Aug-2021

Carbon capture policy development and the pathway forward

How can policymakers help commercialise the carbon capture market to significantly kick off the global deployment of the technology?

Damilola Abe
University of Houston

Article Summary

The global warming challenge is a big concern to each of us, including the very sceptics. Its effects are experienced directly or indirectly by everyone, some of which include harsh weather and a rise in sea level and temperature. Unplanned floods and extreme weather conditions potentially lead to a loss of lives or infrastructures and disasters. Such disasters may lead to severe economic loss and the destruction of private and public infrastructures. They could also lead to people being displaced from their homes and the destabilisation of regional governments, especially in struggling economies, and an increase in government spending to restore severely damaged infrastructures.

According to the International Energy Agency (see Figure 1), alternative renewable energy sources would only meet 8% of human energy demands by 2040. This small percentage means that coal and fossil fuels are the most reliable source for the foreseeable future. Current renewable sources cannot meet the rising global demand for energy. Since the world still relies on fossil fuels for energy consumption, greenhouse gas emissions will continue to increase. At this point, carbon capture utilisation and storage (CCUS) becomes the best option for mitigating climate change.

On an individual level, carbon capture storage projects are proven and effective. The Sleipner and Snøhvit carbon capture project in offshore Norway is a testament to the viability of the success of its technology and advantages. However, several factors still hinder its global deployment, including regulatory, legal, economic and financial challenges. Amongst its challenges to deployment on a commercial level, economic and financial setbacks are the most crucial.

Up until now, policymakers have struggled to develop the business-sustaining groundwork  to commercialise the carbon capture industry. Several schemes have been tested, but none have yielded the much-needed commercialisation of the carbon capture market to significantly kick off the global deployment of the technology and impact emissions reduction.

Carbon pricing
One of the setbacks of the current policy is the regulatory framework to determine carbon pricing. Carbon taxes do not necessarily guarantee a reduction in emissions, as emitters can factor extra expenses into the cost of their products, which the end consumer would ultimately pay. On the other hand, the cap and trade scheme is susceptible to market fluctuations, making it difficult for investors to build a business model.

Creating stability of the carbon price would be best when it is not dependent on the negative societal cost per tonne but rather as a commodity for utilisation. Carbon utilisation will be a better driver to determine carbon pricing; therefore, governments should create incentives and policies to develop the industry and eliminate many uncertainties faced by carbon pricing. The industry would generate the constant demand necessary to keep carbon pricing afloat globally without excess regulations by individual nations. Another solution is for the government to invest in carbon utilisation and create partnerships with industries that utilise carbon for their processes. When more industries use carbon, the demand and supply effect will help structure globally acceptable carbon pricing.

Geo-industrial zones
As of now, there are only 21 currently operating CCUS facilities in the world, according to the International Energy Agency. This number is far from what is needed to reduce CO2 to achieve net-zero. According to the Global CCS Institute, the total capacity of carbon capture facilities globally is around 40 Mtpa, and it must increase more than a hundredfold to achieve net-zero emissions by 2050. Making carbon capture commercially viable is the game changer to spur hundreds of carbon capture projects worldwide.

Governments can invest in carbon capture technology projects by creating a geo-industrial zone and strategically locating the site of the carbon capture facility to build infrastructure directly from the emission source to the site. This geo-industrial zone will consist of neighbouring regions with significant industrial or emission activities.

Areas along the coastline would get emissions sequestered in offshore saline aquifers or depleted oil wells, while industries inland would be connected to an onshore carbon capture storage site. For example, in the US, Houston would serve as a better geo-industrial zone to store carbon emissions into the Gulf of Mexico due to its proximity and accessibility to an emissions source. On the other hand, Montana would be a desirable geo-industrial site for onshore carbon capture storage due to its subsurface storage capacity. Each carbon-emitting company should be mandated to connect to the main carrier for storage and utilisation.
Segmenting the industry

The industry market can be divided into three main categories for policy approach: the Source, the Transport, and the Storage and utilisation. Segmenting the market helps set the right tone to make favourable policies for each stakeholder in the industry. Also, it relieves the stakeholders of bearing the entire financial burden of building the CCUS process and infrastructures.

The Source
The Source is the emitting production companies, and already emitting companies such as coal-fired power plants were mostly built without CCUS plans. Therefore, they would need to retrofit the installation on existing facilities. Retrofitting CCUS infrastructure may be a substantial economic feat that would require years to complete. The idea is to reduce the financial load and enormous technical responsibility as much as possible. The responsibility of the Source can be streamlined to carbon capture only and to connect to the main carrier, leaving them to focus on producing mostly pure CO2 and capturing nearly 100% of their emissions. The transport market takes it up from there.

The Transport
The transport sector is the main carrier responsible for delivering CO2 to the storage site. Building transboundary and interboundary pipelines to deliver CO2 to storage or injection sites requires a set of infrastructure and technical processes (see Figure 2). Instead of having direct pipelines for each emitting Source to a storage site, a well-structured pipeline system can be in place to deliver CO2 to the storage site within the network. 

For the Sources, this eliminates the cost of building pipelines and avoids the overcrowding on land and underground with CO2 pipelines, which are considered dangerous to human lives.