Putting CO2 to Use

New pathways to use CO₂ in the production of fuels, chemicals and building materials are generating global interest. This interest is reflected in increasing support from governments, industry and investors, with global private funding for CO₂ use start-ups reaching nearly USD 1 billion over the last decade.

The market for CO₂ use will likely remain relatively small in the short term, but early opportunities can be cultivated. The use of CO₂ in building materials is one such opportunity, but may require further trials and updating of standards for some products. Public procurement of low-carbon products could help to create early markets for CO₂-derived products with verifiable climate benefits.

CO₂ use has potential to support climate goals, but robust life-cycle assessment is essential. CO₂ use applications can deliver climate benefits where the application is scalable, uses low-carbon energy and displaces a product with higher life-cycle emissions. Quantification of these benefits can be challenging and improved methodologies are needed to inform future policy and investment decisions.

CO₂ could be an important raw material for products that require carbon. Some chemicals require carbon to provide their structure and properties while carbon-based fuels may continue to be needed where direct use of electricity or hydrogen is challenging (for example, in aviation). In the transition to a net-zero CO₂ emission economy, the CO₂ would increasingly have to be sourced from biomass or the air.

Globally, some 230 million tonnes (Mt) of carbon dioxide (CO₂) are used every year. The largest consumer is the fertiliser industry, where 130 Mt CO₂ is used in urea manufacturing, followed by oil and gas, with a consumption of 70 to 80 Mt CO₂ for enhanced oil recovery. Other commercial applications include food and beverage production, metal fabrication, cooling, fire suppression and stimulating plant growth in greenhouses. Most commercial applications today involve direct use of CO₂.

New pathways involve transforming CO₂ into fuels, chemicals and building materials. These chemical and biological conversion processes are attracting increasing interest from governments, industry and investors, but most are still in their infancy and face commercial and regulatory challenges.

The production of CO₂-based fuels and chemicals is energy-intensive and requires large amounts of hydrogen. The carbon in CO₂ enables the conversion of hydrogen into a fuel that is easier to handle and use, for example as an aviation fuel. CO₂ can also replace fossil fuels as a raw material in chemicals and polymers. Less energy-intensive pathways include reacting CO₂ with minerals or waste streams, such as iron slag, to form carbonates for building materials.

The future market potential for CO₂-derived products and services is difficult to assess. The early stage of technology development and anticipated reliance on policy frameworks for most applications makes estimating the future market very challenging. Theoretically, some CO₂ use applications, such as fuels and chemicals, could grow to scales of multiple billions of tonnes of CO₂ use per year, but in practice would compete with direct use of low-carbon hydrogen or electricity, which would be more cost effective in most applications.

The barriers to near-term scale up of CO₂ use are commercial and regulatory rather than technological. This analysis considers the near-term potential for increasing the market to at least 10 Mt CO₂ use per year for each of the five categories of CO₂-derived products and services: fuels, chemicals, building materials from minerals, building materials from waste and CO₂ use to promote plant growth. This level of CO₂ use would be almost as much as the current CO₂ demand for food and beverages.

For CO₂-based fuels and chemicals, production costs are currently several times higher than for their conventionally-produced counterparts. This is mainly due to the costs associated with hydrogen production. Commercial production is possible in markets where both cheap renewable energy and CO₂ are available, such as in Chile or Iceland. CO₂-derived polymers could be produced at lower cost than their fossil counterparts, but the market is relatively small.

Building materials produced from CO₂ and minerals or waste can be competitive today. Early markets for CO₂ use in concrete manufacturing are emerging, with CO₂-cured concrete delivering lower costs and improved performance compared to conventionally-produced concrete. The production of building materials from waste and CO₂ can also be competitive as it avoids the cost associated with conventional waste disposal. The CO₂ used in building materials is permanently stored in the product, with additional climate benefits derived from lower cement input in the case of CO₂-cured concrete. For some concrete products, trials and updating of product standards may be required to support broader deployment.

CO₂ used is not the same as CO₂ avoided. CO₂ use does not necessarily reduce emissions and quantifying climate benefits is complex, requiring a comprehensive life-cycle assessment as well as understanding of market dynamics. CO₂ use can provide climate benefits where the application is scalable, uses low-carbon energy, and displaces a product with higher life-cycle emissions. Longer term, in a net-zero CO₂ emission energy system, the CO₂ would have to be sourced from biomass or the air to achieve climate benefits. CO₂-derived products that involve permanent carbon retention, such as building materials, can offer larger emissions reductions than products that ultimately release CO₂ to the atmosphere, such as fuels and chemicals.

