Glossary

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

by: Jessica Campbell | April 26, 2023

The Need

The scaling of Carbon Capture and Storage (CCS) globally is now widely accepted as necessary (rather than desired) when it comes to achieving net-zero commitments and the targets set out in the Paris Agreement. McKinsey & Company estimated that we need to reach at least 4.2 gigatons of storage per annum (GTPA) by 2050, which represents a growth of 120 times current activity level [1]. Estimates by other groups, including the International Energy Agency (IEA), place the volumetric need anywhere between 3 – 10 GTPA to get us 5 – 10% of the way to net-zero. The International Panel on Climate Change (IPCC) has indicated that under ideal economic conditions, CCS has the potential to contribute between 15–55% of the cumulative mitigation efforts required to stay within 1.5 degrees. However, for this economic potential to be reached (i.e., to achieve economies of scale), “several hundreds of thousands of [carbon dioxide] CO₂ capture systems would need to be installed over the coming century, each capturing some 1 – 5 MTCO2 per year” [2]. This represents a deployment of projects and technology that is unprecedented in its rate and scale. All this to say, no matter which source you look at, the message is clear; we need tremendous amounts of geologic CO2 storage, and we need it at pace.

The Landscape

Despite the scientific consensus on the need for CCS, the path to implementing projects at scale comes with challenges. For one, the regulatory landscape of countries and jurisdictions to deploy CCS at scale are at varying readiness levels, with most falling in the ‘dismally unprepared’ category. Fortunately, there are many regions throughout Europe, the US, and Canada, where the regulatory frameworks are well developed due to decades-long oil and gas activity, including some dedicated geologic CO₂ storage and its relative – Enhanced Oil Recovery (EOR). Even with more advanced regulatory frameworks, CCS projects still face a series of other challenges, including (but not limited to): 1. mineral rights ownership and disputes, 2. back-logs and long lead times for appropriate well permitting (i.e., Class VI in the US), 3. lack of CO₂ transport and pipeline infrastructure, and 4. public opinion/acceptance.

The last one, ‘public opinion and acceptance’, often does not receive the attention it deserves as a potential disruptor and real threat to progress on scaling CCS. In just one example, an open letter to the US and Canadian governments was signed by over 500 groups in 2021, calling for a halt to all support for CCS projects [3]. Due to the complex nature of our energy systems, how they interface with society, and an unfortunate history of ecosystem and environmental justice abuses, it should not come as a surprise that CCS is caught in the crosshairs given the size and the wide variety of potential applications for the projects, cross-sectoral and economy-wide. It will take a cohesive, patient, and relationship-based approach to help educate and repair some of the damage done. Unfortunately, it is a common misconception that CCS is a band-aid solution that will distract from the energy transition and investment in alternate fuels. The reality is that CCS will enable the energy transition, with the key word being transition. CCS will allow the production of lower-cost low-CI hydrogen and other alternate fuels needed to reduce emissions in hard-to-abate sectors. Short-term access to these fuels is critical to achieving emission reductions now and allows time for the supply of renewable fuels and energy sources to ramp up to meet the ever-growing demand.

Regarding environmental markets, CCS projects are considered an emissions avoidance rather than a removal since the CO₂ never actually enters the atmosphere. Logically, the prevention emissions should be valued equally compared to removing them after the fact. Nevertheless, a false dichotomy occurs in the market, where removal-based credits are viewed as superior to (i.e., trading at 2–3 times the price) avoidance credits and activities. The value differential is a function of capital cost – direct air capture (DAC) and other carbon removal technologies and activities are currently more expensive to implement. Still, there is also a component associated with optics, which is unfortunate. Analogous to a bathtub full of water, the bath would never drain if one pulled the plug but kept the tap running. Removals are an exciting technology development associated with vital natural system restoration projects and activities. However, we are still too early in the energy transition to focus our attention too squarely on removals – we still need high-quality avoidance projects that have the potential to mitigate emissions on the gigaton scale, which includes CCS. As is a common theme throughout this blog, we need more of both, not either/or.

Despite the regulatory challenges and bumpy road ahead, hundreds of companies have either proposed CCS projects or are evaluating opportunities, including many of ClimeCo’s clients. In this valiant pursuit, ClimeCo has accepted the challenge and is working to support our clients through strategic advisory services and de-risking investment through partnerships and optimization of multiple potential revenue streams.

