A new report from Wood Mackenzie highlights the critical role of Carbon Capture Utilisation and Storage (CCUS) in global decarbonisation efforts, while revealing significant economic challenges hindering its widespread adoption.
The report, To use or not to use? CO2 utilisation as a carbon capture enabler, indicates that over seven billion tonnes per annum (Btpa) of CCUS capacity will be necessary to achieve Wood Mackenzie’s 2050 net zero scenario.
However, the current planned carbon capture capacity worldwide stands at only 500 million tonnes per annum (Mtpa), with a mere 5 per cent (22.4 Mtpa) dedicated to utilisation.
Rohan Dighe, research analyst for CCUS at Wood Mackenzie, explained: “Expanded CO2 utilisation could bolster overall carbon capture economics, but current high costs, insufficient subsidies, and unsubstantial markets for green premiums are limiting appetite for utilisation growth.”
The report highlights several key economic challenges:
Market competitiveness
E-hydrocarbons, which rely heavily on green hydrogen, are currently three times more expensive than incumbent technologies.
This significant cost disparity makes them uncompetitive in most markets.
Limited market potential
While CO2 mineralisation to high-purity limestone shows promise with potential double-digit returns, its market size remains limited.
The aggregates market, despite its potential for over 500 Mtpa, faces prohibitively high conversion costs.
Insufficient policy support
Dighe noted that existing tax incentives, such as the US 45Q and Canadian Investment Tax Credit, are limited in scope and fail to provide adequate revenue to justify projects.
The EU stands alone in implementing a legislated CO2 utilisation mandate, though it is restricted to e-fuel use in aviation.
“Policy supporting demand for utilisation products is not strong enough,” Dighe stated.
“Without markets for these products, utilisation economics will continue to be disadvantaged.”
To overcome these hurdles and establish CCUS as a viable tool for carbon capture deployment, the report emphasises the need for significant reductions in feedstock and technology costs, coupled with the development of robust policy incentives.
As global efforts to combat climate change intensify, the findings of this report underscore the complex challenges facing the widespread adoption of CCUS technology, highlighting the need for continued innovation and policy support in this critical area of decarbonisation.