What CSOs need to know about CCUS – carbon capture and storage

Carbon capture, utilisation and storage (CCUS) is emerging as one of the most promising technologies to help the world meet its decarbonisation targets – but it is not a perfect solution. Here is what Chief Sustainability Officers need to know as they consider whether CCUS is right for them.

CCUS is not new a new technology

The first thing to know is that carbon capture is not a new technology, nor is it a climate technology per se: it actually emerged in the 1970s to help the fossil fuel industry dig out more oil and gas from the ground – a process known as enhanced oil recovery (EOR). 

According to the US Department of Energy (DoE), gas injection was first tried in 1972 in Scurry County, Texas, and today accounts for nearly 60% of EOR production in the United States. The popularity of this process drove the producers of natural gas, fertiliser, ethanol, and hydrogen to extract CO2 from their processes, to be used in enhanced oil recovery – creating the technological basis for what is today known as carbon capture.

“CCUS technology predates climate concerns,” explains Eve Pope, Technology Analyst at IDTechX, a market intelligence agency that focuses on emerging technologies.

Partly because of this history, the US currently leads the global development of CCUS technologies – though the EU is investing heavily to catch up, since carbon capture is a crucial part of its 2040 decarbonisation strategy.

In 2023, the US unlocked US$1.7 billion for carbon capture demonstration projects and US$1.2 billion for direct air capture (DAC) hubs under the 2021 Infrastructure Investment and Jobs Act. Additionally, President Biden’s 2022 Inflation Reduction Act offers tax credit for carbon capture and storage – up to US$85 per tonne of CO2 stored.

Meanwhile, the EU issued around US$1.5 billion to CCUS projects under its latest Innovation Fund round, and over US$500 million to CO2 transport and storage projects under its Connecting Europe Facility programme, according to the International Energy Agency (IEA). 

CCUS is not a monolith

Pope notes that carbon capture can be split into two types of technology: point source carbon capture, and direct air capture – with the wide majority of capacity today consisting of the former.

“Point-source capture is when a large emission source, like an industrial facility, is equipped with technology allowing the capture and diversion to storage of CO2, preventing it from being emitted,” explains the Global CCS Institute. In other words, a device is installed in the chimneys of polluting facilities such as coal power stations to capture the CO2 before it reaches the atmosphere – preventing emissions. 

On the other hand, direct air capture (DAC) draws CO2 directly from the atmosphere – thus removing historical emissions. As such, DAC and its equivalent, bioenergy with capture and storage (BECCS) are classified as carbon removal, and can lead to the generation of carbon credits.

This type of carbon removal is generating strong interest from the tech community, with corporations realising they will struggle to meet climate targets amidst the rise of artificial intelligence. Microsoft, for instance, just signed a historic 10-year deal with Stockholm Exergi to remove 3.33 million tonnes of CO2 from the atmosphere using BECCS.

But of the 52 megatonnes of CO2 currently captured every year, DAC represents just 40,000 tonnes – most likely due to its much higher cost.

Then, there’s utilisation and storage – again, encompassing several methodologies. 

“Storage often takes the form most prevalently dedicated geological storage: saline aquifers is a common option. Essentially, you just find a geology underground where there's space to store the carbon dioxide and where the geology makes it unlikely that any leaks would occur,” Pope tells CSO Futures.

On the other hand, utilisation can include enhanced oil recovery, but also injecting CO2 in concrete, fuels or chemicals. This is still a nascent market, but IDTechEx expects CO2 utilisation to grow to US$240 billion by 2045.

CCUS is not a clear-cut business case (yet)

Carbon capture and utilisation technologies vary widely in price, and the overall cost is very project-specific, but Pope gives a range of US$30 to US$300 per tonne of CO2 captured at point source, transported and stored, depending on the CO2 concentration in flue gas. (The cost of direct air capture is a different story, currently around US$1,000 per tonne.)

For example, Shell’s Quest CCUS project in Canada, which captures 1.2 megatonnes of CO2 per annum from a hydrogen production plant, had an estimated capex of around US$800 million, with operational expenditure estimated around US$50 million per year.

