Among the technologies that are expected to facilitate energy transition and cut emissions, carbon capture and storage (CCS) is probably one of the most contentious

Alex

<h2>More room and time for improvements</h2>
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&amp;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,<a href="https://www.spglobal.com/marketintelligence/en/news-insights/latest-news-headlines/carbon-capture-simply-won-t-work-to-meet-net-zero-targets-report-says-71959535"> seven performed below their stated capacities, two failed due to technical issues, and one was suspended</a>. However, the current level of government support of CCS (including R&amp;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 <a href="https://www.ipcc.ch/report/ar6/wg3/downloads/report/IPCC_AR6_WGIII_SummaryForPolicymakers.pdf">critical mitigation option</a> 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<a href="https://illuminem.com/illuminemvoices/what-could-fuel-public-concerns-about-ccus"> generally undecided</a> with regard to the emerging industry based on the limited data that we currently have.&nbsp;
<h2>Large investment is yet to come</h2>
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&rsquo;s look at the figures. In 2022, global CCS investment reached a record high of<a href="https://about.bnef.com/blog/carbon-capture-investment-hits-record-high-of-6-4-billion/#:~:text=Investment%20in%20carbon%20capture%20and,even%20than%20in%20previous%20years."> $6.4 billion</a>, with 45% concentrated in the United States. The same amount represents an estimated cost of Canada&rsquo;s <a href="https://www.budget.canada.ca/2022/report-rapport/chap3-en.html">tax credit for carbon capture and storage through 2030</a>. To put this into perspective, the Canadian government is expected to spend<a href="https://www.reuters.com/business/energy/trans-mountain-oil-pipeline-expansion-costs-surge-44-c309-billion-2023-03-10/"> $22.35 billion on the Trans Mountain pipeline expansion project,</a> a 44% increase compared to the 2022 estimate (and more than four times higher than in 2017). 
There's more: last year&rsquo;s<a href="https://about.bnef.com/blog/a-record-495-billion-invested-in-renewable-energy-in-2022/#:~:text=Investment%20in%20renewable%20energy%20last,dollars%20for%20the%20first%20time."> global renewable investment</a> jumped to $495 billion, including $308 billion in solar energy and $175 billion in wind energy. In addition,<a href="https://about.bnef.com/blog/global-low-carbon-energy-technology-investment-surges-past-1-trillion-for-the-first-time/"> $466 billion was spent on electrified transport</a> (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.&nbsp;
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<a href="https://www.pewresearch.org/science/2022/07/14/americans-divided-over-direction-of-bidens-climate-change-policies/ps_2022-07-14_climate-change-policies_00-04/"> report</a>, 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&rsquo;s book<a href="https://www.amazon.com/Quest-Energy-Security-Remaking-Modern-ebook/dp/B005HHSYJA/ref=tmm_kin_swatch_0?_encoding=UTF8&amp;qid=1683463060&amp;sr=8-5"> The Quest: Energy, Security, and the Remaking of the Modern World</a>). Danish wind turbine manufacturer Vestas played a critical role in unlocking California&rsquo;s renewable energy potential, and four decades later it was Vestas that developed a<a href="https://www.vestas.com/en/media/company-news/2023/vestas-unveils-circularity-solution-to-end-landfill-for-c3710818#:~:text=Vestas%20unveils%20circularity%20solution%20to%20end%20landfill%20for%20turbine%20blades,-News%20release%20from&amp;text=Vestas%20is%20presenting%20a%20new,or%20composition%20of%20blade%20material."> circularity solution</a> 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.&nbsp;
<h2>EOR could play a positive role</h2>
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<a href="https://www.iea.org/policies/13346-investment-tax-credit-for-carbon-capture-utilisation-and-storage-ccus"> Canada</a>). 
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.&nbsp; As Dr. William Burns<a href="https://illuminem.com/illuminemvoices/dont-rule-out-enhanced-oil-recovery-in-carbon-dioxide-removal-policymaking"> states</a>, EOR &ldquo;is a counterintuitive strategy for combating climate change&rdquo;, 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.&nbsp;
<h2>Decarbonizing petrochemicals</h2>
Oil and gas are essential to the petrochemical industry, which manufactures products with<a href="https://www.iea.org/reports/the-future-of-petrochemicals"> applications across multiple sectors</a>, including fertilizers, wind turbines, electronics, transportation, toiletries, insulation, etc., and is <a href="https://www.iea.org/reports/the-future-of-petrochemicals">expected </a>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),<a href="https://www.iea.org/reports/the-future-of-petrochemicals"> the chemical sector is responsible for 18% of global industrial emissions</a>, 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<a href="https://about.bnef.com/blog/759-billion-required-for-a-net-zero-petrochemicals-sector-by-2050/"> the cheapest way to achieve net-zero petrochemicals</a> and decrease 40% of high-value chemicals production.&nbsp; 
Northwestern University researchers recently developed<a href="https://news.northwestern.edu/stories/2023/05/catalyst-transforms-carbon-dioxide/"> a method to create acetic acid</a> (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.&nbsp;&nbsp;
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.&nbsp;&nbsp;
illuminem Voices is a democratic space presenting the thoughts and opinions of leading Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.

