The story of CCUS has largely been one of unmet expectations: its potential to mitigate climate change has been recognised for decades, but deployment has been slow and so has had only a limited impact on global CO₂ emissions. This slow progress is a major concern in view of the urgent need to reduce emissions across all regions and sectors in order to reach global net-zero emissions as quickly as possible. Yet there are clear signs that CCUS may be gaining traction in spite of the economic uncertainty created by the Covid-19 crisis, with more projects coming online, more plans to build new ones and increased policy ambition and action. The coming decade will be critical to scaling up investment in developing and deploying CCUS and realising its significant potential to contribute to the achievement of net-zero emissions.

A radical transformation of the way we produce and consume energy will be needed to bring about a rapid reduction in emissions of greenhouse gases (GHGs) consistent with the Paris Agreement goal of “holding the increase in the global average temperature to well below 2°C above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5°C above pre-industrial levels”. The Paris Agreement also seeks to achieve a “balance between anthropogenic emissions by sources and removals by sinks” in the second half of this century: in practice, this translates to net zero emissions. Net zero requires that any CO₂ released into the atmosphere from human activity be balanced by an equivalent amount being removed, either through nature-based solutions (including afforestation, reforestation and other changes in land use) or technological solutions that permanently store CO₂ captured (directly or indirectly) from the atmosphere. The sooner net zero emissions are achieved, the greater the chances of meeting the most ambitious climate goals.

The International Energy Agency (IEA) Energy Technology Perspectives 2020 report highlights the central role that CCUS must play as one of four key pillars of global energy transitions alongside renewables-based electrification, bioenergy and hydrogen (IEA, 2020a). CCUS can reduce emissions from large stationary sources, essentially power stations and large industrial plants, in a variety of ways, as well as generate negative emissions, by combining it with bioenergy (BECCS) or through direct air capture (DAC). Carbon removal technologies will almost certainly be required due to the practical and technical difficulties in eliminating emissions in certain sectors, including some types of industry (notably steel, chemicals and cement), aviation, road freight and maritime shipping.

Another key attraction of CO₂ capture technology is that it can be retrofitted to existing plants, many of which were built recently and could operate for decades to come. CCUS can also provide a least-cost pathway for producing low-carbon hydrogen based on natural gas or coal in countries with low-cost resources. Captured CO₂ can be used in a number of ways, including to produce clean aviation fuels.

CCUS carries considerable strategic value as a climate mitigation option. It can be applied in a number of ways and across a range of sectors, offering the potential to contribute – directly or indirectly – to emissions reductions in almost all parts of the global energy system. Consequently, progress in developing and deploying CCUS technologies in one sector could have significant spillover benefits for other sectors or applications, including for technological learning, cost reductions and infrastructure development. The four main ways in which CCUS can contribute to the transition of the global energy system to net-zero emissions – tackling emissions from existing energy assets, providing a platform for low-carbon hydrogen production, a solution for sectors with hard-to-abate emissions, and removing carbon from the atmosphere – are detailed below.

Tackling emissions from today’s power stations and industrial plants will need to be central to the global clean energy transition. Those assets could generate more than 600 GtCO₂ – almost two decades’ worth of current annual emissions – if they were to operate as they currently do until the end of their technical lives. Together with the committed emissions from other sectors, this would leave virtually no room for any emissions-generating assets in any sector to meet climate goals – an inconceivable prospect as populations and economies around the world continue to grow.

Coal-fired power generation presents a particular challenge. The global coal fleet accounted for almost one-third of global CO₂ emissions in 2019, and 60% of the fleet could still be operating in 2050. Most of the fleet is in the People’s Republic of China (hereafter, “China”), where the average plant age is less than 13 years, and in other emerging Asian economies where the average plant age is less than 20 years. Similarly, 40% of current primary steel-making assets could still be operating in 2050 unless retired early.

CCUS is the only alternative to retiring existing power and industrial plants early or repurposing them to operate at lower rates of capacity utilisation or with alternative fuels. Retrofitting CO₂ capture equipment can enable the continued operation of existing plants, as well as associated infrastructure and supply chains, but with significantly reduced emissions. In the power sector, this can contribute to energy security objectives by supporting greater diversity in generation options and the integration of growing shares of variable renewables with flexible dispatchable power. Retrofitting facilities with CCUS can also help to preserve employment and economic prosperity in regions that rely on emissions-intensive industry, while avoiding the economic and social disruption of early retirements. To illustrate the potential significance, Germany’s plans to retire around 40 GW of coal-fired generation capacity before 2038 is accompanied by a EUR 40 billion (USD 45 billion) package to compensate the owners of coal mines and power plants as well as support the communities that will be affected (BMWi, 2020). 

