Key Definitions:
- CCS (Carbon Capture and Storage): focuses solely on capturing and geologically storing CO₂ to prevent it from entering the atmosphere.
- CDR (Carbon Dioxide Removal): covers technologies and practices that actively remove CO₂ directly from the atmosphere, aiming to reduce existing CO₂ concentrations.
- CCUS (Carbon Capture, Utilisation, and Storage): captures CO₂ from various sources, transforms it into usable products, and stores it long-term. Both CCS and CDR are incorporated into CCUS.
Carbon Capture
This initial step involves isolating CO₂ from industrial processes, energy generation, and natural processes. Some examples of high-potential processes include cement or steel production and power plants using natural gas. Current technologies can capture up to 90% of CO₂ from major sources, although the figures vary. There are still a number of challenges which research is looking to mitigate, including high energy demand, integration with existing systems, and ability to scale projects.
UK example: Projects such as the East Coast Cluster (bp, Equinor, TotalEnergies) and HyNet North West (Eni, Cadent, Progressive Energy) are targeting capture from heavy industry and power generation, positioning the UK as a global leader.
Carbon Utilisation
The captured CO₂ can be transformed into valuable products, mitigating greenhouse gases and creating economic opportunities. This is referred to as Utilisation, and as there is growing demand for CO₂-derived products, it is becoming increasingly popular in many industries. The ways in which this can be done are numerous, most notably mineralisation, chemical conversions, and biological processes. The end-products are respectively stable carbonates, fuels and chemicals, and biofuels (among others).
Carbon Storage
If the carbon is not used, it can be sequestered into Storage for the long term instead. This involves injecting CO₂ into subsurface geological formations. The most common ways of storing this carbon are using depleted oil and gas reservoirs and deep saline aquifers. There are four distinct trapping mechanisms: structural, residual, solubility, and mineral trapping.
Recent momentum: Harbour Energy’s Viking CCS project has received support from the UK Infrastructure Bank to develop large-scale CO₂ storage in the Humber region.
Growth Drivers
- Climate Action Goals: International treaties like the Paris Agreement and national climate commitments and strategies are driving stringent carbon reduction policies. In the UK, the government aims to capture and store 20–30 MtCO₂ per year by 2030.
- Low-Carbon Hydrogen: CCUS is crucial for producing “blue hydrogen”, for which there is increasing demand, in a cost-effective and low-carbon way.
- Decarbonising Hard-to-Abate Industries: CCUS is the only proven large-scale technology to reduce the environmental footprint of heavy industries such as cement and steel that lack other low-carbon options.
- Hubs and Clusters: Centralised hubs reduce costs by sharing infrastructure and improving economies of scale. The UK’s East Coast Cluster and HyNet are leading global examples.
- Demand for Negative Emission Technologies: CCUS is essential for technologies like Bioenergy with Carbon Capture and Storage (BECCS) and Direct Air Capture with Carbon Storage (DACCS) that actively remove CO₂ from the atmosphere. These technologies are important to meet Net Zero goals and directly drive CCUS developments.
Growth Restraints
- Long-Term CO₂ Storage Liability: A lack of clear regulations creates financial risk for investors, due to post-closure risks of leakage.
- High Capital Investment: CCUS projects require significant upfront investment with uncertain returns due to risks and uncertainty.
- Technology, Commercial, and Social Readiness: Despite mature technologies, policy gaps and public scepticism hinder full-scale deployment.
- Lack of Policy and Regulatory Frameworks: Unclear governmental regulations regarding CO₂ transport, cross-border storage, and liability create investment uncertainty.
- Low Economic Value of CO₂: The cost of CCUS often exceeds the market value of CO₂, creating revenue risks that require stronger carbon pricing mechanisms to overcome.
- Interdependency and Cross-Chain Risk: The interconnected nature of CCUS value chains means a failure in one component can jeopardise an entire project.
Outlook
As CCUS has seen great developments in the past few years, we have closely observed and researched the market in great depth. We recognise its potential as a climate solution and as a possible application for some of our areas of expertise.
The global CCUS market revenue was approximately $1.7 billion in 2022, projected to reach $38 billion by 2040 (source: IEA / BloombergNEF). With strong UK policy support and international investor activity, from bp and Equinor to Brookfield and Macquarie, the UK is well-positioned to become a leading player in the deployment of CCUS at commercial scale.
Look out for our future articles where we will make a deep dive into innovations and trends in the market, including shining a light on future developments and opportunities.