How to stop worrying: a case for carbon capture and storage

In early February 2023, Prime Minister Rishi Sunak announced a government reshuffle intended to increase the focus of several departments on emerging challenges, including the decarbonization of the United Kingdom’s energy system. The plan is to advance the country’s climate goals via a targeted approach with the help of dedicated departmental teams that would push through low-carbon and clean energy initiatives. While a leaner administrative structure will facilitate a better allocation and use of resources, the challenge with decarbonizing the United Kingdom lies elsewhere.

In early February 2023, Prime Minister Rishi Sunak announced a government reshuffle intended to increase the focus of several departments on emerging challenges, including the decarbonization of the United Kingdom’s energy system. The plan is to advance the country’s climate goals via a targeted approach with the help of dedicated departmental teams that would push through low-carbon and clean energy initiatives. While a leaner administrative structure will facilitate a better allocation and use of resources, the challenge with decarbonizing the United Kingdom lies elsewhere.
The Department for Energy Security and Net Zero will take over some functions of the previous Department for Business, Energy, and Industrial Strategy (BEIS), which was created in 2016 and became a product of a merger between two different departments. According to the <a href="https://www.gov.uk/government/publications/making-government-deliver-for-the-british-people/making-government-deliver-for-the-british-people-html#department-for-energy-security-and-net-zero">announcement</a>, there are six main areas of action for the newly created department:
<ul><li>Ensure security of energy supply, bring down energy bills and reduce inflation;</li></ul>
<ul><li>Ensure the UK’s compliance with the legally binding Net Zero commitments and speed up the delivery of network infrastructure and domestic energy production;</li></ul>
<ul><li>Improve energy efficiency;</li></ul>
<ul><li>Deliver current schemes to support energy consumers and develop options for a long-term reform of the electricity market;</li></ul>
<ul><li>Seize the economic benefits of Net Zero, including the jobs and growth created through investment in new green industries;</li></ul>
<ul><li>Pass the Energy Bill to support the emerging CCUS and hydrogen sectors; to update the governance of the energy system; and to reduce the time taken to consent offshore wind.</li></ul>
The mandate is in line with the earlier policies and strategies of the Conservative Party, particularly the British Energy Security Strategy released in early 2022, and it encompasses the goals of the 2020 Ten Point Plan to Green Industrial Revolution and 2021 Net Zero Strategy. Over the past two years, the government demonstrated relatively steady progress on the implementation of the plans, including the release of business models for carbon capture and hydrogen projects. Moreover, in 2021, the net zero target was incorporated into the <a href="https://www.spglobal.com/commodityinsights/en/ci/research-analysis/united-kingdom-sustaining-upstream-decarbonization-momentum.html">Maximizing Economic Recovery (MER) Strategy</a>, which guides the development of oil and gas resources on the UK Continental Shelf (UKCS). However, a major legislative proposal in the energy sector, <a href="https://medium.com/@alex_chyzh/the-united-kingdoms-energy-security-balancing-act-83f7a45b9121">the 2022 Energy Bill</a>, got stuck in parliament (currently at the committee stage in the House of Lords) as a result of political volatility and rapidly changing prime ministers rather than due to the lack of institutional capacity. The bill is critical to establishing the regulatory framework for CCUS and hydrogen projects, and if the government remains stable over the near-term, the passage of the draft could be expected in 2023. Yet, the success is likely to be credited to the latest reshuffle.
