Debates revolving around the high cost and economic viability of CCUS technology, as well as what critics call “a false solution”, have been around for years. Does CCUS deserve the bad name though? And is its potential worth the wait?
Carbon capture technology has immense potential for countries around the world, and especially in Asia, to slash carbon emissions, as world leaders scramble to reach their ambitious climate goals of carbon neutrality in a matter of decades. While direct air capture that sucks carbon in the air into storage is still in a very early stage of development, carbon capture utilization and storage (CCUS) has been applied more widely by authorities and companies. The CCUS tech aims to capture carbon dioxide from exhaust gases before burying it underground, or turning it into products like concrete, jewellery and plastics, among others.
The technology has been criticized as a geoengineering climate tool that looks good on paper but has little use. However, it might be too soon to jump to conclusions as to its potential impact when the technology still has much room for exploration and improvement. In fact, the International Energy Agency predicts that by 2070, CCUS, though currently still at the demonstration and prototype stage, will be able to cut half of the globe’s carbon emissions.
Debates revolving around the high cost and economic viability of CCUS technology, as well as what critics call “a false solution”, have been around for years. Does CCUS deserve the bad name though? And is its potential worth the wait?
CCUS cost to drop
The largest obstacle to wider adoption is the high cost of CCUS technology. The average cost of carbon removal currently is up to USD 63.5 per tonne, far above the per tonne carbon price of 48 yuan (USD 7.54) in China’s new carbon trading market, or Singapore’s new carbon tax system that charges institutions SGD 5 (USD 3.65) per tonne of greenhouse gas emissions. Companies have little incentive to push CCUS forward, as they will suffer losses from employing the expensive technology to slash carbon.
Although carbon trading prices and carbon taxes in Asia are rather insignificant in terms of numbers, they are expected to grow eventually to cover the current carbon removal price, which will likely drop in the near future. Europe, which has had a carbon trading system in place for over a decade, has recently seen a record carbon price per tonne of close to USD 80.
Is CCUS technology really too expensive to bring effective results, even now, in Asia? International Energy Agency research shows that the cost of carbon capture actually varies according to the source of the carbon, as well as its transportation and storage.
The cheapest ones − as low as USD 15 per tonne of carbon − are those used for industrial processes producing highly concentrated carbon streams, and the captured carbon is injected into oilfields, while the more expensive ones are from direct carbon capture − as much as USD 120 per tonne of carbon, according to the IEA. The cost of onshore storage in the United States, the report added, is estimated to be below USD 10 per tonne of carbon, and can be negative if it is injected into oilfields to generate income from oil sales.
In China last year, the cost of capturing low concentrations of carbon stood at between CNY 272 (USD 42.7) and 816.5 yuan (USD 128) per tonne, with transportation by tanker costing between 0.8 and 1.2 yuan per tonne per kilometre, as well as variable costs of utilization and storage. This means if the captured carbon is reinjected into oilfields and oil prices are above USD 70 per barrel, companies could still balance the costs.
With heightened intergovernmental cooperation, increasing green capital, and more new methods, the cost of carbon capture is expected to further decrease in the future. The IEA says the cost of carbon capture in the power sector plummeted by 35% from the first to the second large-scale CCUS facility.
South Korea, for example, has announced plans to invest USD 89.5 million each year to develop carbon capture technology and aims to gradually lower the cost of processing from the current USD 63.5 per tonne of carbon to USD 18 per tonne by 2050. Seoul plans to capture carbon emitted during the manufacture of steel, petrochemicals and cement – the notoriously polluting industries that emit massive amounts of carbon.
This follows a soaring price of nature-based carbon offsets from USD 4.65 per tonne to around USD 14.4 between June last year to January this year thanks to surging demand for carbon offsets.
Private corporations are also pursuing carbon capture goals. Exxon Mobil Corp is in talks to build CCS hubs across Asia, while Japan’s Mitsubishi Heavy Industries is creating small carbon-capture plants that will slash the cost of carbon removal from USD 63.5 per tonne of carbon to USD 27.2 by 2035.
The initial capital injection is justifiable if the capacity is large enough, and in Japan’s case, this means building a lot more carbon storage sites to capture 157 million tonnes of carbon by 2050 – four times the current capacity, according to a report from McKinsey & Company. The analysis said the technology is “crucial despite immaturity in storage and technology.”
CCUS now makes up less than 0.5% of total investment in green tech, but governments and industry have committed at least USD 12 billion in funding for CCUS projects. If governments in Asia can take the lead in investing in such projects and lower the cost of the use of CCUS for companies, wider adoption can be expected.
