Towards a science-based definition of ‘unabated’ fossil fuels

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Key points:

  • Unabated fossil fuels refers to the use of coal, oil and gas without substantial efforts to reduce the emissions produced throughout their life cycle.
  • However, there is no rigorous definition of the term that is widely agreed on.
  • Despite this, the term ‘unabated’ in relation to fossil fuels has become central to international negotiations at the G7, G20 and UN climate summits, and is set to be a key point of debate at COP28.
  • Without a rigorous definition, the use of inadequate technologies and weak policies on abatement could fail to curb fossil fuel emissions, undermining global efforts to limit temperature rises.
  • A science-based definition of abatement should include near-total capture of emissions, permanent storage of captured carbon dioxide, the near-total elimination of upstream and transport emissions, and rigorous monitoring and reporting processes for fossil fuel companies and projects.
  • To limit warming to 1.5°C, the use of fossil fuels that do not meet these stringent requirements must be rapidly and substantially reduced to a minimum by 2050.

Abated vs unabated fossil fuels

Abated fossil fuels refer to the use of coal, oil and gas where the emissions from their extraction are minimised, and emissions from their use are almost completely prevented from entering the atmosphere through technologies like carbon capture and storage. Unabated fossil fuels are the use of coal, oil and natural gas where this does not take place – which currently account for 99.9% of fossil fuel emissions.1Global CCS capacity represents 0.1% of global fossil fuel emissions https://www.iea.org/data-and-statistics/data-tools/ccus-projects-explorer & https://www.globalcarbonproject.org/carbonbudget/22/files/GCP_CarbonBudget_2022.pdf.

At this year’s COP28 summit, the term ‘unabated’ is set to be key to negotiations on phasing out fossil fuels. The concept was first used in major international agreements on climate and energy two and half years ago, and since then it has been mentioned repeatedly in G7, G20 and UN Framework Convention on Climate Change agreements and communiques. Despite this, the term has not been officially defined, and countries have signed agreements that refer to unabated fossil fuels without agreeing on its meaning.

The absence of a clear definition presents a huge threat to efforts towards mitigating climate change, and risks a situation where governments and companies pursue policies that are far removed from what is needed to achieve the Paris Agreement goal of limiting warming to 1.5°C.

What is carbon capture and storage?

Carbon capture and storage (CCS) technology separates carbon dioxide from other gases, and then transports and stores it. CCS is mostly used to refer to the removal of carbon dioxide from large single-source emitters, such as power stations or industrial facilities.

‘Unabated’ fossil fuels in international diplomacy

2021

The term ‘unabated’ was first used in major climate and energy negotiations in the concluding statement of the G7 climate and energy ministers meeting in the UK in May 2021, when governments committed to end direct support for unabated thermal coal power. The same promise was made by the G20 in October that year. At COP26, 39 countries went further and committed to end direct international support for all unabated fossil fuel energy projects. The Glasgow Climate Pact, summarising key agreements from COP26, called on countries to phase down unabated coal power for the first time.

2022

In 2022, building on the commitments from the previous year, G7 countries pledged to phase out generation of unabated coal power domestically, while G20 states agreed to accelerate the phase-down of unabated coal power. Ahead of the COP27 summit in Egypt, India said it wanted to expand the agreement made at COP26 and reach a deal on phasing down all unabated fossil fuels. This proposal gathered significant support from around 80 countries, including the EU, US, Canada and Australia. However, the final summit agreement only repeated the commitment from COP26 to accelerate the phase-down of unabated coal power, with Saudi Arabia and Russia reportedly strongly opposed to any broader deal on fossil fuels.

2023

This year, G7 countries committed to work towards ending the construction of new unabated coal fired power generation and to accelerate the phase-out of unabated fossil fuels. However, G20 countries failed to agree on a similar proposal to phase down all unabated fossil fuels – only agreeing to phase down unabated coal power.

Heading into COP28, the battle over unabated fossil fuels is now centre stage in the UN climate talks. This year’s COP President Sultan Al Jaber wants the summit to accelerate work that leads to an “energy system free of unabated fossil fuels in the middle of this century” and support “a responsible phase down of unabated fossil fuels”. The EU is backing this in its negotiating position for COP, recognising the need for a global phase-out of unabated fossil fuels. However, the bloc has noted that abatement technologies currently only exist at limited scale and should be used for hard to abate sectors. The US is slightly less committed, saying only that it aims for a ‘shift away’ from unabated fossil fuels rather than a phase-out. A coalition of 131 major global companies have also thrown their weight behind the phase-out of unabated fossil fuels.

The 16-country High Ambition Coalition is calling on governments to go further at COP28 and agree to a full phase-out of all fossil fuel production and use, noting that current abatement technologies will play a minor role in reducing emissions and they should not be used to delay climate action. At the other end of the spectrum, the same countries that blocked an agreement on an unabated fossil fuel phase-out at the G20 and last year’s COP – such as Saudi Arabia, Russia and China – could remain staunchly opposed to any reference to fossil fuels at COP28.

