Carbon capture gains traction globally

Carbon capture gains traction globally

Carbon Capture

The global push for carbon capture, utilization, and storage (CCUS) is gaining momentum as governments and industries seek to tackle emissions in hard-to-abate sectors. Despite the surge in new projects driven by government grants and tax incentives, recent projections indicate that by 2034, CO2 storage demand will exceed supply. It is estimated that $196 billion in new investments will be necessary to meet the projected industrial demand for 640 million metric tons per annum (mtpa) of CO2 storage by 2034.

Global CCUS capacity is expected to reach only 440 million tonnes per annum (MTPA) by 2034, covering just 66% of the projected demand. The North Sea is emerging as a significant hub for CCUS projects, with Norway’s Northern Lights CCS project leading the way. Equinor, Shell, and TotalEnergies are collaborating on this joint venture, which is expected to start carbon injection and storage later this year.

Norway’s Ministry of Energy has also designated Equinor as the sole operator of two new North Sea CO2 storage licenses, Albondigas and Kinno, which could add significant storage capacity to the region. Government support plays a crucial role in advancing CCUS projects. Initiatives such as the US Inflation Reduction Act, UK business models, Canada’s Investment Tax Credit, and the EU’s Industrial Carbon Management Strategy provide incentives for these projects.

The US alone accounts for half the $80 billion in estimated government support for CCUS. In the US, enhanced oil recovery (EOR) and federal tax credits are the primary financial incentives driving CCS projects. Exxon-Mobil’s 2023 acquisition of Denbury Inc. aims to use CO2 recycling for EOR, producing low-carbon crude.

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Carbon storage capacity challenges ahead

Direct air capture (DAC) is also gaining traction. The US Department of Energy announced up to $1.2 billion in support for commercial-scale DAC facilities in Texas and Louisiana.

Europe faces significant challenges in developing a fully operational CCUS system and meeting the storage capacity needed to achieve mid-century decarbonization targets. According to the International Energy Agency (IEA), reaching net zero will require a 100-fold increase in CCUS capacity over the next three decades. The European Union has made a promising start with the Net Zero Industry Act of March 2023, aiming for an annual CO2 injection target of 50 MTPA by 2030 and streamlined permitting procedures.

The UK has also advanced its CCUS initiatives through government funding competitions, designating four clusters as leaders in its emerging sector. However, industry confidence remains low due to concerns about long-term profitability and the risks of ensuring perfect capture. Financial consequences for non-compliance add to the industry’s apprehensive outlook.

Government support is vital to align profitability with the no-escape requirement for captured CO2 and to provide the range of net-zero energy sources needed for Europe beyond 2050. Cultural attitudes toward carbon may be one of the most significant remaining obstacles to CCUS deployment. Society currently underestimates the value of carbon, and the low price of emissions allowances in the UK’s Emissions Trading System contrasts sharply with the higher costs of decarbonizing through methods like offshore wind, CCUS, hydrogen, or nuclear.

Meeting the Paris Agreement’s decarbonization targets will require heavy investments in diverse energy sources. Wind and solar energy are insufficient to meet the demands of over 746 million people, making industries like CCUS crucial. A shift in the perception of carbon’s value is needed to ensure this essential sector’s future stability and growth.

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