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Commission approves Swedish State aid scheme to support biogenic CCS

Commission approves Swedish State aid scheme to support biogenic CCS
Captured carbon dioxide slurry from a carbon capture pilot test.

The European Commission has approved, under EU State aid rules, a EUR 3 billion (SEK 36 billion) Swedish scheme to support carbon capture and storage (CCS) aimed at reducing carbon dioxide released during the combustion or processing of biomass. The measure will contribute to the achievement of Sweden's climate targets and the EU's strategic objectives under the European Green Deal, in particular the 2050 climate neutrality goal.

Sweden notified the Commission of its plans to adopt a EUR 3 billion (SEK 36 billion) scheme to support projects removing biogenic carbon dioxide (CO2) emissions through permanent carbon capture and storage (CCS) – bioenergy with carbon capture and storage (BECCS).

The measure aims to enable CCS as a viable and effective tool to mitigate climate change.

This is expected to increase investor confidence in CCS technologies, reduce costs for its future applications, and thereby facilitate the development of a CCS value chain in the EU.

Competitive bidding process

Under the scheme, the aid will be awarded through a competitive bidding process, a so-called reverse auction, with the first auction expected in 2024.

Auctions will be open to companies that (i) carry out an activity in Sweden, emitting biogenic CO2, and (ii) implement projects with a capacity to capture and store at least 50,000 tonnes of biogenic CO2 per year.

Under 15-year-long contracts, beneficiaries will receive a grant per tonne of biogenic CO2 that is permanently stored.

The BECCS demo plant at Stockholm Exergi
Hot Potassium Carbonate (HPC) as a solvent has been used to capture carbon dioxide for many decades (pre-combustion), with hundreds of HPC plants in commercial operation in the chemical process industry. In July 2022, Stockholm Exergi signed a Patent License agreement for the use of Capsol’s HPC technology for carbon dioxide capture at its Bioenergy with Carbon Capture (BECCS) demo plant at its Värtaverket biomass-fired combined heat and power (CHP) plant in Stockholm, Sweden.

The aid received will be adjusted taking into account possible revenues that might stem from the projects – for example, voluntary carbon removal certificates – as well as other public support received for the same project.

The scheme will run until December 31, 2028. By enabling the capture and storage of significant amounts of biogenic CO2, the scheme will contribute to Sweden’s efforts to reduce its greenhouse gas (GHG) emissions by 85 percent by 2045 compared to the 1990 level.

It will also help Sweden and the EU to meet the objective of achieving climate neutrality by 2050.

The Commission assessed the scheme under EU State aid rules, in particular Article 107(3)(c) of the Treaty on the Functioning of the EU, which enables Member States to support the development of certain economic activities subject to certain conditions, and the Guidelines on State aid for climate, environmental protection and energy (CEEAG), which allow Member States to support measures reducing or removing CO2 emissions.

The Commission found that:

  • The scheme is necessary and appropriate to incentivize investments in projects concerning the capture and storage of biogenic CO2 in Sweden and thereby contributes to the national and EU climate targets.
  • The scheme has an “incentive effect”, as potential beneficiaries would not carry out the investments in biogenic CCS projects without public support.
  • The scheme has a limited impact on competition and trade within the EU. In particular, the aid is proportionate and any negative effect on competition and trade in the EU will be limited in view of the design of the measure, which will notably ensure that the aid amount is kept to the minimum.
  • The scheme will be subject to an ex-post evaluation, which will verify, among other things, the effectiveness of the competitive bidding process.

On this basis, the Commission approved the Swedish measure under EU State aid rules.

This EUR 3 billion scheme will enable Sweden to capture and permanently store a significant amount of carbon dioxide generated by biomass combustion or processing. It will help Sweden and the EU to achieve their ambitious target of climate neutrality by 2050 while ensuring that competition distortions are kept to the minimum, said Margrethe Vestager, EVP in charge of competition policy.

The Swedish government has appointed the Swedish Energy Agency as the reverse auction auctioneer.

The company or companies that can offer the service to separate, transport, and geologically store biogenic CO2 with the lowest need for support per tonne of CO2 sequestered, wins the auction.

This is a big step forward on the way to Sweden’s climate goal, net zero emissions in 2045. Sweden can now build facilities to capture biogenic carbon dioxide and it will be absolutely crucial for Sweden to maintain its world-leading position in reducing climate emissions, remarked Sweden’s Climate- and Environment Minister Romina Pourmokhtari in a statement.

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