Carbon capture and storage (CCS) is evolving rapidly, moving from pilot projects to large-scale infrastructure as governments and industries ramp up their decarbonization efforts. And yes, that’s still happening around the world! With 50 operational facilities and 628 projects in development, according to the Global CCS Institute, CCS is attracting unprecedented investments and policy support globally.
From capturing refinery emissions to enabling low-carbon hydrogen for fuel production to ethanol producers’ interest in capturing CO2 from their production process, CCS is emerging as an important technology for reducing the carbon intensity of transportation fuels. My latest report for Transport Energy Outlook members dives deep into the state of CCS, covering policy incentives, regional developments, sectoral applications and other key trends. Here’s a snapshot of key issues and themes.
The Momentum Behind CCS
Governments are increasingly integrating CCS into their decarbonization strategies. Policies such as tax credits, carbon pricing, and direct subsidies have emerged as crucial financial enablers. In the U.S., the Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL) created attractive incentives, including the expanded 45Q tax credit, which offers up to $85 per ton for CO₂ stored in geological formations and $180 per ton for direct air capture (DAC). Will the Trump Administration keep those policies in place? I say probably yes: The CCS tax credit existed before the IRA and the Administration supported a revision and increase in 2018. The political cover is there, and they can call the tax credit something else that is not “New Green Scam-ish.” Canada’s approach, meanwhile, combines a rising carbon price—set to reach CA$170 per ton by 2030—with investment tax credits covering up to 60% of project costs.
In Europe, the Net-Zero Industry Act (NZIA) mandates 50 Mtpa of CO₂ injection capacity by 2030, with a focus on cross-border CO₂ storage. The EU’s Carbon Border Adjustment Mechanism (CBAM) further incentivizes CCS adoption by placing carbon taxes on imported goods like steel and cement. And now, the just announced Clean Industrial Deal aims to transform high-emission industries by promoting clean technologies and reducing energy costs, with a goal of achieving a 90% emissions reduction by 2040. CCS will be critical to achieving this target.
China is rapidly expanding its CCS capacity as part of its 14th Five-Year Plan, which identifies CCS as a key pillar for reducing emissions in coal power, cement, and steel sectors. The Huaneng CCS project, now the world’s largest coal-based facility, captures 1.5 Mtpa of CO₂. However, limited private sector involvement and the absence of a mature carbon pricing system pose challenges for long-term scalability.
The chart below charts capacity growth through 2030 against key policies that have been promulgated over the last 5-7 years.
Key Challenges: Financing, Permitting, and Public Opposition
Despite strong momentum, I noted in the report some serious headwinds impacting the growth of CCS. Here are just a few examples:
- High Capex and Opex: CCS projects are capital-intensive, and securing financing remains a significant hurdle. While tax credits and carbon pricing help de-risk projects, the need for innovative financing models is urgent. Beyond capital expenditure, the ongoing operational costs of CCS facilities are significant, making it difficult to achieve long-term financial sustainability without continuous subsidies or strong carbon pricing.
- Permitting Delays: Regulatory uncertainty and slow permitting processes are delaying key projects. For example, the U.S. Environmental Protection Agency’s (EPA) backlog of Class VI well permits has hindered the deployment of new geological storage sites. This is something that I think the Trump Administration is looking to address and correct.
- Public Opposition: Concerns about CO₂ pipelines and storage safety are growing, particularly in the U.S. and Europe, where local opposition has delayed several projects. Addressing these concerns through transparent communication and enhanced safety protocols will be crucial for scaling CCS.
- Policy Volatility and Uncertainty: Uncertainty over the future of existing incentives, such as the U.S. Inflation Reduction Act (IRA) and Bipartisan Infrastructure Law (BIL), along with fluctuating carbon prices in regions like the EU, is creating a risk-averse environment for investors.
Positioning CCS for Long-Term Success
The next decade will be pivotal for CCS. Ensuring its long-term success will require a multi-pronged approach:
- Stable Policy Support: Governments must provide predictable incentives and clear regulatory frameworks. Long-term certainty with stable frameworks just works, and the global government that best recognizes this is China. When will other governments get this?
- Innovative Financing Models: Blended finance, green bonds, and carbon markets will be essential to attract private investment. That may happen, for now, outside of the U.S.
- Enhanced Public Engagement: Transparent communication and community involvement will help address safety concerns and build broader public acceptance. If the recent U.S. presidential election has taught us anything, it’s that the people (you know, consumers and voters) can’t be left out and then served policies funded by their tax dollars that they do not know about or understand and that have no discernible impact (from their perspective) on their day-to-day lives.
Despite the headwinds, global CCS capacity is projected to grow substantially by 2030, with North America, Europe, and China leading the expansion. Transport Energy Outlook members received the full breakdown and regional projection last week. Interested in becoming a member? Subscribe today. Existing members can access the complete report in the member portal.
