Economic Potential of DACCS and Global CCS Progress
If the provision of emission reduction services is considered in the same way as the
market for any other service, investment in CCS would be expected to continue to
grow. Demand for emission reduction services is rising as the carbon budget consistent
with climate targets is depleted. Future demand is projected to rise even more
steeply, creating an expectation of a rapidly growing industry to meet that demand.
Simultaneously, demand for energy and the essential materials and products upon which
modern society is built, such as fertiliser, steel, chemicals and cement, is also rising as
emerging economies develop and their standard of living moves toward developed
economies. CCS is at the centre of the Venn diagram of these demand drivers and
economic growth, delivering emission reduction services in essential industries while
supporting employment and economic prosperity.
Recognising the potential of CCS, government policy continues to strengthen, which is
incentivising greater levels of investment by the private sector. North America, Europe
and the UK, regions containing established leaders in CCS-relevant policy, maintained
or strengthened their positions over the past 12 months. Developments are described
in greater detail in later sections of this report, but here are a few examples.
In the US, the Infrastructure Investment and Jobs Act (US) passed into law, providing
over US$12 billion for CCS and related activities, including:
•
$2.5 billion for carbon storage validation
$8 billion for hydrogen hubs, including blue hydrogen
⚫ over $200 million announced or awarded by the US Department of Energy for CCS
technology development.
The US also enacted the historic Inflation Reduction Act, which includes enhancements
to the 45Q tax credit and accelerates the deployment of CCS by extending the start
of construction timing, lowering capture thresholds, and expanding transferability. US
states, notably Pennsylvania, West Virginia, North Dakota, and California, advanced
legislation related to CO2 storage, and/or proposed or established programs to support
CCS.
Canada established a C$2.6 billion tax credit for CCS projects and Saskatchewan
extended its 20 per cent tax credit under the province's Oil Infrastructure Investment
Program to pipelines carrying CO2.
In Europe, Denmark announced €5 billion in subsidies for CCS, Norway announced
NOK1 billion (US$100 million) to support three large blue hydrogen projects, and four
of the seven projects selected for grant preparation under the first call of the European
Union's Innovation Fund were CCS projects.
These projects are a bioenergy with CCS facility in Stockholm; a cement facility in
France; a hydrogen production facility in Finland; and a hydrogen, ammonia and
ethylene plant in Belgium. A further seven CCS projects were selected in the second
call of the Innovation Fund.
The UK Government released its CCUS Investor Roadmap setting out its approach to
delivering four CCUS low-carbon industrial clusters by 2030, and selected the first two
clusters - East Coast and HyNet.
North America and Europe host the most robust climate and CCS policy mechanisms,
but policy is also advancing in the Asia-Pacific region. The Australian Government
released additional acreage for geological storage of CO2, approved a method to
allow CCS to create Australian carbon credits, and announced over A$200 million in
funding to support CCS. The Japanese Government approved its Sixth Strategic Energy
Plan describing how Japan will achieve net-zero emissions by 2050, in which CCS has
a prominent role. The Chinese State Council has now issued more than 10 national
policies and guidelines promoting CCS, including the Outline of the 14th Five-Year
Plan (2021-2025) for National Economic and Social Development and Vision 2035 of
China. Both Indonesia and Malaysia took steps to develop legislation for the geological
storage of carbon dioxide and the government of Thailand indicated that it will also
develop legislation.
This observed ramp-up of policy and legislation by national governments is consistent
with a growing sense of urgency to drastically reduce greenhouse gas emissions.
In charting a course to net-zero greenhouse gas emissions by 2050, the year 2030
has become a significant milestone in international climate negotiations and national
emission reduction target setting. In addition to the fundamental relationship between
atmospheric CO2 concentration and global average temperature, these challenging
targets recognise that achieving net-zero emissions by 2050 requires a nation's
emissions to be well on that glide path by 2030. Whereas historically, public discussion
of emission reduction targets was almost exclusively concerned with 2050, the end of
this decade is now receiving greater focus. In some respects, 2030 has become the
new 2050.
The outlook for CCS has never been more positive. However, global efforts to reduce
emissions, including investment in CCS, remain grossly inadequate. Following the COVID
shock to the global economy, emissions have returned to trend. Near-zero emission
technologies must be deployed at unprecedented rates to cease the steady rise in
emissions. While the private sector has the capital, the resources, and the expertise to
meet that challenge, governments have the capacity to unleash that potential and drive
investment in CCS through policy.
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GLOBAL CCS
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