CCS smokescreen: the Port of Rotterdam’s corporate-driven energy transition

Oil and gas companies, along with the European Commission(opens in new window) and some of its Member States(opens in new window) , are making substantial investments in carbon capture and storage (CCS) technology as a supposedly vital solution to the climate crisis. The promise is attractive on the surface: CCS would enable the capture and storage of carbon dioxide (CO2) emissions from industrial activities deep underground. Proponents claim that it enables the avoidance of emissions. However, academics(opens in new window) , civil society organisations(opens in new window) , and journalists(opens in new window) have identified fundamental problems with the technology and have been warning about the dangers of ignoring its technological and economic failures, as well as the enormity of its risks. The institutional popularity of CCS may be owed to the fact that it grants major polluters a reprieve from actually reducing their emissions or making structural changes to their operations. Moreover, the fossil fuel industry has been promoting(opens in new window) and heavily lobbying(opens in new window) for this technology to be included in regional and national climate plans.

Huge amounts of investment in infrastructure are needed to implement CCS at scale. Each factory would need to have carbon filters connected to an extensive network of pipelines leading to storage terminals at ports, where the captured CO₂ would be injected underground in exhausted offshore oil and gas fields. Adapted ships(opens in new window) would also be needed for transporting CO₂ to such storage facilities.

The Port of Rotterdam (PoR) exemplifies how the infrastructure and strategic location of ports make them crucial for scaling up(opens in new window) CCS technology. PoR is the largest(opens in new window) port in Europe and one of the largest polluters(opens in new window) in the Netherlands. Logistics and industrial activities conducted via PoR accounted for(opens in new window) 63 billion euros in 2021, or 8.2 per cent of the Netherlands’ GDP for that year. The port has a crucial role in the Dutch trade and energy infrastructure, acting as a hub for the fossil fuel industry in North-West Europe and beyond. Shell, ExxonMobil, and BP are among the 120 companies based in the port complex, each operating refineries and petrochemical plants with processing capacity for hundreds of thousands of barrels of oil per day. These companies use the strategic location of the port to import, refine, and transport chemicals, oil, and derivative products through more than a thousand kilometres of pipelines extending(opens in new window) across Northern Europe.

The fossil fuel economy at the port has had a severe impact on the climate. According to research group CE Delft, the indirect emissions from the value chain of fuels and other energy inputs processed at or transiting through the port in 2023 accounted(opens in new window) for an estimated 604 Mt CO_2, three and a half times greater than the Netherlands’ total emissions for that year. 

The impact of the port’s emissions is also a concern for Rotterdam residents. Air pollution from petrochemical companies at PoR appears to be affecting crop harvests and the health of the population, with the combined effects costing(opens in new window) billions of euros annually. 

The PoR Authority, the company that manages and operates the port and in which the Dutch state and the municipality of Rotterdam are 30% and 70% shareholders, respectively, acknowledges the port’s pollution impacts and has committed(opens in new window) to a 55% CO₂ emissions reduction by 2030. The PoR Authority also aims to become a “climate-neutral port” by 2050, in alignment with Dutch national climate policy. 

Despite the apparent boldness of its commitments, the PoR Authority’s energy transition plans should be understood as a capitulation to the interests of its fossil fuel tenants. The PoR Authority’s heavy reliance on CCS technology in its energy transition plans indicates that the plans are tailored to protect corporate interests while sidestepping real action needed to address the climate crisis.

Whose transition?

Before considering the nuts and bolts of the PoR Authority’s transition plans, it is important to understand the basic constraints that it (and by extension the Dutch state and the municipality of Rotterdam, its shareholders) is navigating while developing these plans.

The most fundamental constraint is a lack of space. High population density in the Rotterdam metropolitan area surrounding the port strictly limits its geographical expansion, while its energy transition plans, including expansive CCS projects, will need new physical infrastructure. The port complex may continue its seaward expansion with another land reclamation(opens in new window) project in the long term, but this would not add the necessary space within a practicable timeframe. As such, the PoR Authority and government stakeholders are well aware(opens in new window) that new infrastructure for their energy transition will largely need to be built within the port complex’s existing space.

