Q: CCUS is often cited as one of our best hopes of reducing emissions from hard-to-abate industries, but we seem to have been talking about its imminent take-off forever. Is it finally happening?
A: I believe we are now seeing the start of the CCUS industry. Those countries that have made net-zero commitments increasingly recognise the critical role that CCUS will play.
Where we are seeing supportive policy, the project pipeline is developing rapidly. Where government has put in place the means to enable deployment, projects are progressing.
That's particularly the case in North America and Europe. In the US, changes to the 45Q tax policy, enabled through the Inflation Reduction Act, make it attractive to store CO2 there. Likewise, the combination of carbon taxes, and local policy support are beginning to make it interesting to store CO2 in EU member states and in the UK.
I think the UK is an interesting example. That may seem controversial because, in prior years, there have been several failed projects here. But the UK has learnt lessons from those and put forward robust business models and a policy framework to enable deployment. Other jurisdictions new to CCUS and seeking to deploy it, could take quite a lot from what’s happening in the UK. There are four industrial clusters that are in various stages of development – that's something that nowhere else in the world really has at this point.
But whilst I’m optimistic about the future for CCUS, given the increasingly obvious effects of climate change, we must increase the speed of deployment.
What about the world’s largest emitter, China?
We are starting to see more interest in CCUS in China. Recently, it was announced that a new facility had entered operation, It's unclear exactly how they will move in the future, but we are definitely starting to see more CCUS projects emerge there.
Could you give a couple of examples of industries that are best suited to CCUS deployment right now?
There are some industrial applications where there is a very natural fit. If we look at cement production, that accounts for 7% of global anthropogenic CO2 emissions. The vast majority of those emissions come from the chemical process itself, so switching to a different power input, such as electricity generated from renewables, won’t eliminate CO2 emissions. For that reason, the cement industry is looking very seriously at CCUS deployment, and we are seeing a number of projects emerge around the world.
Energy from waste is another interesting application. Obviously, society will continue to generate waste and we're trying to move away from using landfill, which produces methane emissions. If we capture the CO2 from waste-to-energy applications and store it that offers a significant environmental benefit.
Would it be accurate to say it is investment rather than the technology that is holding the sector back?
Yes, what is needed today is investment and final investment decisions. The technology is well understood; we have 30 large scale CCUS facilities in operation today. We've been safely storing CO2 in the subsurface for many years, so there’s a lot of experience.
In North America, some facilities have been injecting CO2 for more than 50 years. That part of the value chain is understood and proven. We have thousands of kilometres of CO2 pipelines already operating in the US, transporting CO2 for enhanced oil recovery. Again, this element is well established.
If we consider CO2 capture, we have been separating CO2 from various different industrial processes for many years. We're confident in the existing technology, and
research is ongoing into new ways of capturing CO2 to help drive down costs. Typically, CO2 capture is the most expensive part of the value chain, hence that focus.
What about the “U” in CCUS. Where can captured CO2 be utilized rather than stored underground?
We have to look at utilization on a case-by-case basis. The largest markets for CO2 today are in enhanced oil recovery and production of urea for fertiliser manufacture. But those markets are nowhere near the scale needed to address the amount of CO2 required to meet our climate commitments.
That said, there are many uses that are attractive. For example, if you were to look at a CO2-emitting company that also buys CO2-based materials, we can see that there could be an opportunity for them to capture their own CO2 and feed that into their own value chains.
Besides the scale of the market, we also need to look at the lifecycle emissions associated with the process. We can capture CO2 and convert it into different things, but there is often an energy requirement associated with that process, which may also produce emissions.
We also have to think about permanence. If we're capturing CO2, and then use it in the food and beverage industry, pretty quickly that CO2 ends up back in the atmosphere. But if we're capturing the CO2 and using it to create building materials, like aggregates, that CO2 is locked up in buildings and construction projects for long periods of time.
Could you tell us a bit more about the prerequisites and challenges to be met for successful development of CCUS?
CCUS projects are not unlike any other big infrastructure project, so they can encounter public opposition, project delays, financing challenges and so on. But there are three risks that are quite unique to CCUS that must be addressed for deployment to take place.
