Denmark and the role of CCS in climate policymaking: Lessons from the Danish CCS tender process

In 2020, Denmark’s government launched its first Climate Program. This followed from the adoption of the 2020 Climate Act by the Danish Parliament, which called for a whopping 70% reduction in greenhouse gas emissions by 2030, and net-zero emissions by 2050.  In 2022, the Danish government increased its ambitions, announcing the goal of achieving climate neutrality by 2045, and reducing greenhouse gas emissions by 110% from 1990 levels by 2050. 

Carbon Capture and Storage (CCS) has been deemed to be “a core tool” to achieve this target, comprising approximately 25-50% of the required reductions, or a projected 2.9 million tons of carbon dioxide mitigation by 2030. CCS entails capturing carbon dioxide from the burning of fossil fuels or industrial processes, such as steel or cement production, and transport, often via pipelines or ships, for underground storage in geological formations.

Denmark aspires to be a leader in Europe in the field of CCS (CCS-puljen). To help facilitate the buildout of the sector to achieve its ambitious climate goals, the Danish government also established a CCS Fund to help cover the costs of capture, transportation and geological storage. In 2024, Denmark announced a $4.7 billion tender to support carbon capture with storage (CCS) projects in the country, with the goal of storing two million tons of carbon dioxide annually over the next two decades. This was the third tender round from the fund, and the most ambitious. 

However, the results of this round are a cautionary tale of the strong headwinds that CCS continues to face (especially given that one of the sector’s leaders, Equinor, recently announced it will not make new investments in CCS in the absence of better market signals). It also emphasizes the need for focused and cohesive government policies. 

16 projects tendered bids for pre-qualification. The tender process netted ten pre-qualified bidders in May, 2025, including six waste incineration plants, one waste/straw plant, two wood biomass-fired plants, and a cement plant. Ultimately, however, eight out of ten bidders in the commitment phase of the tender process withdrew, leaving just a major cement company, Aalborg Portland, and an undisclosed bidder in the mix. Consequently, it's highly unlikely that the government's sequestration targets for this phase will be met. 

Among the factors leading to this disappointing outcome in the tender process were the following:

1. Compressed timelines. The timeless established in the tender process were largely driven by political milestones, including the government’s 2030 climate targets. However, it could be argued that this substantially increased risks for companies scrambling to put in place storage assessments, development of infrastructure, and financing, all of which take time, especially in the nascent stages of an industry. 

2. Uncertain access to adequate storage capacity. In 2025, Denmark issued its first approval for a full-stage carbon dioxide storage facility, Greensand Future, which is slated to store CO2 in the North Sea’s Nini West field. The cross-border project has the goal of ultimately storing 8 million tons of carbon dioxide. The nation is also exploring a number of potential onshore sites, but while potentially cheaper, they may prove more controversial. However, most of the early buildout storage potential in the Greensand Future, and well as in the Northern Lights transboundary storage facility in Norway, at least in its first phase, is already booked.  At least through 2029, domestic storage options for Danish emitters will remain extremely limited, and transboundary options could prove very tight also. Thus, access to bankable, licensed storage looms as major constraint for large-scale CCS projects in Denmark, and thus imposes a high level of risk on CCS capture projects.  As Peter Kristensen concluded: “Without storage projects that are sufficiently mature to reach Final Investment Decision (FID), capture projects become premature – regardless of how strong the climate case may be.”

3. Provisions for the imposition of strict penalties and guarantees for delays or changes, even where those risks lie outside the control of project developers. Many of the owners of these potential projects were municipalities, who could have been compelled to pay out of pocket if the projects were plagued by delays or errors. Operators were also facing the prospect of providing guarantees that were three times greater than the annual subsidies provided by the CCS fund. Such rigid terms may not prove viable in a first-of-a-kind market, marked by bespoke design and lots of surprises in a sector with highly interdependent value chains and limited alternatives in most cases;

4. Imposition of a price cap that may have created an artificial ceiling that discouraged realistic bids. While it's understandable for governments to fiercely protect public budgets, CCS costs are still uncertain and site-specific, and thus more flexibility moving forward in government support processes of this nature may be critical.  

On the more positive side of the ledger, it's encouraging that one of the winning bids was from a company in one of the hardest to abate sectors, cement. Moreover, Aalborg is the nation’s largest industrial emitter of carbon dioxide. Production of cement is responsible for as much as 7% of the globe’s carbon dioxide emissions, with each ton of production producing an average of 0.6 tons of CO2. Aalborg Portland’s ACCSION project could capture up to 1.4 million tons of carbon dioxide annually and avoid up to 100,000 tons of carbon dioxide emissions through other initiatives, such as waste heat recovery.  

Thus, successful development of CCS in this sector could be extremely salutary. This one project could potentially meet approximately half of Denmark’s industrial greenhouse gas emissions targets if the government ultimately goes forward with funding the project rather than re-starting the tender process, and if Aalborg makes an investment decision, which it is slated to do this year. It should be emphasized, however, that among the major challenges Aalborg faces is securing adequate storage for its captured CO2. The company has signed a contract with a storage partner in Jutland. However, government approval of storage projects averages about 2 years, and the facility must be up and running in 4 years, which will be a real sprint at this point. 

Moving forward

As was true in the early stages of the development of the renewable energy industry, governments have a critical role to play in standing up the CCS sector, in terms of provisioning of funding to help drive learning by doing and to reach economies of scale that can bring down costs, helping to develop efficient contracting processes, and testing various architectures for risk allocation. As one commentator noted, “CCS will not scale because policies are perfect. It will scale because governments are willing to iterate in public.” 

In terms of the critical bottleneck potentially posed by CO2 storage capacity, Denmark, and other governments committed to CCS, should engage in the appraisal of a wide array of potential storage sites, recognizing that many will not come to fruition. They should also establish clear work plans and decision gates to ensure projects are on track, and establish mechanisms for the return of licenses that don’t mature, so that propitious areas for storage can be reallocated. Recent calculations by the Geological Survey of Denmark and Greenland (GEUS) indicate that Denmark has enough underground storage capacity for 500-1000 years of its national emissions at current levels. However, such theoretical constructs matter little if policies aren’t put in place to ensure that storage projects are operationalized.

Denmark’s latest tender process also focused on treating CCS projects as discrete investments rather than seeking to incentivize the development of clusters or hubs. This can increase the cost of projects, including unit costs for individual entities, and increase risks for individual projects.  

Looking more broadly, the tender process in Denmark may also help governments, investors, and developers globally identify where CCS is currently viable, and where it is not. While the International Energy Agency has steadily downgraded the role of CCS in its net-zero scenarios, it still maintains an important supplementary role, and could potentially play a larger role if issues of cost can be addressed through government support processes such as the one in Denmark.

illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability & Energy writers, their opinions do not necessarily represent those of illuminem.

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