Introduction
Carbon capture technology goes back as far as the 1920s or 1930s when solvents were used in an adsorption process to separate CO2 out from natural gas. This was to make the gas fit for commercial use as CO2 forms carbonic acid when it meets water and the acid would have damaged pipelines and processing equipment. A high CO2content in the gas also reduces the heating value (energy content) of the gas.
Then, in the 1970s, in a procedure known as Enhanced Oil Recovery (EOR), CO2 recovered from oil and gas production started being injected into depleted oil and gas reservoirs to re-pressurise these reservoirs, enabling more oil and gas to be extracted from the reservoirs.
This same injection technology is now being employed as a climate change solution to store CO2 permanently in identified suitable reservoirs ashore and offshore. The Sleipner project in Norway launched in 1996 was the first large-scale dedicated geological storage site for CO2 captured from the processing of natural gas.
Carbon Capture, Utilization and Storage (CCUS) is a suite of technologies that has recently been gaining momentum as a climate change solution.
CCUS projects
CCUS is particularly useful for removing CO2 emissions from hard-to-abate industries such as cement, steel, chemical, power plants and during the production of blue hydrogen, before these emissions enter the atmosphere. The captured CO₂ is compressed and condensed until it turns into liquefied CO2 (LCO₂), a colourless liquid. The LCO₂ can then be permanently stored deep underground in reservoirs or saline aquifers or used as raw material to produce concrete, fuels, fertilisers and chemicals.
The US currently has the highest number of CCUS plants but the largest plant in operation is China’s Huaneng CCUS project which commenced operation on 29 September 2025. Norway’s Brevik CCUS which is the world's first industrial-scale CCUS facility at a cement plant, became operational in May 2025 with its captured CO₂ transported and stored at its Longship project under the North Sea. Norway’s Northern Lights facilities, completed at the end of 2024, welcomed the first injection of CO₂ into its reservoir in August 2025. The UK, like many other countries, is investing heavily in CCUS technology, and in Europe, many CCUS projects have received funding from the EU’s Innovation Fund.
Although CCUS is experiencing significant growth as a decarbonisation solution, storage sites for LCO₂ remain geographically constrained. The ability to transport LCO₂ safely and economically has therefore emerged as a critical enabler of global CCUS deployment.
The total amount of CO₂ captured jointly by all CCUS plants worldwide nevertheless remains a relatively small percentage of total global CO₂ emissions but the technology is gaining momentum. The long-term viability of CCUS projects is heavily dependent on stable carbon pricing, government support mechanisms, and predictable transport and storage access.
Direct Air Carbon Capture and Sequestration (DACCS)
DACCS is another carbon capture technology employed to remove residual emissions from sectors such as aviation, buildings and agriculture, which would otherwise be difficult to eliminate. It offers a more mobile technological solution which can be employed at sites where it is needed. DACCS units can filter CO₂ directly from ambient air at any location. The density of the CO₂ captured using this technology is more dilute than the CO₂ captured through CCUS but the captured CO₂ would be similarly liquefied for storage or used as a raw material in industries. DACCS may increase shipping demand because the capture locations may be remote from storage facilities.
Onboard Carbon Capture and Utilisation and Storage (OCCUS)
The maritime industry is under pressure to meet its decarbonisation targets. Zero carbon fuels are expensive, as is converting existing ships to burn these fuels.
Several OCCUS pilot projects are therefore currently being trialled onboard ships. OCCUS can involve the fitting of a chemical adsorpber unit within or near to the ship’s exhaust stack to capture CO2 emissions before the exhaust gas is released into the atmosphere. This allows the ships to continue burning non-CO2 free fuels. Scrubbing and filtration are other possible methods for extracting CO2 from the exhaust gas.
The captured CO2 would then need to be stored onboard as LCO2 in pressurised and insulated tanks, to be transported away for storage deep underground, or turned into value-added products.
OCCUS however currently raises fuel penalty issues due to the additional energy consumption needs onboard. Regulatory crediting frameworks for OCCUS under IMO/ EU ETS are still evolving.
