Is Carbon Capture in Your Sustainable Investing Future?

In our mission for environmentally friendly investment options, one technology sector is rising to prominence as a key player in reducing carbon emissions for a greener future: Carbon Capture and Storage (CCS). Let's delve into the current status and under what promise this sector may have.

What is Carbon Capture Storage & Why is it Valuable?

CCS is a cutting-edge process designed to capture carbon dioxide (CO2) emissions from industrial sources and power plants, diverting them from the atmosphere. By storing CO2 securely underground, CCS prevents its release and helps curb global warming. It is environmentally valuable for its potential to significantly reduce greenhouse gas emissions and is a vital tool in achieving global climate targets. 

Financially, the carbon pricing mechanisms such as carbon taxes or cap-and-trade systems, create financial incentives for companies to invest in carbon capture technology by putting a price on carbon emissions. The carbon prices vary between regions and not every country has a carbon-priced market. For companies that capture and store carbon dioxide, they can receive credits that can be sold or used to offset emissions liabilities. These credits represent the avoided emissions from carbon capture projects and offset project investments, however, currently, there are no broadly adopted viable business models for the large-scale deployment of CCS technology.

New business models are emerging in CCS, characterized by specialized entities operating in different parts of the value chain, including joint ventures in a hub configuration. Two main models include the full-chain model covering the entire CCS process and the part-chain model with specialized entities collaborating in specific areas. The part-chain model, emphasizing specialization and collaboration, shows promise for the future of CCS because it is more adaptable to different types of emitters and applications, making it a more inclusive and scalable approach to CCUS deployment and sharing of infrastructure costs between emitters, generating economies of scale. CCS is considered an emerging and promising market. 

Wide Range of Applications & Uses

CCS is particularly well-suited for applications with highly concentrated CO2 streams and those lacking other viable carbon abatement solutions. From heavy industries like cement and steel production to natural gas processing and power generation, CCS offers a versatile solution to tackle emissions across various sectors. Below is a summary of various alternatives.

• Post-Combustion Capture: This technology involves capturing carbon dioxide emissions from the exhaust gases of power plants and industrial facilities after combustion. One commercially viable method is amine scrubbing, where a liquid solvent, such as monoethanolamine, absorbs CO2 from flue gas. Several companies have developed and implemented post-combustion capture technologies at various power plants and industrial facilities worldwide.
• Pre-Combustion Capture: Pre-combustion capture involves capturing carbon dioxide from the syngas produced during the gasification of fossil fuels, such as coal or natural gas, before combustion. Integrated Gasification Combined Cycle power plants with pre-combustion capture capabilities have been developed.
• Oxy-Fuel Combustion: In oxy-fuel combustion for power generation applications, fossil fuels are burned in a mixture of oxygen and recycled flue gas, resulting in a flue gas stream with high concentrations of CO2. The CO2 can then be captured and compressed for storage or utilization.
• Direct Air Capture (DAC): DAC technology captures carbon dioxide directly from the ambient air using chemical sorbents or filters. DAC has the potential to capture CO2 emissions from dispersed sources, making it particularly useful for sectors with hard-to-abate emissions.
• Enhanced Oil Recovery (EOR): Enhanced Oil Recovery involves injecting captured CO2 into oil reservoirs to increase oil production while permanently storing the CO2 underground. Companies using CO2 for EOR operations are providing a commercial pathway for carbon capture and storage while also continuing oil production.
• Mineralization: Mineralization involves converting CO2 into stable carbonates or bicarbonates through chemical reactions with minerals. This approach uses mineralization technology to permanently sequester carbon dioxide in solid form while producing valuable construction materials.

These examples represent a range of viable carbon capture technologies that are being deployed or developed by companies worldwide. While each technology has its unique advantages and challenges, they all play a crucial role in mitigating carbon emissions and advancing the transition to a low-carbon economy.

Status Of The Market

Determining the most promising technology for addressing carbon emissions involves considerations of scalability, cost-effectiveness, and environmental impact. DAC stands out due to its potential for large-scale carbon removal and versatility. Unlike other methods focused on capturing emissions from specific sources, DAC can extract CO2 from dispersed sources, making it adaptable to diverse settings.

DAC's scalability allows it to capture significant volumes of carbon dioxide, while its flexibility enables deployment in various locations, including remote areas. Additionally, DAC offers direct carbon removal from the atmosphere, facilitating the reversal of CO2 accumulation and mitigation of climate change impacts. Furthermore, captured CO2 from DAC can be utilized in various applications, providing opportunities for carbon utilization and value creation. Finally, DAC enables permanent storage of captured CO2 underground through carbon sequestration, offering a sustainable long-term solution for carbon removal and storage.

Size of the Market & Future Growth

The market for CCS is set to experience significant growth, this expansion is driven by growing concerns about climate change and the pressing need for effective solutions to reduce emissions on a large scale. According to the International Energy Agency (IEA), CCS could contribute up to 8% of the total emissions reduction required to achieve a Net Zero Emissions scenario by 2050.

Although the deployment of CCS projects has been somewhat stagnant in recent years, there is a noticeable increase in momentum and a rising number of project announcements. In the past three years alone, over 400 new projects across the CCS value chain have been announced, with more than 45 countries actively developing CCS projects. IEA reports, that projects at advanced stages of planning represent a total estimated investment of more than $27 billion. Analysts predict exponential growth for CCS, with global capacity expected to triple by 2030. Governments and industries are intensifying their efforts to meet emission targets, which is driving demand for CCS technologies and infrastructure.

Government Commitments & Incentives

Governments worldwide are bolstering their support for CCS through various policies and incentives, including carbon pricing mechanisms and funding for research and development. This proactive approach is creating a favorable environment for CCS deployment, stimulating investment, and fostering innovation in the sector. 

For example, in the United States, the financial backing by the government for CCS has been substantial, with funding totaling $9 billion from 2009 to 2023. While the 2021 Infrastructure Investment and Jobs Act allocated $8 billion for CCS programs between 2022 and 2026. Also, companies involved in CO2 capture and storage benefit from federal tax credits, which incentivize CCS use. Projections suggest a further $5 billion of federal tax credits from 2023 to 2027.

In Europe, the Innovation Fund aims to raise more than EUR 25 billion, adjusted based on carbon prices, within the next decade. This funding is dedicated to pioneering technologies in carbon capture, utilization, and storage, along with renewable energy, energy-intensive sectors, and energy storage.

Pay Attention, Invest Early?

In summary, CCS offers a crucial investment avenue for environmentally conscious investors. CCS holds the potential to significantly cut emissions and combat climate change, serving as a driving force towards a cleaner, more sustainable future. It's essential to acknowledge that investing in CCS projects entails challenges and risks, including economic viability, project complexity, and lengthy lead times. Nevertheless, with appropriate policy backing, collaboration between governments and the private sector, and a dedication to sustainable growth, investing in companies focused on CCS can emerge as a promising investment prospect for those aiming to both benefit the environment and secure financial returns.

Fun Fact

Did you know? The first large-scale CCS project, Sleipner in Norway, has been operational since 1996. It captures CO2 from natural gas production and stores it deep beneath the North Sea, demonstrating the long-term viability of CCS technology.

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