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.

Blue Carbon 102

Red, White, & Blue (Carbon): The Global Distribution of Blue Carbon Projects and Opportunities in the United States

by: Allyson Ulsh | January 19, 2023

Indonesia is home to the largest percentage of mangrove ecosystems globally. Mangroves are critical ecosystems that can sequester and store carbon dioxide, referred to as blue carbon due to their coastal nature.

Where is Blue Carbon Located?

Our team dove headfirst into the world of blue carbon in a previous blog post, Blue Carbon 101. Through exploring how blue carbon differs from ‘regular’ carbon, which ecosystems sequester it, and the interwoven community and biodiversity benefits, it’s clear that blue carbon projects have a fundamental role in addressing and mitigating climate change. Even with the understanding that mangroves, seagrass meadows, and tidal marshes are responsible for sequestering blue carbon, it’s difficult to envision precisely where these critical ecosystems are in the world.

Mangroves are found worldwide in the intertidal zones along coastlines, with a large percentage of the species’ density and diversity in Southeast Asia. Indonesia has over 3.3 million hectares (approximately 8.2 million acres) of mangroves along its coastlines, accounting for nearly 20% of the world’s global mangrove inventory [1]. Brazil, Nigeria, and Mexico jointly account for another 20% of total mangroves worldwide [2].

Seagrasses (not to be confused with seaweed) can be found globally along coastlines, including regions along the Artic circle. Similar to mangrove distribution, the density and diversity of seagrasses are highest along the coasts of Southeast Asian countries throughout the Pacific [3]. Tidal marshes, defined as the wetland areas along and between coastal areas that are inundated by daily tidal patterns, can also be found globally. The contiguous United States, excluding Hawaii and Alaska, has over 2.9 million hectares (7.2 million acres) of intertidal vegetated coastal wetlands, with mangroves and tidal marshes included in this inventory [4].

Unfortunately, mangrove, seagrass, and tidal marsh ecosystems face significant global threats. In addition to removing existing habitats, coastal development alters the hydrology and increases pollution and sedimentation, putting additional pressure on these blue carbon ecosystems. Mangrove ecosystems suffer from deforestation due to increasing pressures from coastal agriculture, including but not limited to shrimp farming, fishing, and salt production. Rising sea levels, changing salinities, and increasing temperatures all stress these critical environments, contributing to further habitat loss across all coastal ecosystems.

Seagrass meadows play an essential role in sequestering and storing blue carbon in the ocean.

Where Are Today’s Blue Carbon Projects?

Current blue carbon projects listed on Verra’s Verified Carbon Standard (VCS) and Community, Climate, and Biodiversity registries focus primarily on mangrove restoration across four continents. These mangrove projects highlight how carbon finance can be coupled with local conservation organizations to scale restoration efforts. Mirroring the mangrove hotspots discussed above, many of these projects are in the coastal regions of Indonesia, India, China, Nigeria, Senegal, and Mexico. There are currently 28 mangrove projects across 13 countries listed on the VCS registry at various points of project development.

Within the blue carbon space, ClimeCo has partnered with YAKOPI to fund and restore 6,000 acres of mangroves in Indonesia’s Aceh and North Sumatra regions. This mangrove restoration project involves the community throughout the entire process. Including collecting seeds from mangrove propagules, propagating the seeds in nurseries, assessing planting locations, planting the mangroves, and monitoring and maintaining the stand health. More details on this project will be shared in a forthcoming blog post highlighting the incredible community and project partners that have made this project possible.

While several mangrove restoration projects are listed on Verra’s registries, only one listed blue carbon project exists within the United States. This project involves the restoration of seagrass meadows through the direct seeding of seagrass species along Virginia’s coastline. With blue carbon ecosystems accounting for less than 1% of the United States’ natural land area, the opportunity for U.S. blue carbon projects exists but certainly with its own set of challenges.

Blue carbon project locations based on project information publicly available on Verra’s Verified Carbon Standard Registry. Smaller countries on the map may only have one icon representing multiple projects in proximity.

A Louisiana Department of Wildlife and Fisheries Marsh Master moving through Louisiana’s tidal wetlands. Louisiana’s coastline is home to the largest, most productive tidal wetland area across the United States.

Coastal Blue Carbon in the United States

David Chen and I attended the Restoring America’s Estuaries: Coastal and Estuarine Summit early in December 2022 to learn more about the prospects of blue carbon projects in the United States. More than 1,375 coastal restoration professionals joined us to learn about opportunities and challenges surrounding blue carbon projects across the United States. Through attending several blue carbon sessions, we learned about topics such as seagrass carbon variability in California, the blue carbon market potential in Texas, and how to utilize blue carbon to support coastal wetland restoration in the Northeast.

While it’s clear that blue carbon projects have a fundamental role in addressing and mitigating climate change, it’s also evident that sea-level rise and its variable effects across different blue carbon ecosystems will complicate future project planning and development. Existing coastal marshes across the mid-Atlantic region are forecasted to be significantly vulnerable to sea-level rise. However, an opportunity exists for transitional zone habitats to migrate inland. Sea level rise will need to be accounted for in all aspects of blue carbon project development planning and implementation to ensure ecosystem, and subsequent carbon, permanence.

Additionally, there was a degree of uncertainty addressed in relation to the most effective restoration techniques for tidal marshes and seagrasses. Localized considerations, such as hydrology, in-land development, water quality, and salinity, among others, all play a role in the carbon sequestration rates across ecosystems. Careful consideration of the science behind blue carbon restoration will need to be accounted for in the quantification of carbon emission removals across landscapes.

Lastly are the challenges posed by jurisdictional claims. Carbon rights for the coastal and seafloor blue carbon ecosystems in the United States lie within different governmental agency jurisdictions. All blue carbon projects must involve the appropriate governmental agencies and foster relationships with the state legislature to ensure that projects and partners meet both state-led initiatives and voluntary carbon market standards. As sea-level rise affects these vulnerable ecosystems, the question of jurisdiction will become more complicated.

The scientific expertise and restoration partnership experience was unparalleled across the presentations. Our team’s overall takeaway from the conference was that while developing blue carbon projects in the United States is challenging across several facets, it is certainly possible. As a leader in developing and managing environmental commodities, we are excited to see how blue carbon projects will continue to expand and how we can be at the forefront of domestic blue carbon project development.

[1] The Economics of Large-scale Mangrove Conservation and Restoration in Indonesia (worldbank.org)
[2] Global Forest Resources Assessment (fao.org)
[3] Seagrass and Seagrass Beds | Smithsonian Ocean (si.edu)
[4] Inventory of U.S. Greenhouse Gas Emissions and Sinks: 1990-2020

About the Author

Allyson Ulsh manages ClimeCo’s portfolio of nature-based solutions projects. From reforestation in tropical cloud forests to replanting bald cypress trees in Louisiana, Allyson understands the importance of coupling carbon finance with local stakeholder engagement to scale restoration efforts. Allyson is a Project Associate working within the Nature-Based Solutions project team. She received her Bachelor of Science degree in Environmental Resource Management from Pennsylvania State University, Schreyer Honors College.

Glossary

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

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

Blue Carbon 102

Blue Carbon 102

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