While there are significant gaps between the negotiating positions of countries heading to COP28, it is clear that debates on the phasing down or phasing out of fossil fuels, abated or unabated, will be central to negotiations.

Differing definitions of unabated fossil fuels

There are currently a range of differing definitions of ‘unabated’ fossil fuels:

  • Dictionary definitions highlight the breadth of potential interpretations of the term abatement, varying from a ‘reduction in the amount or degree’ to ‘putting an end to’.
  • US Special Envoy for Climate John Kerry has said that the term means “something different to different people” and that countries’ intentions aren’t all the same. In his view, abatement means “capturing the emissions to keep you on a track to reach the Paris goals. Very straightforward.”
  • The International Energy Agency (IEA) defines unabated fossil fuels as the use of those fuels for combustion without carbon capture, utilisation and storage (CCUS).2CCUS includes the use of carbon technology where captured carbon dioxide is used, for example in other industrial processes, whereas CCS refers only to where captured carbon is stored.
  • The Intergovernmental Panel on Climate Change (IPCC) defines them as “fossil fuels produced and used without interventions that substantially reduce the amount of GHG emitted throughout the life cycle; for example, capturing 90% or more CO2 from power plants, or 50–80% of fugitive methane emissions from energy supply.”

Agreeing this definition in the IPCC report was itself controversial and contested. According to one of the IPCC report’s lead authors “A few [countries] came out very aggressively wanting this abated, unabated language in there right in front of fossil fuels, because otherwise, we just want a fossil fuel phase out or phase down. Fundamentally, it’s about a political collision between those parties that want to keep using fossil fuels and those parties that want to phase them out completely.”

The dangers of an ambiguous definition

An ambiguous definition of unabated fossil fuels could have huge implications for future warming, since fossil fuel emissions could be nearly completely halted or just reduced. On top of this, there are risks around the term allowing for low carbon capture rates or excluding upstream emissions.

Carbon capture rates

The IEA and Kerry’s definitions of unabated fossil fuels are problematic as they both refer to carbon capture – but not all CCS projects capture high rates of carbon. As a recent study pointed out, not having a clear definition of abatement could allow for carbon capture rates as low as 50%.

This is very relevant given the track record of CCS projects to date. There are currently only 41 CCS facilities operating worldwide, and many of those have achieved relatively low capture rates. For example, the estimated capture rates at some high-profile CCS projects are:

  • 65% at Boundary Dam, a coal power plant in Washington State, US
  • 45% at Gorgon, a gas processing facility on Barrow Island, Australia
  • 39% at Quest, an oil refinery in Alberta, Canada
  • Under 10% at Century Gas Processing Plant in Texas, US
Upstream emissions

Upstream emissions – which come from the extraction and production of fossil fuels – are not included in the IEA and Kerry’s definitions of unabated fossil fuels, despite accounting for almost 15% of total energy-related greenhouse gas emissions. This figure includes emissions of methane, a greenhouse gas far more powerful than carbon dioxide. The global energy industry is responsible for an estimated 37% of human-caused methane emissions. The IEA does not incorporate upstream emissions into its definition, despite stating that significant reductions in operational and methane emissions from the energy sector are necessary to reach net-zero emissions by 2050.3The IEA’s Net Zero Emissions scenario provides a pathway for the global energy sector to achieve net-zero carbon dioxide emissions by 2050. A definition of abatement that only looks at carbon capture, without addressing upstream emissions, misses a significant share of global fossil fuel emissions.

Key components of a science-based definition

Based on the latest reports from the IPCC, IEA and academic literature, the following key components are needed for a rigorous, science-based definition of abatement:

  1. High carbon capture rates: There must be near-total capture of fossil fuel combustion emissions, with carbon capture rates of at least 90-95%. If carbon capture technology successfully and consistently reaches this rate, then the definition should be reviewed and increased to further reduce residual emissions. Carbon capture technology is not feasible for mobile or small emitters, such as in transport or domestic gas boilers and stoves. The IEA does not see any role for CCS in the use of oil in its net zero scenario, only for gas and coal.
  2. Geological storage: Once captured, carbon dioxide must be stored underground permanently. Alternative uses of captured carbon dioxide, such as increasing rates of oil extraction or for short-lived products like fizzy drinks, are incompatible with a science-based definition of abatement as the carbon is not permanently removed.
  3. Near total containment of upstream and transport emissions: Emissions from the production and transport of fossil fuels, including methane emissions, need to be virtually eliminated. This should include methane intensity levels of 0.5% at the very most, and ideally 0.2% or lower – which large parts of the oil and gas industry claim to have achieved.4Methane intensity refers to the amount of methane that is leaked or released into the atmosphere as a percentage of the total amount of gas sold. Together with post-combustion capture, this should ensure that the definition of abatement includes all Scope 1, 2 and 3 emissions from fossil fuels.5Scope 1 emissions are direct emissions from sources owned or controlled by a company, Scope 2 are indirect emissions from the energy it uses, and Scope 3 includes emissions the company is indirectly responsible for in its value chain, including from the use of the products it sells.
  4. Monitoring, reporting and verification: To ensure that these standards are met, there needs to be rigorous monitoring of all facilities and infrastructure along the fossil fuel supply chain. This data should be publicly reported, and verified by third parties where possible.

