Carbon Capture and Storage in Germany: The Reformed KSpTG

Why carbon capture and storage matters now

Some industrial emissions cannot be avoided by switching to renewable electricity or hydrogen. Cement and lime production release CO2 from the raw material itself, and waste incineration and some chemical processes have similar process emissions. Carbon capture and storage (CCS) captures CO2 at the source, transports it by pipeline, ship or other means and stores it permanently in deep geological formations.

Germany long restricted this technology: the original Carbon Dioxide Storage Act of 2012 allowed only limited demonstration projects, and no commercial storage was developed. The reform of 2025 changes this. The act's purpose is now the environmentally sound permanent storage of CO2 and the approval and operation of CO2 pipelines (§ 1 KSpTG).

The amended statute was renamed the Act on the Permanent Storage and Transport of Carbon Dioxide (Kohlendioxid-Speicherung-und-Transport-Gesetz, KSpTG) by an act of 25 November 2025 (BGBl. 2025 I Nr. 282). Its scope covers the approval and operation of CO2 pipelines and storage facilities, pipeline transport and, where expressly provided, other activities (§ 2(1) KSpTG).

This article explains where storage is permitted, how pipelines and storage sites are approved, the rules on third-party access and liability, and the EU framework, including emissions trading.

Where storage is allowed

The act applies in the German exclusive economic zone and on the continental shelf in accordance with the UN Convention on the Law of the Sea (§ 2(2) KSpTG). Storage facilities may be approved if they are located largely in the exclusive economic zone or on the continental shelf, while injection of CO2 in German territorial waters is excluded (§ 2(3) KSpTG). Onshore storage is generally not permitted, but the federal states may decide to allow permanent storage in the geological subsurface on their territory (§ 2(5) KSpTG). Storage for research purposes can also be approved.

In practice, the first German storage projects are expected in the North Sea. Many German emitters will also rely on storage sites in other North Sea states, such as Norway, Denmark or the Netherlands, where projects are further advanced. Cross-border transport for storage abroad requires international arrangements under the London Protocol and bilateral agreements, as well as compliance with EU rules on monitoring and emissions accounting.

CO2 pipelines: planning approval and public interest

Under § 4(1) KSpTG, the construction, operation and modification of a CO2 pipeline require prior planning approval (Planfeststellung) by the competent authority, in which public and private interests affected by the project are weighed. The construction, operation and modification of CO2 pipelines are in the overriding public interest, except in marine areas protected under the Federal Nature Conservation Act as of 31 December 2023. In the weighing process, authorities must take particular account of the fact that CO2 pipelines serve climate protection.

The law also facilitates the bundling of infrastructure: if a CO2 pipeline is to be built largely in or directly next to a route already used or planned for hydrogen pipelines, this is taken into account in the procedure. Expropriation is available where necessary for pipeline projects (§ 4b KSpTG). Disputes about pipelines, exploration and storage projects are heard at first instance by the Higher Administrative Court (§ 39a KSpTG), which shortens the court process and gives developers earlier legal certainty about their approvals.

Pipeline network development

Unlike the hydrogen core network, there is no state-approved CO2 core network with a public financing mechanism. CO2 pipelines are developed by private companies, often gas network operators or consortia of emitters. This raises questions about network planning, financing and the allocation of capacity between emitters. The act contains a regulation-making power for further rules on pipelines (§ 4c KSpTG).

Exploration and storage permits

Investigating the subsurface for suitability as a storage site requires an exploration permit (§ 7 KSpTG). It is granted if the applicant has the necessary financial capacity, an exploration programme meets the statutory requirements, impairment of mineral resources and other protected uses of the subsurface is excluded, and the applicant and responsible persons are reliable and competent.

The construction, operation and substantial modification of a CO2 storage facility require planning approval (§ 11 KSpTG) and are also in the overriding public interest, outside protected marine areas. The developer should inform the public about the project at the latest when applying. The approval requires, among other things, a safety case, a monitoring concept and financial security. The operator must monitor the storage site, take measures in the event of leaks or significant irregularities and meet requirements for the composition of CO2 streams (§§ 19 to 24 KSpTG).

Third-party access and liability

Operators of CO2 pipeline networks and storage sites must grant other companies connection and access on non-discriminatory, appropriate and transparent technical and economic terms that are no less favourable than those applied within their own group (§ 33(1) KSpTG). They may refuse only if they prove that access is not possible or not reasonable due to lack of capacity or compelling legal reasons; refusals must be justified in writing and sent to the Federal Network Agency, which has supervisory powers (§ 34 KSpTG).