Meeting net-zero goals requires tackling emissions across all energy sectors, including those that are sometimes labelled as “hard to abate”. This includes heavy industry, which accounts for almost 20% of global CO₂ emissions,1 as well as long-distance modes of transport, including aviation, road freight and maritime shipping. In these sectors, alternatives to fossil fuels are either prohibitively expensive, such as electricity to generate extreme heat, or impractical, such as electric-powered aircraft or tankers.

In practice, some sectors will simply not be able to achieve net-zero emissions without CCUS. Cement production is a prime example: it generates significant process emissions, as it involves heating limestone (calcium carbonate) to break it down into calcium oxide and CO₂. These process emissions – which are not associated with fossil fuel use – account for around two-thirds of the 2.4 Gt of emissions from global cement production and more than 4% of all energy sector emissions. With no demonstrated alternative way of producing cement, capturing and permanently storing these CO₂ emissions is effectively the only option.

In other sectors, CCUS is one of few available technologies that can yield significant emissions reductions. In the iron and steel sector, production routes based on CCUS are currently the most advanced and least-cost low-carbon options for the production of virgin steel2 which accounts for around 70% of global steel production. In chemicals, CCUS is often the cheapest option for reducing emissions from the production of fertiliser (ammonia) and methanol.

CCUS is also the only solution to address CO₂ emissions from natural gas processing, which is important given the continued use of natural gas across the energy system over the next decades (IEA, 2020a). Natural gas deposits can contain large amounts of CO₂ – even up to 90% – which, for technical reasons, must be removed before the gas is sold or processed for liquefied natural gas (LNG) production. This CO₂ is typically vented to the atmosphere but can instead be reinjected into geological formations or used for EOR.

CCUS is also among a limited number of options that can decarbonise long-distance transport, including aviation. A supply of CO₂ is needed to produce synthetic hydrocarbon fuels, which alongside biofuels are the only practical alternative to fossil fuels for long-haul flights due to energy density requirements. Limitations on the availability of sustainable biomass mean that these synthetic fuels will be needed for net-zero emissions; the CO₂ would need to come from bioenergy production or the air to be carbon-neutral.

Hydrogen is a versatile energy carrier that can support the decarbonisation of a range of sectors, including transport, industry, power and buildings (IEA, 2019a). CCUS can facilitate the production of clean hydrogen from natural gas or coal, which are the sources of practically all hydrogen production today, and provide an opportunity to bring low-carbon hydrogen into new markets in the near term at least cost.

Today, the cost of CCUS-equipped hydrogen production can be around half that of producing hydrogen through electrolysis powered by renewables-based electricity (which splits water into hydrogen and oxygen). The costs of electrolytic hydrogen will certainly decline over time, with cheaper electrolysers and renewable electricity, but CCUS-equipped hydrogen will most likely remain a competitive option in regions with low-cost fossil fuels and CO₂ storage resources. CCUS also offers an opportunity to address emissions from existing hydrogen production that almost exclusively relies on natural gas and coal and is associated with more than 800 MtCO₂ each year.

Meeting international climate goals, including net-zero emissions, will almost certainly require some form of carbon removal. There are multiple approaches to removing carbon from the atmosphere, including nature-based solutions such as afforestation and reforestation or enhanced natural processes such as the addition of biochar (charcoal produced from biomass) to soils. Technology-based carbon removal solutions are underpinned by CCUS, namely BECCS and DACS.

The role for carbon removal in meeting ambitious climate goals was emphasised by the Intergovernmental Panel on Climate Change (IPCC) in its Special Report on 1.5°C. Out of 90 scenarios considered by the IPCC, 88 assumed some level of net-negative emissions to limit future temperature increases to 1.5°C (IEA, 2019b). Carbon removal can neutralise or offset emissions where direct mitigation is currently technically challenging or prohibitively expensive, such as some industrial processes and long-distance transport. Carbon removal is also a hedge – although not a substitute – against the risk of slower-than-expected innovation or commercialisation of other technologies. BECCS and DACS are an energy sector contribution to carbon removal and, if successfully deployed, can also mitigate slower progress in emissions reductions outside the energy sector. Unlike BECCS, DACS is not limited by the availability of sustainable biomass but rather the availability of low-cost energy.