Since the term ‘unabated’ has become central to international climate negotiations, it is vital that countries agree on a rigorous science-based definition of the term. If there is no agreement on what unabated fossil fuels are, then any agreement to phase them out is arguably meaningless, as each country could impose their own interpretation. It could lead to countries and companies implementing policies that are interpreted as being in line with a phase out of unabated fossil fuels, but that undermine progress towards the Paris Agreement goal of limiting warming to 1.5°C.

The need to rapidly and substantially reduce the use of unabated fossil fuels to limit warming to 1.5°C is clear. In the IEA’s Net Zero Emissions scenario, total use of coal, oil and natural gas falls by 87% by 2050, while the IPCC makes clear that reaching net-zero energy emissions will require “minimal” use of unabated fossil fuels.

  • 1
  • 2
    CCUS includes the use of carbon technology where captured carbon dioxide is used, for example in other industrial processes, whereas CCS refers only to where captured carbon is stored.
  • 3
    The IEA’s Net Zero Emissions scenario provides a pathway for the global energy sector to achieve net-zero carbon dioxide emissions by 2050.
  • 4
    Methane intensity refers to the amount of methane that is leaked or released into the atmosphere as a percentage of the total amount of gas sold.
  • 5
    Scope 1 emissions are direct emissions from sources owned or controlled by a company, Scope 2 are indirect emissions from the energy it uses, and Scope 3 includes emissions the company is indirectly responsible for in its value chain, including from the use of the products it sells.

Analysis of US methane & fossil fuel announcements at COP27

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Key points:

  • The proposed 87% reduction in methane emissions from oil and gas by 2030 in the US Methane Reduction Action Plan is more ambitious than the IEA and the average of IPCC scenarios to limit warming to 1.5oC
  • However, US methane emissions from the oil and gas sector are more than double those in the US government’s own official figures, and are still rising, according to Climate TRACE.
  • The Joint Declaration from Energy Importers and Exporters on Reducing Greenhouse Gas Emissions from Fossil Fuels aims “to minimise flaring, methane, and CO2 emissions across the fossil energy value chain to the fullest extent practicable.”
  • Limiting warming to 1.5oC requires a rapid reduction in fossil fuel use as well as in methane and supply chain emissions. 
  • However, the US accounts for 41% of the world’s LNG capacity that is currently under development (either proposed or in construction). US gas production is forecast to increase by 9% between 2021-2030, but to align with the IEA Net Zero Emissions scenario, gas production would need to reduce by 25% over this period.

Importance of methane reduction

Ambitious domestic oil and gas methane reduction

US oil and gas methane emissions more than double official figures

  • Officially-reported methane emissions in the US are significantly underestimated
  • According to the latest official US data, total reported methane emissions from the oil and gas sector in 2020 were 212 million tonnes of CO2 equivalent. 11https://cfpub.epa.gov/ghgdata/inventoryexplorer/#energy/naturalgasandpetroleumsystems/allgas/gas/all
  • Our analysis of data released this week from Climate TRACE – which is sourced independently and primarily based on direct observations of activity – suggests oil and gas production actually emitted 17.4 million tonnes of methane, or 519 million tonnes of CO2 equivalent, more than double the official figure. 12https://climatetrace.org/downloads conversion from CH4 to CO2e using GWP100 of 29.8, from IPCC AR6 WG1 Table 7.15
  • Similarly, US EPA data show US methane emissions from oil and gas fell by 2% between 2015-2020, whereas Climate TRACE data suggest they actually rose by 34% over the same period. 13https://cfpub.epa.gov/ghgdata/inventoryexplorer/#energy/naturalgasandpetroleumsystems/allgas/gas/all
  • If the 87% reduction is achieved on actual emissions, as measured by Climate TRACE, this would have a significant impact. However, if measurement and reporting remain weak and inaccurate, claimed reductions may have little relationship with real-world methane emissions.

