Value of investment, partnerships and policy in growing CCS market

As 2050 climate targets near, matching climate ambition with urgent action will drive CCS adoption, inching us closer to a net-zero future

Guloren Turan
Global CCS Institute

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Article Summary

In 2021, carbon capture and storage — or CCS — saw the largest scale-up since the technology’s inception over 50 years ago. The first commercial CCS facility was brought online in 1972, primarily to enhance the business operations of a natural gas processing facility in Terrell, Texas. A few decades later, industry players in Norway sought to adopt the innovative technology to abate CO2 emissions and store it offshore in the North Sea, making the country a first mover in undertaking CCS efforts solely for climate change mitigation purposes. Since then, interest and popularity around CCS have steadily grown, leading to increased CCS policy development, a rise in financial investments, and more public-private partnerships.

As climate impacts become a stark reality for governments and businesses alike, applying a sustainability lens to long-term strategic planning has become imperative. Guiding by legislated international and domestic climate targets, the role of CCS as a credible climate solution and a tool to support a just energy transition is being steadily recognised and adopted. 

Current state of CCS
Over the last year alone, 73 new CCS facilities were added to the project pipeline globally (see Figure 1), bringing the total of projects to 135 CCS facilities in various stages of development (Global CCS Institute, 2021). With financial investments being made to support this scale-up, will the returns be worth it? The impact so far suggests so. CCS has mitigated over 300 million tonnes of CO2 since the technology came into effect, abating over 40 million tonnes per year. The versatile technology provides deep decarbonisation in energy-intensive sectors by capturing CO2 — typically from a point source at an industrial facility — and storing it below the earth’s surface before it can reach the atmosphere. While its deployment has been largely associated with the energy sector, CCS’s application is flexible and is being applied by cement, chemical, iron, and steel plants to decarbonise production. 

Across Europe and North America, the urgency of addressing climate change and scaling up CCS is evident. With 40 facilities in operation and under development, the US has remained the global CCS front runner for decades (see Figure 2), which can largely be attributed to long-standing supportive policy development, including a CCS-specific tax benefit that has driven CCS investment.

In Europe, we also see CCS ambitions on the rise. With targets to reach climate neutrality by 2050 cemented by the European Green Deal, the European Commission announced targets to cut emissions by 55% by 2030 (European Commission, 2021). This ambitious but much-needed target is being supported through a number of policy mechanisms, including grant programmes and an emissions trading system.  

Collaborative efforts and the rise of CCS
As a method to mitigate both cost and operational risk, CCS networks — where several CCS projects share CO2 transport and storage infrastructure to enhance cost savings — have taken off. Across the UK and Europe in particular, industrial players are partnering up with the public sector to get CCS networks off the ground (see Figure 2). The response has been promising. In 2020, the UK government pledged to allocate £1 billion towards the development of CCS clusters, with an aim to have four fully operational networks by 2030. 

Concurrently, the European Commission has developed supportive CCS policy and grant schemes to drive project development, most notably through the EU Innovation Fund — one of the world’s largest funding programmes aimed at scaling up green technologies. While the size of the funding pot is directly tied to revenues made from the EU Emissions Trading Scheme (EU ETS), the Innovation Fund will allocate 20-25 billion Euros to projects by 2030 — a small fraction of which has already been dispersed. In April of this year, seven green tech projects totalling 1.1 billion Euros formally signed their grant agreements with the Commission — four of which are CCS focused (European Commission, 2022). With projects in Finland, Sweden, France, and Belgium being supported, the Innovation Fund is opening new doors for CCS across Europe. 

Similarly, in Norway, the recently approved and funded Longship Project aims to provide ample CO2 storage space for CCS initiatives, both from industrial facilities domestically and from facilities across Europe. The ambitious effort will initially store 0.8 million tonnes of CO2, with the capacity to expand and provide 5 million tonnes of CO2 storage space. Although the Norwegian government will provide two-thirds of the funding needed to develop Longship, the European Commission will also support the project and carry some of the cost burdens. At present, five major corporations have signed on to take part in the Longship project (Bellona, 2020). The Norcem cement plant in Brevik — owned and operated by Heidelberg Cement — championed the project, acknowledging that CCS is one of the few climate solutions they can rely on to decarbonise the cement industry. As 2050 climate targets near, CCS is no longer an option but a necessity. 

CCS and international climate targets
The Paris Agreement calls for global warming not to exceed 1.5-2º by 2050 if we are to avoid the catastrophic impacts of climate change. A tough target but one that remains within reach so long as all proven climate mitigating tools are urgently deployed and fully utilised — including CCS. According to the International Energy Agency (IEA), CCS will need to account for 15% of the world’s emissions reduction by mid-century — that requires a 100-fold increase in CCS facilities between now and then (IEA, 2020). To achieve this, a rapid scale-up of projects across the energy-intensive sphere will need to retrofit their industrial facilities with CCS where possible, as soon as possible. 

In time, climate impacts will further affect the bottom line of businesses — particularly as stronger climate policies are implemented — making the business case for CCS more attractive. In Europe, the EU ETS has made emitting CO2 a financial cost that is ever increasing. With CCS recognised as a climate- mitigating tool, both under the EU ETS system and within the EU Green Taxonomy, energy-intensive industries are turning to the technology to reach net zero and mitigate the price tag associated with their operations. 

In North America, the 45Q tax credit in the US alleviated costs and enabled businesses to reflect on CCS as a long-term investment. Enacted in 2008, the tax credit has since been reformed to provide greater regulatory clarity and will soon support small-scale CCS networks to allow for the cost relief benefits that those operations seek.

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