Liability is strict. If someone is killed or injured, or property is damaged, as a result of activities or facilities under the act, the permit holder and the operator must compensate the damage, and causation is presumed where the facility is capable of causing it (§ 29 KSpTG). Operators must provide financial security (§ 30 KSpTG). After closure, responsibility can be transferred to the state no earlier than 40 years after closure has been completed, provided long-term safety is ensured and the operator has paid an aftercare contribution (§ 31 KSpTG).

Contractual risk allocation

Along the value chain – capture, transport and storage – each party will try to limit its liability. Emitters, transport operators and storage operators should agree clear interface points at which responsibility for the CO2 and for leaks passes, together with caps, insurance requirements and rules on the consequences for emissions trading if stored CO2 leaks.

EU framework, emissions trading and funding

The KSpTG transposes the EU CCS Directive 2009/31/EC. Under the Net-Zero Industry Act, the EU aims for an annual CO2 injection capacity of at least 50 million tonnes by 2030 in storage sites in the Union, its exclusive economic zones or on its continental shelf (Article 20 of Regulation (EU) 2024/1735), and certain oil and gas producers must contribute to this objective.

The key economic driver is emissions trading. Under the EU ETS, emissions that are captured and transported for permanent storage in a site permitted under the CCS Directive generally do not require the surrender of allowances. As carbon prices rise and free allocation is phased out, carbon capture and storage becomes more attractive for cement, lime, waste incineration and chemical plants. Our article on EU ETS reform explains this development, and climate protection contracts can support the costs of capture technology.

Carbon capture and storage in German climate policy

The government's carbon management strategy accepts the technology mainly for emissions that are hard to avoid, while the use for gas-fired power plants remains politically contested. Projects therefore need to explain why emissions are hard to avoid to secure funding and public acceptance.

Carbon capture and storage also plays a role in carbon removals. If CO2 from biomass combustion or directly from the air is captured and stored permanently, the result can be net negative emissions. The EU has adopted a certification framework for carbon removals, and the German climate targets for the period after 2045 assume negative emissions. Whether and how removals will be integrated into emissions trading is still under discussion, so projects relying on revenue from removal certificates carry additional regulatory risk.

Structuring CCS projects

A typical carbon capture and storage project involves several parties: the emitter, which builds and operates the capture plant; a transport operator, which may operate a pipeline, a liquefaction terminal or ships; and a storage operator, which holds the storage permit offshore. Each link requires its own permits and contracts. Project finance lenders will look at the whole chain, because a failure at one point – a delayed pipeline, an unavailable storage site, a CO2 stream that does not meet specifications – affects the others.

Key contractual questions include long-term transport and storage capacity commitments, take-or-pay obligations, tariff structures, quality specifications for CO2 streams, measurement and allocation of volumes, the transfer of title and risk, and liability for leaks and for the resulting emissions trading obligations. Where a storage site is abroad, the contracts must also address cross-border rules and the applicable law. Permitting timelines, public participation and potential litigation should be reflected in the project schedule.

Timeline and permitting risk

Even with the reform, carbon capture and storage projects take years to develop. Exploration of an offshore storage site, the safety case, planning approval and construction of injection facilities all take time, as do pipeline approvals onshore. Emitters should plan for interim solutions, such as transport by rail or ship to storage sites abroad, and align capture investment with realistic dates for transport and storage availability. Changes in the regulatory framework, for example further amendments to the KSpTG or ordinances on CO2 stream quality, should be anticipated in contracts through change-in-law clauses.

Municipal and industrial clusters

Emitters in the same region can share pipeline infrastructure and reduce costs. Shared pipelines in industrial clusters lower the cost per tonne. Cluster approaches require cooperation agreements and compliance with antitrust law, particularly when competitors coordinate capacity bookings or transport tariffs.

How TRW & Co helps with carbon capture and storage

We advise industrial emitters, pipeline developers, storage operators and investors on carbon capture and storage projects under the KSpTG and EU law. We support planning approval and exploration permit procedures, draft transport, storage and cooperation agreements, allocate liability and emissions trading risks along the value chain, and advise on funding and state aid. Our work connects with our hydrogen and CCS, planning and environmental and chemicals teams. Please contact us. This article is general information and not legal advice.