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Carbon capture and storage is about reputation, not economics

July 01, 2020
Clark Butler
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Key Findings

There isn't one example of a CCS project anywhere in the world that offers a financial justification for investing in CCS.

There is no flow of finance into the CCS sector because there is no business case.

It is arguable that CCS is little more than a helpful marketing message.

Carbon Capture and Storage Is About Reputation, Not Economics Supermajors Saving Face More Than Reducing Emissions

Executive Summary

The Australian Government proposes to broaden the scope of its Climate Solutions Fund to include the ability to invest in carbon capture, use and storage (CCS or CCUS) projects.

This expansion of scope is essential if CCS projects are to be undertaken as CCS projects:

  • are prohibitively expensive compared to other greenhouse gas emissions mitigation options, such as renewable energy and energy storage technologies;
  • offer no financial return for investors; and
  • have a dubious track-record. Even the Global CCS Institute - a booster organisation for CCS - acknowledges in its 2019 Global Status of CCS report that CCS is at best a minor contributor to decarbonisation, addressing up to 9% of greenhouse gas (GHG) emissions by 2050.

There isn’t one example of a CCS project anywhere in the world that offers a financial justification for investing in CCS.

In the absence of a carbon price, CCS will never provide a return on investment.

European oil companies—in particular, Equinor, Shell and Total—are investing in CCS, notwithstanding the lack of return, because it is an important part of their decarbonisation narrative and supports their aims to be seen as “responsible” energy companies.

The Australian Labor Party’s recent statement that it remains “open to CCS” but insists that CCS must not be funded by the Clean Energy Finance Corporation (CEFC) nor the Australian Renewable Energy Agency (ARENA), makes sense. These bodies are intended to facilitate the increased flow of finance into the commercialisation and deployment of Australian based renewable energy, energy efficiency and low carbon technologies.” With CCS, there is no flow of finance into the CCS sector because there is no business case. With a carbon price, this might change: the market could then decide how much to invest in CCS projects.

Despite the Minerals Council of Australia’s recent hollow statement about the Paris Agreement in its “Climate Action Plan”, decarbonisation of electricity, electrification of mining, and the use of green hydrogen in minerals processing will be the contributions its’ members make to combating increasing emissions, rather than the limited benefits afforded by CCS.

Press release: KEXIM delays investment in Santos’s Barossa gas project despite the company’s carbon capture aspirations, citing concerns

Please view full report PDF for references and sources.

Clark Butler

Clark Butler is an IEEFA guest contributor, and a corporate adviser with a background in the technology and finance sectors. In additional to being a director of and investor in technology and data companies, he is exploring technology and financing solutions to encourage investment in renewable energy solutions.

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