Carbon Capture Comes of Age


Carbon Capture Comes of Age

A growing sense of urgency is driving a step change in efforts to capture and store CO2

After several decades on the sidelines, carbon capture is moving center stage. With more than 196 carbon capture utilization and storage (CCUS) projects now underway around the world (up from 66 in 2018), momentum is growing1. While there is a long lead time from conceptualization to commercial operation, dozens of new CCUS projects will be up and running by 2026.

As it gains traction in North America, Europe and Asia, CCUS is fast becoming a multi-billion dollar industry. In May 2022, for example, the U.S. Department of Energy announced plans for four large-scale direct air capture hubs, which will be able to capture and then permanently store at least one million metric tons of CO2 from the atmosphere annually – equivalent to the annual emissions of 135,000 households. In October 2021, the UK government said it is prioritizing the development of two large-scale CCS projects in a bid to have them up and running by mid-decade, while both Norway (Northern Lights) and the Netherlands (Porthos and Aramis) also have major projects under way. In June 2022, Thailand’s national oil and gas company PTT Exploration and Production said it will initiate the country’s first carbon capture and storage (CCS) project at the Arthit offshore gas field. China and Japan are also deploying CCS. Australia has recently awarded two offshore permits.

What’s changed? It is now crystal clear that we need to harness every tool in the toolbox if we are to stop the climate from warming to dangerous levels. Limiting global warming to 2 degrees centigrade will require installed CCS capacity to increase from around 40 Mt per annum today to more than 5,600 Mt per annum by 2050, according to the International Energy Agency (IEA).  

As more governments and organizations make net zero commitments, CCS has risen up the policy agenda: more than 80% of national long-term strategies now include CCS in some capacity2.  Climate models generally show that CCS is as an essential part of the low-cost, high-efficacy pathway to net zero. 

Important piece of the net zero puzzle

In particular, CCUS will be pivotal to abating emissions from steel, cement, chemicals and fertilizers, which employ fossil fuels to create the very high-temperatures they need for specific processes or generate CO2 inherently by nature of the chemical processes (such as cement production). Moreover, captured CO2 could replace fossil fuels and chemicals in some industrial applications, including food processing and packaging, concrete curing and algae cultivation.

CCS can also enable the clean production of so-called blue hydrogen power from natural gas, which is now regarded as a key ingredient to meet the world’s energy needs until sufficient alternatives are available. The IEA, for example, describes hydrogen as an “increasingly important piece of the net zero emissions by 2050 puzzle.” 

In this decade, the focus will be on using CCUS to contain emissions from industrial processes (e.g. steel, cement, chemicals, fertilizers). Between 2030 and 2050, these hard-to-abate industries will lean heavily on CCS, while production of blue hydrogen is likely to increase significantly until green production increases to scale. 

The European Commission estimates that, by 2050, the EU will need to industrially capture between 300 and 550 Mt of CO2 per year. That is equivalent to 29% to 52% of the total greenhouse gas emissions being generated by the EU economy today. The captured CO2 will be permanently stored underground or in materials, or used as feedstock for production of synthetic fuels.  

Globally, the IEA's Sustainable Development Scenario (see chart) estimates that close to 10% of the emission reductions needed to 2050 will come from CCS3. That will require significant investments in capture, transport and storage facilities. 

There is also growing interest in the concept of removing carbon directly from the atmosphere to achieve negative emissions – an array of new technologies are being developed for this purpose. 

A gradual change in sentiment

As public perception of climate change as an issue has increased, and the urgency for action becomes increasingly evident, more and more NGOs and policymakers now accept CCS will be an essential part of the overall solution. Solving regulatory gaps and understanding societal requirements are a prerequisite for successful project development. 

CCS will be applied differently in different regions. Much depends on the presence and types of industries with hard-to-abate emissions, the country’s storage capacity and the policy frameworks in different countries.  Governments are applying both carrots and sticks. In the European Union, for example, the price of carbon emission permits has risen to a point where using CCS now makes financial sense. Rather than paying to pollute, it is now more cost effective to pay to clean up by capturing and storing the carbon. The complementing Carbon Border Adjustment Mechanism that aims to prevent carbon leakage could incentivize CCS uptake outside of the EU.

At the same time, governments are using incentives and subsidies to persuade businesses to invest in CCUS.  Indeed, strong private-public partnerships across multiple industries, together with integration with other abatement pathways (such as hydrogen applications), are required to ensure the technical and economic viability of CCS projects. These partnerships are at the heart of the complex ecosystems now lowering the risks in the CCS value chain, paving the way for large-scale commercial projects that will help decarbonize the world’s largest emission clusters. 

At Deloitte, we are working closely with partners and clients to apply CCUS as efficiently and as effectively as possible. If you’re looking for insights on markets and strategy development, if you’re interested in learning about funding, business models and value creation options or want to understand regulatory gaps or CO2-accounting, please contact our experts. Also feel free to contact us if you would just like to have a conversation about what these developments could mean for your company.

In future blog posts, we will share some of the insights we have gleaned from our engagements in this increasingly important arena.

For more information on Deloitte’s work on CCUS, please contact: Jeroen van der Wal, Kirill Kalinkin, Femke Perlot-Hoogeveen

1. Source: Global CCS Institute and IOGP data 2021
2. Source: Global CCS Institute.
3. Source: IEA, Energy Technology Perspectives 2020.  

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