This webinar, held on the 18th February 2021, was co-hosted by IETA, the International CCS Knowledge Centre and Latham & Watkins, LLP and welcomed a panel of international experts to discuss the renewed global interest in CCUS in recent years. 'CCUS costs have been declining, new business models that can improve the financial viability have emerged, and technologies associated with CO2 use and carbon removal are advancing and attracting interest from policy makers and investors'. The new positive momentum in CCUS is welcome and this panel looked at the world's enabling regulatory frameworks, innovative incentive structures and carbon market solutions that are driving CCUS infrastructure. Moderator Katie Sullivan, ManagingDirector of IETA welcomed all to this 2021 kick-off event in the IETA Live Series, noting that this was a hot topic with investors, governments and organisations putting out ambitious climate goals, recognising the massive potential in CCUS.
Paul Zakkour (Carbon Counts) gave a scene setting presentation which noted the significant drivers for CCUS in many regions, with real technology needs around CCS learning and capacity building. CCUS is nationally appropriate, with opportunities worldwide and the capture and storage of CO2 emissions is vital to meet the goals of the Paris Agreement. However, not many countries are showing a clear interest in CCUS today; in terms of CCS in first NDCs (Nationally Determined Contributions) and intended NDCs, only 10 refer to the use of CCS and 31 include it as a monitored sector under their NDC, whereas 145 mention renewables. With the issue of CCUS in an Article 6 carbon market, there are things that need to be considered such as the eligibility of CCS in Article 6, inside or out of NDCs, permanence and liability, corresponding adjustments and competition. Currently, climate policies do not adequately value the role of CCUS as an option in avoiding climate change and the commercial market for CCUS poses some challenges for deployment.
Guloren Turan (Global CCS Institute) recognised that CCS deployment continued to gain momentum across the world in 2020 despite the difficult global situation. One of the key reasons for this momentum is that 2020 was a year for building back, and building back better – and there is growing recognition around the world that achieving net zero without CCUS is not possible. Global capture and storage capacity has increased by 33% since 2019 and Guloren gave an in-depth look at the progress across many regions, observing that there has been good progress but in order to meet net zero targets, CCS capacity needs to increase hundredfold. Supportive policy will be crucial, specific measures such as grants may be helpful, there is a need to create a business case for good investment in CCUS and governments should help to coordinated collaboration in project chains.
JP Brisson (Latham Watkins LLP) gave a US perspective to the topic, noting that in the US the price signals are the strongest in the world hence the country is leading on projects currently and there is significant interest in CCS. Various incentives and regulations, such as 45Q and the LCFS (California Low Carbon Fuel Standard), have contributed to this growth. The LCFS looks at the lifecycle of transported fuels and in 2018 the California Air Resources Board introduced a CCS protocol to the Standard, where the state will issue a LCFS credit for each ton of CO2 that is captured and sequestered when the CO2 is produced from a transportation fuel that is delivered in California. This is interesting in that out of state suppliers can still benefit from the credit as long as the fuel is transported physically to California. Direct air capture (DAC) is an exception to this, where LCFS credit is available for DAC projects anywhere – a very powerful statement by the state of California.
The US 45Q tax credit is another strong policy and price signal. Tax credit varies between US $10 – 50 depending on whether the CO2 is used for EOR, utilisation or saline storage (i.e. in EOR the credit will be lower than for saline storage) and is only eligible for US projects. Interestingly, the 45Q tax credit is fully stackable with the LCFS so project developers are creating projects that can benefit from both. This combination of the two policies, which were defined independently and which are very complementary, is very positive for the future of CCUS projects.
Beth Valiaho (International CCS Knowledge Centre) added that CCS is an integrated process and investments in these projects are not just to provide capital to build something – a lot of integrated understanding is needed to build, retrofit ad operate these endeavours. Conversations that are currently ongoing around incentivising are good to bring down barriers, but we now need to look at more deployment, incentives for now and shared infrastructure to help the future of CCUS as an important tool in the net zero mission. Focus on proven technologies and storage of CO2 (be it through EOR or saline aquifer storage) is key; Boundary Dam has stored 3.9 million tonnes of CO2 already and now the industry needs to apply learnings from operational projects like this to accelerate deployment.
Jeff Pearson (Wolf Midstream) spoke about the Alberta Carbon Trunk Line (ACTL), a critical shared infrastructure system. The ACTL became operational in spring 2020 and is transporting 4,400 tonnes per day of CO2 that is a by-product of hydrogen from two different sources, with the initial utilisation being EOR. This infrastructure project was developed in an integrated manner; project proponents jointly secured government funding, capital and operating grants were made available which enabled financing and the final investment decision, and construction and on-stream timing aligned which was critical. This critical collaboration reflects the earlier point made that governments should help to coordinate collaboration across countries and companies. The ACTL pipeline provides an industry egress solution for CO2 with a total capacity of 40,000 tonnes/d and the potential for future growth to new permanent storage sites and could be the basis for a world class CO2 supply and demand system.
This webinar dove into the potential of climate markets to influence and accelerate deployment of CCUS, with panellists giving detailed information of experiences across the world and demonstrating that we have already learned a lot, there is a lot of potential for the future and climate markets and CCUS projects will become more active as we move forward. More information from the webinar and other IETA events can be found at https://www.ieta.org/Events.