What policies are governments using to incentivize capture, transport and storage in CCUS hubs – and how long will government support be needed?
Governments have committed over $6 billion to accelerate the deployment of CCUS since 2021, led by the US, EU, Australia and the UK. They are driven by the recognition that accelerating the pace of industrial decarbonization will depend on the build-out of carbon management infrastructure.
There will be new technologies and approaches that transform heavy industrial sectors, but CCUS is currently one of the few viable ways to remove emissions from products such as cement, chemicals, fertilizers and waste incineration – those that require intense heat and even involve chemical processes that themselves produce carbon dioxide. Building out carbon transport and storage infrastructure will facilitate that hard-to-abate decarbonization, but it will also enable the production of abated power and clean hydrogen, and help scale up high-durability carbon removals. That makes it a no-regrets net zero strategy, rather than a transitional measure.
Supporting CCUS hubs, rather than one-off projects, is now seen as one of the most cost-effective ways to enable industrial decarbonization. Hubs leverage economies of scale, while reducing costs by allocating risk management along the entire value chain. That helps governments to meet interim and long-term national climate targets.
CCUS helps to enable a just transition, allowing existing industries to remain competitive, keep and create jobs and continue contributing to local economies while transitioning to a net-zero future. A CCUS hub can help industrial regions to keep existing industrial jobs. It also helps to attract new businesses close to storage areas, creating jobs and growth in industrial regions. The UK government expects CCUS to support up to 50,000 jobs and create a significant export opportunity.
CCUS hubs accelerate the commercial scale up of CCUS technologies and can help to create a new carbon management industry. Policy support can enable faster decarbonization in the short and medium term, tailormade to the specifics of one or more CCUS hubs, and phase out that support over time as a commercial industry evolves. For countries with significant geological storage resources, that can open up a significant new cross-border industry as a carbon manager for larger regions.
Flexible power generation capacity that complements renewables can be an integral part of a CCUS hub – providing reliable low-carbon power for businesses in the hub area.
Hydrogen is set to play a big role in decarbonizing industry, heating and transport, and the cheapest way to make low-carbon hydrogen today is using natural gas with CCUS. Integrating low-carbon hydrogen production into a hub provides energy for multiple applications in the industrial region.
CCUS hubs can also provide opportunities to remove carbon dioxide from the atmosphere at scale, through direct air capture with storage (DACS) and bioenergy with CCS (BECCS).
Today’s market models make it more favourable for industrial companies to emit carbon dioxide (even where carbon has a cost) than to invest in carbon capture and have the carbon dioxide stored. As carbon prices rise, incentives develop and mandates kick in, CCUS will become cheaper than emitting.
The most advanced CCUS hubs today are supported by government-backed incentives and subsidies that tackle two main challenges:
In addition, the incentives also need to address challenges throughout the CCUS value chain like performance risk and counterparty risk.
Policy support is likely to match the dynamics of low-carbon energies such as offshore wind:
Governments are using a range of different policy frameworks to help a CCUS industry get off the ground and scale rapidly. Government support is expected to decrease over time as the industry matures and sufficiently high carbon prices, mandates and/or market demand for low carbon products create business models.
These are the most common tools governments are using in different combinations to support the large-scale deployment of CCUS, especially through CCUS hubs. In most cases, mechanisms are stackable for the user to create a viable business model.
Identify the potential and value of CCUS
Set up national CCUS strategy and targets
Provide clarity with regulations
Assign roles and responsibilities.
Work on community acceptance
Regulations relating to CCUS vary considerably by country. In order for CCUS hubs to scale, consistent regulations across geographies are necessary. Suggested guidelines for developing such regulations are as follows:
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