CCUS involves the capture of CO2  from fossil or biomass-fuelled power stations, industrial facilities or directly from the air. The CO2 is then transported (by ship, road, or pipeline) to either be used (applications include fuels, chemicals, and building materials) or stored permanently in underground geological formations (onshore or offshore).

According to the IEA, “CCUS is the only group of technologies that contributes both to reducing emissions in key sectors directly and to removing CO2 to balance emissions that are challenging to avoid – a critical part of ‘net’ zero goals”.

CCUS, however, poses some unique market challenges. The interconnected nature of capture, transport, and storage means a “whole-system” approach is required to address interdependency issues between market participants; pipeline transport networks are inherently monopolistic; and certain large impact low-probability risks (e.g., CO2 leakage) are very difficult for the market to efficiently price. CCUS must also compete with other forms of carbon mitigation that are less costly, such as forestry projects and blue carbon projects that use coastal vegetation to store carbon. Therefore, in order to become commercially viable, strategic government support and regulation is required. 

Global progress

According to industry group Global CCS Institute, the project pipeline for CCUS projects is growing strongly, and “mirrors climate ambition”  . Whilst in 2010 just 11 commercial CCUS facilities were in operation around the world , today that figure has reached 27. In addition, five facilities are under construction, 66 are at an advanced stage of development and 97 have been announced or are in initial stages of development. 

Further, as of July 2021, before COP 26 in Glasgow, 14 countries – Australia, Bahrain, Canada, China, Egypt, Iran, Iraq, Malawi, Mongolia, Norway, Saudi Arabia, South Africa, United Arab Emirates, and the U.S. – had included CCS in their Nationally Determined Contributions plans. 

In December, the European Commission set out how the removal of carbon from the atmosphere could be increased , deemed essential in achieving the European Union’s legally binding commitment to become climate neutral by 2050. The Commission plans to develop an internal market for capturing, using, and storing carbon and the necessary cross-border CO2 transport infrastructure. By 2030, 5Mt of CO2 should be removed annually from the atmosphere and permanently stored through technological solutions. By the end of 2022, an EU regulatory framework for the certification of carbon removals will be proposed. 

The UK Government says CCUS is integral to its Green Industrial Revolution and is investing up to £1 billion to establish four CCUS clusters. The first two regional industrial clusters successful in gaining government support were announced in October 2021, covering the North West and North Wales and the Humber and Teesside regions. The UK Government is also at the advanced stages of consulting on three specific business models to support all aspects of the CCUS value-chain: a licensed-based regime for transport and storage, and variations on the existing CfD model to support industrial carbon capture and dispatchable power with CCUS. Ultimately the goal is to capture and store up to 10Mt of COâ‚‚ per year by 2030 . 

In the U.S., the Biden Administration has committed to increasing support for CCUS research, development, demonstration, and deployment . The recently enacted Bipartisan Infrastructure Law provided the U.S. Department of Energy with approximately US$10 billion in new carbon management funding to be spent over the next five years, for such things as direct air capture-based, engineered stack capture and CO2 utilization and storage. There is also a change to the Section 45Q tax incentive for CCUS to make it easier to use for industrial applications that are difficult to decarbonize, direct air capture, and retrofits of existing power plants. 

With the progress to date, CCUS has a real opportunity to play a key role in the energy transition. The fact that CCUS can facilitate the production of clean hydrogen from natural gas or coal will only further accelerate the growth of the technology.

For more on the role of hydrogen in the pathway to net zero, see here.

Authored by David Locascio and Mary Anne Sullivan.