US expansion of gas production and LNG exports threatens global climate targets

Risks & rewards of Just Energy Transition Partnerships

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Key Points

  • Just Energy Transition Partnerships (JETPs) are a pioneering approach that could ensure effective financing for a just transition in global south countries, potentially offering a template for future country-level financing deals
  • The South African JETP investment plan is due to be agreed before COP27 and will be seen as a crucial test of commitments made at COP26. India, Indonesia, Senegal and Vietnam are also developing their own JETPs with G7 countries, with pilot projects also announced for Egypt, Ivory Coast, Kenya and Morocco
  • The JETP process for South Africa has lacked transparency and adequate civil society engagement, limiting its effectiveness 
  • To be effective, donors must prioritise grants and concessional financing in JETP deals to fund the most critical elements of a just transition, such as support and retraining for workers
  • All JETP countries are seeking to expand fossil gas extraction and power, raising the question of whether donor countries may break the commitments made to end international fossil fuel finance at COP26.

What is a Just Energy Transition Partnership?

At COP26, a “historic international partnership” was agreed to support a just transition to a low carbon economy in South Africa. This Just Energy Transition Partnership (JETP) saw France, Germany, the UK, US, and EU (the International Partners Group, or IPG) commit to providing USD 8.5 billion over three to five years to support South Africa’s national climate plan. The finance could be provided as grants, concessional loans (with interest rates lower than would be available from commercial banks), through private finance, guarantees or technical support.

The JETP aims to phase out coal and rapidly accelerate the deployment of renewables in South Africa’s heavily coal-dependent electricity system. This would enable the country to reduce its emissions, consistent with keeping global warming below 2°C. A key focus of the agreement is supporting a just transition that protects vulnerable workers and communities – especially coal miners, women and youth – affected by the move away from coal. The partnership also aims to support private sector investment, including through changes to government policy in South Africa.

This agreement has been described as a potential “new model for climate progress,” a bespoke multilateral agreement developed by and for a single country with greater focus on ensuring a just transition. Even before the implementation plan for the South Africa JETP had been agreed, the model was replicated – in June 2022, the G7 announced it was “working towards” further JETPs with India, Indonesia, Senegal and Vietnam. Pilot projects to develop JETPs for Egypt, Ivory Coast, Kenya and Morocco were also announced at the EU-AU summit in February 2022. While the model has been quickly replicated for other countries, serious questions remain about the transparency, consultation and financing model of the South Africa deal.

An investment plan for South Africa’s JETP has been approved by the South African cabinet and is due to be publicly released during COP27. This implementation plan will play a pivotal role in shaping the financing of the energy transition in South Africa. It could also be seen as a crucial test of this new partnership model and a key milestone in demonstrating progress on delivering on funding commitments ahead of COP27.

The positive impacts JETPs could deliver

Bespoke country-level approach

JETPs could fill a key gap in international climate finance, between broad global-level funder commitments that lack detail and accountability and project-specific financing that does not provide a comprehensive approach to the energy transition. Instead, JETPs are country-led and bespoke – South Africa’s lead climate negotiator described the USD 8.5 billion package as “groundbreaking” because it was “co-created” by South Africa and donor countries, rather than imposed by wealthy nations. 

Linked to this, JETPs are designed to incorporate national policy reforms alongside project financing. These policy reforms should be aimed at removing barriers to the investment and scaling up of clean energy technologies, for example through energy market or domestic subsidy reforms.

Ensuring the energy transition is just

The energy transition has significant social impacts – most acutely on workers and communities that rely on high-emitting industries that need to be phased out. The transition also offers huge opportunities, with investments in renewable energy and infrastructure creating new jobs and economic growth. Significant government and international financing, alongside the right policies, are needed to mitigate the negative impacts of phasing out high emitting industries and ensuring those communities benefit from the shift to clean energy.

A replicable model for the early closure of coal power plants

Ensuring a rapid phaseout of coal-fired power generation is essential to limiting warming to 1.5°C, with richer nations needing to end coal use by 2030 and a global end to coal power by 2040. Coal plants have an average lifetime of 46 years but to align with a 1.5°C goal, plants need to reduce their operational lifetime to an average of 15 years. The early closure of these power plants can come with significant financial costs as the high upfront costs are usually paid off over the life of the project. This is particularly acute in the global south where coal fleets are comparatively young and shorter lifespans would further reduce earnings and increase losses.

Proposals for how to finance the early retirement of coal power plants have developed significantly in recent years, including the possibility of running plants for a shorter period with a lower cost of capital, or buying out existing power-purchasing agreements. JETPs could provide a fully-developed model for financing an accelerated coal phaseout that could be replicated across coal-power dependent countries in the global south.

In parallel with the JETPs, the Asian Development Bank is developing an Energy Transition Mechanism (ETM) for the early retirement of coal power plants. The ETM is currently developing pilots for combining public and private finance to retire or repurpose between five and seven coal-fired power plants in Indonesia, the Philippines and Vietnam.

Deliver on rich countries’ climate finance commitments

Climate finance has become a key sticking point in international climate negotiations, with the failure of rich countries to deliver on the USD 100 billion commitment made in Paris a major block to progress at COP26. While pledges of funding have increased, governments in the global south are also keen to see those pledges delivered and flowing to projects and programmes that urgently need funding. Effective delivery of JETPs could show that donor countries are serious about meeting their funding commitments, building trust in the multilateral process.

