Carbon Capture, Utilisation & Storage Industry

In this month's "Industries that your children will be excited about" series, we look at the Carbon Capture, Utilization & Storage Industry (CCUS)

Why should you care?

To limit global temperature rises to 1.5°C above pre-industrial levels, the world must reach net-zero carbon emissions by around 2050. However, with growing populations, the demand for cheap carbon will continue to rise. While technologies like electric cars can help reduce future CO2 emissions, very few technologies can help reduce existing CO2 emissions from the atmosphere (i.e., get us into carbon-negative territory). CCUS is one of those technologies.

How does it work?

At the risk of oversimplifying, CCUS technologies can capture CO2 directly from the air, compress it, transport it, and inject it deep underground where it will be permanently stored. If this sounds like science fiction to you, it isn't. CCUS technologies have been around for nearly a century. At first (starting in the 1930S), carbon capture was used to purify at natural gas/hydrogen plants. However, in 1972, CO2 was first injected underground at a commercial scale. 

How much CO2 do we currently capture and store?

So far, over 260 million tonnes (Mt) of CO2 have already been captured and stored. Today, around 20 facilities worldwide collectively capture 40 Mt per year (0.04 Gigatonnes). There are another 31 facilities in various stages of development.

Source: Global CCS Institute, 2019

How much more CO2 do we need to capture and store?

Think of this as your total addressable market. According to the International Energy Agency, humanity will need to capture 10 Gigatons of CO2 per year by 2050 to limit warming to 1.5°C. With some quick math, this means that all the CCUS facilities worldwide only make up 0.4% of the total addressable market. We have 30 years to build 99.6% of the rest of the market's CCUS supply.

The good news is, we have plenty of storage capacity.

Source: Global CCS Institute, 2019

What's the business model?

Currently, pay less tax. Governments decided to put a price on carbon emissions and link it to tax; to incentivize industry to take climate change seriously. 

In the United States.

The most notable government intervention that stimulated the CCUS industry in the United States was the 45Q tax credit. Introduced in 2008 and amended in 2018, the 45Q provides capture-operators with credits for each tonne of CO2 stored or utilized, reducing the operator's tax liability. If the tax liability is less than the tax credits' value, the operator can transfer the tax credits claimed to another qualifying organization. With the 2018 amendment, the tax credit is $31/t (for geological storage) and $19/t (for utilization purposes). The credit rate will increase to $50/t and $35/t in 2026, respectively.

In Europe.

Norway leads the CCUS industry in Europe. Currently the most promising incentive is a ~10B Innovation Fund planned (based on a €22 carbon price towards the auction of 450M EU ETS allowances between 2020-2030)