Today, there are 21 CCUS facilities around the world with capacity to capture up to 40 MtCO₂ each year.3 Some of these facilities have been operating since the 1970s and 1980s, when natural gas processing plants in the Val Verde area of Texas began capturing CO₂ and supplying it to local oil producers for EOR operations.4

Since these early projects, CCUS deployment has expanded to more regions and more applications. The first large-scale CO₂ capture and injection project with dedicated CO₂ storage and monitoring was commissioned at the Sleipner offshore gas field in Norway in 1996, which has now stored more than 20 MtCO₂ in a deep saline aquifer. For technical and commercial reasons, the CO₂ needs to be removed from the gas before it can be sold; a CO₂ tax on offshore oil and gas activities introduced by the Norwegian government in 1991 made the project commercially viable (IEA, 2016).

The deployment of carbon capture to date has been concentrated in the United States, which is home to almost half of all operating facilities. This is due in large part to the availability of an extensive CO₂ pipeline network and demand for CO₂ for EOR, as well as public funding programmes, including those introduced after the global financial crisis of 2008‑09. In the last decade, CCUS facilities have been commissioned in Australia, Brazil, Canada, China, Saudi Arabia and the United Arab Emirates. 

Many of the early CCUS projects focused on industrial applications where CO₂ can be captured at relatively low additional cost, from around USD 15/tCO₂. For example, in natural gas processing, any CO₂ contained in the gas usually needs to be separated out to meet market requirements or prior to liquefaction for LNG production to avoid the CO₂ freezing and damaging the production facilities. In other applications, such as bioethanol production (the Illinois Industrial project in the United States) or steam methane reformers to produce hydrogen (such as Quest in Canada), the CO₂ stream is relatively concentrated, which reduces the cost and the amount of energy required in the capture process. Until the 2000s, virtually all the CO₂ captured globally at large-scale facilities came from gas processing plants, but other sources now make up about one-third of the total5.

CCUS deployment tripled over the last decade, albeit from a low base – but it has fallen well short of expectations. In 2009, the IEA roadmap for CCUS set a target of developing 100 large-scale CCUS projects between 2010 and 2020 to meet global climate goals, storing around 300 MtCO₂ per year (IEA, 2009). Actual capacity is only around 40 Mt – just 13% of the target.

Investment in CCUS has also fallen well behind that of other clean energy technologies. Annual investment in CCUS has consistently accounted for less than 0.5% of global investment in clean energy and efficiency technologies (IEA, 2020b). Since 2010, around USD 15 billion in capital has been invested in the 15 large-scale CCUS projects that have been commissioned as well as the Kemper County CCUS facility, which was abandoned in 2017 (IEA, 2017). The investment in these facilities was supported by around USD 2.8 billion in public grant funding6.

There are several reasons CCUS has not advanced as fast as needed; many planned projects have not progressed due to commercial considerations and a lack of consistent policy support. In the absence of an incentive or emissions penalty, CCUS may simply not make any commercial sense, especially where the CO₂ has no significant value as an industrial input. The high cost of installing the infrastructure and difficulties in integrating the different elements of the CO₂ supply chain, technical risks associated with installing or scaling up CCUS facilities in some applications, difficulties in allocating commercial risk among project partners, and problems securing financing have also impeded investment. Public resistance to storage, particularly onshore storage, has also played a role in some cases, notably in Europe. CCUS is also often viewed as a fossil fuel technology that competes with renewable energy for public and private investment, although in practice it has substantial synergies with renewables.

CCUS may not be a new technology or concept, but it has been the subject of renewed global interest and attention in recent years, holding out the promise of a rapid scaling-up of investment, wider deployment and accelerated innovation. The pipeline of new CCUS projects has been growing, underpinned by strengthened national climate targets and new policy incentives. CCUS costs have been declining, new business models that can improve the financial viability of CCUS have emerged, and technologies associated with CO₂ use and carbon removal are advancing and attracting interest from policy makers and investors.