G7 countries are not the only potential donors for energy infrastructure projects in the global south, with Russia and China also providing project financing. If the G7 countries want to maintain their position and influence as a provider of finance to global south countries, they must deliver on finance, and do it in a way that genuinely meets the needs of the recipient countries.

The challenges JETPs need to overcome

Lack of transparency & civil society engagement

Of the proposed JETPs, South Africa’s is the most advanced, yet very limited information about the deal has been released publicly. While the South African government has conducted a countrywide consultation on the just transition, the consultations on the JETP itself have, so far, only involved the South African government, the IPG and development finance institutions. Apart from two events at COP26 in Glasgow, there has been no formal civil society consultation on the proposed partnership.

After the initial announcement at COP26, there was no public communication regarding the partnership for six months, until an update was released by the South African government and the IPG. 

The South African government has been working on a proposed investment plan – the core of what the JETP will fund. A draft of the plan was reportedly sent to the IPG in early October, and was approved by the South African cabinet in mid-October. Unusually, public consultation on the investment plan is only due to take place after it has been agreed by both the IPG and the South African government, limiting the scope for meaningful input. 

From the donors’ side, the IPG has sent financial offers to the South African government for evaluation – however these offers remain confidential. Again, the lack of transparency on the sources and types of funding proposed by the donors severely limits public scrutiny over the financing of the deal.

This lack of transparency and consultation is a key concern, as consultation and engagement with civil society, communities and trade unions should be a cornerstone of a just transition.

Providing the right kind of finance

A core element of the JETP model is the use of blended finance, where public finance from governments is used to leverage further new private sector investment. This model has been proposed for over a decade and pitched as a way not only of ensuring greater value for money for donor governments and their taxpayers, but creating a greater role for the private sector in the traditionally government-focused world of development finance. However, real leverage rates – the ratio of public finance to private finance – are low. On average, for every USD 1 development banks have invested in low income countries, private finance has mobilised just 37 cents.

Part of the challenge with blended finance has been that public funding has come in the form of loans through development banks that have a mandate to deliver a return on their investment. This means that public finance can end up funding commercially-viable projects, rather than being used to take on greater risk or fund activities that don’t generate a return. In other words, the funding does not end up where it is needed most.

This will be a particular challenge for JETPs, as the financing covers a broad spectrum of needs with varying rates of return. These range from renewable energy generation to the costs of supporting communities and workers that need financial support. In order to be successful, public finance should be targeted at zero and low-return needs, which means the majority of the public finance should be provided as grants, guarantees or on highly concessional terms.

Adapted from Making Climate Capital work: Unlocking $8.5bn for South Africa’s Just Energy Transition by the Blended Finance Taskforce and the Centre for Sustainability Transitions at Stellenbosch University

Recipient countries have publicly stated that they are not interested in taking on more debt at near-market rates. As South Africa’s environment minister has said: “We would have no interest in borrowing money that isn’t cheaper, what would be the point?”

While the details of the financing for South Africa’s JETP remain confidential, early signs are not promising – in the case of funding currently being negotiated by France, reports suggest only a small portion would be in the form of grants, which would only cover research studies. Similarly, in early October the German government announced it had pledged EUR 320 million for the JETP, with EUR 270 million in low interest loans and only EUR 50 million in grants. 
A leaked draft of the financing plan for South Africa indicated that just 2.7% of the total USD 8.5 billion would be provided as grants, with 43% provided as commercial loans or guarantees. These figures were disputed by South Africa’s lead official on climate finance, who stated that: “The numbers cited do not reflect the current status of the financing package, details of which will be provided once the plan is released to the public.”

Financing fossil gas

Multiple studies have shown that to limit warming to 1.5°C, no further fossil fuel infrastructure can be built. Yet all five JETP countries have plans to significantly increase the use of fossil gas in power generation and Senegal is set to become a major new gas producer. The five countries alone make up 19% of gas power plant capacity currently under development in the world.

In many of the countries, these gas expansion plans are closely linked to the JETPs:

During COP26, 39 countries committed to end new direct international public finance for the unabated fossil fuel energy sector by the end of 2022 – with Japan the final G7 to join the commitment in May this year. However, this commitment contained an exemption to allow fossil fuel funding in limited and clearly-defined circumstances that are “consistent with a 1.5°C warming limit”. The commitment was further weakened at the G7 summit in June in the wake of the global energy crisis driven by Russia’s invasion of Ukraine. The group’s communique acknowledged that: “Investment in this sector is necessary in response to the current crisis… In these exceptional circumstances, publicly supported investment in the gas sector can be appropriate as a temporary response.” 

In this context, the JETPs serve as a crucial test of whether the G7 countries will keep to their COP26 commitment to end international fossil fuel financing.

