Hydrogen, CO2 Storage and Decarbonisation

Hydrogen and CCS in Germany: the legal framework in brief

Hydrogen and CCS (carbon capture and storage) are the two technologies Germany relies on to decarbonise industries that cannot simply switch to green electricity: steel, chemicals, cement, lime, glass and parts of the power sector. Since 2024, the legal framework has moved from strategy papers to binding law.

The Federal Network Agency has approved a hydrogen core network, a Hydrogen Acceleration Act of 29 March 2026 places hydrogen plants and pipelines in the overriding public interest, and the former CO2 Storage Act has been turned into a Carbon Dioxide Storage and Transport Act that allows offshore storage and CO2 pipelines. Carbon pricing through the EU Emissions Trading System and the national fuel emissions trading scheme, and support through climate protection contracts, provide the economic incentives.

For project developers, industrial off-takers, network operators and investors, the challenge is to combine these instruments in a bankable structure while EU rules on hydrogen networks and low-carbon certification are still being transposed. This page sets out the main elements and links to our detailed insights. It sits within our energy and infrastructure practice and complements our page on energy grids and the EnWG.

The hydrogen core network and hydrogen network regulation

The hydrogen core network is the backbone of Germany's future hydrogen infrastructure. The Federal Network Agency approved it on 22 October 2024: about 9,040 km of pipelines, roughly 60% converted from natural gas pipelines and 40% newly built, are to enter operation gradually by 2032, at expected investment costs of around EUR 18.9 billion, according to the agency's press release. The network connects production sites, import points, storage and major industrial consumers.

Financing follows a special model. Network operators charge a uniform ramp-up charge, and an intertemporal cost allocation mechanism with an amortisation account bridges the gap between costs and revenues while utilisation is still low, with a state backstop up to 31 December 2055 (§ 28r EnWG). The ramp-up charge was set at EUR 25 per kWh/h per year in July 2025.

Hydrogen network operators must grant connection and access on reasonable, non-discriminatory terms. The EU hydrogen and decarbonised gas package (Directive (EU) 2024/1788 and Regulation (EU) 2024/1789) requires further changes to network planning, unbundling and access, which Germany is transposing in stages. Our insight on the hydrogen core network explains the details.

Converting gas networks and hydrogen storage

Much of the core network consists of converted natural gas pipelines, and further conversions will follow at distribution level. Converting a pipeline raises questions of asset valuation and transfer between regulated gas and hydrogen businesses, of existing rights of way and easements, which were often granted for natural gas only, and of technical safety rules. At the same time, gas distribution system operators must plan for declining volumes as heating electrifies and municipal heat plans designate areas for district heating or hydrogen. Underground salt caverns and depleted fields will be needed to store hydrogen at scale; their conversion requires mining law approvals and raises similar questions of access and regulation.

Regional networks and connection

Beyond the core network, regional hydrogen networks will connect industrial clusters and smaller consumers. Companies that want to be connected should register their expected demand in network planning consultations, negotiate connection agreements that specify capacity, timing and quality, and consider who bears the cost of connection lines. Industrial parks may operate their own hydrogen pipelines, which can raise questions of whether the network is subject to regulation.

The Hydrogen Acceleration Act and permitting

Permitting hydrogen projects used to depend on general immission control, water and planning law. The Act on the Acceleration of Planning and Approval for the Production, Storage, Import and Transport of Hydrogen (Wasserstoffbeschleunigungsgesetz, WasserstoffBG) of 29 March 2026 (BGBl. 2026 I No. 84) changes this. It applies to electrolysers, hydrogen storage, import terminals for hydrogen, ammonia, methanol and liquid organic hydrogen carriers, conversion and conditioning facilities, hydrogen pipelines and related compressors, water and power lines (§ 2 WasserstoffBG).

The construction and operation of these facilities are in the overriding public interest and serve public safety until net greenhouse gas neutrality is reached in 2045; they are to be given priority in the weighing of protected interests (§ 4 WasserstoffBG). Exceptions apply where water abstraction may significantly impair public water supply, and in relation to national and alliance defence. Objections and actions against approvals have no suspensive effect, and applications for interim relief must be filed and reasoned within one month (§ 8 WasserstoffBG). For large electrolysers and storage facilities, the Higher Administrative Courts decide at first instance, which shortens the route through the courts.

Water, land and safety

Electrolysers need large quantities of water, and the water permit is often the critical approval. Industrial safety rules under the Major Accidents Ordinance apply to hydrogen and ammonia storage above quantity thresholds. Developers should plan these approvals early and coordinate them with grid connection for electricity supply, which is often the longest lead item.

Carbon capture and storage under the KSpTG

For a decade, CO2 storage was practically impossible in Germany because the former Carbon Dioxide Storage Act (KSpG) was designed for demonstration projects only and the federal states could exclude storage on their territory. An act of 25 November 2025 transformed it into the Carbon Dioxide Storage and Transport Act (KSpTG).

Storage sites may now be approved if they are located largely in the exclusive economic zone or on the continental shelf, while injection in the territorial sea is excluded. CO2 pipelines and storage sites require planning approval and are in the overriding public interest, except in protected marine areas, and operators of CO2 pipeline networks and storage sites must grant non-discriminatory connection and access (§ 33 KSpTG).

The EU Net-Zero Industry Act sets a Union-wide objective of at least 50 million tonnes of annual CO2 injection capacity by 2030 and obliges oil and gas producers to contribute. Until German storage sites are available, emitters will rely on export to storage sites in other North Sea states, which requires bilateral arrangements under the London Protocol and transport chains by ship or pipeline. Our insight on carbon capture and storage discusses the new regime.