In the meantime, legislative and regulatory frameworks need to be underpinned by incentive structures that bolster the attractiveness of investment in low-carbon developments, especially when commerciality is uncertain. In 2020, the Conservative government established the CCS Infrastructure Fund with a budget of $1.2 billion. In late 2021, the government selected two low-carbon clusters — the East Coast Cluster and HyNet — that will receive support from the fund. Additional projects are yet to be selected as part of Phase 2 cluster-sequencing process, which faced repeated delays in 2022. Moreover, successful bidders in the country’s <a href="https://www.nstauthority.co.uk/news-publications/news/2022/carbon-storage-licensing-round-attracts-26-bids/">first offshore carbon storage licensing round</a>, conducted in 2022, are also likely to apply for government support. Can the CCS Infrastructure Fund cover the potential demand? Let’s put it into context.
In 2021, the Norwegian parliament approved a direct investment of over $1 billion in the Northern Lights facility, an offshore CO2 storage segment of the full-scale Longhship CCS project. In the same year, the Netherlands awarded around $2.5 billion in subsidies <a href="https://www.offshore-energy.biz/dutch-govt-awards-over-2-5-bln-to-porthos-carbon-capture-project/">to the consortium</a> operating the Porthos CCS project. In late 2022, the government of Canada announced the establishment of the <a href="https://www.budget.canada.ca/fes-eea/2022/doc/gf-fc-en.html">Canada Growth Fund</a> potentially offering over $11 billion to clean energy and low-carbon projects, including CCUS and hydrogen. Finally, the 2021 Infrastructure Investment and Jobs Act and the 2022 Inflation Reduction Act unlocked billions of dollars for low-carbon projects in the United States and significantly boosted the attractiveness of existing fiscal incentive schemes. In its current form, the UK’s CCS Infrastructure Fund will likely struggle to compete internationally. The Department for Energy Security and Net Zero will likely need to develop additional support mechanisms, such as carbon contracts for difference, or convince the Treasury to increase the fund’s budget and introduce tax credits for low-carbon projects.
Overall, the new department is a signal to the international community that the United Kingdom is serious about addressing climate change. ‘It’s not about money, it’s about sending a message’, Joker said, when he set a pile of dollars on fire in Christopher Nolan’s Dark Knight. Unfortunately, incentivizing decarbonization is first and foremost about taxpayer money and the government&#x27;s ability to put it to a good use. And we are yet to see if the Conservative government could deliver on its funding promises.
Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Sustainability &amp; Energy writers, their opinions do not necessarily represent those of illuminem.
<h6>Cover photo by <a href="https://unsplash.com/@dibert?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText">David Dibert</a> on <a href="https://unsplash.com/photos/POYDluw0tyw?utm_source=unsplash&amp;utm_medium=referral&amp;utm_content=creditCopyText">Unsplash</a>​ </h6>