In contrast, Norway’s 1991 Sleipner project, which captures around the same amount of CO2 per year as Quest, had a capex of just US$90 million (equivalent to US$180 million in 2022).

“Overall you'd be looking at somewhere from the tens of millions to a billion dollars depending on your project,” says Pope. 

Beyond the difficulty in assessing overall project cost, the business case for CCUS is made more difficult by the uncertainty of returns. At a recent webinar on scaling capital for the energy transition, Conway Irwin, Cleantech Research & Analysis Director at S&P Global Commodity Insights, explained that CCUS still suffers from “capital gaps”.

“You're talking about a pretty mature technology that really hasn't scaled,” she warned. “A lot of CCUS projects are proposed, and they just sort of sit on the shelf while they look for financing, and they are, in many cases, unable to raise the kind of financing that they need, especially for these gigantic projects. 

“That has to do with the value of the CO2: what's the value of the end product if you're not in a market that has a clear price on carbon dioxide emissions,” she added. 

Carbon pricing expected to drive CCUS adoption

The rising popularity of carbon taxes and cap and trade systems around the world is set to improve the business case for this technology. For example, CO2 emissions are currently priced at around €70 per tonne in the EU’s Emissions Trading Scheme (EU ETS), and this could increase to €130 per tonne by 2040. 

“If the carbon pricing is high enough, it becomes cheaper to start capturing and storing or utilising the carbon dioxide, which then encourages CCUS. Carbon pricing has really been on the rise this past decade, and that is expected to keep growing in terms of the number of countries with carbon pricing, the number of sectors covered by it, and the value of the carbon price itself. So carbon pricing is expected to be a major driver for new CCS projects,” says Pope.

In 2022, investment in carbon capture, transport and storage infrastructure amounted to $6.4 billion. S&P Global Sustainable1 expects clean energy technology investment to exceed US$900 billion by 2030, with CCUS making up a bit more than one tenth of that total (see graph).

CCUS is not a miracle solution

Even when the business case becomes easier, CCUS must be considered with its limitations, including scale, infrastructure and efficiency. 

Humans emit about 40 billion tonnes of CO2 every year, and currently CCUS can capture just 52 million – about 0.1%. IDTechEx forecasts that based on the current project pipeline, capacity could reach 1.2 billion tonnes by 2035 and 2.5 billion tonnes by 2045 – still just over 6% of what we currently emit.

In addition, CCUS requires dedicated infrastructure not just for capture,but also for transportation, storage and utilisation, all of which are currently lacking. However, Pope is hopeful that recent interest and investment – as well as a shift in CCUS business models – will help solve this infrastructure challenge.

“There's been a major shift towards a more partial chain approach to CCUS, with new developments of clusters and hubs. So we're really expecting to see an emergence of CCUS, storage and transportation provider companies, so emitters aren't expected to develop the entire project from scratch by themselves,” she says.

The Oil and Gas Climate Initiative (OGCI) has even launched a whole CCUS Hub playbook to support the creation of clusters gathering several emitters and logistics firms.

CCUS should not substitute carbon reduction measures

Additionally, some think tanks are warning against an over-reliance on CCUS due to a track record of “underperformance" (the industry standard is 90% efficiency, but several projects have been unable to meet this threshold). This type of warning also comes from a fear that large-scale CCUS implementation could slow down the phase-out of fossil fuels: oil and gas companies are betting heavily on it in the hope to maintain production levels and meet their climate targets.

“CCUS can be unpopular with environmentalists, and they have some degree of negative public perception, since it can extend the lifetime of fossil fuel-based assets: it can be controversial,” warns Pope.

On the plus side, the technology can help decarbonise existing assets, extending their lifetime and preserving jobs, she adds. (These pros and cons are fuelling the debate around policy choices in Alberta, for example).

One thing is for sure: CCUS cannot be used as an excuse to continue business as usual. Instead, it must come with other carbon reduction measures such as switching to renewable power sources, improving energy efficiency and embracing more circular processes.