The Opportunity

The recent changes to the Inflation Reduction Act (IRA) and the opportunities it has created for CCS are generally understood – albeit in theory. Projects that plan to sequester CO₂ in secure, geologic formations can receive up to $85 per tonne of CO₂ injected under the 45Q tax credit. What is often less clear are the opportunities for additional revenue streams, specifically within the voluntary carbon market (VCM), and the rules around stacking the various available incentives. Opportunities for value creation outside of the VCM arise from low-carbon fuel markets and green premiums for low-carbon products. How these fit together within an optimized organizational strategy while achieving broader emission reduction goals can be challenging to navigate. Although ClimeCo takes a holistic approach to value creation via all channels, the paragraphs below will highlight the recent developments that will open pathways in the VCM.

Historically, North America’s only VCM methodologies for generating carbon credits from CO₂ sequestration activities were specifically designed for and limited to EOR. The absence of a methodology for geologic storage was just a symptom of the economic realities of pure geological storage projects – most would just not pencil at previous incentives levels, even with stackable carbon credits. However, the new IRA is a game changer, placing hundreds of millions more tonnes per annum within the realm of potentially economical or marginal. The VCM is ramping up to help projects falling in the ‘uneconomic’ or ‘marginal’ categories to be economic and to de-risk the investments by diversifying the revenue streams. The cost of CCS projects varies widely by industry. Those in hard-to-abate sectors have a particularly high cost of capture to low purity and/or concentration of CO₂ streams. Fortunately, there will be at least one, if not two, new VCM methodologies available in the near term that will allow for the creation of voluntary carbon credits from CCS. This opportunity will be particularly advantageous for those in hard-to-abate sectors where the $85 per tonne alone is not enough.

The American Carbon Registry (ACR) is in the process of finalizing its methodology that would allow for carbon credits created from the following activities: geologic storage, direct air capture (DAC), EOR, and bioenergy with CCS (BECCS). We expect the methodology to be available by the end of 2023.

Verra is working with the CCS+ Initiative to develop a series of modules for CCS projects for credit creation in the VCM. Verra has indicated that the first module will allow for crediting of the same activities as under the ACR methodology; however, it needs to be clarified as to whether any negative emissions (i.e., removals) associated with BECCS will be included in the first release.

For organizations at various stages in the CCS project development journey, it will be necessary to understand all the potential revenue streams associated with the project, including voluntary carbon credits as well as other value-creation opportunities in low-carbon fuel markets, compliance markets, and additional government grants and funding and the associated value, risks, challenges, and optimization opportunities. It is also important to understand how utilizing the VCM fits within the broader organizational strategy, emission reduction targets, and a product’s value in the market (i.e., green premiums).

[1] McKinsey & Company, Scaling the CCUS Industry to Achieve Net-Zero Emissions
[2] Intergovernmental Panel on Climate Change (IPCC), Carbon Dioxide Capture and Storage
[3] Oil Change International, Open Letter to US and Canadian Governments

About the Author

Jessica Campbell, Director of Energy Innovations, leads ClimeCo’s CCS and Low Carbon Fuels Program. She is passionate about the power of utilizing environmental markets to expedite decarbonization goals and supporting our clients through the energy transition.

A Concrete Path to Decarbonizing Cement

by: Kayla Carey and Andrew Primo | October 27, 2022

Cement is a powdery substance that can be mixed with sand, water, and gravel to form concrete.

Most people are familiar with cement, the key ingredient in concrete, but few are likely aware of how foundational this material is to contemporary life. Buildings, roads, bridges, canals, sidewalks, railways, ports, power lines, wind, and solar farms… nearly all infrastructure requires cement and lots of it. The International Energy Agency estimates that nearly 4.3 billion tons of cement were produced in 2021 alone, making enough concrete to build the equivalent of over 2,800 Hoover Dams.

And this number will only grow. By mid-century, the global population is expected to approach 10 billion people, over two-thirds of whom will live in cities, according to the UN Department of Economic and Social Affairs. Add to that the massive buildout of electricity, renewable energy, efficient transportation, and carbon capture infrastructure required to support a decarbonized society, and the need for a significant increase in today’s already record-high cement production levels becomes abundantly clear.

Why are cement emissions so difficult to reduce?

There is, however, a fatal catch to this skyrocketing demand: cement, as it is produced today, has a tremendous greenhouse gas footprint. And decarbonizing isn’t as simple as substituting coal with renewable energy or electrifying vehicles. At least half of all emissions generated from the production of Portland cement (the global standard) are released during production through the creation of “clinker,” one of the primary steps in cement production.