LCO₂ Shipping Market
CCUS projects are expensive to build. The cost of building the LCO2 pipelines alone accounts for approximately 25% of the project costs and higher in areas of high population density.
There is therefore a growing need for more flexible and cost-effective Non-Pipeline Transport (NPT) solutions using road, rail, barge and ships to provide support to carbon capture projects outside of CCUS industrial clusters/ energy hubs, to move CO₂ from remote sites to storage or to end users. This issue is making seaborne options attractive and has kick-started a promising emerging market for LCO₂ shipping which can be expected to grow steadily through at least 2050.
Since September 2024, three out of four specially built LCO₂ carriers managed by K-Line have been delivered to Northern Lights for transporting captured CO₂ from emitters in Norway, Denmark, and the Netherlands to a receiving terminal in Øygarden, Norway. From there, the CO₂ is piped into the North Sea for permanent sequestration. A number of other ships have been ordered, built or are undergoing testing.
Such projects underscore shipping’s essential role in linking emitters, especially those without pipeline access to offshore storage, to dedicated storage sites and highlight the opportunity for Europe, especially the UK and Nordic nations, to serve as a CCUS hub. Meanwhile, other regions such as the US, Australia, Indonesia, and Malaysia are also developing localised LCO₂ transport solutions. Given the capital intensity and regulatory risk, long-term contracts of affreightment are likely to dominate the early LCO₂ shipping market.
Legal and Regulatory Complexities, and Risk Allocation
Cross-border CO₂ transport and storage networks make it possible for CO₂ captured in one jurisdiction to be moved for permanent geological storage in another jurisdiction. However, the absence of comprehensive and harmonised regulatory frameworks across jurisdictions adds complexity. International cooperation and the establishment of bilateral and multilateral agreements are seen as crucial for addressing regulatory gaps and enabling wider deployment of CCS value chains across international borders.
The transportation of CO₂ across borders for further storage remains complicated by international agreements such as the London Convention and the London Protocol. These agreements aim to prevent pollution at sea by the dumping of wastes, and CO₂ is currently classified as "waste" under these protocols. This classification restricts the export of CO₂ for offshore storage, although amendments and provisional applications have been proposed to address this issue.
Various bilateral and multilateral government initiatives have therefore been established, many of which collaborate on legal and regulatory matters. These efforts are expected to become increasingly important for addressing gaps in countries with less mature regulatory frameworks, thus enabling wider deployment of CCS value chains across international borders. The cross-border arrangements and the overlap between G2G (governmental) agreements and commercial contracts however add yet another layer of complexity to the whole picture.
The unresolved and evolving regulatory landscape (explained above) can lead to practical and legal issues. For example, under the EU Emissions Trading System (ETS), responsibility for CO₂ cargo transfers to the shipowner at the point of loading. This means that any losses be it from leakage or venting during operations will expose the shipowner to considerable liabilities.
Further complications arise from the difficulty in distinguishing between fossil and bio-origin CO₂, especially if the cargo is a blend. While only fossil-derived CO₂ is subject to ETS quotas, shipowners may bear responsibility for the entire volume if a release occurs, unless contractual protections are explicitly defined.
These growing exposures make it critical for charter parties to strike a fair balance of risks. Express indemnities for ETS-related liabilities, clear clauses around cargo quality and responsibility for contamination, as well as detailed procedures for emergency venting or losses will become essential inclusions in LCO₂ contracts.
The UK and the EU are actively working towards a resolution of the cross-border storage issue between the jurisdictions which will enable EU countries to benefit from the UK’s ample storage reservoirs for LCO2 in the North Sea. A linked market between the UK and the EU would create a larger, more liquid, and stable carbon market, which is expected to lower overall compliance costs for businesses and enhance investment certainty for low-carbon technologies. Goods from a linked system would be exempt from Carbon Border Adjustment Mechanisms (CBAM).
