Government backing for projects to decarbonise industry pushed CCS to record levels last year, but the global energy crisis is raising fears it will lead to fossil-fuel lock-in, reports Catherine Early
An increasing recognition of the role of carbon capture and storage (CCS) in net-zero targets is spurring action, especially in Europe and the United States.
The past couple of years have seen growing momentum for CCS projects as more governments and businesses have declared net-zero targets, and backed this up with policies and investments.
But last year’s progress was unprecedented, with plans for more than 100 new facilities made public, quadrupling the global pipeline for CO2 capture capacity, according to the International Energy Agency (IEA).
There are encouraging signs that this time the momentum will deliver tangible results that can help tackle global emissions
The capacity of projects in development grew 48%, from 73 million tonnes a year (Mtpa) at the end of 2020 to 111 Mtpa in September 2021, said the Global CCS Institute in its annual status report last October.
While this remains a tiny fraction of what will be needed if CCS is to play a significant role in keeping global warming within 1.5 degrees Celsius, it was a “major departure from the years 2010 to 2017, when plans for CCUS facilities were being cancelled and the pipeline of potential projects shrank,” said Samantha McCulloch, head of carbon capture utilisation and storage at the IEA.
“There are encouraging signs that this time the momentum will deliver tangible results that can help tackle global emissions,” she wrote in a blog.
Increasingly, the focus for the application of CCS is in the industrial or “difficult to decarbonise” sectors, where electrification is not a viable solution, due to the high temperatures needed, the institute’s report noted.
CO2 networks have quickly become a significant element in CCS deployment, since heavy industries often congregate together. There were “significant strides” in progressing many proposals for such networks in 2021, and the announcement of new ones, it stated.
Developments in Europe over the past 12 months include the UK government’s commitment to take forward two industrial clusters to the next stage of its 1 billion pound CCS Infrastructure Fund. The HyNet North West project, backed by Italian energy group ENI and Progressive Energy, hopes to produce low-carbon hydrogen from capturing 10 Mtpa of CO2. The East Coast Cluster, supported by BP, Equinor, Drax and SSE, is expected to capture 27 Mtpa of CO2 by 2030. In February, ENI said it had signed a total of 19 agreements with companies to capture and store their emissions at the HyNet project.
Both the EU’s ETS and taxonomy are helping to incentivise energy-intensive industries to turn to CCS to reach net zero
In the Netherlands, CCS is earmarked to contribute to 50% of the emissions reduction required in industry by 2030. Last year, the government provided $6 billion to CCS projects during the first round of applications to its energy production subsidy scheme, including $2.4bn to develop the large Porthos CCS facility that will store CO2 in the North Sea.
Meanwhile, in November, the Danish Energy Agency announced that it will award 26 million euros to the INEOS-led consortium behind Project Greensand CCS. Two months later, the Norwegian Northern Lights CO2 transport and storage project owned by Equinor, TotalEnergies, and Shell was granted 4 million euros from the European Union to expand capacity to more than five million tonnes per year.
These developments are being driven by two key factors, according to analysis by ING. Carbon prices under the EU Emissions Trading System (ETS) for the power and manufacturing sectors soared above 80 euros per tonne of CO2 in late 2021, reaching levels that support many CCS applications, particularly in carbon-intensive manufacturing clusters, where infrastructure costs can be shared.
Second, ING analysts noted that the EU Sustainable Finance Taxonomy, a classification system defining what counts as “sustainable” for investment purposes, will make CCS more attractive if a project developer can demonstrate that the integration of CCS can bring their carbon intensity to below the threshold for inclusion. For example, the proposed emissions standard for newly built gas-fired power plants can only be met by using CCS, it states.
Guloren Turan, general manager of advocacy and communications at the Global CCS Institute, says that both the EU’s ETS and taxonomy are helping to incentivise energy-intensive industries to turn to CCS to reach net zero.
Business models that allow for economies of scale ‒ such as CCS hubs and clusters, where transport and storage are shared among project developers ‒ will allow CCS to play a stronger role in meeting net-zero targets, she says.
