ExxonMobil launches legal challenge to EU carbon capture rules

ExxonMobil has launched a confidential arbitration challenging the EU’s requirement that large oil and gas producers build carbon dioxide storage capacity by 2030 under the Net-Zero Industry Act. The company is seeking an interim order to suspend the infrastructure deadlines, arguing that firms are being forced to provide storage before a viable market exists and cannot meet the current timetable. It says the rules could raise energy costs and should be amended, not abandoned. The challenge invokes protections against discriminatory or arbitrary policies in a 1994 investor-protection treaty. Although the EU and UK withdrew from the treaty last year, its terms continue to bind them for 20 years after withdrawal; the treaty permits companies to bring disputes before private tribunals, where compensation is generally the main remedy.

The case contrasts with Exxon’s major US carbon-capture investments: the company has spent more than $5bn developing a Gulf Coast business and a 900-mile pipeline network. Its action also extends a broader campaign by chief executive Darren Woods against EU climate and corporate regulations, including rules on corporate sustainability and methane emissions. Brussels has begun preparing a response. The dispute has renewed concerns among climate advocates that secretive investor-state cases can deter governments from pursuing climate policies, while remaining largely invisible to the public. Exxon’s challenge comes as the EU’s carbon-storage mandate is intended to spur investment in net-zero technologies and help meet the bloc’s climate goals.