Improved understanding and quantification of CO₂ use applications and their emission reduction potential is required. To inform future policy and investment decisions, there is a need for robust life-cycle analyses based on clear methodological guidelines and transparent datasets. In recent years, several expert groups have started to develop such guidelines; however, it remains challenging due to the early stage of development of many CO₂ use technologies.

CO₂ use is a complement, not an alternative, to CO₂ storage for large-scale emissions reductions. CO₂ use is not expected to deliver emissions reductions on the same scale as carbon capture and storage (CCS), but can play a role in meeting climate goals as part of an “all technologies” approach. In International Energy Agency (IEA) scenario analysis with limited deployment of CO₂ storage, CO₂ use within the energy system increases (including for the production of methanol and synthetic hydrocarbon fuels) but delivers less than 13% of the emissions reductions that would otherwise be provided from CO₂ storage. The potential for negative emissions from CO₂ use is also very limited. 

The future prospects for CO₂ use will largely be determined by policy support. Many CO2 use technologies will only be competitive with conventional processes where their mitigation potential is recognised in climate policy frameworks or where incentives for lower-carbon products are available. Public procurement can be an effective strategy to create an early market for CO₂-derived products with verifiable climate benefits, and can assist in the development of technical standards.

The market for CO₂ use is expected to be relatively small in the short term, but early opportunities can be developed. These early opportunities include building materials, but in some cases also polymers and industrial CO₂ use in greenhouses. Industrial areas where low-cost raw materials, low-carbon energy and consumers are located together, and where existing CO₂ pipelines can be used to advantage, can provide early deployment opportunities.

Further research, development and demonstration (RD&D) is needed. This is particularly for applications that can contribute to a future net-zero CO₂ emission economy, including chemicals and aviation fuels derived from biogenic or atmospheric CO₂. This should be in conjunction with RD&D for low-carbon hydrogen production.

• Ensure policy and investment decisions for CO₂ use applications are informed by robust life-cycle analysis that provides improved understanding and quantification of climate benefits.
• Identify and enable early market opportunities for CO₂ use that are scalable, commercially-feasible and can deliver emissions reductions. The use of CO₂ in building materials is one such opportunity.
• Introduce public procurement guidelines for low-carbon products. This can create an early market for CO₂-derived products with verifiable CO₂ emissions reductions, and promote innovation and investment.
• Establish performance-based standards for products such as building materials, fuels and chemicals to facilitate the uptake of CO₂-derived alternatives.
• Support research, development and demonstration for future applications of CO₂ use that could play a role in a net-zero CO₂ emission economy, including as a carbon source for aviation fuels and chemicals.

While most of the focus on CO₂ is on its contribution to climate change, it can also be a commercial input to a range of products and services. Today, around 230 million tonnes (Mt) of CO₂ are used each year 1. The largest consumer is the fertiliser industry, where around 130 MtCO₂ per year is used in urea manufacturing, followed by the oil sector, with a consumption of 70 to 80 MtCO₂ for enhanced oil recovery (EOR) 2. CO₂ is also widely used in food and beverage production, the fabrication of metal, cooling, fire suppression and in greenhouses to stimulate plant growth.

More than two-thirds of current global demand for CO₂ comes from North America (33%), the People’s Republic of China (“China”) (21%) and Europe (16%), with the demand for existing uses expected to grow steadily year-on-year (Figure 1). This analysis does not consider these mature CO₂ use pathways, including EOR, but focuses on its emerging and novel applications.

Figure 1. Growth in global demand of CO₂ over the years (left); breakdown of demand in 2015 (right)

The range of potential CO₂ use applications is very large and includes direct use, by which CO₂ is not chemically altered (non-conversion) and the use of CO₂ by transformation (via multiple chemical and biological processes) to fuels, chemicals and building materials (conversion) (Figure 2).

Although most conversion pathways are highly energy-intensive and still in their infancy, they are attracting growing interest and support from governments, industry and investors. Companies such as CarbonCure and Solidia, which use CO₂ to manufacture concrete, have recently attracted investment from Breakthrough Energy Ventures and OGCI Climate Investments, respectively. In North America, the NRG COSIA Carbon XPrize is supporting the development of novel CO₂ use opportunities with a USD 20 million global competition 12. Governments in Canada, Japan, the United Kingdom and the United States as well as the European Commission are also providing significant RD&D support for CO₂ use.

