by Colin Laing, Advisory Team – CCUS Lead, Xodus
Buried amongst December’s UK Government announcement of plans to rejoin the EU’s Erasmus+ programme in 2027 was a policy point of real interest for the, admittedly small, pool of people more interested in emissions exchange than student exchange.
As well as agreeing “progress on talks that could lower electricity costs for British citizens and businesses”, the UK and the EU also resolved to complete discussion on the new “carbon linking (ETS) agreement before the next UK-EU Summit in 2026”.
While you’d be forgiven for having missed this, added as a brief note towards the bottom of the press release, this statement is crucial. It paves the way for the UK to take part in Europe’s burgeoning carbon capture and storage (CCS) market by allowing EU companies to claim credit for storing their emissions in the UK, something that currently isn’t allowed in the EU ETS.
Building Pipelines and Policy
Amidst something of a reassessment of the path ahead for CCS in the UK, this announcement at the tail end of last year was well timed.
Research from Xodus, developed in partnership with the Carbon Capture and Storage Association (CCSA), found that enabling cross-border CO₂ transport and storage between the EU and the UK can be one of the most effective ways of lowering costs for everyone by creating a large, more efficient market for storage.
With the first UK projects now in construction, with spare capacity to offer to the market and also shipping solutions being prepared by major players, the lack of recognition of emissions stored in the UK by the EU ETS stands out as the main barrier to cross border trade. This isn’t a new problem, but with politicians now willing to spend some of their limited face to face time on the topic, there is cause for optimism.
Theory fast becoming reality
Since we first began talking about the need for a fluid market in the EU to drive down costs, we have seen Stockholms Exergi’s capture project agree a contract with Northern Lights to transport and store emissions from Sweden in Norway.
The engineering behind both projects is clearly impressive for all to see. However, the effort needed to navigate the policy environment and secure such a significant deal, that even includes a Carbon Dioxide Removal agreement with Microsoft, is equally admirable.
This deal shows that these complex cross border agreements can be made and, with another Swedish auction in 2026, we might expect these learnings to be applied again soon.
As major economies like France, Belgium, Germany – all of which have limited storage options like Sweden – begin to accelerate their support for emitters, we can expect to see more cross border agreements signed. Including the UK in this mix would be a step towards creating the market scale and competitive tensions needed to drive down costs and help to build public approval of this important technology.
Learning from Denmark
Recent challenges in Denmark’s CCS allocation process, which have seen most prospective emitters step back from the 2025 subsidy round amid timing and cost complaints, are understandably disappointing. It will have imposed real costs on those who invested time and effort in the process.
But the positives from the 2025 process shouldn’t be lost, just because the initial outcome wasn’t what we all hoped for. Designing a credible support mechanism for CCS is genuinely difficult: it has to balance ambition with commercial reality across complex, multi-party, multi-decade, multi‑billion-euro projects. Denmark’s process has helped surface where that balance needs refining.
Relevant: Aalborg Portland Targets 1.4 Mt CO2 Capture with Bid for Denmark’s CCS Funding Pool
In that sense, it mirrors the outcomes from AR5 of the UK Contracts for Difference scheme, where no large offshore wind projects bid for support because the deal on offer wasn’t quite right.
The value in these moments is that they allow governments, investors and developers to regroup with clearer evidence on what does and does not work in practice. With stakeholders aligned around those learnings the next iteration is likely to be more informed, more investable and, ultimately, more successful. It stands to reason that the Danish scheme will be successful the next time around, as has been the case with subsequent wind allocation rounds in the UK.
Removing the Brexit barrier
Xodus’ research shows that by 2050, when much of the continent is hoping to be net zero, the volume of CO₂ being captured and stored could be 200 million tonnes per year.
With a capacity estimated at 78 billion tonnes, the UK is uniquely positioned to act as a central ‘carbon sink’ for the continent, underpinned by deep knowledge of the basin and mature engineering expertise that could offer a highly cost-effective solution.
However, since 2021 and the UKs exit from the EU, a barrier has existed between these stores and the nations that could use them including France, Belgium and Germany.
Reassuringly, in recognising this as an issue, the EU and the UK have taken the first step on the road to correcting it.
A win-win for all involved
For the broader industry, the prize is clear; turn the first cross‑border deals into a repeatable market that brings costs down through competition. The projects are moving from design to construction, but recent experience in places like Denmark reminds us that CCS policy also needs to be designed for real projects competing for financing in real markets.
The UK‑EU commitment to conclude a carbon‑linking agreement before the next summit matters. This alignment between the EU and the UK would allow captured emissions to travel and unlock the UK’s storage resource to create a competitive market for the service.
If we get the rules right now, this becomes the other exchange programme Europe needs, not for students, but for molecules and it can underpin a credible, investable pathway to net zero on both sides of the Channel.
Read more: CarbonStorage.io Launches Global CCS And Low-Carbon Infrastructure Intelligence Platform
