Decreasing carbon price expectations across the European Union are widening the financial deficit for commercial carbon capture and storage (CCS) projects, creating a risk that industrial decarbonization costs will shift from polluters to public balance sheets, according to a report published by the Institute for Energy Economics and Financial Analysis (IEEFA).

IEEFA models that meeting the EU’s 2030 target of capturing and permanently storing 50 million tons of CO2 per year will require €351 billion in cumulative capital and operational expenditures over a 25-year horizon.

However, updated EU ETS carbon price forecasts published by Dutch bank ABN AMRO, which revised 2030 price projections downward from €138 per ton to €91 per ton following proposed European Commission market interventions, have caused the calculated CCS funding gap to expand by 38%, widening from €103 billion to €142 billion without any change to underlying project capital costs.

The widening shortfall poses structural dilemmas for EU climate policy, forcing project developers to absorb lower returns, raise end-product prices, or rely on state aid to bridge commercial gaps.

To protect industrial competitiveness, the European Commission has proposed establishing a €100 billion Industrial Decarbonisation Bank alongside mechanisms to recycle ETS revenues back into heavy industry. 

However, IEEFA highlights a fundamental policy contradiction: suppressing carbon price levels simultaneously erodes the auction value of ETS allowances that member states rely upon to fund industrial transition grants.

Relevant: COP31: Carbon Removal And Utilization Named As Priorities In EU’s 2027 Accelerator Challenges

Prior IEEFA analyses indicate that 66% of proposed European capture volumes depend on technologies currently operating at or below the pre-commercial demonstration phase.

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