False solutions

There are significant risks that JETP deals could finance ‘false solutions’ to the energy transition, either wasting scarce resources on unviable technologies or, worse still, financing technologies that actively harm the environment:

  • Hydrogen exports – Expanding green hydrogen production and use is a core component of South Africa’s ambitions for its JETP, and both South Africa and Senegal have plans to become hydrogen exporters. While green hydrogen can reduce emissions in applications that are hard to electrify, like heavy industry, shipping hydrogen internationally is likely to be prohibitively expensive and inefficient.

Carbon capture and storage: Where are we at?

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Key points

  • The history of CCS is one of unfulfilled expectations. Only 10% of CCS projects undertaken thus far have been built.
  • There is currently unprecedented momentum behind CCS. It has attracted over USD 2 billion in annual investment since 2020 and capacity could increase 600% by the end of the decade.
  • Though it has widespread applications, CCS currently only really makes sense in producing cement.
  • The focus of CCS should be on storing CO2, not on increasing fossil fuel production or even using captured carbon to make products.

What is CCS?

Carbon capture and storage (CCS) refers to myriad CO2 capture technologies, transportation systems and storage methods. As such, CCS is best viewed not as a technology per se – unlike solar and wind – but rather as an “integrated infrastructure” (comparable for instance to existing natural gas infrastructure), which broadly consists of four components:

  • Capture: Technologies that actually capture CO2, either before or after burning
  • Transportation: The captured CO2 then needs to be taken somewhere, either by pipeline or ship
  • Use: The CO2 can then be either used for a specific purpose (see CCUS below)
  • Storage: Or it can be stored more permanently, typically underground.

Based on these components, there are three broad categories we can use to define CCS applications:

  • CCS: A system where the CO2 is captured and stored permanently.
  • CCU (carbon capture and utilisation): A system where the CO2 is instead used in processes, such as producing fizzy drinks, or to make products like building materials. Some applications use the CO2 after it has been captured, while in other cases, the carbon and the oxygen need to be separated through chemical and biological conversion processes so the carbon can be used as a feedstock.
  • CCUS (carbon capture, utilisation and storage): A system where the CO2 is both used and stored. This refers exclusively to enhanced oil and gas recovery (see below).

For the sake of simplicity, when discussing the topic more generally, this briefing will use the acronym CCS, unless it is important to distinguish between these categories.

The main technological component of CCS is the capture technology

A broad range of technologies qualify as CCS, but they have fundamentally different applications. There are capture systems that are directly fitted onto a power plant or an industrial facility that reduce their emissions at source – these are more traditional applications of CCS. These systems can use a chemical or a physical process to capture the CO2 before it is emitted into the atmosphere (see Appendix I for an overview of several technologies).

There are also technologies that directly extract CO2 from the atmosphere, known as carbon dioxide removal (CDR). Organisations like the IEA view CDR as a specific type of CCS, including technologies like direct air capture (DAC) or bioenergy with CCS (BECCS). But this is disputed. Others aim to distinguish between fossil-based CCS, and non-fossil based CCS (which includes BECCS and DAC). However, at its core, CCS is meant to reduce emissions from power stations or industrial facilities, whereas CDR is designed to actually remove CO2 from the atmosphere. As such, this briefing will not focus on CDR.

Transportation and storage is more straightforward

After it has been captured, CO2 can be transported via pipeline or ship. These infrastructure networks could eventually resemble those we use for oil and gas today. It can then be stored in dedicated geological storage sites, such as deep saline formations – essentially deep, underground rock formations – or in depleted oil and gas wells.

CO2 can alternatively be used, post-capture

It can either be used directly or converted into a feedstock:

  • Direct use: It can be used to boost yields in greenhouses, in enhanced fossil fuel production or in producing carbonated beverages.
  • Conversion: It can be used to produce various fuels and chemicals, as well as building materials like concrete by injecting CO2 into the mixture to form a binding agent.

In theory, CCS could be applied to any sector that emits carbon, which is every sector of the economy – from power generation and waste incineration to heavy industry and hydrogen production (see Appendix III).

What are the prospects for CCS?

The history of CCS is characterised by failure

Between 1995 and 2018, over 260 CCS projects were undertaken. Of these, only 27 were ever completed. This despite massive government support following the global financial crisis of 2008-2009. Governments across the world provided USD 8.5 billion in support to CCS projects, but only 30% of that funding was spent as projects failed to get off the ground.

Those that have been built do little to reduce emissions. By the end of 2021, there was only 44 million tonnes a year (mtpa) of capture capacity globally, according to BloombergNEF. This is spread across 27 operational projects – one in the power sector, three in hydrogen production and 23 in industry. To put this into perspective, at this capture capacity, CCS could only capture 0.1% of global emissions. 

But there is now unprecedented momentum behind CCS

However, 2021 was also the year in which the pipeline for new projects began to swell. By November of that year, around 100 new CCS facilities had been announced, bringing the global total to almost 200.