Negative emission technologies are a further field. Direct air capture and bioenergy with carbon capture produce removals that may be certified under the EU's voluntary framework for carbon removals and, in future, possibly integrated into compliance markets. Companies that buy removal certificates to support climate claims must observe the strict rules on environmental claims that now apply under unfair competition law; see our insight on net-zero claims and offsets.

Contracts along the CCS chain

A CCS project involves capture at the emitter, conditioning and compression, transport by pipeline, rail or ship, and injection and long-term monitoring at the storage site. Each interface needs contractual allocation of risks: CO2 quality specifications, volume commitments, liability for leakage and the surrender of emission allowances, insurance and the transfer of long-term liability to the state after closure. Emitters should also check how captured and stored CO2 is treated under the EU ETS monitoring rules before relying on reduced allowance costs in their business case.

Carbon pricing and support for hydrogen and CCS

Carbon pricing drives the economics of hydrogen and CCS. Large industrial installations and power plants are covered by the EU Emissions Trading System, whose free allocation is being phased out in parallel with the introduction of the Carbon Border Adjustment Mechanism. Heating and transport fuels are covered by the national Fuel Emissions Trading Act (Brennstoffemissionshandelsgesetz, BEHG), which set fixed prices rising from EUR 25 per tonne in 2021 to EUR 55 in 2025 and a corridor of EUR 55 to 65 for 2026 (§ 10(2) BEHG).

The EU's separate emissions trading system for buildings and road transport (ETS 2) was postponed until 2028, and a government bill would extend the national price corridor to 2027. See our insight on EU ETS 2 and national fuel emissions trading.

Carbon prices alone rarely close the cost gap. Climate protection contracts (Klimaschutzverträge), Germany's carbon contracts for difference, compensate energy-intensive companies for the additional costs of low-carbon production compared with conventional processes over 15 years, linked to energy and CO2 prices. The first contracts were awarded in October 2024; the 2026 round opened the scheme to CCS and carbon capture and use, and in October 2026 the Federal Ministry for Economic Affairs and Energy opened the preliminary procedure for a 2027 round, according to its press release. Recipients must meet CO2 reduction milestones. Our insight on climate protection contracts explains the bidding process.

Hydrogen and CCS offtake, supply and certification

Commercial contracts determine whether hydrogen and CCS projects can be financed. Hydrogen purchase agreements typically run for ten years or more and must address volume and take-or-pay commitments, quality specifications, delivery by pipeline or as derivatives, price formulas linked to gas, electricity or CO2 prices, and the consequences of regulatory change. Because EU certification rules for renewable fuels of non-biological origin (RFNBO) and for low-carbon hydrogen determine whether a buyer can count the hydrogen towards quotas or targets, contracts should allocate the risk of losing certification and provide for price review or termination if rules change.

Renewable hydrogen must meet strict criteria on additionality, temporal and geographical correlation of the electricity used, set out in EU delegated acts. Imports from outside the EU, whether as ammonia, methanol or liquid carriers, raise additional questions of certification, customs, the Carbon Border Adjustment Mechanism and supply-chain due diligence. Transport fuels and refinery use are further affected by the greenhouse gas quota for fuels; see our insight on the greenhouse gas quota.

Project finance and investment

Lenders to hydrogen and CCS projects look for long-term offtake, a secured grid or pipeline connection, approved support with clear claw-back conditions, and a credible path through permitting. Investors from outside the EU should consider investment screening, because energy infrastructure and critical technologies are sensitive sectors; see our page on foreign investment control.

Hydrogen and CCS for industrial companies

For industrial companies, the decision for hydrogen and CCS is a strategic one with long lead times. A steel producer switching to direct reduction, a chemical park converting its steam crackers, or a cement plant planning capture must coordinate permits, grid and pipeline connections, support, offtake and the emissions trading position over a decade or more.

Board decisions should document the regulatory assumptions and the scenarios considered, because the framework will continue to change. Works councils have co-determination rights where technological change affects jobs and working conditions, and restructuring of conventional production units may require reconciliation of interests and social plans. Our chemicals and process industries page covers site-related issues.

Governance and risk allocation

Managing directors and boards must take investment decisions on the basis of appropriate information, which for hydrogen and CCS includes realistic assumptions on carbon prices, support, network availability and the cost of hydrogen supply. Because many projects will be developed in partnerships between industrial users, utilities, network operators and technology suppliers, joint venture agreements should regulate funding obligations, offtake rights, exit routes and deadlock situations. Merger control can apply to such joint ventures, and cooperation between competitors on infrastructure needs to be assessed under competition law, particularly where information on volumes and prices is exchanged.

Timelines and sequencing

The typical sequence runs from a feasibility study and the reservation of site, grid and pipeline capacity to the support application, permitting, final investment decision, construction and commissioning. Contracts concluded early in this sequence, such as electrolyser supply or offtake agreements, should contain conditions precedent or termination rights linked to later milestones, so that a company is not bound if support or permits fail. Equally, support decisions usually require commissioning within set deadlines, and missing them can trigger repayment.

How TRW & Co helps

We advise developers, industrial companies, network operators, investors and lenders on hydrogen and CCS projects in Germany. We analyse the regulatory framework for hydrogen networks and CO2 transport and storage, support permitting strategy under the Hydrogen Acceleration Act and the KSpTG, and advise on applications for climate protection contracts and other support, including state aid compliance. We draft and negotiate hydrogen purchase agreements, CO2 transport and storage agreements, EPC and supply contracts and joint venture agreements, and conduct regulatory due diligence on hydrogen and CCS assets. To discuss your project, please contact us. This page provides general information, not legal advice.