Could New UK Department Become a Game Changer in UK’s Decarbonization Story?

Last year was a big one for carbon capture, utilization and storage (CCUS) as countries rolled out new policies to encourage the deployment of the technology intended to facilitate the transition to a net-zero world. 

Last year was a big one for carbon capture, utilization and storage (CCUS) as countries rolled out new policies to encourage the deployment of the technology intended to facilitate the transition to a net-zero world. Tax credits and supportive government policies prompted companies to advance their CCUS plans, and in 2022 the <a href="https://status22.globalccsinstitute.com/2022-status-report/global-status-of-ccs/">number of projects surged by 44% relative to 2021</a>, according to the Global CCS Institute. As the CCUS expands, more and more people will be affected by related infrastructure, potentially creating grounds for protest and legal action as evidenced by the latest lawsuits against project developers in the United States. And while the CCUS industry has a role to play in tackling the climate-change crisis, it may face significant public challenges and is yet to gain its social license to operate.
<h1>What Do People Know? Do They Know Things?</h1>
In the 5th season of Taylor Sheridan’s Yellowstone, a proposed CO2 pipeline that would run through Tribal lands in Montana is facing opposition from the Indigenous community supported by high-profile political players. The carbon capture and storage sector is now making its way into popular culture in the United States, likely indicating the sector’s rapid development and underscoring the emerging perceptions of associated risks. We may soon see similar stories in movies, shows or books in other countries with CCUS plans. However, there are relatively few opinion polls that explore public attitudes towards carbon capture and storage and most of them are associated with ad hoc academic research. In this regard, the United Kingdom Business, Energy and Industrial Strategy (BEIS) Department’s Public Attitudes Tracker is a valuable source of data, which used to be a critical indicator of public sentiment towards hydraulic fracturing.
<img src="https://illuminem.b-cdn.net/articlebody/cc92587aa6893a712da284f23fe98270fb291bd6.png" alt="Figure 1: A laptop showing statistics, source: Photo by Lukas Blazek.">
The United Kingdom is a strong proponent of CCUS and made significant progress in advancing regulations to establish a clear and transparent investment framework and <a href="https://medium.com/@alex_chyzh/north-sea-oil-and-gas-transition-policies-progress-and-setbacks-in-2022-b0628986b376">held its first offshore carbon storage licensing round in 2022</a>. Still, the <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1123572/BEIS_PAT_Autumn_2022_Energy_Sources_and_Energy_Infrastructure.pdf">latest issue of the Public Attitudes Tracker</a> shows low public awareness of carbon capture and storage. 59% of the respondents said they knew hardly anything or never heard about CCUS. In the meantime, 47% of people could not give an opinion on whether they supported or opposed carbon capture, with 28% saying they neither supported or opposed the technology and 19% stating that they didn’t know. This is a remarkable situation for the country where the government has prioritized carbon capture as a solution to cut emissions and reach a net-zero target by 2050. Such a share of undecided population indicates that there is room for the proponents and opponents of CCUS to win the hearts and minds of people in the United Kingdom. Doubts about the ability of carbon capture and storage to address climate change and safety concerns were among key reasons to oppose the technology. Politicians and investors have some work to do and improve their communication with the general public to demonstrate the benefits of CCUS. In the meantime, environmental activists are pretty experienced in the United Kingdom, and it is not unlikely that they launch legal and public campaigns against CCUS, which is considered by some groups to be a way for extending the life of fossil fuel industries.
<h1>Safety first</h1>
In February 2020, a CO2 pipeline (owned by Denbury Inc) leak in Mississippi resulted in <a href="https://mississippitoday.org/2022/06/13/carbon-leak-in-satartia-prompts-federal-focus-on-pipeline-safety/">the hospitalization of 49 and evacuation of about 300 residents</a>. The incident prompted the Pipeline and Hazardous Materials Safety Administration (PHMSA) to review federal CO2 transport regulations in an effort to improve the safety of such operations. In North Dakota, <a href="https://www.reuters.com/world/us/opponents-us-carbon-pipeline-draw-lessons-prior-pipeline-fights-2022-10-24/">landowners and activist groups</a> are concerned about the impact of the proposed Midwest Carbon Express pipeline by Summit Carbon Solutions on the property and environment. In the meantime, the safety of carbon storage facilities is also questioned. The Louisiana Clean Energy Complex by Air Products and Chemicals Inc. is facing <a href="https://www.eenews.net/articles/la-legal-showdown-may-preview-national-battle-over-hydrogen/">legal obstacles</a> from local authorities and residents due to the plan to store CO2 captured from blue hydrogen production at a site deep beneath Lake Maurepas, which could delay project development. The opposition is driven by concerns about the safety of the proposed storage facility and overall project’s impact on the ecosystem of the lake and the livelihood of the locals. In July 2021, the safety of CCUS infrastructure was also a subject of an <a href="https://www.ciel.org/organizations-demand-policymakers-reject-carbon-capture-and-storage/">open letter</a> from over 500 organizations across the United States and Canada that urged policymakers in these countries to end the support of carbon capture and storage.
