Carbon capture and storage (CCS) is a controversial technology, yet it is a cornerstone in many climate scenarios for achieving net zero emissions by 2050. While CCS has been used in industry for decades, it remains a nascent climate solution and faces significant challenges, including high costs, inadequate infrastructure, and uncertain political support.

A conversation with

Claire Curry is Global Global Head of Technology, Industry and Innovation at BloombergNEF.

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How can CCS be scaled to meet global climate goals? Why is Asia key to its adoption? And what role will applications like blue hydrogen play? We ask Claire Curry, Head of Research for Technology and Innovation at BloombergNEF, who highlights both the promise and the hurdles facing CCS as a vital technology in the fight against climate change.

<2°C: – What role will CCS play in net-zero scenarios, and are we on track?

Claire Curry: – A couple of factors have made Carbon Capture and Storage (CCS) essential to reach net-zero emissions. First, we haven’t been decarbonizing quickly enough. By 2050, we’re still going to have a lot of fossil fuel-burning capacity in power and industry.

This means it’s no longer viable to think—as maybe even five years ago—that if we’re still extracting fossil fuels in 2050, we’ve failed. It’s become clear that, because we haven’t decarbonized fast enough—largely due to Asia commissioning coal-fired power plants and coal-based steel production, and the U.S. producing cheap natural gas—we will still be burning fossil fuels in the power and industry system in 2050.

That makes CCS essential. That’s the first realization we’ve had in the last few years.

14 percent of world emissions captured by 2050

– And the second realization?

– Every other route to abate industrial emissions and to produce 24/7 clean power has challenges. Biomass is a drop-in solution, but there’s not enough of it to replace coal and gas entirely. Hydrogen continues to be more expensive and harder to scale than anticipated. Nuclear power has political and technological challenges.

Every alternative we’ve explored has barriers. Therefore, CCS, which was a big hope 10 or 15 years ago, has come back into the spotlight because we’re running out of options.  And we know carbon capture can work.

The challenge is we’re still at a hopeful stage with CCS. We believe it’s going to be easier to scale than technologies like hydrogen and nuclear, but that’s yet to be proven. Issues with scaling costs, pipeline challenges, and political hurdles mean it might not be the great hope everyone expects.

So, the two main drivers are the continuation of fossil fuels and the challenges in scaling other solutions. That’s why CCS is back in focus.

– What does this translate to in numbers?

– To get to net-zero by 2050 in the most economic way possible, BNEF’s New Energy Outlook scenario shows carbon capture abating 14% of the world’s emissions in 2050. That’s less than some researchers suggest but still essential, particularly in Asia. A larger proportion of this 8 gigatons of CO₂ captured annually will be from Asian power plants. In Europe, CCS will play a smaller role, but we agree with the EU’s assessment that it needs around 450 million tonnes of carbon capture online by 2050.

Asia as the driver

– Is it fair to say that, in your models, Asia will be the driver?

– Yes. Our scenario work asks what’s the cheapest way to get to net-zero. China, India, and Southeast Asia are building a lot of coal-fired power plants and coal-based industry. We think applying retrofit carbon capture is the cheapest way to abate those emissions.

Retiring those plants early and building clean power and storage instead is more expensive and unlikely to happen. For steel, a huge portion will involve carbon capture because 70% of the world’s steel is currently made in China. Even if China’s industrialization peaks, coal-based steel production will continue for decades.

– Are you seeing any signs of China adopting CCS on a large scale?

– In industry, there’s a move to abate emissions in steel mills. They’re banning new capacity additions unless companies retire old mills, and new ones must meet efficiency mandates. This drives the build-out of Electric Arc Furnaces (EAFs), which are electrified steel recycling plants. While not CCS, it’s a way regulations are pushing companies toward lower-carbon steel.

However, decarbonizing primary steel production remains a challenge. Many Chinese steel companies have net-zero goals. They’re saying that CCS makes more sense than hydrogen because their steel capacity is on the east and southeast coast, while wind resources for green hydrogen are in the northwest. Transporting hydrogen across the country is expensive, so CCS seems more practical for them.

When will China deliver?

– Some argue China isn’t adopting CCS fast enough. What’s your view?

– China has lots of coal and is also building tons of renewables—they installed more solar capacity last year than the U.S. has ever installed. China’s push in solar, batteries, and electric vehicles has significantly aided global decarbonization.

They’re not doing it out of altruism; it’s good business. A significant portion of their economic growth is in clean energy. Renewable energy is the cheapest way to generate new power in China and helps address air quality issues.

It’s easy to point fingers, but new coal power plant commissions in 2024 are way down on what they were two years ago in China. And in steel, air quality concerns and overcapacity will likely push the government to shut down inefficient mills and replace them with steel recycling facilities.

