Carbon capture in 2021: Off and running or another false start?

This year has seen unprecedented advances for carbon capture, utilisation and storage (CCUS) technologies – and there are encouraging signs that this time the momentum will deliver tangible results that can help tackle global emissions.

So far in 2021, more than 100 new CCUS facilities have been announced and the global project pipeline for CO₂ capture capacity is on track to quadruple.

The IEA has consistently highlighted the important role of CCUS in achieving net zero emissions, given that without CCUS we would have limited or no solutions for tackling emissions from heavy industry sectors, including cement. CCUS also provides a key option to address emissions from existing energy assets, to support a cost-competitive scaling up of low-carbon hydrogen production, and to remove carbon from the atmosphere.

Yet, previous hopes that CCUS was about to fulfil its potential have petered out. The past decade saw high-profile project cancellations and government funding programmes that failed to deliver. On average, capture capacity of less than 3 million tonnes of CO₂ (MtCO₂) has been added worldwide each year since 2010, with annual capture capacity now reaching over 40 MtCO₂. This needs to increase to 1.6 billion tonnes (GtCO₂) in 2030 to align with a pathway to net zero by 2050. 

With its track record, why should we expect that CCUS’s current momentum will translate to real progress? While CCUS certainly still faces challenges, the combination of strengthened climate goals, an improved investment environment and new business models have set the stage for greater success in coming years.

The growth in the project pipeline in 2021 represents a major departure from the years 2010 to 2017, when plans for CCUS facilities were being cancelled and the pipeline of potential projects shrank. This trend only started to reverse in 2018, which saw a net increase of six planned projects.

This boost in CCUS project activity is underpinned by three key developments. First, a growing recognition that CCUS is necessary to meet national, regional and even corporate net zero goals. For example, Copenhagen is aiming to be the world’s first carbon-neutral city, and plans to equip its major waste facility with CCUS – removing up to 500 000 tonnes of CO₂ a year. Companies such as Microsoft, United Airlines and others are investing in direct air capture technologies to meet their corporate climate targets.

Second, the growing interest in producing low-carbon hydrogen has resulted in almost 50 facilities under development to capture CO₂ from hydrogen-related processes. This includes an October 2021 announcement by Air Products that it would build the world’s largest CCUS-equipped hydrogen production facility in Louisiana, capturing and storing more than 5 MtCO₂ per year.

Finally, the investment environment for CCUS has substantially improved as a result of new policy incentives. Since the start of 2020, governments and industry have committed more than USD 25 billion in funding specifically for CCUS projects and programmes.  

While the current momentum for CCUS is encouraging, the history of CCUS deployment has largely been one of unmet expectations. CCUS appeared poised for a major expansion following the 2008-2009 global financial crisis, when more than USD 8.5 billion of public support was made available to as many as 27 integrated projects around the world. But ultimately less than 30% of the funding was spent. Today only four projects are operating as a direct result of the earmarked support – all of them in North America and all involving lower-cost industrial applications of CCUS.

So what went wrong? Many CCUS projects simply could not advance fast enough to meet near-term spending milestones required by stimulus programmes. This was the case for the high-profile FutureGen project in the United States, which was awarded up to USD 1 billion in support with a five-year spending deadline. But the project took almost four years just to secure a CO₂ injection permit for storage.

Several programmes targeted coal-fired power generation, an important but more expensive and complex application of CCUS. Available support was also limited to one-off capital grants for select projects, rather than establishing a broader framework for CCUS investment. The absence of measures to address long-term liability for stored CO₂ as well as the higher operating costs for CCUS-equipped facilities were cited by project developers as a reason for cancelling projects. Multi-year grant funding programmes were also vulnerable to external budget pressures. In many countries, the available funding was progressively scaled back or – in the case of the United Kingdom’s CCS Commercialisation Programme – abruptly withdrawn.

Despite the limited success of these CCUS programmes, there has been some important progress since 2010. The CO₂ capture capacity of operating facilities has tripled to more than 40 MtCO₂ per year, and commercial experience has expanded to include steel, power generation and hydrogen applications.