The emerging interest in opportunities for the use of CO₂ is driven by several concerns. Key among these is its potential to contribute to climate goals. Other factors include technology leadership, energy security, the anticipated availability of cheap and abundant renewable energy (which could make CO₂ conversion routes more economical), and the potential for the use of CO₂ to be either a stepping stone or a smaller-scale alternative to carbon capture and storage (CCS).

In select cases, such as building materials, the use of CO₂ can be based on purely commercial drivers as it delivers a product with superior performance and lower cost than conventionally produced building materials. CO₂ could be an important raw material for products that will continue to require carbon, either because it provides their structure and properties (carbon-containing chemicals) or because the use of carbon-free energy carriers, such as electricity or hydrogen, is challenging (for example, aviation fuels). CO₂ is one of few alternatives to fossil fuel as a source of carbon.

Figure 2. Simple classification of pathways for CO₂ use

Using CO₂ in products or services does not necessarily reduce emissions. Quantifying the potential climate benefits is complex and challenging, requiring a life cycle approach. The climate benefits associated with CO₂ use primarily arise from displacing a product or service with one that has higher life-cycle CO₂ emissions, such as fossil-based fuels, chemicals or conventional building materials.

There are five key considerations in assessing the climate benefits of CO₂ use:

1. The source of CO₂ (from natural deposits, fossil fuels, biomass or the air).
2. The product or service the CO₂-based product or service is displacing.
3. How much and what form of energy is used to convert the CO_2.
4. How long the carbon is retained in the product.
5. The scale of the opportunity for CO₂ use.

Over time, and as fossil fuel use declines, the climate benefits associated with displacement will be reduced and the CO₂ used must increasingly be sourced from biomass or through direct air capture (DAC). These CO₂ sources can support a carbon-neutral life cycle for some CO₂ use applications and could deliver negative emissions in applications where the carbon is permanently stored, such as in building materials (Figure 3). However, these negative emission opportunities are likely very limited and must be considered in the context of the product’s entire life cycle.

The carbon retention time for CO₂ use applications can vary per product, ranging from less than one year for fuels, up to ten years for most chemical intermediates, to hundreds of years for polymers, while storage in building materials could last for millions of years. Critically, the potential of CO₂ use to contribute to climate goals will depend on how far, and how fast, these opportunities can be scaled-up.

Figure 3. CO₂ flows for CO₂ use applications

The future market for CO₂-derived products and services is very difficult to assess, reflecting the early stage of technology development for many applications and the reliance on supporting policy frameworks. Global estimates range from less than 1 GtCO₂ per year to 7 GtCO₂ per year by 2030, depending on the assumptions applied. These higher estimates are considered extremely optimistic.

A high-level screening of the theoretical potential for CO₂ use and the likely climate benefits (Figure 4) shows that fuels have the largest potential due to their vast market size, while building materials show the greatest climate change mitigation potential mainly because of the low energy requirements and the permanent retention of carbon in the product.

The market for CO₂-derived products and services is expected to remain small in the short term. Individual markets are either small in nature (polymers, greenhouses), limited to locations with favourable conditions (methane, methanol) or face other barriers for fast deployment, such as building standards and codes (building materials).

Figure 4. Theoretical potential and climate benefits of CO₂-derived products and services

The IEA has identified five key categories of CO₂-derived products and services that are attracting significant global interest and considered the near-term requirements to increase the market for these applications to at least 10 MtCO₂ use per year. This is almost as much as the current CO₂ demand for food and beverages. The analysis finds that technologically all of these applications could be scaled up but would face commercial and regulatory barriers.

1.   CO₂-derived fuels

The carbon in CO₂ can be used to produce fuels that are in use today, including methane, methanol, gasoline and aviation fuels. The process involves using the CO₂ in combination with hydrogen, which is highly energy-intensive to produce, and results in a carbon-containing fuel that is easier to handle and use than pure hydrogen (Figure 5). Low-carbon hydrogen can be produced from fossil fuels when combined with CCS, or through electrolysis of water using low-carbon electricity 3.

CO₂-derived fuels are particularly interesting for applications where the use of other low-carbon energy carriers, such as electricity or hydrogen, is extremely challenging, such as in aviation. Several firms have already built demonstration and pilot plants producing methane and methanol from CO₂ and hydrogen, together using hundreds to thousands of tonnes of CO₂ per year. Other chemical and biological conversion pathways to produce CO₂-derived fuels are in the early research or demonstration stages.

