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The EU Industrial Carbon Management Strategy aims to scale up CO2 capture, utilisation, and storage to meet 2040 climate targets, specifically targeting an annual injection capacity of at least 250 million tonnes in the European Economic Area by 2040. To achieve this, the Commission plans to address current imbalances in storage—which is currently concentrated in the North Sea—by establishing transparent permitting processes by 2025 and creating an investment atlas of potential storage sites. The strategy also envisions a vast transport network, potentially reaching 19,000 km by 2040, and proposes a regulatory package for CO2 transport and a demand aggregation platform by 2026. Financial mechanisms discussed include the Innovation Fund, Connecting Europe Facility, and a possible Important Project of Common European Interest for transport and storage. Additionally, the strategy emphasizes industrial carbon removals (such as BECCS and DACCS) to help reach a target of removing 400 million tonnes of CO2 per year by 2040.

The document analyzes the implementation of CCfDs in Europe, specifically comparing the Dutch SDE++, the UK's Industrial Carbon Capture (ICC) contract, and the Danish CCUS Fund. It details how these mechanisms bridge the cost gap between the EU ETS carbon price and the actual cost of carbon abatement for hard-to-abate sectors like cement, steel, and chemicals. The analysis covers critical design elements including fund sizes, technology eligibility, reference and bid pricing, payment symmetry, and the management of cross-chain risks related to transport and storage (T&S) infrastructure.

The Clean Air Task Force (CATF) argues that carbon capture and storage (CCS) is indispensable for Austria to achieve climate neutrality by 2050, particularly for hard-to-abate sectors like cement, lime, and steel. The document recommends that Austria set specific deployment targets, remove legal barriers to geological CO2 storage, and develop a strategic plan for operationalising storage sites by 2035. To address the 'chicken and egg' problem of infrastructure investment, CATF suggests 'oversizing' transport networks and establishing an aggregation platform to match CO2 sources with sinks. Financially, the document proposes the use of carbon contracts for difference (CCfDs) to bridge the gap between EU ETS prices and decarbonisation costs, while advocating for long-term market demand through near-zero carbon product standards. Finally, it emphasizes the need for proactive public engagement and inclusive stakeholder dialogues to build political and social support for CCS.

The document argues that carbon capture and storage (CCS) is essential for Europe to reach net-zero emissions by 2050, particularly for hard-to-abate industrial sectors like cement and steel. It details the technical processes of capture and geological storage, asserts that leakage risks are extremely low, and outlines current project developments in the North Sea region and across the EU. The text also addresses the economic viability of CCS, noting that while costs vary by industry, the technology is often the lowest-cost path for specific industrial decarbonisation and carbon dioxide removal (CDR).

The marine shipping industry, responsible for about 3% of global GHG emissions, is under pressure to decarbonize following new targets from the EU and the IMO. The Clean Air Task Force (CATF) highlights that dual-fuel engines, which can run on conventional fuel as well as alternatives like methanol and ammonia, are becoming a standard design to provide flexibility over a ship's 30-plus-year lifespan. CATF's analysis indicates that ammonia-fueled ships could nearly fully decarbonize at a lower lifetime fuel cost than heavy fuel oil if carbon pricing is in place. To achieve these goals, the document recommends a clean marine fuel standard that mandates minimal upstream emissions, ensures safe bunkering, requires on-board pollution controls for gases like nitrous oxide, and uses economic incentives like a low carbon fuel standard to manage the higher costs of zero-emission fuels.

The report argues that CCS is essential for the EU to reach climate neutrality by 2050, noting that current deployment rates are far below required levels and that no operational CO2 storage sites currently exist within the EU. It recommends setting clear deployment targets for CCS, DACCS, and BECCS, and establishing a strategic plan to distribute storage basins across the region by 2035 to avoid over-reliance on the North Sea. To address financial barriers, the author suggests coordinating funding, using carbon contracts for difference (CfDs), and creating a dedicated tender for capture capacity. The report also emphasizes the need for a common regulatory framework for cross-border CO2 transport, the creation of an aggregation platform to match CO2 sources with sinks, and the development of market demand for near-zero carbon products. Finally, it advocates for the prioritization of permanent industrial carbon removals (DACCS and BECCS) and their gradual integration into compliance markets like the EU ETS, provided robust standards and monitoring are in place.

The analysis demonstrates that ships built or retrofitted with dual-fuel capacity for ammonia can meet or exceed EU marine sector decarbonization targets at costs equal to or lower than conventional heavy fuel oil (HFO) ships when carbon pricing is applied. A new build fully powered by ammonia can reduce lifetime emissions by 77% with a lifetime fuel cost equivalent to an HFO ship, while retrofits can reduce emissions by 41-52% at a lower overall cost. The report highlights that ammonia's viability depends on the availability of varying carbon intensities—from 'moderate CI' produced via natural gas with carbon capture to 'very low CI' produced via electrolysis—and notes that while ammonia is already handled globally, its toxicity requires purpose-built ship systems and ongoing safety validation by the IMO.

The document explains the EU's State aid control system, which generally prohibits government financial support to companies to protect the internal market unless the European Commission approves it. It details the 'State aid rulebook', including block exemptions and guidelines, and highlights the lack of systematic climate and environmental mainstreaming in these rules. The guide also outlines the procedural challenges for CSOs, who are typically treated as 'third parties' without formal standing to lodge complaints or challenge decisions in EU courts, and provides strategies for CSOs to influence State aid design and transparency.