Slowing the use of new fossil fuels
In China – the world’s largest carbon emitter – the top offshore oil and gas producer, China National Offshore Oil Corporation (CNOOC), launched in August its first offshore CCS project in the South China Sea; it will store over 1.46 million tonnes of carbon. About 300,000 tonnes of carbon will be reinjected into seabed reservoirs each year if this works. Sinopec also started building a CCUS project in July in eastern Shandong province during a hydrogen-making process and will inject the captured carbon into 73 oil wells.
Critics have long panned how enhanced oil recovery – injecting carbon into existing oilfields to facilitate oil production – encourages further use of polluting fossil fuels, essentially negating the purpose of reducing carbon emission.
A separate IEA report revealed that up to 600 kg of carbon are injected in enhanced oil recovery projects in the United States. If a barrel of oil releases around 430.8 kg of carbon, the injection of captured carbon into oilfields can help establish a healthy loop of emissions in the field, making oil carbon much less polluting.
This will become more feasible if CCUS technology further improves, and oil prices remain stable, so companies have sufficient incentive to keep up the practice. One study showed that CCUS and other carbon capture technologies “allow otherwise stranded fossil fuel in the power sector to continue to be used at a much higher level and reduce the abatement requirements of fossil fuels to a 28-33% level.”
Switching the source of carbon capture might be an even more straightforward way to slash carbon in oil production. The IEA has suggested that if enhanced oil recovery projects use carbon captured from combustion or conversion of biomass, in principle even carbon-negative oil can be produced.
Rapidly reducing the use of fossil fuels should be feasible in more developed nations, but in Southeast Asia, oil production and the use of fossil fuels like coal and gas will not be phased out in the near future, due to the state of political and economic development. The IEA says there is a 90% energy demand growth from fossil fuels since 2000, so there is a dire need for clean energy transitions. Close to half of the region’s fossil-fuel power plants were built over the last decade, and many more are still under construction. The installed coal capacity will jump from 103 gigawatts in 2020 to 207 gigawatts in 2040, while that of gas will hike from 90 gigawatts to 154 gigawatts in the same period
In the year 2050, close to 500 mega tonnes of carbon will still be emitted from such facilities, not to mention that the region’s share of coal in the power mix is still increasing. The share of fossil fuels in 2050 in all ASEAN countries will still stand at 80%, at best, without the most drastic remedies for carbon reduction.
If fossil fuels are still essential in the process of transition to renewables and economic growth, CCUS provides a clear pathway to slash carbon and move countries closer to their zero carbon goals.
Facilitating the transition to renewables
CCUS not only can help these polluting energy plants reduce inevitable carbon emissions, but can also facilitate countries’ switch to renewables and low-carbon fuels, including hydrogen.
Hydrogen can be made from either natural gas or water. Nearly all hydrogen produced for industrial use currently is generated from natural gas, leading to massive carbon emissions. A more environmentally friendly way to produce hydrogen is to incorporate CCUS into the process to produce a lower-carbon version called “blue hydrogen”.
As the global demand for hydrogen is growing, many production projects are underway in the region. Japan is funding a hydrogen plant in Brunei using LNG, while Malaysia’s state-own oil producer Petronas plans to scale up production of both CCUS-equipped and electrolytic hydrogen. The IEA projects that 60 mega tonnes of carbon will be captured from hydrogen production in Southeast Asia in 2050.
Green hydrogen, which is produced via electrolysis that separates water into hydrogen and oxygen, can reach zero carbon emissions if the power used in the process comes from renewable resources. In Southeast Asia, which currently uses 80% fossil fuels in its energy mix, the mass production of green hydrogen will take time. Another barrier is that it is up to three times more expensive than blue hydrogen.
Granted, studies and research have cast doubt on the effectiveness of CCUS-produced blue hydrogen, as well as its impact on carbon capture capabilities in coal power plants. But scientists are rolling out studies that suggest more effective ways to improve the technology, with the help of machine learning, for example. As many scientists have said that a rapid, reliable and low-cost transition to a renewable energy system relying exclusively on wind, solar and hydroelectric power is not feasible in the near future, CCUS can be used to slash carbon emissions before that vision can be revised.
Indonesia’s energy chief has said that CCUS is key to achieving energy sovereignty in an affordable, sustainable and competitive manner, as the country plans to slowly reduce fossil fuel use and shutter its last coal-fired power plant in 2056. In Southeast Asia, at least seven CCUS projects are in early development across Indonesia, Malaysia, Singapore and Timor-Leste, according to a report from Eco-Business.
China, Japan and South Korea are taking the lead in Asia in applying CCUS technology, and they bear the responsibility of sharing their technology and policy models with developing countries in Asia, as well as funding such projects in Southeast Asia. They should also assist in research to identify and develop potential CCUS storage sites in these countries, with the support of international funds.
Without intergovernmental support and technology exchange, the complex CCUS technology will not be able to reach its highest potential. With fossil fuels still in use for decades in any realistic vision, CCUS stands as one of the effective ways to directly cut down on carbon emissions.