Carbon capture & the markets: The practical route to equitable decarbonisation?

Updated: Sep 18

As the first week of #Cop26 draws to a close, our global media is full of talk of the challenges and opportunities of achieving net-zero and how we need to deploy multiple approaches to get there. These include carbon capture - long heralded as an economic and environmental solution. What does it mean in practice for businesses and markets?

How can carbon capture drive the race to reduce emissions?

The current focus on COP26, media coverage of climate change and the Intergovernmental Panel on Climate Change (IPCC) 's latest report, have accelerated the debate on reducing emissions, how we can achieve this and which methods will be most effective.

The conversation to drive climate action (SDG13) by focusing on mitigation and adaption has become mainstream, and for a good reason. A key contribution is expected to come from projects designed to capture, reduce or sequester greenhouse gas emissions. They need to be done well and include local communities' needs and rights at their heart.

As we hear more and more about carbon capture, we also know many of our clients find this hard to understand and how this could be relevant to their business planning.

So here we dive into the process, touch on carbon markets, and point to some of the potential benefits and challenges.

What is carbon capture?

On the eve of #COP26 the BBC produced a very clear guide to Carbon Capture and the potential for carbon trading to drive climate action.

The aim is that for every tonne of CO2 that is emitted somewhere, another tonne is captured elsewhere.

The basic principle of carbon capture is reducing the emission of greenhouse gases produced by either industry or the generation of power. As the name suggests, the process begins by capturing carbon dioxide emissions before they reach the atmosphere and disposing of them safely.

The process consists of three stages:

  • Capture - preventing emissions from reaching the atmosphere

  • Transport - bringing emissions to a secure location

  • Storage - safe long-term storage of the emissions

Emissions are usually transported through pipelines or shipping and then injected into underground geological formations. These formations typically have to be at least a kilometre below ground to prevent the gases from escaping.

What impact does carbon capture have?

According to the Centre for Climate and Energy Solutions, carbon capture can potentially achieve 14% global emission reductions by 2050. It could be responsible for more than 90% of carbon dioxide emission reduction. They describe it as 'the only practical way to achieve deep decarbonisation in the industrial sector'.

Back in 2009, prominent American economist Jeffery Sachs identified carbon capture as a critical part of the global approach to sustainable development.

"The rollout of new technologies such as carbon capture and sequestration is essential if we want to avoid economic slump and climate change."
(Jeffrey Sachs, The Guardian, 2009)

Carbon capture is not without its critics, but scientists and economists continue to support the view that carbon capture schemes are vital in the battle against global heating and holding net emissions below zero by 2050.

From Carbon Capture to Carbon Markets: What are the opportunities?

According to market analysts, the global carbon capture, utilisation, and storage market was valued at $1.9 billion in 2020, and is projected to reach $7.0 billion by 2030, growing at a Compound annual growth rate (CAGR) of 13.8% from 2021 to 2030.

By any stretch that it is a good bet economically, let alone for the sustainability potential and additional direct and indirect value.

As Sachs outlined over a decade ago, the economic potential of carbon capture trading grows even more important as traditional fossil-fuel investments start to enter into the category of risk not opportunity.

In research launched at #Cop26 it was estimated that HALF of the world's fossil fuel assets could become worthless by 2036. While this is a high-level summary, it points to a future where an oil-capital like Houston could be facing decline on the same scale as post-industrial cities like Detroit.