A new report suggests the European Union needs to have a dedicated CCUS strategy to maximise its impact
CARBON PRICE
Higher cost of carbon would make a business case in CCS technology more viable
COUNT DOWN
Time is running out for CCS investments before becoming stranded assets post-2050
KEY QUOTE
The EU should focus on the infrastructural requirements of CCS—transport and storage
Carbon capture and the utilisation or storage (CCUS) of those emissions is a technology that has long promised to be a powerful weapon in climate policy arsenals but which has to date shown very few meaningful results. Carbon-capture facilities remain in the process of being installed at cement factories and waste-to-energy plants, while CO2 transport and storage sites are still being prepared. The lack of progress in the sector comes despite the European Commission estimating that 300-500 megatonnes (Mt) of CO2 from various sources will have to be industrially captured every year by 2050, in order to meet the EU’s climate neutrality target. According to its sustainable carbon cycles strategy—which delves into everything from farming and reforestation to technological solutions and certification—5 Mt should be captured by 2030. A new report by the Intergovernmental Panel on Climate Change (IPCC) acknowledges the need to remove carbon from the atmosphere, both through organic means such as carbon sinks and via technological solutions. Drawing carbon down from the atmosphere and either storing it in geological formations and building materials or converting it into advanced fuels will be one side of the coin. The other will be removing legacy emissions so as to curb catastrophic climate change. In Europe, there are four CCS facilities in operation and a total of 50 in development, according to the Global CCS Institute, a think tank. When up and running, they should be able to sequester about 80 Mt of CO2 every year. “Economic and financial constraints are the main reason for CCUS projects not moving ahead as planned, but more countries are starting to see the importance of providing support to such projects,” according to Rystad Energy, a research and intelligence firm. “Demand for carbon capture projects through to 2030 will be predominantly driven by policies and support, especially for hard-to-decarbonise sectors such as cement, steel, maritime and chemicals,” Rystad adds. Policies and support in Europe are currently lacking in coherence or in some cases are yet to be designed and implemented. This may soon change.
SET STRATEGY A new report by the Clean Air Task Force (CATF), a US-based non-profit, makes the case for an EU strategy dedicated solely to scaling up CCS projects, which would include targets and extra funding for the industry. And, according to sources at the European Commission who are working on the finer details of the EU’s Green Deal, this kind of strategy is already on the agenda and focus will likely skew more towards the capture and storage of carbon rather than the utilisation of carbon. The utilisation of the captured carbon does not actually reduce emissions if the gas is then released through the burning of e-fuels or other products. CATF’s recommendations include making sure geological storage is not just limited to the North Sea, streamlining permitting procedures, developing cross-border CO2 transport infrastructure and designing certification schemes for low-carbon products. “Previous efforts to deploy these technologies at a large scale in Europe have struggled, owing primarily to inadequate regulatory incentives and the need to develop common CO2 infrastructure,” the report explains. In 2018, the European Court of Auditors, the EU’s financial management watchdog, concluded that a funding programme for carbon capture demonstrators and prototypes worth more than €3 billion had failed to achieve any of its objectives. “It is imperative that EU and national governments develop a coordinated policy framework that allows these first-mover projects to progress and develop into a viable, region-wide industry for CO2 storage,” the CATF report adds.
COST BALANCE Business cases for projects have improved markedly as the cost of emissions trading permits has increased. The closer the cost of emitting comes to the cost of capturing a tonne of carbon, the bigger the potential demand will become. Funding is, nevertheless, the most significant hurdle that CCS will have to overcome. As far as EU financing is concerned, the bloc’s Innovation Fund, a war chest that already has about €38 billion in spending firepower up to 2030, is a big part of the puzzle. The fund recently doled out more than €1 billion to seven large-scale projects, four of which involve carbon-capture technology. Projects in Belgium, Finland, France, the Netherlands, Norway and Sweden aspire to develop a combined CO2-abatement capacity of more than 30 Mt within the first ten years of operation. According to the Commission, the next round of funding will be worth around €1.5 billion and 138 applications were received by the March 3rd, 2022, deadline—a massive oversubscription to the programme. Results will be announced in the second half of 2022. 