Clinker is produced in giant kilns, where limestone and other minerals are superheated to temperatures up to 2,700 degrees Fahrenheit. The chemical byproduct of this process is tremendous amounts of carbon dioxide (CO₂): in the United States, one metric ton of CO₂ is emitted for every metric ton of Portland cement produced. Because of the difficulty in avoiding the process emissions from this critical step in production, cement is considered a “hard-to-abate” industry.

Clinker production requires high heat and releases carbon dioxide as waste. Image Source: Cement Association of Canada

With such huge volumes of cement produced each year at such high emission rates, the cement industry has become one of the most carbon-intensive on the planet, contributing approximately 2.4 billion metric tons of CO₂. That’s more than all aviation and maritime shipping emissions combined, and these will only continue to increase unless rapid steps are taken to reduce cement’s carbon intensity.

How can we reduce cement’s hard-to-abate emissions?

With the increasing demand for infrastructure paired with the urgency for decarbonization, how can the cement industry balance this paradox? Unsurprisingly, there is not a single or simple solution.

The Global Cement and Concrete Association’s (GCCA) 2050 Net-Zero Roadmap identifies several actions that the cement industry can adopt to slash greenhouse gas emissions and limit the most severe consequences of climate change. These strategies include:

Improving operational efficiency;
Switching to less carbon-intensive fuel sources;
Replacing traditional limestone-derived clinker with alternative materials; and
Deploying carbon capture utilization and storage (CCUS) technologies.

Each pathway can have a significant impact on lowering the carbon intensity of cement; however, only a couple of technologies can reduce the troublesome emissions released during clinker production – clinker replacement and CCUS.

Clinker Replacement: In certain applications, clinker can be at least partially replaced with alternative products called supplementary cementitious materials (SCMs). Typical SCMs are byproducts of industrial processes, such as coal and steel production; however, transitions in these industries, such as the closing of coal-fired power plants and the shift to more efficient steel-production furnaces, have limited the availability of these commonly used SCMs, creating a gap between supply and demand. Some companies have launched demonstration projects to produce additional clinker replacements, such as fly ash harvested from landfills and naturally occurring substances—known as “natural pozzolans”—like volcanic ash. But producing and treating these materials so that they can be used in cement is complicated and expensive, and they have not yet reached the scale needed to meet the worsening SCM supply void.

Carbon Capture Utilization and Storage: CCUS—in which the CO₂ released in clinker production is captured and stored or used in other applications—is another key approach to reducing cement’s process emissions. Very few CCUS projects currently exist, especially at cement plants. Nearly all CCUS projects worldwide are still in the pilot phase as the technology faces substantial implementation challenges and is extremely cost-prohibitive.

Nearly 4.3 billion tons of cement were produced in 2021, which is enough concrete to build the equivalent of over 2,800 Hoover Dams.

Leveraging the Voluntary Carbon Market

For hard-to-abate sectors to meet net-zero targets on time, they must work together to employ a mix of proven and emerging technologies, such as clinker replacement and CCUS. But how can the industry overcome existing economic and technical challenges to scaling these technologies? The voluntary carbon market could be an important lever in bringing new SCMs to market and making CCUS more economically viable.

Today, there are a growing number of opportunities for the cement industry to generate voluntary carbon credits. One of the most trusted carbon offset registries, the Climate Action Reserve, recently announced the development of a Low-Carbon Cement Protocol that will incentivize the production of innovative SCMs to address the current supply gap. In addition to tax incentives, new opportunities are also emerging to generate carbon credits from CCUS projects. The cement industry can leverage the voluntary carbon market to direct much-needed financing to the sector and accelerate the road to decarbonization.

About the Authors

Kayla Carey is a Manager for Program Development, specializing in decarbonization for hard-to-abate sectors. With experience in sustainability management and energy policy, she helps energy and industrial clients navigate environmental markets and develop new quantitative methodologies. She holds a master’s degree in Environmental and Natural Resources Policy and a Bachelor of Arts in Ecology and Evolutionary Biology, both from the University of Colorado Boulder.

Andrew Primo is a Manager on ClimeCo’s Program Development team, based out of Denver, Colorado. He assesses the feasibility of new emission reduction projects in hard-to-abate sectors, including heavy industry, waste management, and shipping. He works with corporate partners and carbon registries to develop new technical methodologies for carbon crediting programs.

Glossary

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

Carbon Capture & Storage: The Need, The Landscape, The Opportunity

A Concrete Path to Decarbonizing Cement

A Concrete Path to Decarbonizing Cement

Sources

Additional Resources