Germany: Government adopts bill for commercial carbon capture and storage

Why should I read this?

The German Federal Government has adopted a bill to amend the Carbon Dioxide Storage Act (Kohlendioxid-Speicherungsgesetz – KSpG, in the future Kohlendioxid-Speicherung- und -Transportgesetz, KSpTG), which Act will enable carbon capture and storage (CCS) as well as carbon capture and utilisation (CCU) for commercial purposes and introduce a permitting and operating regime for a CO₂ pipeline infrastructure. Now, the debate and vote in Parliament may start.  The Government considers the Act as essential for Germany’s strategy to achieve climate neutrality by 2045 and net-negative emissions thereafter.

What do I need to know?

The bill provides for the following key changes:

• Permission for CCS: CCS projects may now be permitted for large-scale, commercial and not merely research and demonstration purposes.  It will be allowed offshore in the continental shelf and in the German exclusive economic zone.  The Federal States may opt for and allow onshore storage projects.
• Environmental safeguards: Offshore storage will be prohibited in marine protected areas and their buffer zones. CCS projects must not significantly impair offshore wind or hydrogen infrastructure.
• National planning procedures: CO₂ pipelines will be deemed an infrastructure of overriding public interest. The bill foresees a uniform national planning approval procedure (Planfeststellungsverfahren) for CO₂ pipelines, modelled on the procedure provided in the Energy Industry Act (EnWG).
• Repurposing and extension of pipelines: Existing pipelines for natural gas, hydrogen and products may be converted into CO₂ pipelines without planning procedures. – New CO₂ pipelines along existing pipeline routes are unlikely to raise concerns.
• Exclusion of coal-fired power plants: Operators of CCS infrastructure will be forbidden to transport and store carbon dioxide from coal-based power generation. Carbon dioxide deriving from natural gas-fired power plants, however, will remain eligible.
• Implementation of EU law: The Act will also implement EU Regulation 2024/1735, the “Net Zero Industry Act” (NZIA).  In line with Art. 21 of the NZIA, it will oblige parties which had an exclusive permit for prospecting, exploring or producing hydrocarbons in a geographical area to make available geological and other data, including economic assessments, on abandoned places of production for information purposes on possible CO₂ transport and storage, unless this party has applied for a permit for exploring CO₂ storage.
• Basis for specification of contributions to CCS run-up: Requirements for contributions by authorized oil and gas producers to the run-up of CCS, as foreseen in Art. 23 of the NZIA, may be specified, and penalties for CCS capacity not created by such a producer in violation of its obligations, may be fixed by ordinance of the Ministry of the Economy, in agreement with the Ministry of Environmental Affairs, and approval of the Federal Council.

What does this mean for stakeholders?

The bill may possibly be implemented in 2026.  While it has provoked harsh criticism by environmental organizations, associations of the cement, chemical, limestone, steel and waste incineration industries have urged for a change in the German CCS and CCU policies.  Others welcome offshore CCS storage, but are skeptical about onshore storage, suspecting hazards for water supply.  Given this broad range of interests and positions, there may be changes in the course of the parliamentary process.

If adopted as proposed, the Act will allow and significantly improve conditions for investment in carbon dioxide storage and transport projects.  The classification of CO₂ pipelines and storage facilities as projects of overriding public interest is expected to accelerate permitting and reduce legal uncertainty. – Demands for subsidization of CO₂ transport, CCS and CCU projects, for example by way of contracts for difference, have also been raised.

The German Federal Cartel Office (Bundeskartellamt) has reviewed two early stage projects upon request of gas transmission system operator Open Grid Europe on cooperation of (potentially competing) gas pipeline operators for building CO₂ pipelines along existing gas routes.  It has accepted that competition between pipeline systems and operators will be unlikely in the near future.  It is also likely to accept long-term agreements between pipeline operators and users for securing investment and ramp-up costs.

The Act will also improve perspectives for industries where carbon dioxide emissions cannot be fully avoided.  These include, among others, steel, chemicals, cement, limestone and waste incineration.

What should I do next?

Utilities, stakeholders in industries with unavoidable carbon dioxide emissions, project developers and investors should further monitor both the legislative and political process and technological development.  While CCS had a very bad image in Germany for a long time, discussions about the draft KSpTG and positive experiences in other countries, for instance Norway, could bring a change and trigger investment and activities.

Authorised oil and gas producers identified by the Commission Decision of 23 May 2025 (3322/2025) will have to observe both the process for fixing contributions under the NZIA on the European level, namely in view of Delegated Regulation 2025/1477 of 21 May 2025 on the calculation of contribution and reporting obligations, and in Germany for specification of the contribution and the penalties.