This raises the more serious constraint of fossil fuel companies’ domination of space in the port. Virtually all space in the port complex is controlled by industrial companies under long-term lease arrangements(opens in new window) , giving them generation-spanning powers to obstruct meaningful steps in executing the energy transition.

The lease arrangements between the PoR Authority and its tenants can be legally structured in two different ways, carrying slightly different practical consequences. Some lease arrangements take the form of a leasehold (erfpacht) – a distinct category of land use right under Dutch law – for which the deeds are publicly available from the Dutch land registry. A benefit of leaseholds is that Dutch law permits their usage as collateral for loans, which, in this context, PoR tenants can use to finance the construction of facilities at the port. Other lease arrangements between PoR and its tenants are conducted simply on a contractual basis. These contracts cannot be used as collateral for loans, but they offer the benefit of confidentiality, making this option attractive for companies with deep enough pockets not to require external financing and who hope to keep prying eyes away from their lucrative operations.

SOMO reviewed a sample of eight leasehold deeds for PoR tenants (and the applicable general terms and conditions, with the 2015 edition(opens in new window) being the most recent). 1

SOMO found that the leasehold deeds:

• range in duration from 30 to 100 years,

• place vague and limited restrictions on the environmental impact of the tenants’ activities, 

• can only be terminated by the PoR Authority in the event of the tenants’ major default of their obligations or through prohibitively costly expropriation procedures.

These terms are extremely favourable for tenants, giving the PoR Authority limited contractual recourse against them as they drag their heels rather than taking meaningful steps to support the energy transition.

Shell, ExxonMobil, BP, and other industrial majors operating at the port have contract-based lease arrangements with the PoR Authority, which are confidential. The lack of transparency for these agreements is especially troubling in light of their significance to national energy policy. Despite this secrecy, it is reasonable to make informed assumptions about the terms of those agreements based on the review of the leasehold deeds. While the leasehold deeds and the lease agreements operate under different acts of law, they serve nearly the same function of allocating and regulating a tenant’s rights to use land at the port. Moreover, from a commercial perspective, and considering that oil majors have full visibility into the terms of the leasehold deeds of their neighbours in the port, these companies would not accept terms any less favourable than those contained in the leasehold deeds. This is especially true in consideration of the strong negotiating position the oil majors have vis-à-vis the PoR Authority, given their immense financial resources.

When SOMO asked the PoR Authority about its tenants’ favourable contractual terms in relation to the port’s energy transition plans, the PoR Authority explained that the lease agreements for the port’s top 20 emitters do not contain conditions on emissions reductions as these agreements were entered into several decades ago before there was a societal focus on climate change. 2 The PoR Authority also indicated that it raises emissions reduction objectives during negotiations for new or renewed lease agreements, and that it “aim[s] to make a tailor-made action plan” in this respect for the top 20 emitters. However, it remains unclear from the PoR Authority’s comments to SOMO or from its 2024 Annual Report(opens in new window) if any such provisions have actually been included in any material lease agreement, or if any action plans have been put in place and positively impacted the behaviour (and emissions) of top emitters.

With little unclaimed space(opens in new window) available in the port for new infrastructure and given the high cost to the PoR Authority of terminating contracts, the existing companies with land lease arrangements in the port have the power to dictate significant aspects of Dutch policy on the energy transition for decades to come. Consequently, the PoR Authority has focused on making the energy transition commercially attractive for its tenants, rather than prioritising a robust climate strategy. 

However, the port’s tenants are not the only parties to blame for this power dynamic. The PoR Authority and its government shareholders are complicit in their own weak negotiating position. Friendly lease terms were granted to tenants in the stated interest of maintaining the international commercial competitiveness of the port and the Netherlands more broadly. 3 Much like the sovereignty-compromising nature of arbitration clauses in the international trade agreements the Netherlands has signed, the PoR Authority’s agreement to pro-corporate terms in decades-long leasing arrangements has proven to be a Faustian bargain. It has traded away control over energy policy and the environmental health of the country and its neighbours to Big Oil companies in exchange for economic benefits assumed to trickle down from these companies’ pursuit of their own interests.

