Carbon Capture

Carbon capture, utilization, and storage (CCUS) – identified as a key emissions reductions technology by the Intergovernmental Panel on Climate Change (IPCC) – refers to the capture of carbon dioxide and its subsequent utilization or storage. Through CCUS, Carbon dioxide is generally captured from large-point sources, such as industrial facilities and power plants. CCUS enables emissions reductions in hard-to-abate sectors and can remove carbon dioxide from the atmosphere to generate “negative emissions.” CCUS can also be used as a low-carbon way to produce electricity and hydrogen. It helps decarbonize processes that typically generate high emissions. For example, CCUS neutralizes emissions from steam methane reforming (SMR) – the principal technology for hydrogen production. This can help shift a wide range of sectors away from fossil fuels.

CCUS has the potential to play a key role in driving deep decarbonization globally. According to some reports:

  • CCUS can achieve an estimated 14% of the global greenhouse gas emissions reductions needed by 2050; 5

  • CCUS is virtually the only know way to achieve significant emissions cuts in cement production (which accounts for nearly 7% of global emissions); and

  • CCUS can capture more than 90% of carbon emissions from industrial facilities and power plants.

Given the ability to reduce emissions (and even produce negative emissions) in hard-to-abate sectors, market expansion, and advancing technologies, CCUS represents a key player in global decarbonization, and its role is expected to become more prevalent as various projects around the world further develop. Below we discuss: (1) How CCUS works, (2) certain obstacles to CCUS growth and development, (3) global CCUS development, and (4) CCUS regulation.

  • In CCUS, carbon is captured using one of three primary methods: (1) post-combustion, (2) pre-combustion, and (3) oxy-fuel combustion. The captured carbon dioxide is then compressed into a liquid-like substance and either used or transported to a storage site. Carbon dioxide can be used in enhanced oil recovery (EOR), the production of chemicals and carbon-neutral fuels, and conversion into plastics and other materials. Most current CCUS strategies, however, focus on storage in which carbon dioxide is injected deep underground, forming a “closed loop” where carbon is returned to the earth. Carbon dioxide can also be injected into deep oceans.

    In addition to CCUS, research is also focusing on two other related technologies: (1) Direct Air Capture (DAC) and (2) Bioenergy with Carbon Capture and Storage (BECCS). Direct Air Capture extracts carbon dioxide directly from the atmosphere, unlike CCUS which typically operates at the site of emissions. DAC constitutes the most expensive application of carbon capture with high energy costs. Still, many governments are actively focused on developing DAC projects. In August 2023, for example, the U.S. Department of Energy chose two DAC facility projects as recipients of up to $1.2 billion in grants -- with each project capable of capturing 250 times more CO2 than today’s largest DAC facility. Bioenergy with carbon capture and storage refers to the capture and permanent storage of carbon dioxide wherein organic matter is converted into fuel for storage or directly burned to generate energy. DAC and BECCS both accomplish negative emissions by actively removing carbon dioxide from the atmosphere.

  • The International Energy Agency (IEA), International Renewable Energy Agency (IRENA), Intergovernmental Panel on Climate Change (IPCC) and Bloomberg New Energy Finance (BNEF) have produced long-term energy outlooks that rely on the expansion of CCUS to combat global warming.16 There are, however, a number of challenges that may slow the growth of CCUS:

    • Limiting factors, including land space and water resource utilization rate;

    • A lack of storage availability that could become a bottleneck to CCUS deployment;

    • A “part-chain” approach (in which stakeholders focus discretely on capture, transportation, or storage), which mitigates commercial risk but relies heavily on close coordination in the development of each component of the CCUS value chain; and

    • The high cost of CCUS facilities, which are capital-intensive to develop and energy-intensive to operate.

  • Despite obstacles, momentum in CCUS growth and development has accelerated since 2018. In 2022, 61 new CCUS facilities were added to the global project pipeline. Since March 2023, the global total of CCUS projects numbered 30 operational, 11 under construction, and 153 in development. Moreover, CCUS costs can be expected to fall as the market grows and the technology further advances.

    Globally, CCUS projects are increasingly being announced and developed:

    • In 2022, the United States announced opportunities to drive CCUS project development with funding under the 2021 Infrastructure Investment and Jobs Act, along with favorable CCUS tax credits in the 2022 Inflation Reduction Act;

    • In March 2023, the EU launched the Net Zero Industry Act, proposing a carbon dioxide injection target and improved permitting procedures to spark CCUS investment;

    • In its Spring Budget 2023, the UK announced GBP 20 billion for the early development of CCUS projects;

    • Canada proposed an expansion of its investment tax credit for CCUS projects as part of its Budget 2023;

    • In the Asia Pacific, 10 CCUS projects have been announced since January 2022 and three new projects became operational in China in 2023; and

    • In the Middle East, three projects are operational and 10 are in development.

    The US government has provided significant funding opportunities for CCUS development in recent years. The 2021 Infrastructure Investment and Jobs Act (IIJA) allocates approximately $12 billion across the CCUS value chain through 2026. In 2022, the Department of Energy announced new funding opportunities under the IIJA including $45 million for CCUS in power and industrial applications, $820 million for large-scale CCUS pilot projects, and $1.7 billion for CCUS demonstration projects. In April 2023, the US also announced a COP28 Carbon Management Challenge which aims to catalyze the international development of CCUS technologies.

  • In the United States, risks associated with CCUS development and storage are being addressed through federal and state regulations. The Safe Drinking Water Act, along with the EPA’s Underground Injection Control Program, set safety standards for the geologic injection of carbon dioxide. Moreover, the Clean Air Act and the EPA’s Greenhouse Gas Emissions Program require monitoring, reporting, and verification plans for geologic injection and storage.