In the latest update, targets have been set for UK-EU ETS agreements to be in place, with potential implementation by 2028. It needs to be borne in mind that any forthcoming agreement and allocations reached will be statutory in nature and thus will not be easily overridden by contract.
BIMCO has also developed an industry-standard charter party for the maritime transportation of LCO₂. The charter party, CO2Time 2026 which is based on BIMCO’s GASTIME for ships carrying liquefied petroleum gases and petrochemical gases was published on 30 April 2026. The charter party, whilst designed specifically for the carriage of LCO₂, has been drafted with sufficient flexibility for it to be used also in the liquefied petroleum gases and petrochemical gases trade. Karolina Mentz of the UK Club was on the drafting committee.
Operational and Technical Challenges
Operationally, the LCO₂ trade is constrained by its unique thermodynamic characteristics. LCO₂ must be maintained at a narrow band of temperature and pressure (away from its triple point at -56.6°C and 5.1 bar) to remain stable. Deviations can cause phase changes that result in dry ice formation, tank overpressure, or delays in transfer operations.
Key technical constraints in LCO₂ shipping include several interrelated challenges. Tank design and insulation are critical, as off-spec cargo or temperature fluctuations can lead to corrosion or pressure spikes within the containment system, making it essential for contracts to clearly allocate liability for any resulting damage. Additionally, port and ship-to-ship (STS) infrastructure remains limited, with few facilities currently equipped to handle the specialised loading and unloading requirements of LCO₂, necessitating further investment. In terms of scale and capacity, most LCO₂ carriers today range from 1,000 to 7,500 cubic meters, though larger vessels of up to 22,000 cbm are on order; however, the viability of such vessels for long-haul transport has yet to be proven. Finally, safety is a significant concern, LCO₂ leaks can cause cold burns, rapid asphyxiation, and environmental harm, underscoring the need for robust emergency protocols integrated into both operational procedures and contractual agreements.
Bills of Lading and Value Attribution
Despite its classification as a waste product, LCO₂ transported by sea still necessitates proper documentation, with the Bill of Lading (BL) playing a central role. Although LCO₂ has commercial value when transported for industrial applications, it may have no commercial value when transported for storage. In the latter case, the BL nevertheless serves as critical evidence of the quantity loaded and transported, information that becomes vital given the financial exposure linked to emissions obligations under systems like the UK ETS and the EU ETS. Two main types of claims are anticipated in this context. First, under EU ETS compliance, if CO₂ is lost in transit, the shipowner may be required to surrender emissions allowances (EA) to account for the released volume. Second, the shipper may seek compensation through EA related claims if the cargo is not delivered as certified. As such, the accuracy of BLs and accompanying cargo certificates is essential to protect the interests of both owners and shippers and to mitigate the risk of regulatory or financial liability.
Best Practices and Industry Collaboration
Given the infancy of the LCO₂ shipping sector, collaboration among stakeholders and proactive risk management are essential to building a stable and scalable market. Best practices emerging from early adopters include requiring lab certified documentation to verify CO₂ purity and defining acceptable thermodynamic ranges within contracts to prevent cargo instability. Real-time monitoring of cargo conditions during transit is also on the cards to help identify and resolve issues before they escalate into disputes. In addition, involving classification societies during contract drafting can help ensure that technical standards are met, while early engagement with P&I Clubs enables shipowners to structure appropriate indemnity coverage, particularly for liabilities. Ultimately, as regulations mature and technology advances, the success of LCO₂ shipping will depend on establishing harmonised standards, balanced charter party terms, and a clear understanding of the legal and operational risks associated with cross-border CO₂ transport.
Conclusion
LCO₂ shipping is set to become a cornerstone of the global CCS value chain. While the pathway is fraught with regulatory ambiguity, technical constraints, and contractual risk, industry stakeholders including regulators, shipowners, charterers, and insurers are rising to the challenge. If you have any queries, please contact a member of our team working in this area (see details below) or your usual Club representative.
Akshat Arora | Ansuman Ghosh | Jacqueline Tan | Karolina Mentz | Patrick Ryan | Paul Sessions
