New report urges for policy changes to boost CCU investments in the EU

The Industrial Carbon Management (ICM) Forum's Working Group on Carbon Capture & Utilisation (CCU) recently published its report, which gives recommendations how to incentivize the CCU value chain. 

The Working Group on CCU was established under the ICM Forum by the European Commission. I had a pleasure to represent our company in there. Below, I’m happy to share some of my views related to the work with you.

The huge potential of CCU has been recognized

The report is intended to give recommendations to the Commission and to policy-makers to incentivize the CCU value chain within the EU. The key aspect, which the report rightly recognizes, is the potentially huge importance of the CCU for the European industry in the future. To transition, the industry needs access to alternative sources of carbon, such as captured CO2. Capturing carbon from biogenic and residual fossil sources, and utilising it to replace virgin fossil carbon, is fundamental for the de-fossilisation of hard-to-abate sectors, like waste-to-energy.

Operators capturing carbon for product utilization should not pay for emissions

The issue of chemically bounding the captured carbon in non-permanent ways to chemicals or products, is the most relevant for us. It is also the one, which is lacking all the legal incentives. In fact, the current EU ETS Directive disincentivise such production. Currently the CCU process, displacing virgin fossil carbon feedstock, still needs to surrender the emission allowances, as if it the CO2 was emitted, even though it is not. 

This flaw in the system must be addressed during the 2026 revision of the ETS Directive. The upstream “emitter”, who captures the carbon and utilises it in production of e.g. chemicals or plastics, should not be the one paying for the emissions. The final emitter in the downstream should be the one paying the costs. In most cases the final emitter would be the waste incineration plant, which receives the CCU product when it has become waste.

Municipal waste incineration should be included in the ETS Directive

For the scenario to work, we need to include municipal waste incineration to the scope of the ETS Directive. All emissions in the ETS must be accounted for and someone always needs to pay for the emission. Without the inclusion, the ETS system would “leak” – emissions avoided in the upstream would not be accounted for in the downstream. 

The inclusion of municipal waste incineration in the ETS is expected to happen during the upcoming revision, though there is strong opposition from the industry itself. So much so that the report does not touch upon this matter at all, even though the inclusion can be considered critical for the whole CCU sector to flourish in the long run.

Creating market pull for CCU products as a key driver

While the possibility to avoid ETS costs is key in boosting CCU investments, that is not the only means of incentivising CCU. Creating markets on the demand-side would be another efficient way to do the same. Mechanisms requiring product manufacturers to use certain percentage of CCU based raw materials, in a similar way as mandatory recycled content works in waste legislation, would add market-pull for CCU products. We believe that both of the mechanisms are needed.

Report lacks linkage between waste and climate legislation

The only major thing which is not fully recognized in the report is the linkage between waste and climate legislation, which is highly relevant for us operating in the waste management business. When the carbon is of waste-origin, meaning it is captured from the waste incineration process, the process utilizing the carbon to manufacture new products or chemicals, should be consider a recycling process. This would create a specific and much needed incentive for waste incineration sector, which will have to adapt to added costs coming from the ETS. It would also enable higher recycling rates via molecular route in waste incineration plants able to invest in the process.