By Marco Kisic and Christie Clarke
Carbon capture and storage (CCS) is an important technology and often presented as a key climate change solution, however, there is a significant gap between where CCS is now, and where it needs to be in the future in order to meet expectations. A new report from CDP, ‘Mind the CCS Gap’, analyses the potential risks and opportunities for high-emitting sectors currently relying on CCS in their low-carbon transition plans.
The potential is recognized
CCS is a set of technologies capable of delivering a significant reduction in carbon emissions from fossil fuel power generation and other industrial applications, by capturing and storing waste CO2 instead of releasing it into the atmosphere.
The appeal of CCS is multifaceted, as it allows for fossil fuel and other high emitting practices to continue as integral parts of the energy and industrial systems for years to come. It is also one of the few methods that can generate negative emissions, and in theory can be applied in scale.
Given its potential, CCS is frequently put forward as one of the key solutions for tackling climate change, and has a significant presence in the majority of future climate models. For example, the International Energy Agency’s (IEA) beyond two-degree scenario assumes that CCS capture rates will grow 30 times where they are now, by 2025.
Expectations and reality
However, despite the intuitive potential of CCS and its crucial rule in the majority of decarbonization pathways, development is considerably lagging behind expectations.
Today, there are 17 operating plants which capture around 30Mt of carbon per annum and a pipeline of projects in development that will have a maximum capacity of around 40Mt potentially coming on-line by the mid-2020s. This potential capacity is, however, only 8% of the projected capture rate the IEA sets out in its beyond two-degree scenario for 2025, revealing a concerning gap between expectations and reality.
Why the slow progress?
The main challenges to implementation lie in the financing constraints, uncertain policy framework, and limited development of storage and transport infrastructure. The lack of financing is arguably the most critical challenge to progress, with both limited bankability and uncertainty around government funding programs.
The policy context surrounding CCS has undergone significant volatility over the last decade making long term planning and decision-making difficult. The positive momentum has faded, while a lack of consistent policy has contributed to increased uncertainty.
Furthermore, the availability of transport and storage infrastructure has the potential to significantly limit its deployment at scale, and the current storage capacity would need to increase several thousand times, in order to meet the requirements of existing and planned projects.
Chemical sector leading the way
The significant role CCS has in decarbonization pathways could present profound risks for companies operating in high-emitting sectors, while it could also open up potential revenues opportunities for some players.
The chemical sector - which contributes to 13% of industrial emissions - stood out as one of the better placed, representing 6 out of the 17 plants currently in operation. The sector is simultaneously a key developer and user of CCS, a supplier of capture technologies to other sectors, and a candidate to become an important end user of CO2. Furthermore, the global scale of leading chemical companies, the sector’s wide margins and its R&D intensity put it in a favorable position compared to other sectors.
Hedging the risks while keeping up momentum
Should significant progress not be made, we could either end up locked into high-temperature pathways or forced to take sweeping actions across multiple sectors. The risk of this happening should be hedged more credibly. This can be done by better defining and quantifying these risks, decreasing integrated assessment model reliance on CCS, making CCS part of a wider array of capturing technologies, and ultimately pushing further ahead with existing mitigation strategies. At the same time, the discussion should become central to policy at both a national and international level.
Despite its theoretical appeal and conceptual simplicity, the adoption of CCS as one of the key abatement technologies carries significant risks and raises important questions over its role in decarbonization frameworks. The development of CCS should be encouraged and forcefully pursued, but at the same time the risk of failure should be hedged more credibly.
Marco Kisic is Senior Analyst on the CDP Investor Research team and Christie Clarke is a Research Analyst also on the CDP Investor Research team