The path to net zero requires balancing more efficient energy use with upscaling renewable energy and carbon abatement solutions.
In the last decade, however, this balance has skewed towards growth in the renewable power generation sectors, while CCUS has remained relatively stagnant. This is clearly illustrated by the investment gap between the two: close to $600bn was invested in renewable power in 2022 alone, while CCUS attracted an estimated $6bn.
Today, only about 42mn t/yr of CO₂ is captured and sequestered around the world. For CCUS to have the expected impact on supporting global net-zero ambitions, it will need to scale up 100–200 times in less than three decades.
While the economics of CCUS projects must shift to enable growth, scaling CCUS is not merely an economic decision, it is a reflection of societal values and priorities, supported by a collective will to address the critical climate challenge at hand. Thus, it will require collaboration between governments, public and private actors, and communities to make it happen.
Gaining traction
Most CCUS investments in recent years have been in the lowest ‘cost-to-capture’ sectors such as natural gas processing, ethanol or ammonia production. While these investments are an important step, they represent only a fraction of the carbon abatement needed to reach net-zero targets.
Where CCUS stands to have an even greater impact is in hard-to-abate sectors such as power generation, steel and cement, which represent more than 19gt of CO₂ emissions. These sectors have more dilute emission streams, with lower CO₂ partial pressures, resulting in higher technical complexity and cost of capture. Recent policy updates are beginning to support the economics for these industrial use cases in the US and Europe, for example. While this is an encouraging sign, more needs to be done from both a policy and technology innovation standpoint to shift CCUS project economics.
Carbon markets and policy landscape
Durable regulations and policies and carbon markets are a must to support large-scale capital deployment.
The World Bank estimates that a carbon price of $50–100/t of CO₂ is required by 2030 to meet the goals of the Paris Agreement. Less than 5pc of greenhouse gas (GHG) emissions are covered by a direct carbon price at or above the range recommended by 2030.
More countries are recognising the value of putting a price on carbon, however. Today, an estimated 23pc of global GHG emissions fall under a so-called compliance-based carbon market (e.g., carbon taxes and emission trading systems, or ETSs), in which entities must purchase or trade allowances to cover the emissions they produce. This is up from just 5pc a decade ago.
Even with this growth in carbon markets, global adoption is still underwhelming and prices are mostly too low to materially drive climate actions.
On the policy front, there have been several positive updates in the last 18 months. In Europe, the revision of the EU ETS is a promising development towards meeting climate targets, as it covers a broader range of sectors and GHGs.
In the US, the Inflation Reduction Act (IRA) provides tax incentives that give CCUS projects a higher chance of becoming economical. The legislation is having a direct impact on CCUS projects for the hard-to-abate sectors, and several are now going through the Feed phase. The IRA will also support the acceleration of investments into large-scale CCUS hubs in the US.
On the back of policy revisions, the tipping point to scale up CCUS has been crossed for several use cases. However, to accelerate CCUS across power generation, cement, steel and petrochemicals, more technology disruption is needed to bring the cost curve down, and robust and relevant carbon pricing mechanisms need to be deployed widely.
Technology’s role
Getting CCUS projects past FID stage remains a challenge. The impediments to FID can be related to lack of regulatory clarity, lack of revenue model certainty or simply project economics being below hurdle rates.
Technology represents a significant opportunity to help projects move past the FID stage.
Advanced digital technologies and domain expertise for de-risking CO₂ storage sites—through detailed subsurface characterisation, advanced reservoir modelling and CO₂ plume migration simulations—are fundamental to the pre-FID evaluation phase. The enhanced subsurface understanding these technologies enable can help accelerate projects to the next stage of development and ensure their overall safety and success.
Once a project gets beyond FID, cost-driven challenges for the capture facility include high energy consumption requirements and material costs. Today, CO₂ capture generally represents 50–70pc of a total CCUS project spend.
The main challenge of the technology in development is the time it takes to scale, yet there are some technologies on the cusp of commercial availability. One of these is US non-profit RTI International’s water-lean solvent, which is less corrosive than conventional chemical absorption technologies. Not only does this water-lean solvent eliminate the need for costly high-grade corrosion resistant alloys, but it also has the potential to materially reduce energy requirements by up to 30pc. This technology can represent a material impact on reducing both capex and opex from CCUS projects.
CCUS business models and stakeholder engagement
With more supportive policies and technology advancements, there are several business models shaping up around CCUS: transportation and storage as a service, carbon capture OEM delivery models, carbon as a commodity, and direct air capture, to name a few. The CCUS revenue model has long been a challenge, especially in applications where CO₂ is not being utilised. Carbon markets and carbon pricing have a key role to play here by providing support to project financing and a monetisation pathway for carbon offsets.
CO₂ utilisation is currently limited to a few applications, such as enhanced oil recovery or conversion into construction materials or biofuels. However, the volumes of CO₂ being utilised are a fraction of the required volumes to be abated in any net-zero scenario. As such, most CO₂ abatement via CCUS will take place via permanent sequestration in geological basins.
Climate awareness and concerns associated with climate change have elevated the understanding of the need for ambitious emissions reduction methods. Raising awareness around CCUS, as a necessary and valuable technique and as a decarbonisation lever, is an essential avenue to gain wider and more inclusive societal support. CCUS represents a large industry potential to create rewarding jobs where investments take place as a foundation for a lasting decarbonisation industrial ecosystem.
There has never been a better landscape for CCUS to scale up. The commitments to decarbonise are stronger than ever. The regulations and policies to support CCUS deployment have strengthened across key geographies, making the technique deployable and financeable. Technology advancements support CCUS de-risking, as well as further economical enhancements. The onus is now on public and private actors to tilt the balance towards CCUS growth acceleration by increasing capital allocation and deploying scalable cost-reducing technologies.
Frederik Majkut is SVP Carbon Solutions at SLB.
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