The rapid deployment of renewables, energy storage and improved grid infrastructure will be critical to reining in global warming. However, many of the world’s top climate authorities believe that we won’t be successful without carbon capture, utilisation and storage (CCUS) — a technology that features prominently in many net-zero plans. 

CCUS is an umbrella term for a range of technologies that capture emissions for use in new products or for burial underground. It also covers direct air capture (DAC) — the direct extraction of CO2 from the atmosphere.   

In 2023, the EU and the US governments made a combined $20bn available for CCUS development as part of ongoing subsidy programmes. Last year, the UK committed £20bn to scale up CCUS projects across the country. Currently, the bulk of these funds is being funnelled into capturing emissions from the oil and
gas industry.

This includes Porthos in the Netherlands, a €1.3bn scheme to capture carbon from oil refineries and inject it in empty gas fields in the North Sea, and Stratos, a $1bn DAC plant currently under construction in Texas by petroleum firm Oxy.   

In a Kafkian chain of events, CO2 that is buried underground is extracted and released in the atmosphere through the combustion of fossil fuels, only to be recaptured by CCUS and reburied. 

Significant capital is flowing into European start-ups developing novel carbon capture solutions. In 2022, Swiss DAC scale-up Climeworks raised $650m in a funding round co-led by Singaporean sovereign wealth fund GIC. That same year, London-based Carbon Clean raised $150m from the likes of Chevron, CEMEX and Samsung. 

More recently, BlackRock and Temasek led a $69m investment in German carbon-to-concrete upstart Neustark through Decarbonization Partners, while Bill Gates’s Breakthrough Energy Ventures backed UK start-up Mission Zero in a £21.8m funding round. 

Climeworks’s second plant in Iceland opened in May, designed to capture up to 36,000 tonnes of CO2 per year. The start-up and many others are scaling partly thanks to multiyear offtake agreements, where the company generating the CO2 promises to pay for the carbon removed only after it has been verified that a project has removed it.

In 2023, JPMorgan inked a $20m, nine-year agreement with Climeworks to process the equivalent of 25,000 tonnes of CO2. This year alone, Microsoft signed two of the largest carbon capture offtake agreements to date — one with Oxy’s Stratos project for the removal of 500,000 metric tonnes of CO2 over six years, and another with Stockholm Exergi for the removal of 3.3 million tonnes of CO2 over 10 years, starting in 2028.  

However, the long-term effectiveness and scalability of carbon removal technologies is still uncertain. For example, the facilities handling Microsoft’s big contracts haven’t been built yet. Most CCUS projects to date have been small-scale demonstrators. And even then, many underperformed compared to their expected capture rates. 

What’s more, backing projects used for trapping emissions from oil and gas could provide incentives for continued fossil fuel extraction. 

Besides, despite the flurry of deals in recent years, CCUS — especially DAC — remains expensive. Independent experts estimate the Stratos project will cost more than $500 per tonne of avoided emissions. Even optimistic forecasts put the cost of DAC projects at $300–400 per tonne by 2030.

For context, solar photovoltaic and offshore wind can avoid the same amount of emissions for just $60. 

Investment in CCUS should focus on a wide portfolio of projects to spread the risk. Alongside DAC, projects that capture carbon at-source from industries like cement, steel and chemicals hold significant potential, at a much lower price point. 

Nevertheless, with the uncertainty around carbon capture technology, investments should focus on scaling CCUS only where there is a dearth of viable alternatives. Every dollar spent on carbon capture could instead go to proven technologies like renewables, energy storage and
infrastructure.

Siôn Geschwindt is a climate and energy reporter with TNW. 

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This article first appeared in the October/November 2024 print edition of fDi Intelligence