The PoR Authority’s “flagship projects” facilitate corporate interests

In light of these constraints, the PoR Authority’s prioritisation of the interests of Big Oil in its energy transition plans becomes apparent. While the PoR Authority claims to be working toward carbon neutrality by 2050 for its own operations, it largely leaves emissions from its tenants unaddressed(opens in new window) . The cynical reality underpinning the PoR Authority’s plans is that none of its flagship energy transition projects are designed to reduce the amount of energy production or consumption, neither within the PoR’s own operations, nor in respect of the vast flows of fossil energy moving through the port. Moreover, the pace of constructing new infrastructure is dictated not by the urgency of the climate crisis, but by the timeframe in which it becomes profitable for the energy companies, even if this must come at the Dutch taxpayer’s expense through heavy subsidisation(opens in new window) by the state.

The PoR Authority has grouped numerous projects into four strategic pillars(opens in new window) for its energy transition. This research will address the two pillars with direct relevance to the implementation of CCS technology: “Energy and infrastructure” and “A new energy system.” 

1. “Efficiency and infrastructure”

This pillar includes new infrastructure intended either to compensate for emissions or to facilitate the introduction of hydrogen as a new primary energy source. The two flagship projects under this pillar are the Porthos CCS project and the Delta Rhine Corridor.

The Porthos project relies on CCS technology, which uses a chemical process to capture some of the CO₂ released by industrial chimneys in order to transport it to underground storage sites, such as disused gas or oil fields. Porthos’ current clients – Shell, ExxonMobil, and hydrogen producers Air Liquide and Air Products – are already under contract(opens in new window) to supply CO₂ generated from their operations at PoR to pipelines transporting the CO₂ to a platform 20 km off the coast in the North Sea, where it will be pumped into a depleted gas field under the sea floor. Together with state-owned gas companies Gasunie and Energie Beheer Nederland (EBN), the PoR Authority is planning to build capacity for around 2.5 Mt of CO₂ storage(opens in new window) annually over 15 years, starting in 2026. This falls far short of the estimated(opens in new window) 20.3 Mt of CO₂ generated by activities in the port complex in 2023 and does nothing to stimulate the phase-out of fossil fuel activities at the port. 

Many scientists(opens in new window) and organisations(opens in new window) have challenged(opens in new window) the promise of permanent carbon storage, the processes for long-term monitoring of the pipelines and storage sites, and the leaks. CCS is an unproven(opens in new window) technology at scale, with a poor track record(opens in new window) and significant health(opens in new window) and environmental(opens in new window) risks. An IEEFA study(opens in new window) reviewed the capacity and performance of 13 flagship CCS projects worldwide and found that 10 of the 13 failed or underperformed against their designed capacities, mostly by large margins. Pipelines can leak, and compressed CO₂ is highly hazardous(opens in new window) upon release, potentially resulting in the asphyxiation of humans and animals. Underground storage also poses risks(opens in new window) , such as leakage, contamination of drinking water, and stimulation of seismic activity. As such, CCS technology is deeply inadequate for reaching the port’s (and the Netherlands’) climate objectives. 

Despite these known problems, billions of public money are being invested in CCS, with Porthos as the pilot project and keystone of national energy policy. Worse still, a significant portion of this investment is not even going toward further development or improvement of the technology, but rather toward sweetening the deal for polluting companies by shielding(opens in new window) them from excess costs they might incur by using the technology. The PoR Authority, EBN, and Gasunie, the state-owned firms owning Porthos, bear(opens in new window) the vast majority of an estimated(opens in new window) EUR 1.3 billion of development costs for the project, and the Dutch state has granted(opens in new window) Porthos’ four corporate clients EUR 2.1 billion in subsidies to absorb the excess costs between CCS and CO₂ certificates under the EU Emissions Trading Scheme. The PoR Authority told SOMO 4 that “the policy and vision of the national government are guiding” and that the central government is also directly involved in the implementation of CCS in the Netherlands.

