In October 2023, Poland enacted regulations that amend the Geological and Mining Law and the Energy Law, simplify regulations governing previously dormant CCUS technology (carbon dioxide capture, utilisation and storage) and open new possibilities for the use of CCUS in the country.
Place of CCUS technology on the market
CCUS technology is regulated at EU level in 2009 by Directive 2009/31/EC of the European Parliament and of the Council on the geological storage of carbon dioxide. This CCS Directive governs the capture of carbon dioxide from appropriate installations, its transport to the storage site and its storage after injection into an appropriate geological formation. The purpose of implementing the CCUS Directive is to contribute to the achievement of EU objectives in terms of reducing greenhouse gas emissions. It also alleviates the environmental impact of entities from the industrial sector and the conventional energy sector.
Participation in a CCUS project will exempt investors from the obligation to present greenhouse gas emission allowances. For carbon dioxide that has been captured and will be stored in the installation, such an obligation does not arise, which is particularly beneficial in connection with the prices of CO2 emission allowances under the EU ETS. Furthermore, CCUS will play an important role in achieving net-zero. On 6 February 2024, the EU Commission adopted an Industrial Carbon Management Communication, which provides details on how CCUS technologies can contribute to reducing emissions by 90% by 2040 and reaching climate neutrality by 2050.
Legal conditions of CCUS
Despite the benefits of using CCUS technology, until the October amendment Polish regulations contained a number of regulatory restrictions on the creation of such projects. CO2 capture and storage were only allowed as a demonstration project. This, in accordance with the CCS Directive, made it impossible to use the resulting installation on an industrial scale.
Each installation, even a so-called ‘small pilot project’, needed an appropriate licence. The Polish act also did not provide for smaller installations (i.e. those with total storage of less than 100 kilotons of CO2), which was expressly permitted by the CCS Directive. A licence was also required to search for or identify an appropriate location for a CCUS installation.
Moreover, the transport of carbon dioxide to a carbon dioxide storage site was defined extremely narrowly in the original regulations. The wording of the regulations before the amendment transmission was understood as being via pipeline within the transmission network, similar to existing solutions in the energy and gas sectors. The transport of CO2 was unregulated and, although allowed, did not enjoy the privilege of being exempt from the obligation to settle CO2 emission allowances. In practice, CCUS technology did not develop effectively under these rules.
What has changed?
The October amendment introduced changes in the scope of the above-mentioned barriers. Provisions limiting the use of CCUS technology to demonstration projects were removed. Thus, the procedure now takes into account the use of CCUS on a large industrial scale.
A licence is no longer required to search for or identify a location of a CCUS installation at the investment planning stage. It is sufficient for the investor to prepare a geological works project and have it approved by the Chief State Geologist. Investments in small installations (i.e. CO2 storage in a total amount of less than 100 kilotons) are also exempt from the licensing obligation.
Additionally, the possibility of CO2 transport directly connecting the capture site with the storage site, bypassing the transport network, has been introduced. The amended Act also includes a new institution of “enhanced hydrocarbon recovery”, which will further increase the profitability of future CCUS projects.
What’s next?
The amendment removes a number of regulatory barriers and facilitates the implementation of CCUS technology installations, which will expedite business for industry and conventional energy sectors. Installing CCUS technology within the undertaking ensures a reduction in costs related to participation in the ETS. At the same time, such an installation allows a reduction in the impact of business units from these sectors on the environment. The regulatory and market environment for CCUS in Poland is still developing and the amendment of the law has the potential to accelerate the development of this technology, and contribute to the decarbonisation of the Polish economy. Recent adoption of the Industrial Carbon Management Communication by the EU Commission could also give CCUS an additional boost.
For more information on this amendment to CCUS regulations, contact your CMS partner or these CMS experts.
Publication co-authored by Jan Michaluk, a trainee at the Energy & Infrastructure at CMS.
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