Trapping and storing carbon emissions is costly and uncertain. It risks letting fossil fuel users and producers off the hook. Yet the chance of preventing calamitous climate change may well depend on it. Plans to hit net zero by 2050 require a 40-fold increase in carbon dioxide (CO2) capture capacity by 2030, according to the International Energy Agency.
Carbon capture and storage (CCS) is a significant opportunity for oil and gas producers, long used to injecting CO2 into oilfields to enhance its recovery. They could earn half the $600bn of annual ebitda likely to be generated by CCS by 2050, said Jefferies. That punchy forecast, which assumes governments stick to limits agreed at the 2015 Paris accord, would more than offset declining earnings from their traditional businesses.
There are also opportunities to cut the cost of capturing carbon dioxide, which accounts for about three-quarters of total CCS expense. Scrubbing technology typically uses amine solutions from the likes of Shell and BASF and is advancing quickly.
Air Liquide has developed a cryogenic process to capture CO2 thrown off when hydrogen is produced by natural gas reforming. Milan-listed Saipem and Denmark’s Novozyme recently agreed a collaboration to develop a carbon-capture process using enzymes that requires less heat. Privately owned Svante, based in Canada, says its CO2-capturing nano-materials can halve the capital cost of existing solutions.
Investors in lossmaking CCS companies, as with other high-risk sectors, have suffered recently. Listed Norwegian pureplay CCS company Aker Carbon Capture has lost 37 per cent of its value in the year to date. But it has promising projects, including one with HeidelbergCement due to come on stream in 2024. The cost of removing carbon from cement production is high at $60-$100/tonne. But CCS is virtually the only technology capable of deep emissions cuts in the cement industry, says the IEA.
The costs of CCS for power generation — potentially the most important market — are only a sixth lower. Its uptake will depend on costs falling far enough to compete against other clean energy technologies. It will also depend on governments supporting decarbonisation by pushing up the price of carbon itself. In the short term that looks a tough ask given the implications for energy prices following the Ukraine invasion.
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