The first is what's called cross-chain risk, which reflects the interdependence between the different parts of the value chain. There is no point in capturing your CO2 if you haven't got somewhere to store it. Likewise, there is no point in developing a storage site if you haven't got emitters to provide CO2. One way we can mitigate that cross-chain risk is through the development of industrial clusters.
Secondly there is the storage liability. So, once we store the CO2 deep underground, there is a liability associated with the potential leakage. The way we mitigate that risk for CCUS developers is by having clear definitions of when that liability will be transferred to government. The reality is that governments will outlive corporations, so sooner or later, that has to happen.
There are also other things that can be done to reduce such risk. For example, within DNV, we do a lot of work to certify storage sites such as depleted gas fields and saline aquifers to ensure they've been developed in accordance with best practice. To be clear, there is very low risk associated with storage and leakage, but it’s still something that we have to make provisions for.
The third risk facing CCUS projects is revenue certainty, which is typically addressed through long-term policy support, as we’ve discussed.
Given CCUS is reliant on public subsidies at present, wouldn’t that funding be better spent on renewables and other ways to cut carbon emissions faster at a time when action is urgently needed?
It's important to recognise that we need to deploy all decarbonisation techniques available. We're going to need a lot of efficiency improvements, a lot of renewables, and also technologies like carbon capture.
CCUS is not a solution for all applications – there are certainly situations where it makes much more sense to use renewables. But there isn’t really an alternative to CCUS for many industrial emission sources. So ultimately, we're going to need to deploy it.
Yes, CCUS needs government support at this point to enable costs to come down so it can become a self-sufficient industry. But If we look at renewables, we're already getting to a point where the private sector can invest, and in some areas subsidies are not required.
In the long-term, the aspiration for CCUS, certainly in Europe, is that it will be deployed to avoid paying carbon taxes. You can see how we can get to a point where carbon taxes are at a level where CCUS is actually a lower cost alternative, and a self-sufficient industry will exist.
Also, there's a bigger picture here. For example, a steel manufacturing facility employs a lot of people and will have had a lot of investment pumped into its existing infrastructure. In that case, it makes sense to decarbonise by retrofitting a solution such as CCUS to that particular facility to ensure continuous operation and ultimately protect the jobs of people that work there.
The oil and gas sector is playing a major role by supplying storage for other industries in depleted fields and so on. But where are hydrocarbons firms using CCUS to capture their own emissions?
A good example is that of gas processing facilities, which often emit significant volumes of CO2, where the cost of capturing and storing that CO 2 is relatively low. Most of the early CO2 projects in North America are based on capturing CO2 from natural gas processing and that is also happening in other parts of the world.
We're also seeing a number of oil and gas companies working on carbon capture in refineries. So, if you look at some of the early projects associated with the Porthos CCUS project in Rotterdam, for example, they're planning to capture CO2 from refineries.
We also see a lot of situations where CO2 is produced with hydrocarbons. Sleipner, currently operating in Norway, has been reinjecting such CO2 since1996. A number of similar projects are emerging such as Kasawari, which Petronas is developing in Malaysia.
Finally, couldn’t technology to remove greenhouse gases directly from the atmosphere make the CCUS process partly redundant?
On the contrary, for technology-based carbon dioxide removal such as Direct Air Capture and BECCS [Bioenergy with Carbon Capture and Storage] to work at scale requires the availability of CCUS infrastructure. Fundamentally we need to be able to store the CO2 that is removed from the atmosphere.
Direct air capture and related technologies will be needed in the future, as there are some emission sources for which there isn’t an obvious alternative. We are a long way from being able to decarbonize today's fleet of aeroplanes, for example.
The amount of carbon dioxide removal needed will really depend on how successful we are in meeting our climate objectives in the coming years. If we are unable to decarbonise by 2050, then such technologies will play a far greater role in in the second half of the century. But it is more efficient and economical for us to capture emissions from point sources and avoid putting them into the atmosphere in the first place, rather than trying to remove them later.