CCS proponents view Porthos as the first node of a planned network of pan-European CCS infrastructure. Other CCS projects are also under construction at the port, such as Aramis, which is being developed by EBN, Gasunie, Shell, and French oil company TotalEnergies, and is expected(opens in new window) to start operations in 2029.

The Delta Rhine Corridor project is related(opens in new window) to the network of CCS infrastructure in building a cross-border network of pipelines to transport CO₂, hydrogen, and other chemicals across the Netherlands and Germany. The pipelines would be open for different users with various combustion processes, which raises concerns(opens in new window) over leakage risks and untested technologies.

2. “A new energy system” 

The second pillar of the PoR Authority’s energy transition plan involves switching to electricity and hydrogen energy sources. While the PoR Authority is focused on “green hydrogen”, which is supported by solar and wind energy for its manufacturing process, the use of CCS technology is presented as a transitional solution(opens in new window) to offset emissions stemming from the use of natural gas in the manufacturing process. Currently, the production of “green hydrogen” remains elusive(opens in new window) , as most production methods rely on non-renewable sources like natural gas or coal. 

The PoR Authority anticipates(opens in new window) production of hydrogen at the port, as well as significant imports (and related storage) of hydrogen manufactured abroad in order to meet demand. To achieve this, the PoR Authority is developing hydrogen corridors, including pipelines in Northern Europe, and partnerships with other ports around the world, connecting the Netherlands with, among others, Portugal(opens in new window) and South Africa(opens in new window) . Additionally, it is building(opens in new window) import terminals, hydrogen cracker units 5 and pipelines to transport hydrogen between Belgium, Germany, and the Netherlands. Gas and chemical company Air Products is building the largest CCS-hydrogen facility(opens in new window) in Europe at PoR. This facility will serve ExxonMobil’s Rotterdam refinery and other clients, and it will connect to the Porthos system to transport the captured CO₂ to storage facilities under the North Sea.

Support from EU governments, including Germany and the Netherlands,(opens in new window) along with backing from major oil and gas companies, is accelerating the growth of the hydrogen sector. However, hydrogen is highly energy inefficient, making it unsuitable(opens in new window) for many current proposed applications. The footprint(opens in new window) to generate CCS-hydrogen, considering both the uncaptured carbon and the methane emissions inherent in using natural gas, is more than 20% greater than burning either natural gas or coal directly for heat.

Even the “green hydrogen” produced with renewable energy is resource-intensive, requiring significant amounts of minerals, land, and water. These inputs are often extracted from the Global South, thus risking perpetuating historical inequalities. The PoR Authority acknowledged 6 the risks of imported “green hydrogen” but asserted that “due to the size and urgency of the reduction task,” the port “cannot afford to exclude any means”. This implies a dismissal of potential harmful consequences while leaving the same patterns of energy production and consumption untouched. 

Passing the buck 

Contrary to the PoR Authority’s bold communications about its energy transition plans, the flagship transition projects exemplify the domination of corporate interests over its plans. Dutch taxpayer money is being used to buy decades of breathing room for oil majors to continue business-as-usual emissions. Moreover, a hydrogen energy system, in the form promoted by the PoR Authority as the next paradigm for meeting Dutch and European energy demand, is resource-intensive and unrealistic in scope, not to mention problematic in terms of its environmental, social, and climate impacts.

This contradiction is clearly illustrated by the PoR Authority’s move to avoid responsibility for the emissions of its tenants. While the PoR Authority frequently highlights(opens in new window) its involvement in tenant-led transition measures to show its proactiveness and to reap reputational benefits, it disavows formal responsibility when it comes to emissions accounting. In calculating its progress toward net-zero targets, the PoR Authority excludes(opens in new window) the massive emissions produced by the port’s industrial cluster from its scope 3 emissions. 7 This is despite the fact that the majority of its revenue(opens in new window) is derived from lease fees paid by these polluters. The PoR Authority indicated 8 to SOMO that “there is room for interpretation as to whether emissions from companies in the port belong to [its] scope 3 emissions” because the land it leases to clients does not cause emissions, but rather that “they are caused by our clients’ installations which the Port of Rotterdam Authority does not lease them [sic].” This contradicts authoritative guidance(opens in new window) on scope 3 emissions, which dictates that emissions generated on real estate leased by the reporting organisation should be incorporated in calculations. 

