Cop 28 could help nudge emerging CCS sector forward

Oil producers are key proponents of the technology, but they will need to prove their goal is abatement and not ‘business as usual', write Madeleine Jenkins, Georgia Gratton and Nader Itayim

Carbon capture and storage (CCS) projects could draw more attention at the UN Cop 28 climate summit, set for November-December in Dubai, UAE. President-designate Sultan al-Jaber has called for a 30-fold scale-up of global CCS capacity, and Mideast Gulf oil producers have long supported the technology in theory. But the nascent sector requires clear policy before a global industry can be established, while costs and scaling hurdles put emissions reduction potential at risk.

Europe leads the pack in terms of CCS development for mitigation — efforts to reduce climate change. Norway is the region's frontrunner, with the first phase of its 80pc government-funded Northern Lights CO2 storage project set to start up next year, and commercial agreements in place with emitters. Denmark has awarded storage licences and successfully demonstrated CO2 injection and storage, while the UK has also set up a strong pipeline, although all of its planned clusters are yet to start up.

"It's no surprise that CCS is ending up in the places that are also hydrocarbon producers," professor of energy policy at University College London Jim Watson tells Argus. Norway, Denmark and the UK share a geological advantage in the North Sea, with access to vast potential storage in depleting oil and gas reservoirs.

Other oil and gas producers have pushed ahead with CCS. Key oil producer Saudi Arabia has long been one of the most outspoken proponents of CCS, pushing hard for its inclusion in summaries and communiques from past climate talks. The Mideast Gulf today accounts for just under 10pc of the world's total 44mn t/yr carbon capture capacity, across three large-scale facilities in Saudi Arabia, the UAE and Qatar — although the first two of those centre on enhanced oil recovery. The region has plans for more dedicated storage, including state-controlled Saudi Aramco's Jubail CCS hub, which could capture up to 9mn t/yr of CO2 from 2027.

The UAE is targeting a capture rate of 5mn t/yr by 2030, while Qatar has upped its ambition to 11mn t/yr by 2035. Saudi Arabia aims for an ambitious 44mn t/yr capture rate by 2035. But there is a sense that the region should be aiming higher. "The conditions in this region are the best in the world to carry out these kinds of projects, so long as the economic case is there," says Robin Mills, chief executive of UAE-based consultancy Qamar Energy. "They should be doing a lot more. They could do, and I hope they will."

Huge price tag

One hurdle to a global CCS scale-up is the price tag. The technology is "hugely capital intensive", with a pay-off of 15-20 years for investment, CCS senior policy adviser at climate think-tank E3G Domien Vangenechten tells Argus. US climate envoy John Kerry this week pointed out the financial risk, as CCS might not be competitive with "alternative renewable energy in the marketplace".

"Most investment is happening in the US," Ted Christie-Miller, director of carbon removal at carbon credit ratings agency BeZero Carbon, says. North America already has a bonus in the form of existing CO2 pipeline infrastructure, Watson notes. The US' sweeping 2022 Inflation Reduction Act also offers clear tax credits for CCS and direct air capture (DAC), rising to as much as $180/t of CO2 permanently stored from DAC technology. DAC costs range from $400/t to $2,000/t. Washington this month announced investment of up to $1.2bn for the development of two DAC hubs, with funding from the 2021 bipartisan infrastructure law, which offered $3.5bn to support four large-scale DAC projects. Funding for a further 19 projects was also pledged.

In Europe, the rising price of CO2 in the EU's emissions trading system (ETS) is starting to make CCS projects economically viable, developers have said. ETS prices are designed to increase the cost of emitting over time, aligned with the ‘polluter pays' principle.

"Ultimately, costs will have to be borne by polluters," Vangenechten says. "It's going to be very difficult to argue that the public taxpayer has to pay for companies cleaning up their pollution." But "first and foremost, those financial incentives need to come from regulation in the public sector", he says.

Some have turned to the voluntary carbon market for the capital required, including UK and Danish utilities Drax and Orsted — both of which have ambitious plans for bioenergy with CCS (Beccs). Under EU legislation, Beccs is a carbon-negative technology with biomass emissions classed as biogenic and not under the scope of the ETS. Christie-Miller points to the current high price of such credits, which will "reduce over time because of the innovation curve".

But finance is not the only barrier to the sector's development. CCS and DAC will require vast amounts of storage. The UN's Intergovernmental Panel on Climate Change (IPCC) — the overriding authority on climate science — estimates technical global storage capacity at 1 trillion t. This is "more than the CO2 storage requirements through 2100 to limit global warming to 1.5°C, although the regional availability of geological storage could be a limiting factor", the IPCC says.

Onshore storage, though possible, is unpopular. "No one wants to take that political risk and deal with the public push-back," and so projects are usually based in offshore locations, or depleted oil and gas fields, Vangenechten says.

Countries must currently jump through hoops to legally transport CO2 cross-border. The International Maritime Organisation's (IMO) London Protocol prohibits the cross-border import or export of CO2, although a 2009 amendment permits it for safe storage. But the amendment has not been ratified by sufficient signatories, so any country that wishes to store CO2 elsewhere must sign a bilateral agreement with the importing nation and make a declaration to the IMO.

Japan will have to export CO2 to hit its climate goals, setting itself a diplomatic challenge to secure storage sites. In southeast Asia, Malaysia has storage potential and is interested in developing a framework, but energy security remains the overwhelming concern in the region.

Policy obstacles

Developers agree that clarity on policy is key to jump-starting an industry that needs all elements — capture from heavy emitters, transportation and storage — in place simultaneously to work. And Cop summits are good for messaging, Christie-Miller notes. "A clear unified backing of the engineered carbon removal industry would be very welcome."

Cop 28 could result in CCS targets, but these must be granular, with "qualitative benchmarks or guardrails", Vangenechten says. And, ultimately, the "crucial point is to reduce emissions, not to necessarily scale up CCS", he adds. The IPCC is clear that CCS and other carbon removal technologies are necessary to hit the Paris agreement's more ambitious temperature rise limit of 1.5°C — but only to offset hard-to-abate industry and existing fossil fuel infrastructure. If CCS is used to justify oil and gas expansion, climate goals will be missed, scientists say. "Nuanced definitions don't help if oil and gas actors use CCS as a scapegoat to continue business as usual," Vangenechten warns.

Kerry wants stakeholders to "acknowledge the reality" of a still-developing sector. "If it isn't doable, then there's going to be a real confrontation over the question of where the next step is," he says.

EU ETS front-year contract