CCUS: The state of play in the UK, European and US markets

TL;DR

• Carbon capture, storage and/or utilisation is expected to play a crucial role in the fight against climate change and reduce the harm caused by emissions in hard-to-abate industries like the iron, steel and chemical sectors.

• CCUS is the process by which carbon dioxide emissions are captured at source, transported, and then either stored or repurposed.

• The UK has pledged to capture and store between 20 and 30 million tonnes of carbon emissions by 2030 and the government has agreed to invest almost £22 billion over the next 25 years to establish CCUS clusters in Teesside and the Northwest.

• European countries are also investing heavily in the sector. By 2050, it aims to capture and store at least 150 million tonnes of carbon emissions annually by supporting efforts to develop commercial-scale CCUS projects, promote cross-border CO2 infrastructure, and fund pilot projects for new capture technologies.

• In the US, CCUS is being promoted by incentivising the fossil fuel industry. A strategy that has proved effective so far (as the US has the most CCUS facilities in the world) , it has also led to concerns around the level of commitment and investment the fossil fuel industry itself will pledge.

The detail

Carbon capture, storage and/or utilisation – or CCUS for short – is expected to play a crucial role in the fight against climate change, not least because it is uniquely placed to help curb emissions in hard-to-abate industries like the iron, steel and chemical sectors.

In short, CCUS is the process by which carbon dioxide emissions are captured at source, transported, and then either stored or repurposed. The term can also refer to the removal of CO2 directly or indirectly from the atmosphere.

There are three techniques that can be used to scrub or remove CO2: post-combustion, pre-combustion and oxyfuel combustion. As its name suggests, post-combustion is when the carbon emissions are removed after fossil fuel is burned; pre-combustion traps the CO2 before it’s burned; and oxyfuel combustion happens when the fossil fuels are burned in oxygen not air. Post-combustion arguably has the most potential to make a difference in the short-term as it can be retrofitted and applied to most conventional power plants.

When operational facilities are fitted with CCUS technology, the process can capture around 90% of the CO2 present in flue gas. Once the water vapour is condensed through cooling, the result is almost pure CO2 and the separated hydrogen can be used as fuel. However, most of the CO2 captured is stored deep underground.

CCUS is a growing industry – there are currently 45 commercial carbon capture, utilisation, and storage facilities operating worldwide with over 700 more in various stages of development. While these facilities can only capture around 45 million tonnes of carbon emissions each year – and CO2 removal by artificial methods is only responsible for the capture of two million tonnes – global capture capacity is increasing. In 2023, it was predicted that carbon capture capacity by 2030 will increase by 35% and storage capacity by 70%. The total amount captured by 2030 could reach 435 million tonnes; however, this figure is still a far cry from the 32 billion tonnes required by 2050.

An ambitious approach

The UK has pledged to capture and store between 20 and 30 million tonnes of carbon emissions by 2030, supported by a committed government investment of almost £22 billion over the next 25 years. There are valid reasons behind these ambitious targets; many experts believe that the UK has the potential to become Europe’s largest market for carbon storage and is predicted to expand to 78 billion tonnes of capacity, which could lock up the equivalent of 200 years’ worth of national carbon emissions.

Creating a competitive and self-sustaining CCUS industry in the UK could have myriad benefits. If government targets are met, the industry could create 50,000 new jobs and protect 100,000 more, while also creating a supply chain worth £100 billion by 2050. Indeed, it’s statistics like these that have shifted opinion on CCUS to it becoming a necessity, and not simply a nice to have. As Enrique Cornejo, UK Policy Head of Offshore Energies UK, puts it: “There is no viable alternative to CCUS for decarbonising several energy-intensive industries.”

Successive governments have demonstrated their confidence in the sector through continued investment. Despite two funding cancellations in 2011 and 2015, 2020 saw £1 billion committed to support the deployment of CCUS in four industrial clusters, while a longer-term funding package of up to £20 billion was announced in 2023.

Creating carbon clusters

This funding is helping to support the creation of two major CCUS clusters – one in Teesside and one that spans Northwest England and North Wales. The East Coast Cluster covers the country’s historic engine room, Teesside and the Humber, where half of the UK’s carbon emissions are generated. CCUS investment in this region could remove these emissions, protect thousands of jobs, and help make the region a climate-friendly hub for industry and innovation. On the other side of the country, HyNet North West is being developed by the Italian oil company, Eni, and could reduce carbon emissions by around a quarter.

These large-scale projects are supported by clusters all over the British Isles. The Viking CCS cluster in the southern North Sea, for example, could create 10,000 jobs, capture 10 million tonnes of carbon emissions by 2030 and attract £7 billion in investment, while the Morecambe Net Zero project will accept carbon emissions by pipeline, ship and rail.

The UK’s sustainable start-up scene is also thriving, with many emerging businesses concentrating their efforts on CCUS. CUR8 is a London-based climate tech company that is creating a market platform for carbon removals. It has recently closed £5.3 million in pre-seed funding to help it tackle the obstacles facing companies that are looking to invest in carbon removal portfolios such as supply limitations, concerns about quality and risk, and high prices.