This growth is also reflected in higher inflows of capital. Global investment into CCS hit USD 2.3 billion in 2021, down from USD 3 billion in 2020, but over twice as much as in 2018 and 2019. Investment in this case is a lagging indicator and usually comes one or two years after a project has been announced. As such, the growing pipeline would suggest that investment will not only rebound, but surge in the years ahead. Indeed, several major projects are expected to reach their final investment decision in 2022, which will push the total amount of capital deployed in the sector above USD 3 billion for the first time. 

With higher investments and more projects in the pipeline, global capture capacity could surge at a compound annual rate of 18% between now and the end of the decade, BloombergNEF forecasts – the fastest growth rate CCS has seen in a decade, though admittedly this rate is coming from a low baseline. If all these projects are built, capture capacity would then reach 225 Mt/yr – a fivefold increase from today’s levels, but still orders of magnitude below energy-related global emissions, which hit 36 gigatonnes of CO2 (GtCO2) in 2021 (or 36 billion tonnes of CO2). 

North America and Europe account for the largest share of the CCS pipeline

Between them, these regions host over 70% of the global CCS pipeline, BloombergNEF data show. 
The US has the largest operational capacity and pipeline, due to a favourable policy environment – since 2018, the 45Q tax credit has provided a subsidy to the tune of USD 50 a tonne of carbon stored permanently. This is increasing to USD 180 under the recently-passed Inflation Reduction Act. Additionally, in November 2021, President Biden signed the Infrastructure Investment and Jobs Act, which earmarked around USD 12 billion for the development of CCS projects. The majority of operational US CCS projects are connected to enhanced oil recovery (EOR) – a process of injecting CO2 into oil wells to extract as much oil as possible.

There are a number of large developments in Europe as well, but these are more focused on storage. In Norway, the government has provided USD 1.8 billion in support to the Longship Project, which includes the Northern Lights offshore storage hub. The Dutch state has pledged EUR 2.1 billion to develop the Porthos CCS hub in the Port of Rotterdam. In the UK, the government has committed GBP 1 billion to building four CCS hubs by 2030. 

Other regions are also actively expanding their capacity. The Australian government, at least before the recent election, announced AUD 250 million in funding for CCS hubs. Meanwhile the Canadian government has announced CAD 319 million in research and development funding for CCS technologies. In China, the provincial government in Guangdong recently announced the construction of its first offshore CCS hub, as a joint venture with Shell and Exxon. However China’s commitment to CCS remains small – it has three operational facilities, and three others in various stages of development.

The power sector has the largest pipeline

With a development pipeline of 48 projects, the power sector has attracted most CCS attention, according to BloombergNEF. This despite the well-documented limitations (see below). 

Hydrogen has a pipeline of 37 projects, making it the second largest sector after power. Most of these are in early stages of development and are unlikely to be brought online until later this decade, BloombergNEF suggests. With increasing demand for low-carbon hydrogen, producers see an opportunity for blue hydrogen – produced using natural gas and CCS – to meet some of that demand.

What is striking is that the sectors that would be best served by CCS (see below) – cement and steel production – have the smallest number of projects in the pipeline. This suggests that CCS is being prioritised in the wrong sectors.  

Oil and gas companies developing CCS projects

ExxonMobil is by some distance the market leader. It has a total of 25 mtpa of capture capacity spread across its portfolio – both operational facilities and those in the pipeline. Other oil majors, such as TotalEneriges, Eni, Equinor and Shell, are also among the top ten largest CCS players. Companies that specialise in liquefied natural gas (LNG) are also heavily involved – Rio Grande LNG has a cumulative capacity of 5 mtpa, more than Shell.

How feasible are all these pipelines?

Proponents of CCS stress that it is a cost effective way to meet climate goals. Though CCS could be used to decarbonise existing and future energy assets, its feasibility varies by application.

The power sector

In electricity, CCS has widely been seen as a failure. This is also the sector with the most readily-deployable alternatives, namely solar and wind. Fundamentally, CCS has failed to take off in the power sector for two reasons – cost and the growing competitiveness of renewables. 

CCS requires additional energy to function above and beyond the needs of the power plant. This is known as the energy penalty, and it makes a CCS-equipped facility more expensive. This has been exacerbated by the extreme cost decline in renewables, which have become the most cost-competitive sources of electricity generation. Despite inflationary pressures, onshore wind and solar are 40% cheaper than new gas and coal capacity, even without CCS.

Both factors mean the potential for CCS in the power sector is exceedingly small. This means that a number of projects in the development pipeline will not, like many before them, see the light of day, while many that are built will become increasingly uncompetitive against renewables and so be priced out of the market. Of all projects that have been cancelled so far, 66% have been in the power sector.

