Associate Hamburg
"The political will of the coalition partners to enable CCS and CCU on an industrial scale in Germany opens up cross-sector opportunities for heavy industry as well as in the further development of such technology."
In its recently published coalition agreement, Germany’s new government has committed to achieving both German and EU climate targets domestically by 2045. Carbon Capture and Storage (“CCS”) and Carbon Capture and Utilisation (“CCU”) are seen as ‘essential tools’ for achieving climate neutrality, with an entire paragraph in the coalition agreement dedicated to them. This aligns the coalition agreement with the overwhelming scientific and political consensus according to which CCS and CCU are indispensable for energy-intensive heavy industries in particular given their emissions are difficult or impossible to avoid. This applies to lime, steel, cement and glass production among others. Interestingly, the coalition of Christian and Social Democrats stresses that they will also implement CCS and CCU in the operation of gas-fired power plants without expressly excluding the promotion of fossil fuels. A separate article discusses the coalition’s strategy on combined cycle gas turbine power plants. Overall, CCS and CCU are a topic in the coalition agreement on which there is broad consensus among the coalition partners. Unlike other issues, the agreement here has not been called into question.
The political will of the coalition partners to enable CCS and CCU on an industrial scale in Germany opens up cross-sector opportunities for heavy industry as well as in the further development of such technology. More clarity will likely be provided in the legislative process and, with the adoption of a legislative package to be adopted ‘immediately’ according to the coalition agreement. However, in a field as dynamic and complex as CCS and CCU, we also expect new legal uncertainties and areas of conflict to emerge that will have to be addressed by industry, the authorities and courts.
Current legal framework for CCS and CCU
The current legal framework for CCS and CCU is set out in the Carbon Dioxide Storage Act (Kohlendioxidspeicherungsgesetz, “KSpG”). So far, the KSpG only regulates the research, testing and demonstration of technology for the permanent storage of carbon dioxide in underground rock formations at a small number of pilot-scale sites. The commercial use of CCS and CCU is not yet possible under the current legal framework.
"In a field as dynamic and complex as CCS and CCU, we also expect new legal uncertainties and areas of conflict to emerge that will have to be addressed by industry, the authorities and courts."
The previous government had already recognised the urgent need for action on CCS and CCU in its Carbon Management Strategy. Its draft bill provided for a plan approval procedure based closely on the Energy Industry Act, an acceleration of the approval process, the possibility of reallocating natural gas pipelines and a largely common legal framework for CCS and CCU. As the last governing coalition collapsed last autumn, the law was not passed.
Key aspects on CCS and CCU in the coalition agreement
In the coalition agreement, the parties clearly commit to promoting CCS and CCU technology. CCS and CCU are intended to complement the accelerated expansion of renewable energies and energy-efficient production processes. As such, they are considered an “indispensable instrument” for achieving climate neutrality by 2045.
Therefore, the coalition parties intend to adopt a legislative package “immediately” after the beginning of the legislative period. The legislative package aims at enabling the capture, transportation, use and storage of CO2 from heavy industry where emissions are difficult to avoid and from gas-fired power plants. The coalition agreement points out that the steel industry, which is considered to be of central strategic importance for Germany, may also use CCS technology.
Further indications of the future legal framework for CCS and CCU are already apparent in the coalition agreement. The coalition intends to establish an overriding public interest in the construction of CCS and CCU facilities and transport pipelines. The goal is to simplify and accelerate approval procedures. Good experience was gained in the previous legislative period with parallel legislative amendments for renewable energy plants (Section 2 of the Renewable Energy Sources Act) and installations for storing electrical energy (Section 11c of the Energy Industry Act). However, it is uncertain whether CCS and CCU will be prioritised in the same way as renewable energy plants under Section 2 EEG and what specific consequences this will have for permitting procedures. The wording of the future law and the practice of the authorities and courts will have to be observed closely here.
"Industry leaders expect the new government to swiftly present concrete legislative proposals and create the necessary legal framework to get the commercial use of CCS and CCU technology off the ground."
Furthermore, the legislative package is intended to enable CO2 storage mainly offshore and – if agreed to by federal states – also at “suitable and accepted” onshore locations. Offshore CCS and CCU may be implemented in the exclusive economic zone and the continental shelf of the North Sea, outside German territorial waters. This corresponds to the previous draft law, although no details (e.g. on marine protection measures etc.) are yet known. The conclusion of bilateral agreements with neighbouring countries and the ratification of the amendment to the London Protocol are given ‘highest priority’. Although the coalition agreement refers explicitly to ratification of the London Protocol, what is meant is ratification of an amendment to the protocol. This concerns, among other things, CO2 exports for the purpose of offshore storage. We assume that the law prohibiting the dumping of waste and other substances and objects into the high seas will also be amended in this context.
For onshore CCS, an opt-in opportunity for federal states will be created to allow permanent storage of CO2 within their territory. The federal states will be given the choice of whether to allow such storage. This was already provided for in the previous draft which speaks in favour of continuity. The storage potential in Germany is estimated to be large, both offshore and onshore, so a considerable economic impact can be expected.
Finally, the coalition agreement states that direct air capture is seen as a possible future technology for raising negative emissions. However, the coalition agreement is silent on any regulatory changes or support measures to be taken in this regard.
Outlook
The coalition agreement makes it clear that the new government regards CCS and CCU as key technologies for achieving climate targets. The planned legislative amendments are intended to enable the commercial use of CCS and CCU for the first time. Energy-intensive industries as well as companies in the CCS and CCU sector can significantly benefit from this economically. Nevertheless, in a field as dynamic and complex as CCS and CCU we also expect new legal uncertainties and areas of conflict to emerge that will have to be addressed by industry, local and national authorities and the courts.
It is not yet clear whether and to what extent the new draft law will be based on its predecessor and its Carbon Management Strategy, though it is likely that this will be the case in many instances. Industry leaders expect the new government to swiftly present concrete legislative proposals and create the necessary legal framework to get the commercial use of CCS and CCU technology off the ground. This includes indications on how the financing of CCS and CCU projects will be set up and what incentives will be offered to companies. One possible option is carbon contracts for differences.
The coalition agreement provides important impulses for the use of CCS and CCU technology and gives rise to optimism that urgently needed reforms will be implemented soon. Companies should follow the developments closely and prepare proactively for the new framework conditions.
Click here to view all articles in our series about the German federal government’s 2025 coalition agreement which offer a legal and practical assessment of selected topics from the coalition agreement.
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Associate Hamburg
Associate Hamburg
