More room and time for improvements
There is no doubt that CCS projects are expensive, requiring subsidies or state participation and some form of carbon pricing to become viable. It is also true that governments are crucial drivers of research and development (R&D) activities intended to find innovative cost-cutting solutions for the CCS sector. A 2022 report by the Institute for Energy Economics and Financial Analysis found that out of 13 carbon capture projects analyzed, seven performed below their stated capacities, two failed due to technical issues, and one was suspended. However, the current level of government support of CCS (including R&D funding) is unprecedented compared to previous decades, and we are yet to see the effects of such investment over the medium-to-longer term.
The Sixth Assessment Report by the Intergovernmental Panel on Climate Change (IPCC) highlights that CCS is a critical mitigation option for cement and chemicals production. The report also underscores the need to create enabling conditions to scale up CCS in line with our emissions-reduction targets, including policy instruments, public support, and technological innovation. Basically, ongoing debates represent a fight for the hearts and minds of people, who are generally undecided with regard to the emerging industry based on the limited data that we currently have.
Large investment is yet to come
The opponents of CCS claim that governments and private players spend too much money on the technology, which could be invested in more mature decarbonization projects, such as renewables. However, fiscal incentives are still taking shape across many geographies, while CCS investment leaves much to be desired compared to other energy-related capital spending.
Let’s look at the figures. In 2022, global CCS investment reached a record high of $6.4 billion, with 45% concentrated in the United States. The same amount represents an estimated cost of Canada’s tax credit for carbon capture and storage through 2030. To put this into perspective, the Canadian government is expected to spend $22.35 billion on the Trans Mountain pipeline expansion project, a 44% increase compared to the 2022 estimate (and more than four times higher than in 2017).
There's more: last year’s global renewable investment jumped to $495 billion, including $308 billion in solar energy and $175 billion in wind energy. In addition, $466 billion was spent on electrified transport (vehicles and associated infrastructure), while investment in hydrogen stood at just $1.1 billion. It's a bit of a stretch to say that the world is overspending on CCS when it is rather underinvesting in the industry, which needs much more money to scale up.
In addition, critics argue that we should not subsidize carbon capture and storage to facilitate investment, but public polls suggest the opposite. In mid-2022, the Pew Research Center released a report, which showed that in the United States, 88% of Democrats (or leaning toward Democrats) and 70% of Republicans (or leaning toward Republicans) were in favor of providing tax credits to businesses to develop carbon capture and storage projects. And they may be right to think so because it is not the first time in history that tax incentives helped to create a new industry. In the 1970s and 1980s, a combination of federal tax credits, political will and technological innovation made California the hottest destination for investment in wind power (this success story is detailed in Daniel Yergin’s book The Quest: Energy, Security, and the Remaking of the Modern World). Danish wind turbine manufacturer Vestas played a critical role in unlocking California’s renewable energy potential, and four decades later it was Vestas that developed a circularity solution to decommission turbine blades in a more environmentally friendly way.
Innovations do take time, and we may need another decade or two of active government support to scale up CCS.
EOR could play a positive role
Currently, enhanced oil recovery (EOR) operations represent the most viable source of revenue for CCS projects as upstream companies would be interested in leveraging captured CO2 to improve production rates from mature fields. Opponents argue that this will lock in future hydrocarbon production and compromise our climate goals, and in some cases, governments tend to exclude EOR from CCS tax credit schemes (like in Canada).
However, each barrel of oil produced with EOR reduces the need for a barrel of oil extracted from a newly developed field, which could lead to scaling back exploration and production activity over the longer term. As Dr. William Burns states, EOR “is a counterintuitive strategy for combating climate change”, but if it can encourage CCS cost-cutting and limit the need for more oil and gas exploration, governments should not discard the technology in the development of CCS incentives.
Oil and gas are essential to the petrochemical industry, which manufactures products with applications across multiple sectors, including fertilizers, wind turbines, electronics, transportation, toiletries, insulation, etc., and is expected to account for almost half of the global oil demand by 2050. And while we are developing viable recycling and green plastics solutions and improving our waste-management practices, the petrochemical industry will likely remain in its current form and will need to cut emissions.
According to the International Energy Agency (IEA), the chemical sector is responsible for 18% of global industrial emissions, with 85% represented by energy-related emissions and 15% coming from process-related emissions, that is, the difference between the carbon content of feedstock and the product. Bloomberg NEF found that by 2050, CCS could become the cheapest way to achieve net-zero petrochemicals and decrease 40% of high-value chemicals production.
Northwestern University researchers recently developed a method to create acetic acid (a feedstock in the manufacturing of paints, coatings, adhesives and other products) out of carbon monoxide derived from captured carbon dioxide. The innovative solution not only offers an option to commercialize captured CO2 but also paves the way to reducing emissions as large-scale acetic acid production is based on methanol, which is derived from fossil fuels.
Overall, disruptive innovations are required to cut capture costs and commercialize captured carbon dioxide. The policy and regulatory changes of the past two years have unlocked a new stage in the CCS industry development, and like many other technologies that we use today, carbon capture and storage should have a chance to demonstrate their viability.
Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Energy & Sustainability writers, their opinions do not necessarily represent those of illuminem.