering climate neutrality and net negative emissions thereafter for Europe. In its current form, the Act excludes technologies that generate negative emissions even where these could fall under the definition of ‘Innovative net-zero technologies’ (e.g., some forms of direct air capture are considered TRL 7). Furthermore, the NZIA must also respond to the new realities facing net zero technology companies created by the three recent US climate bills. Permanent carbon removal technologies will receive support in the US on the order of mid-single digit billions USD. If CDR is not included in the NZIA, the EU risks ceding this promising slice of the net zero technology suite entirely. If instead CDR innovation and scale-up are shared across many regions and countries rather than concentrated in a few, the planet will benefit.

As the baton passes to the European Parliament and Council, we encourage them to consider the role of CDR and ensure it is explicitly included in this Act as a (strategic) net-zero technology. In a welcome development, however, the NZIA introduces two major opportunities that could contribute to scaling up carbon removal in the EU.  

1. An explicit CO2 injection capacity target is a start to unlocking carbon removal

Carbon Gap welcomes the explicit commitment to an EU annual CO2 injection capacity target by 2030. The proposed target of 50 million tonnes of CO2 per year as a minimum for the EU alone is a strong start, but may need to be increased even as we clarify which sources of CO2 are eligible for storage. Commission has rightly recognised the lack of existing or planned CO2 storage as a key piece of the puzzle. Many CDR methods store CO2 geologically, such as direct air capture with carbon storage (DACCS), bioenergy with carbon capture and storage (BECCS), especially the capture of biogenic carbon from waste and non-energy processes such as waste incineration (so-called Biomass Carbon Removal and Storage), and the permanent storage of mineralised carbon. Therefore, we welcome clarity that an EU CO2 storage network will be created that can accommodate CO2 from carbon removal activities. Crucially, this limited shared storage capacity must be transparently administered and prioritised so that high-value decarbonisation and removal projects are not crowded out by the capture of carbon that could have been avoided in the first place. To counteract this risk, a comprehensive and coordinated approach to carbon management that considers both CCS and CDR will be essential for ensuring that limited CO2 storage capacity is used effectively to reach the Union’s climate neutrality targets.

2. “Carbon Takeback” – The responsibility to build that injection capacity is placed where it belongs: on fossil producers 

The NZIA obliges the very industries that introduce fossil fuels into the climate system – oil and gas extractors – to take responsibility for storing CO2. This is a world-leading example of “Extended Producer Responsibility”, whereby the producers of hydrocarbons are required to store carbon back where it came from.  

How it works: Anyone who dug up oil or gas in the 2020-2023 period is directly responsible for building and operating the newly mandated CO2 injection capacity, pro rata according to how much fossil fuel they produced. This puts fossil fuel producers on the hook, in the same way that producers of packaging, car tires, and other consumer products are often required by law to take responsibility for the environmental footprint of end-of-life disposal of those products. 

This also creates an unprecedented opportunity to collate and host transparent, open data on carbon storage resources, much of which is held today by private companies. We will need a centralised EU registry to log all CO2 stored under the scheme, including the source of the stored CO2 so regulators can ensure that the highest-value removals, and most difficult-to-decarbonise sectors, are prioritised. 

One catch: for this obligation to deliver all of its benefits, it needs to oblige not just the producers of fossil fuel, but also the suppliers. Without covering the entirety of the fossil fuel supply, such an obligation may inadvertently incentivise imports over domestic production. We must ensure this policy delivers both less fossil fuel use overall, and more carbon storage. 

Carbon Gap looks forward to engaging on critical details of the obligation, such as which entities are obliged to build Europe’s CO2 storage infrastructure, where this infrastructure can be located, and how different sources of CO2 for storage are prioritised or barred.  

Call to action

The next months will be crucial to land the Net-Zero Industry Act. We encourage the Parliament and the Council to strengthen the world-leading requirement of producer responsibility for the EU’s carbon storage infrastructure, and to explicitly include CDR methods as (strategic) net-zero technologies. This family of mature and permanent CDR methods would become the only set of technologies that can deliver the “net” in the EU’s net zero strategy.

By Eloisa Viloria, Andrea Klaric, and Eli Mitchell-Larson