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The prospects for CCS have changed

The end of 2020 witnessed CCS making a comeback to the main stage of the climate decarbonisation debate, after nearly a decade of inaction. Now, 2021 marks the year when CCS finally moves beyond the “ready” and the “steady” phases and is finally really getting going in Europe. CCS is not precisely a new technology, nor one that comes without its controversies, but it could prove to be a pivotal technology within the EU over the course of the next decade. You may say, “We have been here before”—the promise of CCS has long been discussed, with its detractors arguing it can be used by conventional forms of energy as an excuse to keep their polluting forms of generation operating. But I argue that we are now in a new place, where instead of being a delayer of climate action, CCS could become an enabler. What has changed and why should we be talking about CCS, again? The 2018 IPCC report on 1.5°C scenarios, which in part sparked the Fridays4Future global climate movement due to the urgency for action it called for, dispelled any naivety that the ambitious goals of the Paris Agreement could ever be met without CCS. The European Commission’s own modelling exercise for net-zero by 2050 scenarios clearly counts on CCS for meeting its targets.

INVESTMENT CLIMATE

The role of CCS in the debate has fundamentally changed into one that now makes this technology a viable—and urgent—investment option for the present moment, not least as part of a build-back-better post-pandemic recovery portfolio. This is a sizeable change of prospects for this technology and key factors have made the case for CCS to play a role in the transition towards carbon neutrality already now, in the 2020s. Firstly, the global wave of net-zero announcements witnessed in the autumn of 2020 requires us to think of CCS in a different way. The net-zero equation itself refers to a balance between sources and sinks, and requires a thorough consideration of carbon removal and the options for long-term storage. Reaching net-zero in 30 years will require that not only we consider these carbon removal options but that we also deploy them at scale starting with the extensive CO2 transport and storage network that will enable them. Secondly, some of the old narratives in the CCS, such as the idea that coal plants could benefit from adding CCS capability have been removed permanently from the agenda, as the coal phase-out in Europe accelerates. Not only have all EU countries but two—Bulgaria and Romania—already declared coal phase-outs, but those with deadlines beyond 2030 will struggle to keep their plants open in an environment where the carbon price in Europe is the highest it has ever been to date.

HARD TO ABATE SECTORS

This means the decarbonisation conversation is moving to the hard to abate sectors, like heavy industry, where CCS’s role in the transition is becoming increasingly important as it is one of the few proven technologies to reduce emissions now. In the harder to abate sectors unlike in the power sector, cheaper alternatives are not easily available, which means that CCS has a pretty good business case behind it. The new climate target under the EU Green Deal strengthens this case further as industry alone will need to deliver emission reductions of 55% by 2030. Most importantly, this newly acquired clarity on its role now allows for focused intervention from investors and policymakers. Thirdly, shifting the decarbonisation debate from the power sector to the industrial sector brings a cluster-based approach to the solutions mix. Instead of point by point reservoir projects, in heavy industry cluster approaches will dominate making CCS a good fit for the future low-carbon industrial landscapes. Additionally, CCS is bound to become an attractive way of making low-carbon hydrogen, which is likely to make an important contribution in some of the heavy industry sectors and transport.

LOOKING EAST

Finally, Asia, where most conventional power plants, as well as some industries, are quite young. Can we still expect the age-old CCS debate there, with regards to retrofitting power generation plants? Yes and no, depending on how fast the region moves to peak its emissions, but the case for retrofitting existing power plants with CCS will be higher there than in the EU. When China starts to implement its carbon market, the increasing carbon price will create a similar landscape to that of the EU. Yet even without it, at the rapid pace, the cost of renewables is falling, coal might become simply too expensive. Japan has a challenging decarbonisation landscape but it has still committed to carbon neutrality by 2050. Given its energy set-up and lack of suitable storage, it might need to find other storage sites to ship the carbon dioxide to. The end of 2020 saw the €2.4 billion Longship CCS project in Norway sail through a complicated route of approvals and discussions, ringing in a new era for CCS properly getting going. We might revisit this discussion a decade from now and be able to look back with the benefit of hindsight—but this type of project is precisely why we need to get going on CCS, so we are in a better place to assess the full potential of this technology against a favourable cost scenario.

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