Germany’s gas dependence: An energy security risk  /  Chapter 3

The case against carbon capture for Germany’s gas power sector 

Key findings

Context: Germany’s 10GW gas power strategy

Germany’s coalition government has committed to ensuring sufficient electricity capacity by 2030, as the country moves towards phasing out coal generation by 2038. To meet this need, the government intends to tender up to 10 gigawatts (GW) of new gas-fired power plants. These are expected to bridge security of supply during “dunkelflaute” winter periods of low wind and solar output.

A key unresolved question is whether these new gas assets should be made future-proof by integrating carbon capture and storage (CCS). On paper, CCS could decarbonise gas power generation. Yet in practice, it remains unproven, costly and heavily constrained by Germany’s legal and infrastructural environment.

What is CCS?

CCS refers to the process of capturing carbon dioxide (CO₂) from large point sources (such as power plants or cement kilns), compressing it and transporting it (via pipeline, ship or rail) for permanent underground storage in saline aquifers or depleted oil and gas reservoirs.

The first projects emerged in the 1970s in North America, mainly to support oil extraction through enhanced oil recovery. Today, around 50 million tonnes of carbon dioxide (MtCO₂) is captured globally each year, but 73% is still used for oil recovery, not permanent storage. Europe has just five operational CCS projects, capturing 2.7MtCO₂ per year across the Netherlands, Norway, Iceland, and Hungary. None involve gas power stations.

Despite its prominence in EU climate strategies, CCS has never been deployed on new-build gas power in Germany nor at scale on retrofits anywhere in the world. This is in part due to the technical and economic challenges of integrating CCS into existing or newly built facilities. 

Challenges of CCS for gas power

• No track record: Europe has no successful CCS projects attached to gas-fired power plants. Previous efforts in the UK and EU were cancelled because of high cost and poor performance. The technology readiness level for gas-fired CCS is seven out of 11, or the pre-commercial demonstration phase, according to the International Energy Agency.
• Costs: IEEFA estimates that CCS costs for the power and heat sector in Europe are more than €150/tonne of CO2, including €64/tonne for capture and €88/tonne for transport and storage. This is around double the current EU Emissions Trading System price of €76. Assuming the EU Emissions Trading System price remains at similar levels over the coming years, there is little economic incentive for infrastructure owners to apply CCS without subsidies or other forms of financial support.
• Capture rates: Even leading projects underperform. An IEEFA review of 13 operating CCS projects globally found that most captured below design levels of 90%, while some failed outright. This highlights the continued technical challenges of CCS as a solution and the potential for further cost escalation per tonne.
• Timelines: CCS projects take 10–15 years to develop because of permitting, infrastructure and cross-border agreements. With Germany planning tenders for gas plants in the 2020s, the country will not realistically have any gas-fired CCS projects operational by 2030. Delays at flagship European CCS projects such as Northern Lights in Norway and Porthos in the Netherlands illustrate the risks: Both are over budget and behind schedule.
• Infrastructure gaps: Germany has no operational CO₂ pipeline network. Legal barriers have historically blocked permanent CO₂ storage in the country. There are four potential transport projects across Germany, linking to storage sites in Belgium and the Netherlands. These transport projects remain at the early stages of planning and require legislative changes, project final investment decision and economic support before a lengthy construction process can begin. Until Germany ratifies international agreements, exporting CO₂ to Norway or Denmark is uncertain. Without this, domestic offshore storage capacity will not be sufficient to support CCS at scale.
• Storage: Offshore sites are technically feasible but costly. Even leading sites, such as Sleipner and Snøhvit in Norway, have experienced unexpected CO₂ migration and capacity problems.

Legal and subsidy support in Germany

Before November 2025, Germany’s Carbon Dioxide Storage Act restricted CCS to pilot projects and gave states the right to opt out. This halted early projects in Schleswig-Holstein and Brandenburg. However, following an amendment by the federal government, a revised Carbon Dioxide Storage and Transport Act came into force in November 2025. The revision now permits capture and storage on a larger scale, allowing for both onshore and offshore CO₂ storage, and enabling development of a national CO₂ pipeline network. The legislation also designates that investment in transport and storage infrastructure is in the overriding public interest. This status intends to simplify and accelerate the permitting process, leading to increased CCS use. 

A core purpose of the legislative change is to open CCS use to combat emissions in hard-to-abate sectors, such as cement and lime production, basic chemicals and waste incineration. The law only excludes CCS for coal power plants, suggesting that gas-fired power generation may be applicable for future government support. 

German Economy Minister Katherina Reiche announced a €6 billion funding initiative for CCS projects in October 2025. This will see firms participate in competitive auctions for climate protection contracts in 2026. The contracts will provide 15-year subsidies for projects that demonstrate the largest emissions reductions at the lowest public cost. While the announcement implies that the initiative will support hard-to-abate sectors, it does not explicitly exclude support for gas-fired power plants. 

Germany is behind other European countries such as Norway and the UK in providing the required legislative and financial support for large-scale CCS adoption. The UK is much further progressed. In 2025, it announced funding support for the Net Zero Teesside, a new-build gas-fired power station with CCS. The exposure to the UK government and electricity consumers is significant. The project may require £10 billion of subsidies for the power plant and £7 billion for transport and storage. This is to capture and store 2MtCO2 equivalent from 860 megawatts of abated capacity. This is a first-of-a-kind project, and future costs should reduce through learnings. However, the implication remains that if Germany were to attempt to decarbonise its 10GW ambition through CCS, the subsidy costs could run into hundreds of billions of euros.

CCS, gas and blue hydrogen

The government’s 10GW strategy also overlaps with debates on hydrogen. Blue hydrogen (made from natural gas with CCS) is often touted as a decarbonisation option. However, like CCS for gas power plants, the CO₂ capture technology is unproven, and the costs are high. This is in addition to the same transport, storage and associated legal issues discussed earlier.

Using CCS alongside steam methane reforming to create blue hydrogen has a technology readiness level of nine, the early adoption phase.  This means it is more technically advanced than using CCS for the power and heat sector. CO₂ capture costs for hydrogen production are also lower at €55/tonne, while transport and storage are the same at €88/tonne, with a cumulative cost of €143/tonne. This is 88% above current EU Emissions Trading System prices.

If Germany shifts its gas fleet to blue hydrogen with CCS, it would lock in long-term gas demand, requiring massive transport and storage infrastructure for both hydrogen and CO₂ — creating dual infrastructure lock-in.

Conclusions

Germany’s 10GW gas power plan aims to guarantee supply security post-coal and nuclear. The country faces significant technical and economic risks if it uses CCS to try to decarbonise gas-fired power. There is no track record of CCS on gas plants in Germany or Europe, costs are prohibitively high, timelines extend beyond 2030, and infrastructure does not exist. Legal reforms are only just emerging and remain incomplete, while using blue hydrogen with CCS risks locking in natural gas use and may fail to deliver climate neutrality.

Transport and storage remain the weakest links: Without pipelines and ratified cross-border storage agreements, CCS cannot scale. CCS is not a near-term solution for Germany’s 10GW gas requirement. At best, it is a long-term option contingent on heavy subsidies, regulatory change and infrastructure build-out. The risk is that reliance on CCS could delay more viable alternatives (renewables, storage, green hydrogen) and expose Germany to high costs and project failures.

Go to next chapter: 

German issuers exposed to transition risks from fossil fuel assets