Figure 5. Mature conversion route for CO₂-derived fuels and chemical intermediates

Estimated production costs of methanol and methane from CO₂ in most regions of the world are currently 2 to 7 times higher than for their fossil counterparts. The chief cost factor is typically electricity, accounting for between 40-70% of the production costs, and hence very low average grid electricity prices are required for CO₂-derived methanol and methane to be competitive. Even under these conditions, the direct use of low-carbon hydrogen and electricity as a fuel will be a more cost-effective option in most cases.

Commercial production of CO₂-derived methanol and methane could be possible in markets where both low-cost renewable energy and CO₂ are available, such as in North Africa, Chile or Iceland. A prime example is the George Olah facility in Iceland that converts around 5 600 tonnes of CO₂ per year into methanol using hydrogen produced from renewable electricity 4.

Over time, production costs of CO₂-derived fuels are expected to come down, mainly due to capital cost reductions and availability of low-cost renewable electricity and feedstock CO_2. While CO₂-derived methane and CO₂-derived liquid fuels, such as diesel or aviation fuels, will continue to be uncompetitive in the absence of a stringent CO₂ price regime, CO₂-derived methanol may become competitive in more regions around the world, depending on local methanol market prices.

Both CO₂-derived methane and methanol can provide climate benefits, but the use of low-carbon energy for their production is critical. Analysis of the relevant literature shows that, in a best case scenario, emissions can be reduced by 74% to 93% for methanol and 54% to 87% for methane as compared to conventional production routes 5. However, extensive testing is needed before these products can be recognised by existing product quality standards.

2.   CO₂-derived chemicals

The carbon (and oxygen) in CO₂ can be used as an alternative to fossil fuels in the production of chemicals, including plastics, fibres and synthetic rubber. As with CO₂-derived fuels, converting CO₂ to methanol and methane is the most technologically mature pathway. The methanol can be subsequently converted into other carbon-containing high-value chemical intermediates such as olefins, which are used to manufacture plastics, and aromatics, which are used in a range of sectors including health and hygiene, food production and processing.

A special group of chemicals, polymers, are used in the production of plastics, foams and resins. The carbon in CO₂ can be used in polymer production by replacing part of the fossil fuel-based raw material in the manufacturing process (Figure 6). Unlike the conversion of CO₂ to fuels and chemical intermediates, polymer processing with CO₂ requires little energy input, because CO₂ is converted into a molecule with an even lower energy state (carbonate). A number of companies are currently operating polymer plants using CO₂ as a raw material.

Figure 6. Mature conversion pathway for CO₂-derived polymers

Polymer processing with CO₂ can be competitive in the market, due to the relatively low energy required for their production and their high market value. Some claim that certain polymers can be made at 15% to 30% lower cost than their fossil counterparts, provided the CO₂ used is cheaper than the fossil fuels-based raw material it replaces 6. The Chimei Asai facility in Chinese Taipei, a joint venture of Asahi Kasei Chemicals and Chi Mei Corp, has been manufacturing around 150 000 tonnes of polycarbonates per year using CO₂ as a starting material for more than a decade 7. Although the potential market for polymers is relatively small, early opportunities for polymer processing with CO₂ may be available in locations where existing polymer plants can be modified and where fossil fuel prices are high.

Potential climate benefits in polymer production depend on the amount of CO₂ that can be absorbed in the material, which can be up to 50% of the polymer’s mass 8. For example, a polymer containing 20% CO₂ by weight shows life cycle CO₂ emissions reductions of 15% relative to the conventional production process 6. Similarly to CO₂‑derived fuels and chemicals, further compliance testing is needed before polymers with high mass percentages of CO₂ can enter the market.

3.   Building materials from minerals and CO₂

CO₂ can be used in the production of building materials to replace water in concrete, called CO₂ curing, or as a raw material in its constituents (cement and construction aggregates). These applications involve the reaction of CO₂ with calcium or magnesium to form low-energy carbonate molecules, the form of carbon that makes up concrete (Figure 7). CO₂-cured concrete is one of the most mature and promising applications of CO₂ use, while the integration of CO₂ in the production of cement itself is at an earlier stage of development.

Figure 7. Mature conversion pathway for CO₂-derived building materials

CO₂-cured concrete can have superior performance, lower manufacturing costs and a lower CO₂ footprint than conventionally-produced concrete. The climate benefits come mainly from the lower input of cement, which is responsible for the bulk of the costs and life-cycle emissions of concrete. Two North American companies, CarbonCure and Solidia Technologies, are leading the development and marketing of CO₂ curing technology 9 10.

