Offshore carbon storage, carbon export and marine geoengineering – two new bills and what they mean for business

In context

The German Bundestag is currently reviewing two landmark bills that represent major regulatory steps towards carbon capture and storage (“CCS”) and offshore climate protection: a CO₂ Export Enabling Act (CO₂-Export-Ermöglichungsgesetz) implementing the amendment to Article 6 of the London Protocol (“LP”), and an act amending the High Seas Dumping Act (Hohe-See-Einbringungsgesetz, “HSEG”). The new legislation brings German law in line with international and EU law and will permit offshore carbon storage in Germany’s exclusive economic zone (“EEZ”) and on the continental shelf, facilitate the transnational export of CO₂, and define what marine geoengineering measures are allowed for research purposes. The bills are part of the Federal Government’s efforts to meet the goals of the Paris Agreement and the Federal Climate Change Act (Bundes-Klimaschutzgesetz).

The CO₂ Export Enabling Act will enable Germany to ratify resolution LP.3(4) (adopted in 2009 to supplement article 6 LP, which had completely prohibited the export of waste and other matter to other countries for dumping or incineration), to declare provisional application of article 6 LP pursuant to LP.5(14) (2019), and to deposit the declaration with the International Maritime Organisation. The proposed amendments to the HSEG will transpose these international framework provisions into German law, exempt more activities from the dumping ban, and codify an explicit ban on exporting waste for dumping or incineration while exempting CO₂ under strict criteria.

National regulatory framework: Harmonising the HSEG with carbon storage legislation

The revised HSEG will chiefly address three aspects:

• Offshore storage: The bill amends section 4 HSEG to exempt sub-seabed sequestration of carbon dioxide streams from the dumping ban. For storage in the German EEZ and on the continental shelf, section 5(5) of the revised HSEG refers specifically to rules of approval laid down in the Carbon Dioxide Storage Act (Kohlendioxid-Speicherungsgesetz, “KSpG”) (or Carbon Dioxide Storage and Transportation Act (Kohlendioxidspeicherungs- und -transportgesetz, “KSpTG”) as it will likely soon become). These rules stipulate planning permission as a general requirement, and add more detailed requirements concerning the environment, safety and spatial planning. No additional permission under the HSEG is required, thus dispensing with duplicate checks and ensuring a high level of protection.
• CO₂ export: The proposed new section 6a HSEG constitutes a general ban on exporting waste or other matter for marine disposal, but exempts carbon dioxide streams subject to certain strict requirements.
• Marine geoengineering and emergency response: The revised HSEG extends the list of geoengineering methods permitted for research purposes, including ocean alkalinity enhancement, biomass sinking, mineralisation in basalt formations in the oceanic crust, and artificial upwelling. These methods are permitted for scientific research only.

Relationship between the bills, basis in EU law

The two bills are closely connected: The CO₂ export exemption will be ineffectual unless the LP amendments are approved and applied; no national rules will enable carbon dioxide export or offshore storage in the German EEZ unless the revised HSEG is implemented. Exports to EU Member States and the EEA States are regulated primarily by European law and its national transposition. The CCS Directive will therefore continue to govern site selection, operation, monitoring, post-closure, liability and decommissioning. The ETS Directive regulates trading in greenhouse gas emission certificates.

That means bilateral agreements with these states can only regulate points not already regulated by EU law or its national transposition.

Section 4(2) KSpG, it should be noted, already requires that any storage outside Germany meet planning justification and other minimum standards. The amendments to the HSEG also clarify implementation in the maritime sector and the rules for CO₂ export. Section 2 of the revised HSEG will define “high seas” as including the German EEZ and the continental shelf, which will then fall within the act’s scope of application.

The revised HSEG will enter into force either when resolution LP.3(4) takes effect or when Germany declares that it will provisionally apply the 2009 amendment to the London Protocol in line with LP.5(14). Its entry into force will be announced in the Federal Law Gazette.

Practical implications and opportunities for companies

The proposed new provisions open up new decarbonisation options, particularly for emissions-intensive industries with hard-to-avoid residual emissions (e.g. cement, lime, steel, chemicals, refineries, waste management). At the same time, they raise complex planning and compliance considerations along the CCS value chain:

• Location and infrastructure constraints: Offshore storage capacities in the German EEZ are subject to planning permission and spatial development laws, and protected areas (including marine reserves, buffer zones, species-related restrictions) limit site selection. Companies will need to assess whether storage in Germany is feasible or export is the better option (infrastructure and site scouting).
• Responsibility for permits: LP.3(4) requires permitting responsibilities to be clearly allocated between the exporting and receiving country. Bilateral agreements must reflect the minimum requirements of Annex 2 LP and be consistent with EU law where applicable. Companies should closely monitor the proposed new regulations, particularly with regard to how responsibilities and potential liabilities are allocated.
• Environmental and liability risks: The provisions of the HSEG and KSpG, covering among other things reliable proof of storage safety, leakage prevention, monitoring and financial safeguards, must also be considered in this context. Cross-border supply chains may raise issues relating to liability, insurability and recourse risk.
• Emissions trading and balancing: To qualify under the EU ETS, the capture, transport and permanent storage of emissions must meet regulatory requirements and be auditable. Exports pose new challenges for accounting for carbon credits and offsets consistently across borders.
• Project-planning timing constraints: These mainly result from the relationship between the two proposed sets of changes and also affect the conditions on which exports may be permitted.
• Research and innovation: The expanded range of approved geoengineering research methods will create interesting R&D opportunities, including ocean alkalinity enhancement, mineralisation and artificial upwelling.
• Monitoring and reporting obligations, nature conservation considerations and permit application windows must also be taken into account.

Outlook

Companies can take early action to set initial strategic and operational priorities based on the planned changes, e.g. in the form of CCS roadmaps or by performing general compliance reviews of company contracts and approvals.

At the same time, they should pay close attention to the evolving legislative process, especially the interesting developments in international law. Companies should review and adapt their corporate strategies to respond to the proposed export regime in good time – especially in the context of existing regulations.