The EU ETS for aviation currently covers intra-EEA flights, with a potential expansion to global flights pending a 2026 evaluation of ICAO's CORSIA. A key reform is the gradual phase-out of free allowances, with airlines paying for all emissions by 2026. The system is also introducing monitoring for non-CO2 emissions and providing 20 million free allowances until 2030 to support sustainable aviation fuel (SAF) uptake.

Carbon Market Watch (CMW) opposes the current draft of the Free Allocation Regulation (FAR) revision, stating it increases free allowances for industrial sectors and contradicts the political mandate of the EU ETS Directive. CMW identifies critical failures in steel and cement benchmarking, the use of median production levels for Historical Activity Level (HAL) calculations, and an insufficiently ambitious reduction in free allowances for process emissions.

The statement criticises the EU for granting billions of euros in free emission allowances to heavy industry, which it claims contradicts the 'polluter pays' principle. It contrasts the high value of these industrial subsidies with the capped funding of the Social Climate Fund, intended to protect vulnerable citizens from the costs of the new ETS2 system for buildings and transport.

The EU ETS will expand to shipping in 2024, applying the 'polluter pays principle' to cargo and passenger ships of 5,000 gross tonnage and above. The system covers 100% of emissions for voyages between EU ports and 50% for voyages between EU and non-EU ports. Costs will be phased in, starting with 40% of 2024 emissions paid in 2025, reaching 100% by 2027. While CO2 is covered from 2024, methane and nitrous oxide will be included from 2026. Revenue will support the Innovation Fund and member state climate projects, with specific exemptions for ice-traveling ships, certain outermost regions, and small island ferries until 2030.

A joint letter from multiple environmental and industry organizations argues that the European Commission's draft proposal for the Free Allocation Regulation (FAR) revision ignores previous political agreements by continuing to differentiate between steel production processes. The signatories contend that the current FAR incentivizes carbon-intensive iron ore processing over the use of ferrous scrap, which hinders the EU's circular economy goals and the steel sector's alignment with the 1.5°C Paris Agreement limit. They call for a shift to a product-based approach to free allocation to encourage the substitution of ore with scrap and accelerate the transition to net-zero steelmaking.

The EU chemicals sector faces a critical investment window until 2030, requiring over EUR1tn by 2050 to achieve net zero. The document argues that decarbonisation must address scope 3 emissions—which account for 60% to 80% of total emissions—through demand reduction, circularity, and alternative feedstocks. Key policy recommendations include expanding the Carbon Border Adjustment Mechanism (CBAM) to include polymers and organic chemicals, implementing Carbon Contracts for Difference (CCfDs) for low-carbon hydrogen, and strengthening the EU Taxonomy to better incentivise low-carbon basic chemicals production.

The report identifies 30 companies, termed the "emissions aristocracy," that were responsible for over 50% of total EU ETS emissions in 2022. While the power sector has seen significant emission reductions since 2013 due to the absence of free allowances, heavy industries like steel, cement, and petrochemicals have experienced stagnant progress. The author argues that free allowances create windfall profits and remove the financial incentive to innovate, calling for a transition to full auctioning by 2030 to ensure the polluter pays principle is upheld.

The European Union is expanding its Emissions Trading System (ETS2) to cover buildings and road transport, starting in 2027 or 2028. While intended to accelerate decarbonisation by applying the 'polluter pays' principle, the system risks disproportionately impacting low-income households. To mitigate this, the EU has established the Social Climate Fund (SCF) to support vulnerable groups and finance energy retrofitting. Carbon Market Watch advocates for increasing the SCF cap, strengthening energy performance standards, banning internal combustion engines by 2035, and ensuring that carbon pricing is complemented by binding national targets under the Effort Sharing Regulation.

The author contends that carbon markets are unsuitable for incentivising high-quality carbon removals because they favour the cheapest offsetting options over expensive technological solutions. The document criticises the EU's Carbon Removals Certification Framework (CRCF) for being too vague, lacking safeguards against mitigation deterrence, and potentially enabling greenwashing by allowing certified credits to be sold on the voluntary carbon market. It proposes that the EU's 2040 target should be split into three distinct targets—emission reductions, land-based sinks, and technical removals—to prevent the conflation of reductions and removals into a single net target.

The global steel sector faces significant challenges in decarbonization, with emissions intensity growing by 0.5% annually since 2010. While hydrogen-based Direct Reduced Iron (H-DRI) and Electric Arc Furnaces (EAF) offer paths to near-zero emissions, their deployment is hindered by high costs, limited green hydrogen supply, and a shortage of high-grade iron ore. The report highlights a geographic divide: the EU and US are shifting toward low-emission tech supported by subsidies and carbon pricing, while high-growth regions like India continue to expand high-emission Blast Furnace-Basic Oxygen Furnace (BF-BOF) capacity. Carbon Capture and Storage (CCS) is viewed as a necessary but expensive tool for abating existing capacity, though commercial-scale projects remain limited.

The briefing outlines five recommendations to enhance the Net Zero Industry Act (NZIA) to meet Europe's climate goals, focusing on increasing CO2 storage capacity, creating an EU-level aggregation platform for CO2 markets, improving Member State mapping of storage potential, leveraging oil and gas sector resources, and accelerating infrastructure permitting.

A survey of 58 European climate experts reveals skepticism about Europe's ability to meet its 2030 and 2050 climate goals, citing lagging investments and bureaucratic hurdles. While experts show varying confidence in technologies like CCS and hydrogen, there is a notable call for a more prominent role for nuclear energy and a shift toward 'technology optionality' and simplified, incentive-based policymaking.