In terms of exponential growth in CCS projects, I don’t think we’re there yet, but we’re in a better place than three to five years ago
However, she adds that regulatory barriers will need to be addressed.
Domien Vangenechten, policy advisor at think-tank E3G, agrees. “In terms of exponential growth in CCS projects, I don’t think we’re there yet. We’re in a better place than three to five years ago, but it remains to be seen if these announcements will actually materialise,” he says.
Hydra Rodrigues, technology analyst, IDTechEx, says that although the overall growth in CCS remains “a drop in the bucket” compared with what is needed to keep global temperature rise within 1.5C, governments had realised they need to tackle the infrastructure bottleneck, citing the EU investment in Norway’s Longship CCS project as an example.
In the United States, more than 40 CCS projects were installed in 2021, helped by generous government incentives, according to the Global CCS Institute. These include several large-scale CCS networks, such as ExxonMobil’s proposal for a CCS Innovation Zone in the Houston Ship Channel, which aims to bring together private industry and academia to capture up to 100 Mtpa of CO2 and store it offshore from the Gulf of Mexico.
The U.S. Internal Revenue Service’s tax credit for carbon sequestration, known as Section 45Q, was boosted in 2018 to allow industrial players to receive up to $50/tonne of CO2 that is permanently sequestered, and up to $35/tonne of CO2 when used for enhanced oil recovery (EOR), where the carbon is pumped into oil reservoirs to boost pressure and increase production.
Current proposals under the Build Back Better Bill could see the tax credit enhanced again, to $85 per tonne of CO2 stored, and $60 for EOR. Though the final amount could be watered down in the Senate, it would still boost CCS deployment, ING believes.
CCS on its own doesn’t have a business model without regulation. But that’s where carbon capture and utilisation comes in
In addition, Biden’s infrastructure bill, which was signed into law in November, contained the single largest appropriation of money for CCS in the technology’s history, according to the Global CCS Institute. This includes $2.5 billion for CCS demonstration projects, $1 billion for large-scale CCS pilot projects, and $3.5 billion for regional direct air capture hubs over the next five years. (See New life injected into ambition of capturing CO2 from air) The bill also contains nearly $5 billion towards the development and financing of CO2 transport and storage infrastructure and sites.
Despite last year’s positive development, there are still only around 30 CCS facilities operating worldwide, a number the Global CCS institute believes needs to rise at least 100-fold to meet the targets in the Paris Agreement. Commentators expressed mixed opinions in the direction of travel.
For Rodrigues at IDTechEx, the key for the sector’s viability is in using the carbon to make products, such as bricks. “CCS on its own doesn’t have a business model without regulation. But that’s where carbon capture and utilisation comes in: for the past two to four years there’s been a push to see CO2 not as a liability, but more as a product, so it can be monetised,” she says.
Vangenechten of E3G has noticed a change in the public acceptability of carbon capture, with even environmental campaign groups becoming more accepting of certain applications. “There’s increasingly a recognition that CCS is necessary in some sectors, such as cement, and a willingness to engage on those. The discussions are becoming more granular,” he says.
But this risks being undermined by the current energy crisis stemming from the war in Ukraine.
With European countries scrambling to replace imports of Russian fossil fuels by restarting coal plants and making plans for imported liquified natural gas, the focus may revert to CCS being used on power stations, with the risk of fossil-fuel lock-in, he suggests.
“CCS is a solution for CO2, not for fossil fuels,” Vangenechten said. “I think that’s still a big hurdle to overcome. We might need to reassess some of our CCS priorities in Europe, and abroad as well.”
Catherine Early is a freelance journalist specialising in the environment and sustainability. She writes for Business Green, China Dialogue and the ENDS Report among others. She was a finalist in the Guardian’s International Development Journalism competition.
This article is part of The Ethical Corporation’s March 2022 Energy Transition briefing: See also:
CCS Global CCS Institute carbon capture utilisation and storage CCUS HyNet East Coast Cluster Northern LIghts CCS PROJECT GREENSAND ETS E3G iDTechEx Longship CCS CCS Innovation Zone