With carbon prices set to reach €100 as soon as the middle of this decade, capture technology is going mainstream as governments push to reach net zero.
Smoke and powder dust pollution from steel mills in China.
SUN, 15 AUG, 2021 - 21:25
RACHEL MORISON AND SAMUEL ETIENNE
Skyrocketing carbon prices and a “code red” warning about the threat posed by climate change are giving fresh momentum to a technology that captures and removes greenhouse gas emissions so they can be buried.
The market for these tools could reach $2 trillion (€1.7trn) if used to cut pollution from heavy industry, according to Credit Suisse.
With carbon more than doubling in the past year and prices set to reach €100 as soon as the middle of this decade, capture technology is finally going mainstream as governments push to reach net zero.
The cost to release carbon has never been higher in Europe, and it is poised to keep increasing, creating a tipping point where preventing the emissions becomes a viable economic alternative.
"Carbon pricing is driving industries to push to adopt the technology sooner,” said Samantha McCulloch, head of carbon capture usage and storage at the International Energy Agency (IEA).
Carbon-capture technology has been around for decades and is used in some industries, but it is expensive, costing as much as $120 a ton in cement production and power generation, according to the IEA.
The process siphons off carbon dioxide from fossil fuels, compresses it, transports it, and then stores it in depleted undersea oil reservoirs.
The number of projects planned around the world has risen six-fold since 2019 to 300, according to Wood Mackenzie.
Carbon prices could reach €100 as soon as 2025, according to Bank of America.
At that level, it is more economical, long-term, for some sectors using natural gas to capture their emissions rather than paying for permits to release them.
“A carbon price of €100 obviously changes the game,” said Simon Virley, vice chairman and head of energy at KPMG and a former UK government official responsible for carbon capture.
Norway and the Netherlands are leading the way in Europe, with the UK in hot pursuit.
“We need to see higher carbon prices to make those projects profitable,” said Anders Opedal, chief executive officer of Equinor, which is developing CCS in the UK, Norway, Germany, and the Netherlands.
It actually needs to be more expensive to pollute than actually capture and store.”
These three nations, spread around the North Sea, have a history of fossil-fuel exploration and production.
Spending by UK oil and gas companies in the North Sea last year fell to the lowest level since 2004.
Britain has the most ambitious climate goals of the G20 nations, targeting a 78% reduction in emissions by 2035.
At today’s power prices, the UK’s largest planned project at Drax Group's biomass station in north England already would be profitable using carbon-capture technology, according to Credit Suisse.
Drax’s project will start in 2027, and by 2030 it will capture and store 8m tons of carbon dioxide a year.
In 2019, the world emitted about 33 gigatons of carbon.
Operational projects are capturing just a minuscule fraction of that, about 40m tons, according to Wood Mackenzie.
There are 19 large-scale CCS facilities in operation today and another 32 in development, according to Credit Suisse.
If these all come online, they could store 100m tons — a slightly bigger fraction.
There is also a chance the technology might not be as effective as promised.
The world’s biggest project, at Chevron's $55bn liquefied natural gas plant in Australia, has fallen short of its target to capture 80% of emissions from the plant, burying just 30% over five years.
“The tech isn’t there yet for large-scale adoption, but our industry has to start changing how we operate,” said Andrew Gardner, chairman of Ineos Grangemouth, which is working with Shell on the Acorn project in Scotland that is scheduled to start in 2027.
The system developed by Oslo-based Aker Carbon Capture costs between €60 and €120 per ton.
It’s a question of when, not if, for CCS becoming economic and coming to the fore,” said Mhairidh Evans, an analyst at Wood Mackenzie.
“The 2020s are about that market development.”
Bloomberg
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