After years of a declining investment pipeline, plans for more than 30 new integrated CCUS facilities have been announced since 2017. The vast majority are in the United States and Europe, but projects are also planned in Australia, China, Korea, the Middle East and New Zealand. If all these projects were to proceed, the amount of global CO₂ capture capacity would more than triple, to around 130 Mt/year. The 16 projects at advanced stages of planning, including several facing a final investment decision (FID) within the next 12 months, represent a total estimated investment of more than USD 27 billion. This is almost double the investment in projects commissioned since 2010 and around 2.5 times the planned investment in projects at a similar stage of development in 2017.

Although some projects might fall by the wayside, the new investment plans for CCUS, if realised, will push the technology further along the learning curve, contribute to infrastructure development and further reduce unit costs. Importantly, several of the planned projects go beyond the “low-hanging fruit” opportunities associated with natural gas processing to include less developed applications, including coal- and gas-fired power generation and cement production. There is also less reliance on EOR, which has been a major driver of CCUS investment to date (16 of the 21 capture facilities in operation sell or use the CO₂ for EOR). Less than half of the planned facilities are linked to EOR, with a shift towards dedicated CO₂ storage options. Almost one-third of planned projects involve the development of industrial CCUS hubs with shared CO₂ transport and storage infrastructure.

The large-scale deployment of CCUS provides an important indicator of the state of technology development, but does not convey the entire CCUS story. In addition to major commercial projects, there are a large number of pilot and demonstration-scale CCUS facilities operating around the world, as well as numerous CCUS technology test centres (GCCSI, 2020). There are also a growing number of facilities making use of CO₂.

Strengthened climate commitments

The more stringent climate targets triggered by the greater ambition of the 2015 Paris Agreement and the 2018 IPCC Special Report on 1.5°C have spurred greater interest in mitigation options that go beyond renewables or power generation, including CCUS. There is also increased focus on technology opportunities to reduce emissions where they are hard to abate, given the need to fully decarbonise the entire energy sector to reach net zero.

An increasing number of countries and organisations have adopted net-zero emissions targets, drawing attention to the need for CCUS. By August 2020, 14 countries and the European Union (EU) – representing around 10% of energy-related global CO₂ emissions – had adopted formal net-zero emissions targets in national law or proposed legislation to that effect, with a target date of 2045, 2050 or beyond (IEA, 2020a). Similar targets are under discussion in about 100 other countries.

CCUS also features in the mid‑century climate strategies that parties to the Paris Agreement are invited to submit this year. Of the 16 country strategies submitted by August 2020, nine referenced a role for CCUS: Canada, France, Germany, Japan, Mexico, Portugal, Singapore, the United Kingdom (UK) and the United States (UNFCCC, 2020). Together, these countries account for 96% of the total energy-related CO₂ emissions of those countries that have submitted mid‑century strategies.  

A growing number of corporations across a range of industry sectors, including oil and gas, power generation, manufacturing, transport, and technology services, are also adopting net-zero emissions targets (IEA, 2020a). The level of detail and approach to meeting these commitments varies, including in the coverage of emissions across the value chain.7 More than 20% of global oil and gas production is covered by 2050 net-zero commitments, with CCUS expected to play a role in every case. Companies such as Dalmia Cement and Heidelberg Cement in the cement sector and ArcelorMittal in steel are actively pursuing CCUS to meet their goals.

Carbon removal approaches are to the fore in meeting commitments in other sectors, notably aviation. To date, all airline companies that have adopted net-zero goals have identified the need for offsets from other sectors, primarily relying on nature-based solutions such as reforestation (IEA, 2020a). Microsoft announced in January 2020 that it aims to become carbon negative by 2030, and by 2050 it plans to have removed from the atmosphere all the carbon that it has emitted since it was founded in 1975 (Microsoft, 2020). This would be achieved through a portfolio of solutions, potentially including afforestation and reforestation, soil carbon sequestration, BECCS, and DACS. Microsoft is establishing a USD 1 billion climate innovation fund to accelerate the global development of carbon reduction, capture and removal technologies.

Improved investment environment

The growing pipeline of CCUS facilities also reflects a considerably improved investment environment, underpinned by new policy incentives.8 In the United States, the expansion of the 45Q tax credit alongside complementary policies – such as the California Low Carbon Fuel Standard (LCFS) – has spurred a large number of new investment plans. The expanded tax credit, introduced in 2018, provides a credit of USD 50/t for CO₂ that is permanently stored and USD 35/t for CO₂ used in EOR or other beneficial uses, for 12 years from the commencement of operation of the project.