The PoR Authority stated 9 to SOMO that in 2026, it will reconsider whether land lease emissions should be included in its Scope 3 inventory for its post-2030 reduction targets. While promoting efforts to influence tenants’ emissions, the PoR Authority reiterated, “ultimately, it is the companies in the port that make the necessary investments to convert their production facilities and reduce their direct and indirect emissions.” In any event, the PoR Authority’s self-serving approach to its carbon accounting signals that when push comes to shove, it will not take responsibility for reining in its Big Oil tenants.

A different energy transition is possible

Taken at face value, the PoR Authority’s energy transition plans promise to “solve” the climate impact of industry at the port through new technologies poised to offset or reduce emissions and with the development of such technology presenting economic opportunity for all. But the techno-optimist tone of these plans obfuscates a grim political determination made by the PoR Authority and its government shareholders. Given unavoidable spatial limitations and the PoR Authority’s conscious choice to handcuff itself to the interests of its industrial tenants for decades to come through extremely friendly terms in their leasing arrangements, the PoR Authority’s current energy transition plans prioritise the interests of corporations over those of the broader public. In this context, CCS technology plays a pivotal role in expanding the lifespan of the fossil fuel industry.

The calculus underlying this political choice could well be driven by fear. Reading between the lines of various strategy briefs stressing the need to balance climate goals with the preservation of a favourable investment climate, the PoR Authority and the Dutch government insinuate their fear of the economic damage that might be incurred by antagonising its corporate benefactors. This concern is not unfounded; in recent years, companies such as ExxonMobil(opens in new window) , Shell, Unilever(opens in new window) , ASML(opens in new window) , RWE, and Uniper have threatened or taken aggressive action, such as major divestment or high-value arbitration, against the Netherlands for policies viewed as contrary to their interests. However, given the urgency and historical responsibility to reduce absolute emissions to address the climate crisis, the PoR Authority and the Dutch government must confront this fear and change course.

To that end, there are numerous measures the PoR Authority could feasibly take in the short term to accelerate the energy transition without going to war with its tenants. For example, the PoR Authority could more effectively activate some of the vague environmental restrictions in lease arrangements with tenants by interpreting their scope as strictly requiring some extent of real emissions reductions over a number of years and by more forcefully incentivising compliance with discounts or penalties on lease payments (beyond the minor discount to lease fees(opens in new window) it provides to tenants for proportionate commitments to sustainability investments). In parallel, as a PoR Authority shareholder, the Dutch government could redirect some of the billions of euros in subsidies it provides to industrial companies for energy use or to risky technologies such as CCS toward initiatives focused on reducing absolute emissions and phasing out fossil fuels. 

In light of the scale and urgency of the climate crisis, the Dutch government should dare to take even more proactive and forceful measures. This could entail a real transition strategy, where all subsidies benefitting the fossil fuel economy are transposed to decreasing energy production and use and re-introducing or even ramping up increases to the national carbon tax rate outlined in the Dutch Climate Agreement(opens in new window) to have a punitive effect on industrial companies who fail to adequately reduce their emissions in coming years. To that end, transformation of the port’s energy infrastructure away from fossil fuels is necessary for the Netherlands and Europe to meet their climate objectives. Despite the industry’s intimidation tactics, the true extent of the cost of the energy transition they are willing to bear remains largely untested.

Whatever approach is taken, it is time for the PoR Authority and its government shareholders to stand up to the port’s fossil fuel tenants. While the economic repercussions of penalising industry for failing to reduce emissions may be painful, the consequences of failing to address the climate crisis will be greater than we can imagine.

SOMO’s pro-bono corporate research desk, The Counter, contributed to this story.