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Carbon Capture: Should Its Future Be Financed?

image credit: Image from the NYT, 2017
Diane Cherry's picture
Principal Diane Cherry Consulting, LLC

Diane Cherry is a woman owned small business providing clean energy consulting services for local government, clean energy companies, non-profits and educational institutions. Her projects and...

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  • Sep 8, 2021
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Carbon capture: it's a term we have all likely heard, bouncing around in the energy and climate space for years. Carbon capture, utilization, and storage (CCUS) technologies have been around for decades; many have touted them as a key solution in reducing carbon dioxide in the atmosphere and, consequently, mitigating climate change. In recent months, we have seen billionaires like Elon Musk and Bill Gates offer funding for carbon extraction endeavors. Commitments like these show growth in private sector conversations around climate investments. But for all of the hype, there is just as much skepticism about both the viability and rigor of carbon capture as a mitigation tool. 

What is Carbon Capture?

The primary use of CCUS involves three main processes: capture, transport, and storage. Carbon dioxide is first "captured" from industrial processes, such as fossil-fueled power generation. It is then compressed and transported via pipelines, road, and water transport to a storage site. Storage entails either reusing the carbon, or (most commonly) injecting it back into the earth—think oil and gas reservoirs, unmineable coal seams, and deep saline reservoirs, all of which are natural carbon repositories. There are currently at least 26 commercial-scale carbon capture facilities around the world, with 21 more in early development and 13 in advanced development. The earliest projects, implemented in the 1970s, were initially used to assist oil companies in retrieving more oil from the ground. In the 80s and 90s, the technology was expanded as a potential climate mitigation strategy and received a lot of hype.

Most carbon capture today entails factory capture, reducing the level of emissions released into the air. In terms of reversing climate change, however, we are already over 400 parts per million—a significant threshold for climate disaster and a record for human emissions. When capture technology was first emerging—around the same time that experts were first pushing climate projections to politicians and the public—simply scrubbing carbon from factory pollution may have been a sensible and successful plan. At this point, however, the amount of carbon already in the atmosphere is detrimental to climate goals. Direct air capture technologies, while they exist and may be essential for mitigation, are incredibly expensive and uncertain. So the question remains—to what extent is carbon capture a useful and sound investment?

An Ongoing Debate

A big point of contention is the economics of capturing carbon versus mitigation at the source. CCUS is very expensive and energy-intensive, and faces skepticism that drives further investment hesitation. As things stand, it is much cheaper to simply continue emitting carbon than to install capture technology or to shut down costly fossil-fueled assets. Capturing emissions from a gas-fired power station, for example, requires burning 16 percent more gas than normal, simply to provide the energy for CCUS. This yields 16 percent more emissions—not only of carbon dioxide, but other dangerous particulates and pollutions—and the cost of processing and transporting more gas. Overall, a tricky prospect for companies to consider. Deployment has thus been very slow, and CCUS investment has annually accounted for only 0.5% of global investment in clean energy and efficiency technologies.

On top of carbon capture's direct downsides, climate experts also argue that investment should go toward direct carbon reduction on the front end—i.e., let's try to remove ONLY what we can't avoid. Removal will play a role in mitigating climate change—but a more urgent objective is to transition away from emitting technologies, rather than making costly and intensive modifications to make them "cleaner." Again, a big issue with industries continuing to use polluting facilities rather than implement non-emitting tech or carbon capture, is that the status quo is cheaper. If we're sinking money into more climate-friendly strategies, many argue that this is an opportunity to provide financial incentives and rewards for not burning fossil fuels in the first place. What's more, economic and efficiency models demonstrate that the energy return on energy investment in wind, solar, and other renewables far outpaces return on investment for the majority of carbon capture technologies.

Lending for Its Development?

So, in the world of lending, what is the smart choice regarding carbon capture? Despite the expense and uncertainty, a number of investors and businesses are still moving forward with projects. Oil giants like ExxonMobil are pledging billions toward carbon capture and storage businesses. Venture-capital startups like Carbon Engineering, Carbon Clean, and Blue Planet are attempting direct-air carbon capture at scale. These ventures look at industrial emissions sources like cement factories and steel mills, capturing their significant emissions and repurposing them into useful liquid fuels and limestone for "sustainable" concrete. What's more, a tax credit from the tail end of the Trump administration allows for a deduction of up to $50 per metric ton of carbon captured and sequestered, although a short timeline (2025 deadline) may not generate significant benefits.

Still, though, there are many reasons to be skeptical. The enormous capital costs, uncertain political landscape, and lengthy time horizons required for projects make CCUS initiatives a tricky venture. As a whole, investors have been hesitant to commit to the industry. Estimates say that "massive [CCUS] deployments" won't even begin to have an impact on drawing down CO2 concentrations until at least 2070. This is a far cry from the significant action imperative climate experts demand within the next decade. In this light, investing more in front-end reductions (i.e., conversion to renewables) seems more logical.

Diane Cherry's picture
Thank Diane for the Post!
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Audra Drazga's picture
Audra Drazga on Sep 9, 2021

Diane,  Thanks for your post.  we do not see much in the community about CCUS.  The trendy thing to talk about right now is wind, solar, hydrogen, and energy storage.  So, thanks for sharing this article.  As with all technologies, there are downsides.  Renewables have theirs too.  It would be great if we look at each solution by location and what makes the most sense base on economics for that location etc.  I guess since transportation is probably a big part of the cost with CCUS, the location may play a big role.  

Diane Cherry's picture
Diane Cherry on Sep 14, 2021

Yeah I agree that's why I wrote it. The carbon capture issue is just fairly dormant and yet it really may not get us anywhere.

Jed Marson's picture
Jed Marson on Sep 10, 2021

Thanks Diane, very instructive.  Is it reasonable to lead from here to several conclusions -
1. If 2070 is the timeline for CCUS at scale, the small investment and loud  noise and lobby are greenwashing.

2. We will need fossil fuels for future generations to have plastics and clothes for certain applications.  Should the 16% extra burn for CCUS be priced in now to act as a clear incentive to replace with natural renewable materials  where possible immediately and to allow choice to turn that money into industry effective investment in CCUS research and delivery. 
3. No Planet B  - TICK TOCK!

Diane Cherry's picture
Diane Cherry on Sep 14, 2021

HI Jed: I'd say your points are valid. 

Diane

T Conroy's picture
T Conroy on Sep 10, 2021

Who knows? Until we reach a point where we are reducing atmospheric carbon on the "most cost efficient trajectory", i.e. starting with the easy wins and working up to the more expensive $/pound technologies, we will continue to flounder w/r/t any carbon mitigation goals. Note that for every pound of carbon the U.S. and Europe remove, China and India add that many and trump it with more. 

The only effective solution appears to be a carbon tax, which would rive cost efficiency and also reach over into China and India and other countries to take action. 

Decarbonization seems to be turning into an issue like immigration: worth more as an unresolved political issue to campaign on than as an actual issue to make progress on.

Diane Cherry's picture
Diane Cherry on Sep 14, 2021

Immigration and decarbonization link - never thought of that but has some similarities.

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