<img src="https://illuminem.b-cdn.net/articlebody/27ade0172931b9848bacba9827a77b4e214725da.png" alt="Figure 2: Trust, spelled out with Scrabble letters, source: Photo by Alex Shute.">
Given health risks associated with CO2 leaks, government agencies need to make sure that safety regulations are robust, and compliance is strict. However, there is still potential for protests and legal action against CCUS projects due to the lack of trust in public institutions. According to the Pew Research Center, <a href="https://www.pewresearch.org/politics/2022/06/06/public-trust-in-government-1958-2022/">only 20% of Americans trust their government</a>. In the <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/wellbeing/bulletins/trustingovernmentuk/2022#:~:text=One%2Dthird%20(35%25)%20of,the%20OECD%20countries%20(41%25).">United Kingdom</a>, 35% of citizens trust the national government, while the percentage for local government is slightly better at 42%. The figures are not encouraging at all and could indicate that major actions by the authorities in the CCUS space could be closely watched at the local level and any incidents could trigger strong backlash against project developers. Therefore, public awareness campaigns, community engagement, transparent environmental reviews, and compensation mechanisms to share the benefits with the people directly affected by such projects would be crucial to mitigate the risk of lawsuits.
<h1>Where is our money, Lebowski?!</h1>
In the Sustainable Development Scenario by the International Energy Agency (IEA), CCUS will be responsible for almost <a href="https://www.iea.org/reports/ccus-in-clean-energy-transitions/ccus-in-the-transition-to-net-zero-emissions">7 gigatons of CO2 emission reductions</a> in 2070 compared to 0.01 gigatons in 2021. This would be more than enough to make carbon-neutral such a country as the United States that emitted 4.6 gigatons of CO2 in 2021. To develop a pipeline of projects with the capacity of such magnitude, governments across the globe will have to provide significant financial support to CCUS investors to make capture and storage facilities economically viable. The United States and Canada already have tax credits in place, Norway is investing billions of kroner in a CCS project directly from the budget, and the United Kingdom has established a £1-billion fund to finance carbon capture and storage developments. It is not impossible that at some point voters will question public spending on expensive technologies with remote benefits for the current generation, when there are more urgent needs, particularly at a time of skyrocketing energy prices. Sure thing, CCUS projects will create new direct and indirect jobs, and local communities will likely capitalize on these developments. But what about other taxpayers? Policymakers who support carbon capture and storage could face such questions in the future and poor answers could cost them votes and parliamentary seats. It is crucial that governments boost the transparency of their CCUS policies and clarify their funding commitments to wider population.
<img src="https://illuminem.b-cdn.net/articlebody/ced8d512c8013a1682448f203a54aadbc0cf78a6.png" alt="Figure 3: Different currency bills, Source: Photo by Jason Leung.">
On the other hand, tax incentives, grants, and low-interest loans to CCUS projects could be seen as fossil fuel subsidies as capture and storage facilities would extend the use of fossil fuels in hard-to-abate industries. In 2021, at COP26 at Glasgow, countries made a commitment to phase out <a href="https://unfccc.int/sites/default/files/resource/cma2021_10_add1_adv.pdf">inefficient fossil fuel subsidies</a>. However, there is hardly any consensus around the definition of such subsidies, but the commitment could be enough to spur legal action by environmental groups against governments that fail to comply. It remains to be seen whether CCUS support could fall under any definition of fossil fuel subsidies, and the outcome of any potential court case will depend on the interpretation of legislation. Still, the risk is not non-existent and the concerns about government spending could also shape public opinion about CCUS along with the potential impact on the environment and the safety of transport and storage infrastructure.
Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Energy &amp; Sustainability writers, their opinions do not necessarily represent those of illuminem. This article has also been published on <a href="https://medium.com/@alex_chyzh/what-could-fuel-public-concerns-about-ccus-3079c3ec9a05">Medium.</a>​