Carbon Infinity is another start-up worthy of note as it is developing a cost-effective modular technology that captures carbon emissions direct from the atmosphere. Its technology is optimised for standardised production and rapid deployment, harnessing an advanced sponge-like material that, after absorbing CO2,  creates a pure stream for conversion into carbon-based products or subsequent storage.

The EU carbon ecosystem

Looking beyond the UK, Europe has also been investing in its CCUS industry. In fact, under the latest round of the Innovation Fund it issued approximately $1.5 billion to CCUS projects and over $500 million to CO2 transport and storage projects under the Connecting Europe Facility. These sums reflect the fact that CCUS has become a key element of the EU’s strategic agenda for a carbon neutral future. By 2050, the bloc aims to capture and store at least 150 million tonnes of carbon emissions annually, which supports its 2030 target to reduce greenhouse gas emissions by at least 55% (compared to 1990 levels).

The EU is working to develop an ecosystem that recognises the role robust regulatory frameworks have to play in ensuring safety, environmental integrity and public acceptance of CCUS technologies. In 2020, the [CCUS SET-Plan](https://setis.ec.europa.eu/implementing-actions/ccs-ccu_en#:~:text=Commission's dedicated webpage .-,About CCS%2FCCU,essential for reaching this goal.) updated its targets to reflect the EU’s ambitious goals. It aims to develop commercial-scale CCUS projects, promote cross-border CO2 infrastructure and support pilot projects focusing on promising new capture technologies.

The existence of this plan demonstrates the importance Europe is placing on developing its CO2 capture and storage capacity, with participating nations including the Czech Republic, Germany, France, Hungary, Italy, Spain, Sweden, Turkey, the Netherlands and Norway. Notable projects already underway include the Port of Rotterdam Porthos Project, the Amsterdam-Ijmuiden Athos Project, and the Northern Lights project, which is using a carbon storage site 3km beneath the seabed in Norway.

A culture of collaboration

This development plan has been reinforced and supported with targeted investment. There are several European funds and facilities dedicated to CCUS. The substantial contribution of the Innovation Fund led to four out of the seven projects awarded funds incorporating elements of the CCUS value chain in November 2021 – by March 2023, this figure more than doubled. Horizon Europe, the Recovery and Resilience Facility and the Connecting Europe Facility all allocate funds to CCUS, with the latter providing a substantial investment in cross-border infrastructure that promotes market integration. Finally, the ANRAV project in Bulgaria is hoping to create the first comprehensive CCUS value chain in Eastern Europe and has the potential to avoid 7.8 million tonnes of carbon emissions in its first decade.

As in the UK, Europe also has a flourishing start-up scene innovating in the CCUS space. Carbominer, based in Ukraine, has developed a modular direct air capture carbon removal technology, which uses intermittent renewable energy to effectively capture diluted CO2  from the air and convert it into pure CO2. Also working on direct air capture technology, Greenlyte Carbon Technologies in Germany has developed – and now markets – a system that operates at an unprecedented level of energy efficiency, capturing carbon emissions at a world-leading rate and supplying hydrogen as a by-product.

Can the fossil fuel industry embrace change?

The US, meanwhile, is currently home to more CCUS facilities than any other country, yet the sector operates differently to Europe, especially in the way it’s funded. In 2023, the US government announced a $1.7 billion package for carbon capture demonstration projects and a further $1.2 billion for direct air capture hubs. Both of these figures are in line with the UK and Europe’s commitment.

However, the US climate policy framework, as outlined in the 2022 Inflation Reduction Act, relies largely on subsidies to promote the energy transition. The Biden administration has helped to stimulate growth in the sector by offering companies a tax credit of $85 per tonne of CO2  stored.

These incentives take embedded carbon in traded goods as their starting point rather than carbon pricing. This contrasts with the European approach, which is likely to increase the cost of carbon as the EU starts to remove free allowances and encourages polluting companies to cut or remove their carbon emissions entirely. While US incentives are considered better than those in Europe and the UK, this policy has been criticised. Some believe that this type of industrial policy is more inefficient and at risk of being ineffective. There is also a culture of uncertainty that surrounds the US policy landscape when it comes to the level of commitment and investment that the fossil fuel industry will make in carbon capture and storage.

Despite these differences, it’s widely recognised that CCUS can play a positive role in the energy transition and fight against climate change. Not only can it remove existing carbon emissions from the atmosphere, but the by-products it produces can help to make the energy supply more diverse, flexible and secure. That’s not to say it doesn’t have detractors; many are concerned that it will elongate the life of oil and gas providers, but it is also the most immediate solution to reducing the harmful emissions generated by necessary industries like steel and concrete.

While different regions are taking different approaches, realising the potential of CCUS, promoting innovation and ultimately reducing the carbon emissions in our atmosphere will require a global effort. Sustained investment, fostering a culture of innovation and ensuring CCUS policy is aligned with climate change targets will all help to support this mission. It may not have the allure of clean energy, but CCUS is a necessary piece of the puzzle if we are to advance industrial decarbonisation and eventually arrive at net zero.

— Lew 👋

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