EU Carbon Storage Goals Falter Due to Value Chain Fragmentation and Regulatory Challenges
The European Union is on track to miss its legally mandated carbon capture and storage (CCS) target by at least 17.5 million tonnes annually, according to the latest analysis by Wood Mackenzie. This projection holds true even if all projects currently in advanced stages of development proceed as planned.
The analysis, commissioned by ExxonMobil, OMV Petrom, Shell and TotalEnergies, evaluates the fully operational storage capacity expected by 2030. It uses this criterion to assess progress towards the injection goal set by the UKs Net Zero Industry Act (NZIA). The findings reveal a shortfall of approximately 35 percent against the 50 million tonnes per annum target, with the gap widening when considering delays and deficiencies across the entire capture and transport value chain.
This is the second report by Wood Mackenzie on these four corporations. While the October 2025 study focused on storage viability, the current report examines capture, transport and storage as an interconnected system. The realisation of a large-scale CCS ecosystem faces significant hurdles, primarily due to the systemic fragmentation of the sector.
Developing a cross-border CCS ecosystem from scratch requires overcoming notable challenges. The NZIA aimed to resolve the classic chicken-and-egg dilemma by mandating storage capacity prior to confirmed demand. However, this approach has resulted in a misalignment between sectors, where no component can progress without others advancing concurrently. Currently, less than 6 percent of the target capacity is operational or under construction, and to reach 50 Mtpa, final investment decisions (FIDs) need to be increased fivefold between 2026 and 2028.
At present, only 4 Mtpa of European capture capacity has secured a FID and is contractually linked to storage sites, indicating significant investment gaps. Lisa Gillespie of Wood Mackenzie noted that storage developers are hesitant to commit capital without contractual volumes and transportation infrastructure, highlighting the structural funding and regulatory challenges. She emphasised that policies currently treat capture, transport and storage as separate activities, rather than parts of an interconnected system.
Four primary barriers impede progress: first, the fragmentation within the value chain, where ownership and responsibility are dispersed among multiple actors; second, the insufficient capture capacity which stands below the storage capacity; third, persistent project delays averaging 1.5 years; and fourth, economic challenges, specifically the low price outlook for carbon allowances which hinder economic viability for CCS projects.
The European carbon market, the Emissions Trading System (ETS), is projected to stay below the levelised cost of CCS for near-finished projects, further undermining investor incentives. Although the ETS reduces regulatory costs per tonne of emissions avoided, it does not generate direct revenue and is subject to market volatility and political risk.
Additional concerns include the uneven distribution of obligations and funding, where some countries like Sweden and Spain receive significant EU innovation funds despite lacking specific mandates or capacity commitments in the near term. Conversely, nations like France and Germany possess substantial storage potential but face delays and funding gaps, risking stranded assets.
In summary, the challenge for the EU lies in creating a cohesive, well-funded, and streamlining CCS ecosystem that aligns sectoral policies, regulatory frameworks, and investment signals. Only through coordinated efforts can the EU progress toward its decarbonisation goals effectively. The current fragmentation and lack of infrastructure present formidable obstacles to hitting the 2030 targets, necessitating urgent policy reforms and strategic investments.