UK Carbon Capture Outlook

UK Carbon Capture Outlook

In late 2020, the UK prime minister Boris Johnson announced his “10-Point Plan” - which will utilise £12bn of government investment and attract approximately £36bn from the private sector to achieve the UK’s Net-Zero goal by 2050 while creating and sustaining 250,000 green jobs. The plan will use a range of cutting-edge technologies, including Offshore Wind to power buildings, low carbon hydrogen to replace natural gas for cooking & heating, green transport, and Carbon Capture Usage & Storage (CCUS) to reduce emissions by the industrial sector. This article aims to zoom in on CCUS technology to explore how the UK government can support the commercialisation of CCUS.

The amount of carbon dioxide in the atmosphere has increased by around 50% since the industrial revolution, mainly due to human activity involving burning hydrocarbons (fossil fuels) for energy, production of chemicals, extraction of elements from their cores, and deforestation for land use. Carbon dioxide and other greenhouse gases, including methane, nitrous oxide, and water vapour, create the greenhouse effect, trapping radiation from the Sun and resulting in earth warming. The impacts of global warming include rising sea levels resulting in flooding and erosion of coastal areas, extreme weather events, reduction of quality and availability of water, changes in animal ecosystems and many more.

CCUS is the process of capturing carbon dioxide (from power generation and industrial processes), safely transporting it to a storage site and depositing it to prevent it from entering the atmosphere. CCUS has the potential to capture all of the CO2 produced by a facility and extract economic value from the greenhouse gas. Current storage facilities for CCUS include departed oil & gas reservoirs, coal beds and deep saline formations. CCUS can create revenue streams for companies by selling captured CO2 to be used as a feedstock for methanol production, cement manufacturing, producing hydrogen, foaming plastics and carbonated beverages.

The UK government aims to capture 10Mt of CO2 per year using CCUS, equivalent to CO2 released by 4 million cars per annum or 3% of total UK CO2 emissions in 2019. A highly ambitious target, as the current total capacity of large-scale carbon capture and storage facilities globally, is only around 40Mt per annum. Tata Chemicals Group (TCE) is presently constructing the UK’s first industrial-scale CCU plant with financial support from the government. The plant will capture 40,000 tons of CO2 per year, reducing the plant’s carbon emissions by 11%. However, this only contributes to 0.012% of the UK’s total CO2 emissions in 2020.

The geographical break down of CCS shows that the US dominates the market with 54% (22Mt) of total global capacity. The next three players Brazil, Canada and Australia, make up 31% of the total global capacity. Despite being a 40-year-old technology, CCS has traditionally adopted by few nations representing the majority of CCS capacity. Even in those nations, the total amount of carbon captured represents less than 1% of global CO2 emissions. This low adoption rate is explained by the following commercial challenges associated with CCUS:

  • Significant investments for infrastructure are required, costing hundreds of millions of dollars.
  • Business models and practices existing in matured industries are not developed in CCSU, increasing perceived investment risk.
  • Captured products are not utilised for generating revenue streams due to low demand and perceived value.
  • Lack of public and investor knowledge, creating scepticism.

Figure 1: Geographical breakdown of current Carbon Capture Capacity per year.

Figure 1: Geographical breakdown of current Carbon Capture Capacity per year.

Figure 2: Geographical breakdown of current operational Carbon Capture Capacity per year.

Figure 2: Geographical breakdown of current operational Carbon Capture Capacity per year.

So, the question remains. What steps must the UK government take to extract maximum value from this underutilised technology and attract the private sector? Firstly, the UK government can learn from other countries. In the United States, federal tax credits issued by the government offer $35 to companies for every metric tonne of captured CO2 used commercially and $50 for every metric tonne of CO2 stored safely. Tax credits and financial support from the government can enable several new projects. Additionally, Carbon taxes introduced by Norway and Australia are incentivising industrial emitters to consider CCSU in their long-term infrastructure investment.

Investors are also looking for clear guidelines and regulations around short-term and long-term operations of the storage space to ensure compliance risks are easy to manage. The UK government should bring together the scientific community, industrials and policymakers to develop a transparent regulatory framework. Finally, the UK government must educate the public and business community to allow the next generations and current scientists to innovate in this space while initiating discussions on C-suite levels.