In Europe, the EU Innovation Fund for demonstrating innovative low-carbon technologies and funded by revenues from the Emissions Trading System (ETS) – valued at EUR 10 billion at current CO₂ prices – will be able to support CCUS projects among other clean energy technologies from 2020 (European Commission, 2020). Norway is also funding the development of a full-chain CCUS project – Longship – , involving CO₂ capture at a cement factory and a waste-to-energy plant and its storage in a large facility in the North Sea – Northern Lights – being developed by a consortium of oil and gas companies. The Netherlands is expanding its SDE+ support scheme to a wider set of clean energy technologies, including CCUS and low-carbon hydrogen (SDE++). The UK government has also announced significant public funding for new CCUS projects.

Deployment strategies that shift the focus from large, stand-alone CCUS facilities to the development of industrial “hubs” with shared CO₂ transport and storage infrastructure are also opening up new investment opportunities. This approach can improve the economics of CCUS by reducing unit costs through economies of scale as well as reducing commercial risk and financing costs by separating out the capture, transport and storage components of the CCUS chain. The development of shared infrastructure can also be a major trigger for new investments. For example, the development of the Northern Lights CO₂ storage project – the central component of Norway’s Longship project – is linked to the potential development of at least nine capture facilities across Europe, including four cement factories and a steel plant (Northern Lights PCI, 2020). Plans to equip these facilities with CO₂ capture would probably not have materialised in the absence of a potential CO₂ storage solution. 

Technological advances

Experience with building and operating CCUS facilities has contributed to progressive improvements in CCUS technologies as well as significant cost reductions. At around USD 65/t of CO₂, the cost of capture at the Petra Nova coal-fired power plant in Houston (commissioned in 2017) is more than 30% lower than the Boundary Dam facility in Canada – the only other commercial coal plant with capture facilities – which started operations in 2014. Detailed engineering studies show that retrofitting a coal-fired power plant today could cost around USD 45/t (International CCS Knowledge Centre, 2018). There are now plans to retrofit as many as ten coal power plants with capture equipment (in China, Korea and the United States). With further research, development and demonstration (RD&D) and growing practical experience, there is considerable potential to further reduce energy needs and cost .

New technologies and ways for using or recycling CO₂ other than EOR, such as to produce synthetic fuels or building materials, are emerging, potentially boosting demand for CO₂. The growing interest in these technologies is reflected in increasing support from governments, industry and investors, with global private funding for CO₂ use start-ups reaching nearly USD 1 billion over the last decade (IEA, 2019c). Several governments and agencies have been supporting innovation related to CO₂ conversion technologies. For example, in June 2019, Japan released a Carbon Recycling Roadmap highlighting opportunities to commercialise CO₂ use technologies over the next decade (METI, 2019). Additionally, several prize initiatives have been held with the aim of promoting the development of CO₂ conversion technologies, awarding a prize to the most innovative CO₂ use applications. A notable example is the NRG COSIA Carbon XPrize (NRG COSIA XPRIZE, 2019).

DAC technologies are also making significant progress and attracting investment from a range of stakeholders. Since 2019, around USD 180 million in private investment has been raised by leading developers alongside more than USD 170 million in public funding for research and development. A number of small-scale DAC facilities are operating commercially today, and a planned large-scale facility in the United States, with capacity to capture 1 MtCO₂ per year, could be operational by the mid-2020s. 

The response to the Covid-19 crisis has driven the world into a deep recession, which will almost certainly affect investment plans for CCUS. The slump in economic activity is likely to curb interest in new CCUS projects, at least in the near term, but this could be partially or wholly offset by fresh government incentives for CCUS and other clean energy technologies as part of economic recovery programmes currently under development.

With the global economy set to shrink by several percentage points in 2020 and gross domestic product (GDP) expected to contract in nearly every country, investment in clean energy technologies could plunge by as much as 20% (IEA, 2020b). This has prompted governments around the world to draw up plans to invest massively to stimulate economic recovery. The IEA has called for governments to put clean energy at the heart of stimulus packages and, in July 2020, released the Sustainable Recovery Plan – a set of actions that can be taken over the next three years to promote economic growth through investment in clean energy. The IEA estimates that implementing this plan could boost global economic growth by 1.1% per year and save or create 9 million jobs while avoiding a rebound in emissions (IEA, 2020c). 