What Could Fuel Public Concerns About CCUS

Energy security has dominated policy agenda of the North Sea producers in 2022, although it has not derailed the efforts to decarbonize the upstream industry.

Energy security has dominated policy agenda of the North Sea producers in 2022, although it has not derailed the efforts to decarbonize the upstream industry. Although there have been some big government announcements, mostly coming from the United Kingdom, producers have focused on the implementation of previous commitments to bolster low-carbon investment and cut emissions. Still, there are several emerging obstacles that could slow progress in the coming year.
<h1>Denmark is going full steam ahead to build CCS industry</h1>
Among the North Sea producers, Denmark has been the last one to join the decarbonization club, but it is quickly moving to keep up with the regional peers. Several legislative initiatives and broad political agreements over the past three years have formed a framework for the development of the offshore carbon storage sector. In its first carbon storage tender, the Danish Energy Agency (DEA) received <a href="https://via.ritzau.dk/pressemeddelelse/the-danish-energy-agency-has-received-two-applications-to-the-first-danish-tender-of-licenses-for-co2-storage?publisherId=13560521&amp;releaseId=13661310">two applications from three companies</a> — TotalEnergies and a consortium between INEOS and Wintershall Dea International. Awards are expected in early 2023, and Nordsøfonden, a state-owned company, will participate in future projects with a 20% stake, which is likely to reduce risks for the operators.
<img src="https://illuminem.b-cdn.net/articlebody/0cb4f09d5f08cdec074d83230895359913d130fb.png" alt="Figure 1: Bridge in Copenhagen Photo by Aurora Ferreira. ">
The Danish energy regulator has also demonstrated an ability to ensure efficient review and approval procedures, which could accelerate the start-up of new projects. In late August, INEOS E&amp;P and Wintershall Dea applied for a permit to begin CO2 injection as part of the Greensand Project off the coast of Denmark. Following a relatively fast review, the <a href="https://via.ritzau.dk/pressemeddelelse/energistyrelsen-giver-forste-tilladelse-til-co2-lagringsprojekt-i-danmark?publisherId=13560344&amp;releaseId=13665892">DEA granted a permit</a> in early December. Further stages of the project, which is expected to store up to 1.5 million tons of CO2 by 2025, will require additional approvals, but the latest permitting decision by the DEA indicates a potentially smooth regulatory road for the Greensand developers.
Overall, the Danish government and political parties are strongly committed to advancing carbon storage projects, which is a likely to ensure favorable above-ground environment for the CCS sector. There is some uncertainty associated with the <a href="https://www.thelocal.dk/20221206/how-close-is-denmark-to-getting-a-new-government/">formation of a new government</a> after the latest general election on 1 November. However, the country’s political parties are expected to honor previous agreements on the carbon storage framework, ensuring policy continuity and stable terms and conditions.
<h1>In Norway, business as usual under a center-left coalition</h1>
The energy policy of the minority coalition between the Labour and Center Parties is impacted by the Socialist Left Party, a parliamentary partner, whose votes are critical to passing major legislation, such as annual budgets. Still, all three parties seem to be on the same page, when it comes to the energy transition on the Norwegian Continental Shelf (NCS). The government continued to promote offshore carbon storage acreage: in October, the Ministry of Petroleum and Energy awarded a CO2 <a href="https://www.regjeringen.no/no/aktuelt/tildeling-av-letetillatelse-etter-lagringsforskriften/id2931632/">exploration license</a> to Wintershall Dea Norge AS and CapeOmega AS in the North Sea. Subsequently, yet another North Sea area was opened to CO2 storage licensing, with applications due on 3 January 2023.
<img src="https://illuminem.b-cdn.net/articlebody/f917888eb5dbaada7c0d33c91de6d178a3abab7a.png" alt="Figure 2: Photo of a park in Oslo, Photo by Gunnar Ridderström.">
Moreover, the Norwegian authorities have moved forward with the plans to promote offshore wind development, which could open opportunities for cutting emissions from oil and gas operations through platform electrification. In early December, the Ministry of Petroleum and Energy released <a href="https://www.regjeringen.no/en/aktuelt/regjeringen-gar-videre-i-sin-satsing-pa-havvind/id2949762/">plans to hold offshore wind tenders</a> in the Southern North Sea II and Utsira North (here with the focus on floating offshore wind) areas in 2023. Still, it remains to be seen how much power (if any) will be available to decarbonize the petroleum industry, given the need to mitigate the risk of high electricity prices in the domestic market. Soaring power prices that rocked Norway in the second half of 2021 and compelled the government to allocate budget funds to support households, fueled political debates about the electrification of oil and gas facilities and its potential impact on mainland power supply and prices. If the center-left coalition prioritizes affordability of energy, the oil and gas industry may have to wait until the next round of acreage offerings to pursue platform electrification. However, over the longer term the focus on power affordability could benefit the upstream sector as lower electricity prices would bring down the cost of electrifying existing and new projects.
