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Climate Action

How (and why) to boost carbon capture, usage and storage to move towards net zero

Carbon capture, usage and storage technology could be an effective climate solution. Image: Unsplash/Juniper Photon

Wioletta Nawrot
Associate Professor of Economics and Sustainable Finance, ESCP Business School, London campus
Tomasz Walkowicz
Senior Manager, Banking Analytics, Deloitte
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  • One promising process to reach carbon emission targets laid out in the Paris Agreement is Carbon Capture, Usage and Storage (CCUS).
  • The shortcomings of these technologies, including high costs and low efficiency, need to be addressed before CCUS can be deployed at scale and turned into an effective climate solution.
  • A recent impact paper suggests ways to boost this underdeveloped path towards carbon emission targets.

Unlike the proverbial cat let out of the bag, carbon dioxide, once let out into the atmosphere, may be recaptured. As climate urgency mounts, one promising path to keep greenhouse gas levels in check is that of Carbon Capture, Usage and Storage (CCUS). CCUS technologies enable the reduction of carbon dioxide (CO2) emissions from large, polluting industrial facilities and/or the removal of existing CO2 from the atmosphere.

Various methods exist to separate and capture CO2 from flue gas streams, with the CO2 either reused (directly or after transformation) in industrial processes or stored underground, for instance in saline aquifers or depleted oil and gas wells.

An underdeveloped path towards carbon emission targets

While such technologies have been commercially available for decades, only 30 CCUS projects are currently in operation across the globe, according to the Global CCS Institute. Another 11 are in construction and 153 are in development (in 2022 alone, 61 new CCUS projects were initiated). Yet it is now time to step on the gas, so to speak, and change at scale. That’s what we argue in a recent impact paper we wrote as part of ESCP Business School’s new techs and the future of individuals, organisations, and society series.

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Climate scientists claim that it is impossible to reach net-zero targets without CCUS deployment on a wide global scale, and several organisations, including the Intergovernmental Panel on Climate Change (IPCC), the International Energy Agency (IEA) and the International Renewable Energy Agency (IRENA), advocate for an effective acceleration of CCUS globally to reach climate targets.

An acceleration of the deployment of CCUS technologies would also enhance energy security, especially in times of significant geopolitical reconfigurations. The possible use of CCUS technologies to produce low-carbon hydrogen, with its potential of serving as a source of energy of various applications after carbon dioxide is set to be permanently removed, offers another argument in support of the acceleration of CCUS deployment. Yet a number of significant obstacles stand in the way of the expansion of CCUS projects.

Expensive, underperforming operations

We identify three main challenges. The first is cost, as CCUS facilities are both capital-intensive to deploy and energy-intensive and expensive to operate. Some technologies are pricier than others: for instance, natural gas processing (from highly concentrated CO2 streams) is far less expensive than direct air capture – for the moment. Indeed, costs go down as technologies mature: in large-scale facilities, the cost of CO2 capture in the power sector has already dropped by 35% since the first deployments, according to IEA estimates. But for heavy industries like cement production, that struggle to achieve necessary emission reductions, even the most expensive technologies can be cheaper than other alternatives – or than having to shut down altogether in a restrictive future scenario.

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A second challenge is the underperformance (and sometimes outright failure) of CCUS operations, possibly due to their relative technological youth. For example, according to recent reports, the world’s only large power station with CCUS, SaskPower’s Boundary Dam in Saskatchewan, Canada, underperformed by close to 50%.

Finally, CCUS operations are not free of environmental concerns. One risk is CO2 leakage from storage, though we can be reasonably reassured about the solidity of natural geological formations that have already stored gas for millions of years. CCUS systems increase environmental damages from toxicity, acidification, eutrophication, etc. However, the literature also concludes that there is a net environmental benefit if we compare the reduced environmental damage from climate change achieved by CCUS systems with the environmental and health damage induced by CCUS itself. Still, the complex climate implications of carbon uses, especially the controversial Enhanced Oil Recovery (EOR) technology that ultimately serves to produce more fossil fuel, require more research.

The solution: boosting innovation

Costly, underperforming and potentially risky technologies perhaps don’t sound like a very apt climate solution, yet many aspects of these challenges can be effectively addressed by boosting innovation. It is generally expected that the cost and performance gap (compared to established technologies) will be closed when the deployment of CCUS moves to the mainstream. In turn, the pace of innovation will depend on the involvement of various stakeholders and the policies governments introduce today.

This is why we call on further significant public and private investment in R&D. As knowledge and practical know-how accumulate, the market will grow and economies of scale will help lower costs, as happened with the solar photovoltaic industry.

Through funding and incentives, governments can also support building and improving CCUS infrastructure. For instance, developing industrial clusters is especially beneficial to generate economies of scale.

We also argue that once the technologies become mainstream, governments need to consider making carbon capture, usage and storage a legal requirement for the most polluting industries. We suggest initiating policy consultations as soon as possible, for companies to start preparing operationally and financially, incorporating the requirements of future climate legislation into their budgets and long-term business models.

Some governments have already launched initiatives to strengthen investment in CCUS development. We single out the US as a leader, with a recent $62 billion budget for the Department of Energy, including $10 billion earmarked for carbon capture, direct air capture and industrial emission reduction, and Canada, which has established a CAN$2.6 billion tax credit budget for CCUS projects. In Europe, the UK, Norway and Denmark are also investing. It is vital that governments make CCUS policy a national priority, since the recent UN IPCC assessments make it clear that the transition to net-zero cannot be delayed if the world is to avoid a humanitarian crisis on an unprecedented scale.

Other countries must follow suit, as we point to the evidence that government incentives do influence companies’ investment commitments. We also warn Western governments against the temptation to heavily tax the windfall profits of energy companies, which may slow their investments towards net-zero. Instead, we suggest encouraging fossil fuel extractors to invest in technologies to dispose of carbon dioxide safely and permanently, not only with EOR, but possibly also through such requirements as a carbon takeback obligation.

Despite some governments' efforts, there is an urgent need for policy-makers to provide wider support for the technological development, deployment and operation of CCUS to ensure that it can serve as an effective solution to the climate problem.

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