ETS Revision Must Address Cross-Chain Risks for European CCS Growth

⚡ AI Executive Summary

Europe's carbon capture and storage sector faces a critical financing barrier: cross-chain dependency risks where delays in any part of the CO2 value chain (capture, transport, or storage) undermine the entire project's economics. Industrial emitters face a 'double burden'—investing in capture equipment while potentially paying EU ETS carbon prices if storage infrastructure fails to materialize. The UK has pioneered risk-mitigation through government-backed carbon contracts for difference that cover fixed costs during infrastructure outages, unlocking private finance for CCS projects there. For the EU to scale CCS deployment toward its 2040 decarbonization targets, policymakers must embed similar cross-chain protections into the revised ETS framework and the forthcoming Industrial Decarbonisation Bank. A state-backed fund—potentially leveraging ETS revenues—could compensate capture projects during transport or storage delays, aligning public incentives with private investment. The design of this mechanism, including fund size and trigger conditions, will determine whether the EU can replicate the UK's financing success or remain dependent on subsidized infrastructure like Norway's Northern Lights facility.