<h1>Court ruling could play havoc with decarbonization plans in the Netherlands</h1>
<img src="https://illuminem.b-cdn.net/articlebody/a8cc59bb194d85458966d229a38b72e2fe40f71c.png" alt="Figure 3: Bridge in the Netherlands, Photo by Daniel Agudelo ">
The Dutch government is determined to accelerate the development of low-carbon projects by removing any regulatory or funding obstacles. In early December, the government <a href="https://www.rijksoverheid.nl/documenten/rapporten/2022/12/02/ezk-miek-overzicht-2022-meerjarenprogramma-infrastructuur-energie-en-klimaat">named five developments as projects of national interest</a>, including offshore wind grid connections, hydrogen infrastructure, and Aramis, a CCS full-scale facility. The prioritization of the proposed projects is likely to facilitate construction and ensure their launch according to schedule.
However, the country’s CCS and blue hydrogen projects could face delays due to the latest ruling by the Council of State, the Dutch highest court. In early November, the Council upheld the lawsuit by the Mobilization for the Environment (MOB), an environmental group, which challenged the exemption of the Porthos CCS project from assessing and reporting nitrogen emissions during the construction stage. More broadly, the group targeted the allocation of over <a href="https://www.offshore-energy.biz/dutch-govt-awards-over-2-5-bln-to-porthos-carbon-capture-project/">$2.5 billion to the project in 2021</a> as part of the state-funded SDE++ scheme as a subsidy to fossil fuel companies (the Porthos consortium includes Shell and ExxonMobil). Still, the parties to the case will have several more months to defend their positions before the Council delivers its final verdict. If the MOB wins, the project operators will likely have to seek additional regulatory approvals, which could delay the construction phase.
<h1>Mixed bag for energy transition in the United Kingdom</h1>
The UK has been an enfant terrible among the North Sea producers in 2022. On the one hand, the country announced a new Energy Security Strategy, held its <a href="https://medium.com/@alex_chyzh/the-united-kingdoms-energy-security-balancing-act-83f7a45b9121">first carbon storage licensing round</a>, and Scotland conducted a targeted offshore wind tender for platform electrification. These developments indicate a potentially strong start for 2023 and a solid low-carbon project pipeline over the medium-term. However, the UK’s political turmoil — three prime ministers in less than six months — and fiscal policy swings raise doubts about the Conservative government’s ability to live up to expectations.
The Energy Profits Levy (EPL), a <a href="https://www.linkedin.com/posts/alexchyzh_uk-hits-power-firms-with-windfall-tax-hikes-activity-6999043429577998336-1w_L?utm_source=share&amp;utm_medium=member_desktop">35% windfall tax on oil and gas companies</a> (a 10% increase compared to the initial rate), could become a major deterrent to investment over the medium-to-longer term. Following its introduction as part of the Autumn Statement in November, major players on the UK Continental Shelf (UKCS) started reviewing their investment plans, with TotalEnergies shortly announcing a 25% cut in planned 2023 capex. However, an accompanying 80% Investment Allowance for decarbonization projects could potentially encourage low-carbon developments. For example, in early December Equinor, BP, and Ithaca Energy signed a memorandum of understanding to explore electrification options for their fields — Rosebank, Clair, and Cambo, respectively — in the West of Shetland area. The announcement encourages optimism about decarbonization investment on the UKCS, but regulatory amendments could be required to facilitate such projects.
<img src="https://illuminem.b-cdn.net/articlebody/a9d534e6b48d5adfe89cdd6335e9b4fce5e3e043.png" alt="Figure 4: Picture of the Big Ben and Westminster, Photo by Tom Chen.">
In the meantime, the reform to streamline blue hydrogen and CCUS regulations remains uncertain, increasing the risk of project delays. The <a href="https://bills.parliament.uk/bills/3311">Energy Bill</a>, the centerpiece of the Conservative Party’s efforts to bolster decarbonization (and energy security), remains stuck at the committee stage in the House of Lords without any clear timeline for adoption. In addition, as the government is focused on supporting households amid skyrocketing energy costs, the allocation of funding to proposed CCUS projects from the CCS Infrastructure Fund could be in question. The proceeds from the hydrocarbon industry (including the EPL) are expected to bolster public finances: the Office of Budget Responsibility <a href="https://obr.uk/docs/dlm_uploads/CCS0822661240-002_SECURE_OBR_EFO_November_2022_WEB_ACCESSIBLE.pdf">forecasts</a> the oil and gas revenue over $18 billion in 2022–23 and over $25 billion in 2023–24. The government is likely to have enough money to finance the $1.2 billion CCS Fund, but policy swings and previous track record in backtracking on CCS funding will continue to generate uncertainty.
Future Thought Leaders is a democratic space presenting the thoughts and opinions of rising Energy &amp; Sustainability writers, their opinions do not necessarily represent those of illuminem. This article has also been published on <a href="https://medium.com/@alex_chyzh/north-sea-oil-and-gas-transition-policies-progress-and-setbacks-in-2022-b0628986b376">Medium.</a>

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Alex Chyzh

Alex Chyzh

How to stop worrying: a case for carbon capture and storage

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