Quantifying the potential of CO₂-cured concrete to reduce emissions remains difficult. CarbonCure reports that the CO₂ footprint of concrete can be reduced by around 80%, but these claims have not been verified independently 9. A highly prospective opportunity for early application of these technologies is the market for pre-cast concrete products and ready-mixed concrete that is cured with CO₂ and water at the plant before being transported for use in construction.

Existing regulations and product standards may stand in the way of early application in certain parts of the market. Updating existing product standards can take up to a decade; multi-year trials must demonstrate safe and environmentally friendly performance. A shift from prescriptive to performance-based standards could facilitate the uptake of novel CO₂-derived building materials.

In the interim, non-structural applications of concrete for which high mechanical strength is not required (for example construction of roads, floors and ditches) could be a target for early deployment of these new products.

4.   Building materials from waste and CO₂

Construction aggregates (small particulates used in building materials) can be produced by reacting CO₂ with waste materials from power plants or industrial processes. Among these are iron slag and coal fly ash, which would otherwise be stockpiled or stored in landfill (Figure 7). Producing building materials from waste and CO₂ can be competitive as it offsets the cost associated with conventional waste disposal.

Waste materials such as steel slag, bauxite residue and air pollution control (APC) residues are good candidates for conversion into building materials using CO₂. Companies in different parts of the world are scaling up businesses using these waste materials; together they consume around 75 kilotonnes (kt) of CO₂ annually. The British company Carbon8 uses around 5 kt/yr of CO₂ to convert around 60 kt/yr of APC residues into lightweight aggregates as a component of building materials 11.

The climate benefits of these materials created from waste depend on the energy intensity of the production process and the transport of both the inputs and the carbonate products. Pre-treatment and separation steps can be particularly energy-intensive. The exact potential for reduction of emissions remains difficult to quantify and is case-specific. Carbon8 claims that more carbon is permanently stored during the process than emitted in its manufacture, resulting in a carbon-negative aggregate 11.

This process also requires multi-year trials demonstrating safe and environmental-friendly performance. Existing regulations, such as the European Union’s End of Waste Regulations, need to be revised to allow the use of certain waste materials. Similarly to using building materials made from minerals, targeting market segments that are more receptive to novel building materials may help build an early market.

5.   Crop yield boosting with CO₂

CO₂ can be used to enhance yields of biological processes, such as algae production and crop cultivation in greenhouses. The application of CO₂ with low-temperature heat in industrial greenhouses is the most mature yield-boosting application today, and can increase yields by 25% to 30%. The clear leader in the use of CO₂ in greenhouses is the Netherlands, with an estimated annual consumption between 5 and 6.3 MtCO₂. Of this amount, approximately 500 ktCO₂ per year comes from external sources, mainly industrial plants, with the balance taken from on-site gas-fired boilers or co-generation systems 8. The replacement of these on-site systems with other industrial CO₂ sources or with CO₂ captured directly from the atmosphere could deliver climate benefits.

CO₂ use has the potential to support the development of products and services with a lower CO₂ footprint and to contribute to emissions reductions. It can also be a complement to the widespread deployment of CCS, which the IEA has consistently highlighted as a critical part of the portfolio of technologies needed to achieve climate goals. In particular, CO₂ use can support investment in CO₂ capture opportunities, technology refinement and (in limited cases) early development of CO₂ transport infrastructure.

However, CO₂ use cannot replace CO₂ storage in delivering the very significant emissions reductions needed to meet Paris Agreement ambitions. This reflects the expected smaller scale of many CO₂ use opportunities, their very limited scope for negative emissions, and their early stage of technology and market development.

IEA scenario analysis highlights that CO₂ use could become a more attractive mitigation option where availability of CO₂ storage is limited, but it would not scale to similar levels of deployment. In the Clean Technology Scenario (CTS), which sets out a pathway consistent with the Paris Agreement climate goals, CO₂ use in fuel transformation and industry would reach around 250 MtCO₂ annually by 2060. In a variant of the CTS where the cumulative availability of CO₂ storage is limited to only 10 GtCO₂ (the Limited CO₂ Storage [LCS] scenario variant), CO₂ use would increase three-fold, to 878 MtCO₂ in 2060 (Figure 8). The CO₂ is used for the production of methanol, urea and CO₂-derived fuels (kerosene, gasoline and diesel). Although this scenario analysis only considers the use of CO₂ in energy and industrial applications, it highlights the difference in anticipated scale for CO₂ use and CO₂ storage.

Figure 8. CO₂ use in a climate pathway with limited availability of CO₂ storage