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EU Commission Approves €1.1 Billion Danish Scheme for Carbon Capture and Storage Technologies

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EU Commission Approves €1.1 Billion Danish Scheme for Carbon Capture and Storage Technologies

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  • The measure will support CSS as a viable and effective tool to mitigate the effects of climate change
  • Aid be awarded via competitive tender to be concluded in 2023
  • Under 20-year contracts, beneficiaries will capture and store a minimum of 400,000 metric tons of CO2 per year starting in 2026

The European Commission has approved, under EU State aid rules, a €1.1 billion Danish scheme to support the roll-out of carbon capture and storage technologies. The measure contributes to the achievement of Denmark’s climate targets and the EU’s strategic objectives under the European Green Deal, in particular the 2050 climate neutrality goal.

The Danish scheme

The scheme notified by Denmark, with a total budget of around €1.1 billion (DKK 8.1 billion), aims at promoting the roll-out of CCS technologies used to reduce carbon dioxide (‘CO2‘) emissions that are released in the atmosphere and achieve deeper decarbonisation of industrial processes. The measure will support CCS as a viable and effective tool to mitigate climate change. This is expected to increase investor confidence in the CCS-technology, reduce costs for future application of CCS technologies and thereby facilitate the development of a commercial CCS market in Denmark.

Under the scheme, the aid will be awarded through a competitive tendering procedure to be concluded in 2023. The tender will be open to companies active in any industrial sectors, including the waste and energy sectors. Under a 20-year contract, the beneficiary will capture and store an annual minimum of 0.4 million tonnes of CO2 as from 2026. The aid will cover the difference between the estimated total costs of capturing and storing a tonne of CO2 over the lifetime of the contract and the return expected by the beneficiary. The maximum amount of aid will be equal to €54.9 million per year (DKK 408.4 million), adjusted to inflation.

The scheme will contribute to Denmark’s efforts reduce its greenhouse gas emissions by 70% by 2030 compared to the 1990 level. It will also help Denmark and the EU meet their objective of achieving climate neutrality by 2050. The scheme is expected to enable the capture and storage of a minimum of 0.4 million tonnes of CO2 per year and 8 million tonnes of CO2 over the total 20-year period of the contract.

See related article: EU Commission and EBRD to Unlock €2.1 Billion for Sustainable Infrastructure and Green Economy

Image: Christiansborg Palace, Copenhagen. Source: Moahim, CC BY-SA 4.0, via Wikimedia Commons

The Commission’s assessment

The Commission assessed the scheme under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the European Union, which enables Member States to support the development of certain economic activities under certain conditions, and the 2022 Guidelines on State aid for climate, environmental protection and energy (‘CEEAG’), which allow Member States to support measures reducing or removing CO2 emissions.

The Commission found that:

  • The scheme is necessary and appropriate to support the reduction of greenhouse gas emissions through the capture and storage of CO2 in Denmark and thereby contribute to the EU and national climate targets.
  • The scheme has an “incentive effect” as potential beneficiaries would not carry out the investments and engage in a CCS project without the public support.
  • The scheme has a limited impact on competition and trade within the EU. In particular, the aid is proportionate and any negative effect on competition and trade in the EU will be limited in view of the design of the bidding process, which will ensure that the aid amount is kept to the minimum.
  • The scheme will be subject to an ex-post evaluation, which will verify among other things the effectiveness of the competitive bidding process.
  • Finally, Denmark committed to ensure that the aid delivers overall CO2 reductions and that it does not merely displace the emissions from one sector to another.

On this basis, the Commission approved the Danish scheme under EU State aid rules.

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