IEA (2020), Tracking CCUS in Industry and Transformation 2020, IEA, Paris https://www.iea.org/reports/tracking-ccus-in-industry-and-transformation-2020
About this report
Despite recent project start-ups and a series of projects under development, CCUS in industry and fuel transformation is not on track to reach the Sustainable Development Scenario (SDS) level of 450 Mtpa by 2030 (290 Mtpa in industrial applications and 160 Mtpa in fuel transformation).
The number of large CCUS projects in industry and fuel transformation rose to 19 in 2020 when the two Alberta Carbon Trunk Line projects in Canada, set to capture CO2 from fertiliser production (0.5 Mtpa) and oil refining (1.3 Mtpa), became operational.
In 2019, the 4‑Mtpa Gorgon CO2 injection project launched operations in Australia, capturing CO2 from natural gas processing. The Gorgon CO2 injection project is part of the wider Gorgon gas development project in Western Australia.
In 2018, the 0.6‑Mtpa CNPC Jilin Oil Field CO2 enhanced oil recovery (EOR) project started commercial operations in China. The CO2 for the EOR project is captured from a natural gas processing plant at a nearby gas field.
The world’s first large-scale iron and steel facility with CCUS began operating in 2016 in Abu Dhabi, capturing up to 0.8 Mtpa.
The Illinois Industrial CCS Project in the United States (1 Mtpa) has been operating since April 2017. The facility, which produces corn ethanol, is the world’s first large-scale CCUS project linked with bioenergy.
Making progress on bio-CCS applications is important for SDS alignment, as they can enable the net removal of CO2 from the atmosphere and hence offset emissions from other sources and sectors.
The 19 large industrial projects operating today have a potential annual capture capacity of 34 MtCO2.
The total number of operating facilities is expected to climb to 21 when 2 large-scale industrial and fuel transformation CCUS projects come online in 2020‑21 in China.
The Sinopec Qilu Petrochemical project in China moved into the construction phase in 2018 and will capture 0.4 Mtpa from fertiliser production. The Yanchang integrated demonstration project, which currently captures 0.05 Mtpa from a coal-to-chemical plant, will add another 0.36 Mtpa from a larger CO2 source. The captured CO2 will be transported for EOR in central China’s Ordos Basin.
An improved investment environment has helped increase the number of CCUS projects under development in Europe, including several targeting industrial hubs. In Norway, feasibility studies are under way for CO2 capture from a cement facility (Norcem's Brevik plant) and from a waste-to-energy recovery plant (Fortum's Klemetsrud plant). An Equinor, Shell and Total partnership is developing offshore CO2 storage in the North Sea – the Northern Lights project – to support Norway’s plans for a fully integrated industrial project.
Further projects under development in Europe include the Porthos project in the Netherlands. Zero Carbon Humber and Net Zero Teesside in the United Kingdom and Ervia Cork in Ireland. In addition, a number of UK projects such as H21 North of England and HyNet are developing CCUS infrastructure for low-carbon hydrogen production. Industrial CCUS hubs are also being planned in Australia (CarbonNet).
In the United States, a number of new carbon capture projects have been announced in the last 12 to 18 months, with potential to benefit from the 45Q tax credit and other complementary policies, including the California Low Carbon Fuel Standard. If all proceed, they will nearly double the current global CO2 capture rate from CCUS facilities.
Of the substantial policy progress made before the Covid‑19 crisis, the extension and expansion of the 45Q tax credits for CCUS in the United States is particularly significant. These tax credits rise progressively to USD 35 per tonne of CO2 used in EOR and USD 50 per tonne of CO2 stored. They now also apply to smaller industrial facilities that produce 100 000 tCO2 per year and to applications that use more than 25 000 tCO2 (excluding EOR). These tax credits could unlock many lower-cost industrial and fuel transformation CCUS opportunities, particularly in natural gas processing, refining, and ammonia and bioethanol production.
In addition to the 45Q scheme, in January 2019 a CCUS protocol was agreed upon for the California Low Carbon Fuel Standard, which allows transportation fuels for which lifecycle emissions have been reduced through CCUS to become eligible for credits. Facilities anywhere in the world capturing CO2 from the air (direct air capture) for permanent geological storage are also eligible for the credit, but must satisfy the requirements of the CCUS protocol (which includes monitoring the stored CO2 for 100 years). The credits traded at around USD 180/tCO2 in 2019 and can be stacked with those of the 45Q scheme.
In March 2020, the United Kingdom confirmed its pledge to invest GBP 800 million (USD 995 million) in CCUS infrastructure, including to establish CCUS in at least two locations. In Europe, the EUR 10 billion Innovation Fund will be able to support CCUS projects (and other clean energy technologies) starting in 2020.
Owing to the improved investment environment, plans for as many as 20 new industrial CCUS facilities (including industrial hubs) have emerged in recent years. However, many projects will face greater uncertainty and near-term investment challenges in the wake of the Covid‑19 crisis. Many projects, particularly in the United States, plan to sell the captured CO2 for EOR, with the CO2 price typically indexed to the oil price, which collapsed in 2020. A large number of projects are also backed by oil and gas companies, which are scaling back 2020 investment plans.
Emissions from industry subsectors will need to be increasingly targeted if global climate goals are to be achieved. CCUS is one of the few technology options that can significantly reduce direct CO2 emissions (including process emissions) from the industry sector, which produces one-quarter of global CO2 emissions.
Using CCUS in industry and fuel transformation is one of the most cost-effective ways to reduce emissions, particularly from processes that produce concentrated CO2 streams. Targeted policies and incentives such as the 45Q could stimulate near-term investment in these sectors.
Indeed, more than three-quarters of the CO2 capture capacity built in the past decade and operating today is in low-cost areas such as hydrogen production-related processes, gas processing and biomass fermentation for ethanol production.
At the other end of the spectrum, it is more challenging – both economically and technically – to capture CO2 from industries such as iron and steel and cement production due to more dilute CO2 streams and multiple capture points.
To stimulate early investments in these subsectors, a range of targeted policy measures, such as regulatory levers, market-based frameworks, public procurement, low-carbon product incentives, tax credits and grant funding will be needed.
New business models and deployment approaches could also facilitate rapid CCUS scale-up in industry. This includes separating the components of the CCUS value chain and developing multi-user transport and storage networks that industrial facilities can access (CCUS hubs).
The economies of scale and improved allocation of commercial risks resulting from these approaches would reduce unit costs and save industrial facilities from engaging directly in activities outside their traditional expertise, such as CO2 storage development.
Government stimulus funding is important to keep CCUS and other clean-energy investments on track. Critically, well-targeted support for CCUS can help governments boost economic activity in the near term – including by supporting jobs and industries in key regions – while laying the foundation to meet long-term energy and climate goals.
To accelerate CCUS deployment and establish the infrastructure for significant emissions reductions, experiences from the decade following the 2008 global financial crisis suggest that future stimulus support should consider targeting lower-cost high-density industrial projects, such as in the petrochemicals sector, or low-carbon hydrogen production.
Jared Daniels (US DOE), Monica Garcia (IEAGHG), Guloren Turan (Global CCS Institute).