© Supplied by VPI A deal between the UK and the EU marks a “pivotal moment’ in establishing a Europe-wide CO2 storage market, according to the Carbon Capture and Storage Association (CCSA).
The trade body said the deal, which included commitments to work towards linking the EU and UK emissions trading schemes (ETS), alongside other regulatory cooperation, would “ensure a level playing field in terms of carbon pricing”.
The CCSA said this would “reduce the risk of competitive distortions and carbon leakage”, as well as lowering the overall cost of reaching net zero through carbon capture, utilisation and storage (CCUS).
Greater cross-border cooperation aimed at creating a Europe-wide CO2 storage market has the potential to bring down CO2 transport and storage costs by 28% for EU emitters, the CCSA added.
While the CCSA welcomed the deal, the organisation called for the EU and the UK to deliver a “comprehensive and robust” carbon border adjustment mechanism (CBAM).
The CBAM levies a fee based on the carbon intensity of imported goods, which aims to protect EU production from being shifted to countries with lower emissions standards.
The CCSA also said “urgent steps” are needed towards removing regulatory barriers to cross-border CO2 transport and storage between the EU and the UK.
EU and UK alignment ‘vital’
CCSA chief executive Olivia Powis said a linked EU and UK ETS alongside a comprehensive CBAM would provide a “clear, stable signal to industry”.
“For sectors that are hard to decarbonise, CCUS will play a critical role in meeting net zero goals,” Powis said.
© Supplied by CCSA“A unified carbon market can reduce fragmentation, lower compliance costs, and help ensure that carbon abatement happens where it’s most cost-effective.”
Powis said close alignment between the EU and the UK on carbon pricing is “vital to safeguard competitiveness and minimise trade friction”.
“This is not just about environmental alignment, but also about economic and industrial strategy,” she said.
“A linked system, alongside urgently addressing the regulatory barriers to a European CO2 market, will give the UK and EU a shared platform to lead on international carbon market development, demonstrating climate leadership on the global stage at a time when ambition and cooperation are more important than ever.”
North Sea energy transition
The UK and EU agreement was also welcomed by the UK’s offshore oil and gas sector.
Offshore Energies UK (OEUK) head of energy policy Enrique Cornejo said the deal marks the start of a “new conversation” between the UK and the EU on energy.
“Since the invasion of Ukraine, energy security and costs have become very real issues for people across our continent,” Cornejo said.
© Supplied by Shell““I hope we can work with our European partners to drive down costs and unlock a new era of innovation and collaboration across our shared energy mix from offshore wind, hydrogen to carbon capture – all secured by domestic oil and gas production and our world class supply chains.”
Cornejo said with the UK having Europe’s largest CO2 storage capacity, there is the potential to develop a £7 billion storage market for EU countries by 2040.
“The linkage of UK-EU emissions trading systems could help to create a more robust market and avoid significant costs for UK exporters as the EU CBAM comes into force,” he said.
“This has the potential to reintegrate UK and EU electricity markets, reducing frictions and costs to consumers.”
“By transforming the North Sea into an integrated hub that produces low-cost, high-value energy for consumers, the UK and its neighbours can capitalise on the existing resources, supply chains, skills and expertise we have built up together over many decades.”
‘Huge step forward’ for offshore wind investment
Meanwhile, E3G energy transition director Lisa Fischer said the agreement to work towards closer cooperation on integrating the UK into EU electricity markets is a “huge step forward” for investment certainty.
“Given that the UK’s offshore wind resources face a much greater market if fully integrated with the EU, this is a huge opportunity for this sector for continuous growth,” Fischer said.
“What they now need to do urgently is agree next steps on aligning planning for a meshed grid between the EU & UK which could accelerate delivery timelines, bring down costs and reduce environmental impacts – and it would send the right signal for supply chain ramp up.
“The UK’s NESO is already working on a spatial energy plan – the opportunity to make sure this works with, rather than against, the EU’s plans, is now.”
Fischer pointed to an upcoming North Sea summit in Germany as an opportunity to announce further progress.