China knows how to do CCS, and there is appetite to scale it, at the government and corporate level. So, while we can’t be complacent, I believe CCS adoption in China will happen.

Sticks

– Let’s talk about the balance of carrots and sticks. The EU’s Emissions Trading System (ETS) is a powerful stick. Do you see similar incentives elsewhere?

– Yes. The only carbon market with a price high enough to incentivize CCS is the EU’s ETS, including Norway. The UK faces current challenges with plummeting carbon prices, but a correction in the UK ETS could mean it is also a place where CCS can be competitive.

In the U.S., the EPA passed a ruling that beyond 2039, coal, and some gas, power plants can no longer emit CO₂, meaning they must shut down or implement carbon capture. While this may face legal challenges and isn’t specifically a CCS policy, it mentions carbon capture as the only route for these plants to stay operational.

India announced it will launch a carbon capture policy by the end of the year, similar to its National Green Hydrogen Mission, which includes tax credits and mandates. Since India is a huge emitter and will continue building fossil fuel plants, this is significant.

China has steel regulations that might push some carbon capture. So, there are sticks in place globally.

Carrots

– And what about the carrots—what’s being done to incentivize CCS?

– In Europe, we’ve tracked almost $50 billion of subsidy support for CCS across the UK and EU member states. The UK has pledged £22 billion through its Carbon Contracts for Difference (CCfD) mechanism, which we think is a great policy to incentivize CCS without overspending.

Germany is trying to implement similar mechanisms for hydrogen and possibly CCS. The Netherlands’ SDE++ program is similar in design. Denmark announced a subsidy of 3.5 billion kroner for a CCS scheme like CCfDs.

The EU’s Innovation Fund has pledged €4 billion to date, to industrial decarbonization, half of which is toward CCS projects, particularly in cement. Additionally, countries like Germany and France are investing billions to support their steel and cement industries in adopting CCS.

In the U.S., the Industrial Demonstration Projects Fund is CCS-heavy, pledging $6.3 billion toward industrial decarbonization.

It seems governments are throwing grants at the capital expenditure side, along with policies that will facilitate CCS deployment even if they’re not CCS-specific.

Lack of transport and storage funding

– What are the main challenges to scaling up CCS?

– Transport and storage infrastructure is a significant hurdle. The UK government acknowledges this and is funding transport and storage alongside capture projects. Part of their £22 billion pledge goes toward this.

This hasn’t been addressed adequately by the EU. The Innovation Fund is funding carbon capture but not transport and storage. The EU doesn’t plan to announce how it will handle cross-border transport and storage until 2027, which is problematic.

Funding for transport and storage is crucial. Some infrastructure companies suggest that government ownership, at least initially, might be the best approach. Governments could build the infrastructure and then privatize it later, as we’ve seen successfully done in other infrastructure sectors.

Overcapacity

– Could we end up with overcapacity in captured CO₂ with nowhere to store it?

– On paper, yes. But in reality, banks won’t fund a carbon capture project without a storage or utilization solution. We have an undercapacity in transport and storage announcements—only about two-thirds of the needed capacity is planned. We need more.

The EU aims for 450 million tonnes of carbon capture in Europe but wants a portion utilized, not stored, mainly to support e-fuels. Synthetic fuels are incredibly expensive to produce, and using them may not make economic sense compared to alternatives like Direct Air Capture.

For emitters far from storage sites, like those in Eastern Europe, options include onshore storage or CO₂ utilization. Startups are exploring sequestering CO₂ into cement, and there’s interest in using captured CO₂ to make e-chemicals and e-fuels.

However, projects often receive financing only when they have transport and storage solutions in place. For example, Equinor’s blue hydrogen project in Norway was canceled because the associated transport and storage network was canceled.

In reality, projects won’t be financed without a use or storage solution for the CO₂.

Blue hydrogen

– What role does blue hydrogen play, and how damaging are project cancellations for CCS rollout?

– Blue hydrogen is the most common application announced for carbon capture projects, especially in the U.S., where natural gas is cheap. Companies like ExxonMobil and Air Products are building massive projects in Texas.

In Europe, blue hydrogen is less accepted. The EU doesn’t currently acknowledge blue hydrogen as low-carbon, which limits its market. Proving hydrogen is green is expensive, leading some companies to push for blue hydrogen’s inclusion.

However, cancellations are happening due to a lack of demand. The EU aims for 20 million tonnes of hydrogen demand by 2030, but policies only drive about eight million tonnes. Blue hydrogen doesn’t currently count toward mandates, which is a challenge.

Oil and gas companies expect returns similar to traditional fossil fuel projects. These risky, complex projects relying on policy support don’t offer comparable returns, leading companies to pull back.

It’s a fallacy to think low-carbon technology projects will yield returns like fossil fuels. This financial reality is causing hesitancy in investing heavily in blue hydrogen, impacting the broader CCS rollout.