CCUS developments in 2020

Despite the economic and investment uncertainty created by the Covid-19 crisis, the prospects for CCUS have been boosted by a number of new funding announcements and project developments since the beginning of 2020. In March, the UK government confirmed its pledge to invest GBP 800 million (USD 995 million) in CCUS infrastructure, involving establishing CCUS in at least two industrial locations and equipping a gas-fired power plant with CCUS. In July, it announced additional investment of GBP 139 million (USD 178 million) to cut emissions from heavy industry, including through CCUS. In April, the US government awarded USD 85 million in grants and announced a further USD 46 million in new grants for CCUS development and deployment, followed by an additional USD 72 million in funding in September (DOE, 2020a, 2020b). In May, the Australian government announced plans to make CCUS eligible for existing funding programmes for clean technologies, including via the Clean Energy Finance Corporation’s AUD 10 billion (USD 7.1 million) investment fund (Australian Government, 2020). In September 2020, the Norwegian government announced it would provide NOK 16.8 billion (USD 1.8 billion) in funding for the Longship CCS project (formerly called the “Full-Scale CCS Project), including ten years of operating support. The total cost of the Longship project is estimated at NOK 25.1 billion (USD 2.7 billion).

The private sector has also announced several new CCUS investments. In April 2020, the Oil and Gas Climate Initiative (OGCI) – a group of 13 international oil and gas companies – announced it would invest in equipping a natural gas power plant in the United States with CCUS (OGCI, 2020). A month later, Equinor, Shell and Total announced plans to invest more than USD 700 million in the Northern Lights offshore CO₂ storage project, subject to government support (Equinor, 2020a). In July, Equinor announced it would lead a project – H2H Saltend – to produce hydrogen from natural gas with CCUS in the Humber region of the United Kingdom (Equinor, 2020b).

Spending on DAC research has also expanded since the start of 2020. In March, the US Department of Energy announced USD 22 million in funding for DAC. In June, the UK government allocated GBP 100 million (USD 128 million) to the technology. In addition, Climeworks – one of the leading DAC technology developers – announced in September 2020 that it had raised 100 million Swiss francs (USD 110 million), the largest private investment for DAC (Climeworks, 2020).

The impact of the economic downturn and lower oil prices

Notwithstanding these positive developments in 2020, CCUS investments will almost certainly be vulnerable to delays and cancellations due to the global economic downturn. In particular, oil and gas companies, which are involved in more than half of planned CCUS projects, have announced significant capital spending cuts for 2020. 

In the United States, the attractiveness of the 45Q tax credit – a major driver of new investments – is likely to diminish as profits slump and corporate tax liabilities fall. Any delays to projects would also have a significant impact on their eligibility for credits, as facilities must be in construction before 1 January 2024 to qualify under current arrangements. Projects unable to meet this deadline are far less likely to proceed.

Another important consideration is the impact of low oil prices on the demand and price for CO₂ used in EOR. Two-thirds of operating CCUS facilities rely on revenue from sales of CO₂ for EOR, and more than one-third of planned projects are linked to EOR (GCCSI, 2020). The price paid for CO₂ for EOR is typically indexed to the oil price in commercial contracts, so the recent slump in oil demand and prices will have substantially reduced revenues for CCUS facilities.

Low oil prices led NRG, the operator of the Petra Nova coal-fired power plant in Texas, to suspend CO₂ capture operations at the plant in May 2020. The plant has a CO₂ capture capacity of 1.4 Mt/year, with the CO₂ transported by a 132 km pipeline to the West Ranch oilfield southwest of Houston for EOR. According to NRG, crude oil prices in excess of USD 60/bbl to USD 65/bbl are required to cover the operating costs of the capture facilities, while the price of West Texas Intermediate has averaged less than USD 40/barrel between January and August 2020 and USD 17/barrel in April (NRG, 2020a). Petra Nova is the only CCUS facility in the United States capturing CO₂ from a relatively dilute source, which is associated with higher capture costs.9 This highlights the risks of business models linked to EOR revenue – especially for these higher-cost CCUS applications. NRG has stated that it will bring the facility back online “when economic conditions improve” (NRG, 2020b).

