Despite its role in decarbonisation, the use of carbon capture faces cost challenges

Despite its role in decarbonisation, the use of carbon capture faces cost challenges


A recent report from Wood Mackenzie highlights the importance of carbon capture and storage (CCUS) to the global effort to achieve net-zero emissions by 2050, but warns that economic hurdles significantly hinder the deployment of carbon utilization technologies.

In Wood Mackenzie’s 2050 net zero scenario, it is imperative to achieve CCUS capacity of over 7 billion tonnes per year (Btpa). Currently, 500 million tonnes per year (Mtpa) of carbon capture capacity has been announced globally, of which over 95 percent is for storage and less than 5 percent (22.4 Mtpa) is for use.

“Expanded carbon utilization could strengthen the overall economics of carbon capture, but current high costs, inadequate subsidies and unstable green premium markets limit appetite for usage growth,” said Rohan Dighe, CCUS research analyst at Wood Mackenzie.

Costs of carbon capture
Costs of carbon capture

While CO2 mineralization to high-purity limestone is promising and delivers competitive yields, other methods, such as the production of e-hydrocarbons using green hydrogen, remain economically unviable. These e-hydrocarbons currently cost three times more than existing technologies, mainly due to the high cost of green hydrogen, which accounts for over 80 percent of production costs.

While there is potential for significant markets, such as aggregates, which could reach volumes of over 500 million tonnes per year, these markets are not competitive due to current switching costs.

Strong policy support and tax incentives are needed to encourage carbon utilization. While incentives such as the US 45Q approach and the Canadian investment tax credit exist, they are limited in scope and do not provide enough revenue to justify large-scale projects. The EU, which has a legal mandate for carbon utilization, restricts its application mainly to e-fuels in aviation.

Without markets for these products, the use will be economically disadvantaged, the report says. For the use to become a legitimate, widespread enabler for carbon capture deployment, decreasing raw material and technology costs and developing policy incentives are crucial.

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