EXTRA FINANCE Even taking into account a higher carbon price—the Innovation Fund is filled by revenues made from selling emissions trading permits—and assuming that governments will agree to a rule change, EU money alone will not be enough to get CCS up and running. “Taking into account the carbon price and existing funding schemes, there is a revenue shortfall for currently announced projects which amounts to a cumulative €10 billion by 2030,” CATF estimates in its report. This is where member states will have to take up the slack. CATF points to the Netherlands as a prime example of an EU government clearly spelling out its priorities and making funding decisions in good time, particularly in the Port of Rotterdam area which is quickly emerging as a carbon-capture industrial hub. The report suggests that policies such as carbon contracts for difference—a financial instrument that rewards emission reductions that are made above the prevailing ETS price—could be used to scale up CCS and mitigate the costs associated with the technology. “Such an approach is already being adopted by national governments such as the Netherlands, the UK and Denmark,” CATF explains. Jonas Helseth from Bellona Europe, an environmental NGO, agrees that the Innovation Fund is a powerful investment tool but suggests that there should be a rethink of what parts of the CCS value chain receive the most attention. “The EU should focus on the infrastructural requirements of CCS—transport and storage—which are shared costs, instead of looking at the capture costs which are broadly dependent on each individual facility,” he says. In that regard, CCS received a big boost in December, when an agreement on the European Union’s updated Trans-European Networks for Energy (TEN-E) regulation was brokered. The deal includes funding for CO2 storage and transport from 2023. National governments could also choose to team up under the EU’s Important Projects of Common European Interest (IPCEI) banner, which allows them to plough money into industries like battery and hydrogen production, without falling foul of state aid rules. One of the Innovation Fund projects involves Belgium, the Netherlands and Norway and, if successful, might serve as a template for an IPCEI, acknowledges a Commission official involved with setting energy policies. CCS is also currently listed as a sustainable investment option under the EU’s taxonomy and, according to energy chief Frans Timmermans, a number of countries want to spend a part of their slices of the bloc’s €800 billion Covid recovery fund on carbon capture projects.
IN THE LIMELIGHT CATF’s report is not the first to call for an EU-wide strategy on CCS deployment: earlier this year the Florence School of Regulation, part of the European University Institute, also made its case for a carbon capture plan. “The use of CCUS has been slow. Strong leadership by the Commission is needed. The adoption of a European Strategy for CCUS and a Commission initiative to catalyse CO2 infrastructure could provide this necessary step change,” its report insists. Christopher Jones and Andris Piebalgs, from the Florence School of Regulation and the report authors, warn that there is little time to waste and that CCUS risks falling into a “valley of death” situation, as investments will not be recoupable by 2050. The Florence School report leans heavier on the idea that CCUS will be “largely a transition technology” and unless capture technology advances to such a stage that 100% of emissions can be trapped, “has relatively little role to play post-2050”. “The CCS grid can neither be a stranded asset nor an argument for grandfathering positive emission technologies post-2050,” the report adds. Hard to abate sectors such as cement production may still need CCS and if the hydrogen economy becomes well-established with blue hydrogen—produced using fossil gas—as part of the mix, after which carbon capture will likely remain in the policy mix for decades. Jones explains that the EU’s Hydrogen Strategy, “[should] not be used as a template, as there are different challenges, but it is an example of how agreeing on clear objectives, action and targets are needed.”
MIXED SIGNALS Meanwhile, CCS is not a popular climate policy among green groups, which insist that it diverts resources away from emission reduction measures and sends the wrong signal to emitters that business as usual can continue. This appraisal of carbon capture technology often stems from how CCS was originally viewed, in Europe in particular: namely, that it would be used in conjunction with fossil fuel power plants and energy majors could continue burning gas and coal for electricity. “Carbon capture and storage is the fossil fuel industry’s get out of jail free card—it buys it time, legitimacy and keeps its current business model intact under the promise of cleaning up its mess in the future,” says Eilidh Robb from Friends of the Earth Europe, a campaign group. “Not creating the emissions in the first place is the obvious answer, CCS is just one big distraction that only benefits fossil fuel profiteers,” Robb adds. Dana Nuccitelli, an environmental scientist, explains that advocates are right to say that carbon dioxide removal (CDR)—which includes both technological CO2 removals and biological removals—should not negatively impact emission reduction efforts. “The bathtub water level will continue to rise until the faucet is turned off and right now it’s on full blast,” he says, using an analogy in which the tap is greenhouse gas emissions and the drain is CDR policies. Brussels lawmakers have also tried to make this point: “The European Parliament has repeatedly called for prioritising emissions reductions over CDR and stressed the importance of conserving biodiversity and enhancing natural sinks and reservoirs,” reads one MEP briefing note.
LICENCE TO POLLUTE Rapid developments in the renewable energy sector have largely put paid to the idea that conventional power generation and carbon capture are a match made in heaven. Heavy industry, plus some scope for biomass energy, are now the favoured candidates. CATF’s report also makes recommendations on how the EU could make sure that energy majors do not treat the technology as a licence to pollute, suggesting a few policy options that could guide the power sector in the right direction. “Introducing regulatory requirements for the oil and gas industry to undertake steps towards storage site development, including data acquisition and permitting,” is one suggestion, while another is incentivising industry to reuse existing infrastructure for CO2. Toby Lockwood from CATF and the report author turns the “licence to pollute” argument on its head. “The aim of CCS rollout is to give emitters the option not to pollute. Currently, emitters such as heavy industry and waste-to-energy plants effectively have a licence to pollute through their limited exposure to the carbon price. Helping these plants to access CO2 storage infrastructure provides a viable pathway to decarbonisation, which in turn allows regulation to require greater action,” he says. The EU Commission published its in-depth plan on sustainable carbon cycles late last year and is due to follow it up with a regulation on carbon removal certification by the end of 2022. •
TEXT Sam Morgan