Can CO2 utilization drive increased carbon capture?

Sep 25, 2024

Carbon capture will be a crucial element to achieving global decarbonization. Image: Freepik.com

Rohan Dighe

Research Analyst, CCUS, Wood Mackenzie

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CO2 Capture, Utilization, and Storage

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Currently less than 5% of carbon capture capacity announced globally involves utilization.
Carbon dioxide utilization could bolster carbon capture economics, but there are major obstacles.
Outlining a 'bull' and 'bear' case, we examine what’s preventing this potentially useful resource being reused.

In theory, using captured carbon dioxide (CO2) instead of simply storing it should improve capture project economics, boosting uptake. However, currently less than 5% of carbon capture capacity announced globally involves utilization.

So, what’s stopping this potentially useful resource being reused?

Why carbon capture matters

Strong carbon capture utilization and storage (CCUS) buildout will be a crucial element of achieving global decarbonization in a timescale aligned with minimising the impact of climate change. In our base case, which corresponds to a 2.5C global warming pathway, 2 billion tonnes per annum of CCUS and engineered CO2 removals will be needed by 2050.

Meanwhile, under our net-zero 2050 scenario, which assumes global warming is brought back under 1.5C by 2100, that figure rises to 7 billion tonnes a year (see chart below).

Over 7bt of carbon capture capacity is needed by 2050 in a net zero scenario.

Why utilization matters

Unfortunately, current incentives are not enough to encourage the widespread use of carbon capture and storage (CCS) in some sectors. Aside from government support, developers need other ways to boost revenue and bolster project economics.

Potential revenue pathways include credit generation (from selling CO2 removal in voluntary or compliance-based marketplaces) and product premiums. However, proven markets for green premiums and carbon removal don’t yet exist at scale, and in any case will be highly unpredictable.

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Another option is to derive revenue from the sale or conversion of CO2, which can be used in a number of ways, such as in the production of e-fuels. If CO2 utilization pathways can be made competitive, this could provide sustainable, long-term revenues for projects, supporting increased deployment of CCS and carbon dioxide removal (CDR) – i.e., any technology used to produce net removal of CO2 from the atmosphere.

The bull case

In theory, utilization could enable increased CO2 capture deployment through the creation of a large-scale CO2 commodity market:

Mineralisation and plant co-feed: Pathways including conversion to high-purity limestone and plant co-feed are already technologically mature and cost competitive with traditional methods.
E-Hydrocarbon production: CO2-to-hydrocarbon pathways could help compensate for limited availability of biofuel feedstocks, providing drop-in fuel replacements for shipping and aviation.
Commodity replacement: Using captured CO2 in low-emission processes could displace commodities produced through high-emission processes, delivering additional emissions reductions.
Co-feed to existing production units: Traditional pathways such as methanol production provide opportunities for co-feed to deliver selective decarbonization of production with minimal capex.

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What's the World Economic Forum doing about the transition to clean energy?

Moving to clean energy is key to combating climate change, yet in the past five years, the energy transition has stagnated.

Energy consumption and production contribute to two-thirds of global emissions, and 81% of the global energy system is still based on fossil fuels, the same percentage as 30 years ago. Plus, improvements in the energy intensity of the global economy (the amount of energy used per unit of economic activity) are slowing. In 2018 energy intensity improved by 1.2%, the slowest rate since 2010.

Effective policies, private-sector action and public-private cooperation are needed to create a more inclusive, sustainable, affordable and secure global energy system.

Benchmarking progress is essential to a successful transition. The World Economic Forum’s Energy Transition Index, which ranks 115 economies on how well they balance energy security and access with environmental sustainability and affordability, shows that the biggest challenge facing energy transition is the lack of readiness among the world’s largest emitters, including US, China, India and Russia. The 10 countries that score the highest in terms of readiness account for only 2.6% of global annual emissions.

To future-proof the global energy system, the Forum’s Centre for Energy & Materials is working on initiatives including Clean Power and Electrification, Energy and Industry Transition Intelligence, Industrial Ecosystems Transformation, and Transition Enablers to encourage and enable innovative energy investments, technologies and solutions.

Additionally, the Mission Possible Partnership (MPP) is working to assemble public and private partners to further the industry transition to set heavy industry and mobility sectors on the pathway towards net-zero emissions. MPP is an initiative created by the World Economic Forum and the Energy Transitions Commission.

Is your organisation interested in working with the World Economic Forum? Find out more here.

The bear case

While there are a range of potential uses for captured CO2, they may not be competitive with other CCS revenues and traditional manufacturing:

Limited potential scale: Global prospective subsurface CO2 storage capacity is nearly 15,000 billion tonnes, dwarfing the potential of utilization.
Policy disadvantages: Policy support for utilization is weaker than for storage; currently, the European Union’s legislated CO2 utilization mandate is unique – and it only covers aviation e-fuel.
Cost issues: e-fuel pathways are immature and rely on expensive green hydrogen and renewable power; e-fuel is not expected to be directly competitive with traditional fuels through 2040.
Immature markets: Decarbonized commodities have yet to be commercialised at scale – it remains unclear whether price premiums for decarbonized goods will justify higher costs.
Co-feed limitations: While partial decarbonization through co-feeding of CO2 is achievable at low cost, full decarbonization of production is expensive and limited in scope and volume.

Overall, declines in feedstock and technology costs and the development of strong policy incentives will be crucial if CO2 is to become a legitimate, widespread enabler of carbon capture deployment.

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