An extended period of low oil prices and demand would undoubtedly undermine planned investment in CCUS projects linked to EOR. The risk of project delays or cancellations is generally higher for CCUS projects at early stages of development, or in regions where the use of CO₂ for EOR is still relatively limited and where expansions require significant new injections of capital for EOR infrastructure.

In the United States, demand for CO₂ for EOR may be more resilient. Around 80 MtCO₂ is used for EOR today, with around 70% of this extracted from declining natural CO₂ deposits. An increase in the availability of CO₂ captured from power or industrial CCUS facilities could displace the use of this naturally occurring CO₂, without requiring an expansion in demand or significant new EOR infrastructure. Further, the availability of the 45Q tax credits could act as a commercial buffer during periods of low CO₂ prices. However, capture projects may opt for dedicated geological storage, which attracts a higher tax credit, as a more financially attractive and stable alternative, especially if oil prices remain low for a long time.

The inclusion of CCUS in economic recovery plans and programmes could help ensure that the Covid-related economic downturn does not derail recent progress in deploying the technology. A collective push by all stakeholders is needed to exploit recent progress and drive a major leap forward in deployment. Governments have a key role to play in incentivising investment, as well as co‑ordinating and underwriting new transport and storage infrastructure. The development of economic stimulus packages presents a critical window of opportunity for governments to support investment in a technology that will be needed to meet their climate goals. The IEA Sustainable Recovery Plan identified boosting innovation in CCUS and other crucial technologies, including hydrogen, batteries and small modular nuclear reactors, as one of six key objectives for economic stimulus packages.

CCUS is in a stronger position to contribute to sustainable economic recovery plans than after the global financial crisis in 2008‑09. A decade of experience in developing projects and the recent uptick in activity means that there are a number of advanced “shovel-ready” projects with potential to double CCUS deployment and create thousands of jobs worldwide by 2025. As discussed above, the pipeline of at least 16 advanced projects could represent a potential investment of more than USD 27 billion and an additional 50 Mt/year of CO₂ capture capacity. For several of these projects, a FID is imminent, and construction could begin as early as 2021. These projects are well aligned with government goals of boosting economic activity in the near term while providing the foundation to meet long-term energy and climate goals. However, almost all will rely on some form of government support to overcome the commercial barriers associated with early deployment. 

A number of planned projects could benefit quickly from economic stimulus packages, bringing major economic, social and environmental benefits. In Europe, the Norway Longship CCS project (including Northern Lights) is expected to generate as many as 4 000 jobs during the investment and construction phase, and 170 permanent jobs (Northern Lights PCI, 2020). In July, the European Free Trade Association (EFTA) Surveillance Authority cleared the way for the Norwegian government’s support for the project under EU market rules, recognising it as “a ground-breaking step towards tackling climate change” (ESA, 2020).

A number of advanced CCUS projects are based on the development of industrial hubs, benefiting from economies of scale and reducing integration risk through shared CO₂ transport and storage infrastructure. This includes the Port of Rotterdam (Porthos) project in the Netherlands, the Net Zero Teesside project in the United Kingdom, the Carbon Storage Assurance Facility Enterprise (CarbonSAFE) Integrated Midcontinent Stacked Carbon Storage Hub in the United States, and CarbonNet in Australia. Several of these CCUS hubs involve the production of low-carbon hydrogen.

The employment benefits of encouraging these projects – a major objective of stimulus packages – could be significant. At least 1 200 direct construction jobs could be created at each new large-scale capture facility, rising to 4 000 or more depending on location, application and size. CCUS investments would also secure existing jobs and minimise social and economic disruption by enabling the continued operation of power and industrial facilities under tighter emissions constraints. For example, the developers of the Net Zero Teesside industrial hub claim that CCUS infrastructure could safeguard between 35% and 70% of existing manufacturing jobs in the region (Net Zero Teesside, 2020). 

Many of the job opportunities that will arise in the CCUS sector will also be able to make use of the subsurface skills and experience of personnel in the oil and gas sector, which has seen thousands of job losses already in 2020. These opportunities include the near-term employment needs associated with CO₂ storage exploration, as well as the more intensive phase of characterisation and development of new storage facilities.