Carbon capture and storage (CCS) has long been recognized as a critical technology for achieving net-zero emissions, particularly in hard-to-abate sectors like steel, cement, and chemicals. Historically, the United States has been at the forefront of CCS development, propelled by generous subsidies and tax incentives, notably the 45Q tax credit enhanced by the Inflation Reduction Act (IRA). However, recent policy developments in Europe signal a strategic shift that could redefine global leadership in CCS.

The U.S. approach: A market-led model facing political uncertainty

For years, the United States has been the global frontrunner in CCS deployment, thanks to a market-based approach centered around financial incentives. The 45Q tax credit, bolstered by the IRA, offered up to $85 per tonne of CO2 captured and stored in geological formations, and up to $180 per tonne for direct air capture (DAC) projects. These incentives sparked a surge of interest and investment, with over $320 billion in clean energy projects announced in the wake of the IRA—many incorporating CCS as a key decarbonization tool.

The enthusiasm for CCS in the U.S. market remains strong. Companies and investors are still eager to pursue large-scale projects, and the technological expertise in CCS is considerable. However, the political landscape has introduced significant uncertainty. Proposed legislation to repeal or weaken key provisions of the IRA has created a cloud of doubt over the future of CCS incentives. Already, this policy instability has led to the cancellation or delay of major projects, with estimates suggesting that over $14 billion in clean energy investments have been shelved due to fears that the regulatory framework may shift.

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This political uncertainty undermines investor confidence and makes it harder for companies to commit to the long lead times and high capital costs required for CCS projects. As a result, while the interest and market potential for CCS in the U.S. remain strong, the momentum is at risk of stalling.

Europe’s regulatory mandate: A new model for CCS deployment

In contrast, Europe is taking a more direct and regulatory-driven approach. Under the recently adopted Net-Zero Industry Act, the EU has introduced a groundbreaking requirement: oil and gas companies must collectively develop and reserve at least 50 million tonnes of annual CO2 storage capacity by 2030. This mandate is proportionally assigned, with each company’s obligation based on its historical production levels, ensuring that those most responsible for emissions contribute the most to the solution.

This shift marks a fundamental departure from the U.S. model. Rather than relying on voluntary market signals and financial incentives, Europe is creating a binding legal obligation—turning CCS from a niche technology into a critical pillar of its industrial decarbonization strategy. By designating these storage projects as Net-Zero Strategic Projects, the EU also accelerates permitting processes and unlocks access to funding mechanisms like the Innovation Fund, supported by revenues from the EU ETS.

This regulatory certainty offers investors a stable environment in which to commit capital, reducing risk and providing a clear roadmap for the long-term development of CCS infrastructure.

A shift in global momentum

The contrasting approaches between the U.S. and Europe highlight a shifting dynamic in global CCS leadership. The U.S. market, once the undisputed leader in CCS due to its financial incentives, now faces a potential slowdown as policy uncertainty erodes confidence. While interest and market conditions for CCS in the U.S. remain strong, the lack of stability in the regulatory environment makes it difficult for projects to reach final investment decisions.

Europe, by contrast, is creating a stable and predictable policy framework that reduces uncertainty and drives investment. By mandating the development of storage capacity, Europe ensures that the infrastructure will be in place to support decarbonization efforts across multiple sectors—from steel and cement to hydrogen and negative emissions technologies. This approach positions Europe as a growing center of gravity for CCS innovation, offering a blueprint that other regions may seek to emulate.

Oil and gas companies as part of the solution

In previous publications, I have discussed how oil and gas companies can contribute to the energy transition—not just as suppliers of fossil fuels, but as builders of critical infrastructure for a net-zero future. Europe’s CO2 storage mandate is a clear example of this vision in action. By leveraging their expertise in subsurface operations, oil and gas companies can develop the storage capacity that will serve as the backbone of Europe’s industrial decarbonization strategy. This is a tangible way for these companies to contribute positively to the transition, using their resources and knowledge to solve one of the most pressing challenges of the clean energy shift: where to safely and permanently store CO2.

Conclusion

The European Union’s CO2 storage mandate is more than just a regulatory milestone—it is a turning point for the global CCS industry. By creating a legally binding requirement for storage development, Europe is providing the certainty that markets and investors need to scale up CCS projects. In contrast, the U.S., despite its early lead and the market’s ongoing interest, risks losing momentum due to political instability and the potential rollback of critical incentives.

This transatlantic divergence has far-reaching implications. As Europe accelerates its CCS deployment, it positions itself as a leader in the global race to decarbonize heavy industry. The U.S., meanwhile, faces the risk of ceding its leadership role unless it can provide stable and predictable policy support.

The challenge now is clear: Europe must act swiftly to implement its ambitious plans, and the U.S. must ensure that political uncertainty does not undermine its CCS potential. The world is watching, and the choices made today will shape the industrial landscape of tomorrow.

By Leon Stille for Oilprice.com

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