Denmark Aims to Corner Carbon Capture Market

The Danish government is investing billions of euros to establish the country as a hub for carbon capture and storage (CCS) in Europe, a technology central to the EU’s 2050 net-zero climate plans.

Denmark aims to kickstart the nascent CCS industry by enticing the market with subsidies, helping the Scandinavian country to pull in front of EU competition.

The government wants Danish industry to run ahead of the market, building the necessary infrastructure to make CCS viable as soon as market demand arrives at scale.

In addition to removing domestic carbon, Denmark is looking to transport CO2 from surrounding nations for storage under Danish soil, becoming a regional leader.

Last September, Danish authorities signed an agreement with the Belgian region of Flanders to transport and store carbon-emissions, with the first carbon exports injected under the Danish North Sea in March. 

Norway, Germany, and Poland have also expressed interest in working with Danish industry to store planet-heating CO2.

CCS technology sees carbon dioxide removed from the atmosphere and injected underground, where it will remain for hundreds of years, removing its contribution to global warming. 

Depleted oil fields and gas reservoirs are considered ideal sites for CCS, though it is also possible to inject carbon deep under subsoil.

While the CCS industry is taking off in the United States, thanks in large part to a government tax credit of $85 for each tonne of carbon stored, the industry is in its infancy in Europe.

This is despite carbon removals being a central plank in EU plans to reach net-zero carbon emissions by 2050.  The EU has set a goal to have at least 300 million tonnes of CO2 stored per year by mid-century.

CCS is seen as particularly important to quell the climate impact of sectors without a clear path to complete decarbonisation, such as aviation and shipping.

The European Commission’s Net-Zero Industry act, released in March 2023, includes CCS as a strategic green technology, making it eligible for investment support and quicker permitting processes.

For the first time, the EU also set out a target to enable 50 million tonnes of annual CO2 injection capacity by 2030, putting the oil and gas industry under pressure to deliver on a technology they have promoted for years.

Under EU state aid rules, significant government investments must be approved by the European Commission to prevent market distortions.

On 12 January 2023, the Commission approved a €1.1 billion Danish scheme to support the roll-out of CCS technologies, citing the importance for Denmark’s climate targets and the wider EU goal of climate neutrality.

The Danish energy company Ørsted was among the first to be awarded a tender to support carbon capture from the company’s combined heat and power (CHP) plants.

CHP plants in Denmark are primarily powered by wood chips, meaning the process is theoretically carbon negative, as carbon from the atmosphere is absorbed by forestry prior to it being captured and stored underground.

At present, the carbon captured is shipped to the Northern Lights storage reservoir in the Norwegian part of the North Sea, as Danish storage facilities are not yet ready at scale.

Ørsted has signed an agreement with American tech giant Microsoft to offset 2.76 million tons of CO2 from the Asnæs Power Station over 11 years.

Ørsted said in a statement, “given the nascent state of bioenergy-based CCS, Danish state subsidies and Microsoft’s contract were both necessary to make this project viable.”

Both the government and industry want to eventually transition Denmark away from a state subsidy model to an independent CCS market.

Anne Højer Simonsen, Deputy Director of the Confederation of Danish Industry, said, “there’s no question that this needs to become a market. And the only reason that you need subsidies right now is that the market will not pay for the cost. And you need political will to get the market up and running. If you have a project you depend so much on other parts of the value chain that you cannot control, so the risk for most commercial components is simply too high.”

The commitment of other European countries is also needed to spur private investment in the Danish CCS market, according to Simonsen, who continued, “even though we actually think we are going to catch and store a lot of CO2 in a Danish context, it’s far from enough to pay for infrastructure, and especially also storage. So it will depend very much on being able to attract carbon dioxide storage also from other countries.”

Source: Euractiv