EU carbon fee could unlock Africa's first CCS market

Since 1 January 2026, the European Union’s carbon border regime has put a price on carbon-intensive imports, making it the most concrete route yet to a first carbon capture and storage business case in Africa for exporters in Algeria, Egypt and elsewhere on the continent. The industries that sell into Europe, from cement to steel to fertiliser, are the ones now weighing what capturing their emissions might be worth.

The mechanism’s purpose is straightforward. European producers covered by the Emissions Trading System should not be undercut by foreign competitors who face no comparable carbon charge. It applies to iron and steel, cement, fertiliser, aluminium, electricity and hydrogen. Its phase-in tracks the withdrawal of free allowances from EU producers, currently set to conclude in 2034, though proposals before the European Parliament would extend that to 2038. African exporters in the covered sectors therefore already pay an amount tied to the prevailing EU Allowance price, and that payment grows each year as the phase-in proceeds.

A cement or clinker producer in Algeria or Egypt selling mainly into the EU could, in principle, install capture facilities and develop permanent geological storage near its plant, trimming the charge on every shipment. Such a producer may also enjoy structurally lower construction and operating costs than European rivals facing the same ETS burden, energy included, along with the advantages of larger modern plants and, if suitable onshore storage sites can be found, cheaper CO₂ disposal.

Three drivers underpin African CCS, according to the analysis. The carbon border is the nearest in time; the other two, importing CO₂ captured in southern Europe and producing carbon removal credits, follow behind. A national carbon price might eventually add a further rationale, but only South Africa has implemented a carbon tax, and its price outlook is not yet sufficient to justify capture investment.

The second driver hinges on geography. The North Sea is estimated to hold about 80Gt of storage in Norwegian waters and a comparable volume in UK waters, enough to absorb hundreds of years of emissions from hard-to-abate sectors, so CO₂ captured in Northern Europe will most likely stay there. The Mediterranean is less generously endowed with suitable geology, which turns North Africa into an appealing destination for southern European emitters. Moving CO₂ as a liquid aboard carriers of 20 to 40kt sidesteps the difficulties of large pipeline networks and preserves commercial flexibility, and imported CO₂ could go to enhanced oil recovery or into aquifers and depleted oil and gas fields. The economics would depend heavily on port infrastructure, proximity to a store and whether emitters can bear the cost.

Removals, by contrast, are the most speculative of the three. Carbon dioxide removal credits, currently tied to the voluntary market, could be produced through direct air capture with storage, biogenic capture with storage (BECCS) or biochar burial, technologies the EU’s Carbon Removals and Carbon Farming Regulation describes in detail. Volumes remain small but are growing quickly, and prices reported substantially exceed EU Allowance levels. Proposed ETS changes would admit CDRs only if produced domestically for now, though a review around 2033 and 2034 might consider international credits. Artisanal biochar production in Africa is advancing, with several entities developing the metering and verification needed for certification.

At industrial scale, BECCS tends to be favoured over costlier DAC. But it faces limited infrastructure for biomass, electricity and heat, competition with food production for land and water, and the need for granular evaluation of storage proximity. No BECCS facility is in development or operating in Africa, and studies are at an early stage. CDR revenue alone is unlikely to justify investment, with electricity or heat sales likely central to any case.

For governments, preparation can begin now: regional geological studies mapping storage capacity, licensing regimes for storage exploration and development built on existing oil and gas processes, and port plans that account for CCS from the outset. The caveat is fiscal. The emitter-to-store value chain is far weaker economically than oil and gas, so what states can capture through royalties or taxes is likely to be much smaller.

The article is by Dr John McLaughlin of Storegga, who has more than 30 years of energy sector experience across Europe, the UK, Australia, South East Asia and West Africa, began his career at Shell and first worked on CCS 23 years ago on the Gorgon LNG Project in Australia. Whether the 2033-2034 review opens the door to international removal credits may ultimately decide how large this market becomes.