The quickest way to give utilities an incentive to invest in developing the technology would be to give them credits in the EU's Emissions Trading System for CO2 they capture and store, he said, according to extracts released by Shell.

The European Commission has proposed legislation to encourage carbon capture and storage (CCS), notably by helping fund the construction of a dozen demonstration plants.

But van der Veer said that could come too late to achieve the EU's goal of cutting CO2 emissions by at least 20 percent by 2020 from 1990 levels.

"At the very least, companies should earn carbon credits for the CO2 they capture and store," he said.

Carbon capture and storage, designed to reduce CO2 emissions from large industrial sites such as power plants, has yet to be proven to work on an industrial scale.

The Commission's draft legislation will provide a legal and regulatory framework to make geological storage of CO2 possible.

"Yet in the absence of an accompanying transitional EU funding mechanism to incentivise private sector investment, large-scale CCS projects in Europe are likely to be delayed," van der Veer said.

Some EU lawmakers argue that energy companies should be reinvesting part of the windfall profits they have made from higher energy prices and from receiving CO2 permits free under the current ETS system to fund investment in carbon storage.