CCUS: Is Carbon Capture Use and Sequestration a Key to Meeting Climate Goals?
Why a rapid scaleup of CCUS is essential for meeting climate and emissions targets
- The Wall Street Journal
- March 12, 2019
- Atul Arya
This article ran in a special section of the Wall Street Journal published on March 12, 2019.
CCS — “carbon capture and sequestration” — is back on the energy agenda. The reason is clear. Meeting the world’s growing demand for energy while also reducing carbon emissions is an enormous challenge for the 21st century. The main approaches put forward today for addressing it — adopting low carbon and renewable sources of energy and increasing energy efficiency — can’t get the job done on their own. Meeting the challenge will require deployment of an approach that had some attention before, then seemed to fade away. But it is back in a new form, this time with a “U”— as CCUS, with a focus not only on capture and storage but also on “utilization,” or “use,” of the carbon for applications like increasing output from oil wells or as an input for creating useful products. A rapid scaleup of CCUS is essential for meeting climate and emissions targets while not crippling economic growth.
The reason CCUS will have to play a key role is simple: Despite rapid recent growth in renewable sources like wind and solar, the world still relies on fossil fuels to meet about 80 percent of its energy needs. Shifting the balance in the world’s energy mix from a reliance on fossil fuels to renewable energy sources will require considerable time.
Much of the focus today is on decarbonizing electric power production, but it should be noted that only about one quarter of global greenhouse gas (GHG) emissions are from electricity. Coal, the most carbon-intensive fuel, accounts for about 40 percent of power generation globally. Even if coal consumption were to plateau within the next few years, it will remain the fuel of choice in Asia for decades to come. Coal is a cheap, reliable, and secure energy source in China and India, two countries with the fastest growth in electricity demand. Rapid closure of coal-fired power plants in these countries is economically and politically infeasible.
There are comparable obstacles to changing the energy mix in other sectors. Shifting the world’s car, truck, plane, and shipping fleets from oil-based to low carbon fuels will require decades, not years. And in industries like refining, petrochemicals, and cement and steel production, which together generate about 20 percent of global GHG emissions, carbon abatement is even more challenging. Because of these facts, every long-term outlook, including all IHS Markit scenarios, fall well short of achieving the goal set out in the 2015 Paris Accord of limiting the increase in average global temperature to 2 degrees Celsius. As a result, there is a growing realization that a strategy including CCUS is needed to achieve the Paris goals.
CCUS as a bridge
CCUS deployed at scale is the necessary bridge to a future in which the global energy system can run on cost-competitive renewables and storage technologies alone. IHS Markit has recently developed a scenario in which the world meets the 2 degree goal with reliance on CCUS at scale as part of the equation. CCUS has already been proven in some domains. The oil industry has decades of experience, starting in the 1970s, of safely injecting gases of varying types into oil reservoirs to increase production, in a technique known as enhanced oil recovery (EOR). CCUS for EOR is a proven technology and is now seeing widespread use in the Permian Basin in Texas. The industry has a very good understanding of the geology, and injected CO2 is monitored for any leaks. This expertise can also be used to sequester CO2 permanently in depleted oil and gas fields. Offshore fields are an attractive initial target for sequestration at scale because of their size and because they are far away from population centers.
The challenge of scaling
Scale-up and large-scale deployment of CCUS remains the challenge. The IHS Markit CCS/CCUS project database shows that between 2012 and 2017 the number of large integrated CCS and CCUS projects in operation doubled — but just from 8 to 17. The bulk of these are in the United States, Canada, and Norway. China also has seven projects in various stages of development.
In the last couple of years, new projects have come online in the U.S. that have successfully demonstrated that CCUS technology can be applied at scale. In 2018, Congress approved an expansion of tax credits for CCUS facilities across a wide range of industrial sectors. For facilities targeting EOR, the new per metric ton credit started in 2017 at nearly $13 and rises linearly until 2026 to reach $35, where it will remain for the life of the credit period (12 years from project start). The credit for captured CO2 stored in geological formations starts at $20 per metric ton and eventually rises to $50 per metric ton.
There is also increasing policy support for CCUS projects around the world. In Europe, the focus is on industrial emissions. In May 2018, Norway announced that it is allocating $33 million to continue the development of its full-chain CCS concept. The European Union is providing additional funding to CCS/CCUS projects through the EU Emissions Trading System Innovation Fund and the Horizon Europe research and innovation fund.
Despite these developments, CCUS deployment at scale needs to be accelerated. The challenges are significant: the high cost of CO2 capture, lack of infrastructure, absence of policy incentives such as a carbon price, and public acceptance.
In the United States, the National Petroleum Council is conducting a major study to define potential pathways for deploying CCUS at scale, including R&D, regulatory, and policy options. China will also play a key role. It has abundant resources, low development costs, and significant experience in large-scale industrial operations. To meet its own emission commitments and address local air pollution, China will have to accelerate CCUS deployment significantly. The new carbon market in China is expected to provide an impetus. Reducing CO2 emissions will require a diverse set of technology and policy tools. CCUS will have to be one of them.
Atul Arya is Senior Vice President of Energy and Chief Energy Strategist at IHS Markit.