Heavy industry

The picture for heavy industry is different. CCS is seen as a key decarbonisation tool in cement production and steelmaking, although less so in the chemicals industry. As noted above, however, neither the cement nor the steel sector has a large pipeline of CCS projects. Though CCS is seen as a necessary tool to cut emissions, these industries are only slowly adopting it.

CCS is currently the only way to decarbonise the cement sector, which is a major emitter, contributing about 7% of global emissions. These come both from the fossil fuels used to generate the heat needed to make cement, but also from the chemical composition of the raw materials used. Cement is made through a calcination process, where CO2 is burned off the limestone. Put simply, you cannot make cement without emitting CO2, and the lack of alternatives make CCS a necessity for cutting emissions from the sector. Moreover, it can be deployed at some scale before 2030, research by Agora Energiewende finds. There is also support within the industry for reducing emissions – major construction and engineering firms have joined forces in the ConcreteZero initiative, a group of 17 companies that pledge to have 30% of the concrete they use low-emission by 2025 and 50% by 2030.

In theory, there is also potential for CCS in steelmaking, but it is more limited due to the cost competitiveness of alternatives. Though retrofitting blast furnaces with CCS could cut CO2 emissions from the sector by 86% by 2050, the mitigation potential by 2030 is much smaller, Agora Energiewende finds. In fact, other processes, such as using hydrogen, could reduce emissions by 66 mtpa by 2030, compared to 26 mtpa with CCS. When it comes to re-smelting existing steel and iron, direct electrification through electric arc furnaces is already widely used. Much of the research done into steel decarbonisation has focused on European industry and globally there may be some room for CCS as part of a portfolio of solutions, but it is far from a silver bullet.

Hydrogen production

CCS is seen as playing a role in producing clean hydrogen. Blue hydrogen, manufactured using natural gas or coal and CCS, is one way of making it. However, it is unlikely to be a cost effective option in the future. By 2030, green hydrogen – made with electrolysers running on renewable energy – is expected to undercut blue hydrogen across all major markets, BNEF finds. Nevertheless, there will be some room for blue hydrogen as well. This is partially due to costs – even with today’s gas prices, it is still cheaper than green hydrogen. It is also due to the energy requirement for manufacturing hydrogen. To supply enough green hydrogen in the future could require up to five times the existing installed solar and wind capacity. 

The drawbacks of CCS

CCU and CCUS have low mitigation potential

In the case of CCU, its ability to offset emissions depends on the lifecycle of the products the captured CO2 is used to create and the amount of energy that is required to make them. If, for instance, it is used to produce plastics that are then burned within a year, the CO2 is still emitted, simply at a later date. However, if the CO2 is used in concrete, which has a much longer lifecycle, then it has more mitigation potential.

If the CO2 needs to be converted into something else before being used, its mitigation potential decreases significantly. This is because of the compound’s low thermodynamic potential. Essentially, CO2 is a very stable compound and separating the carbon from the oxygen requires lots of energy. Widespread use would increase demand significantly, making it more difficult for clean energy sources to meet global energy demand. As such, CCU could end up increasing net emissions, because the energy required would not necessarily come from renewables and it is by no means a given that all these emissions would be captured. Large scale CCU is likely to be a “distraction” and so CO2 should only be used as a feedstock where there are no other alternatives.

To give an example of how energy intensive it is to convert CO2 into a useful element at scale, consider the amount of additional electricity needed to electrify the EU’s chemicals industry. In this example, electricity is used to facilitate CCU, by the energy input to help convert CO2. This process would add 4,400 TWh of electricity demand. Current EU electricity demand is 3,200 TWh. This represents 140% of electricity demand in the EU today.

Most projects today focus on CCUS

Most facilities that are currently in operation are connected to natural gas processing facilities and the CO2 that they capture is often used in EOR. Around 74% of operational facilities either entirely or partially depend on EOR for revenue. The fact that most CCS projects are tied to EOR was by design – these projects received over 42% of public spending on CCS in 2011.

Though some literature suggests that EOR could have a net negative impact on emissions, once the process scales up significantly, the CO2 released by burning the recovered oil and gas more than offsets the CO2 stored. As such, emissions only grow.

That being said, while most CCS projects in the past focused on EOR, the number of projects in the pipeline shows that geological storage is now becoming more popular. This suggests the industry is moving away from focusing on EOR, and indeed CCUS, towards prioritising storage. 

Cost profiles of CCS vary enormously

The costs of CCS are split across capturing carbon, transporting it and then storing or using it. When it comes to capturing carbon, the more concentrated the source, the cheaper it is to capture. This can vary from as little as USD 10 per tonne of CO2 (/tCO2) to USD 300/tCO2.

Building the infrastructure to transport and store carbon is significantly more expensive as it requires scale to make economic sense. This can add as much as USD 74/tCO2. It is for this reason that governments, such as in Norway and the Netherlands, are providing subsidies to help pay for the transportation and storage infrastructure to make the projects more economically feasible. 

When combined, costs can vary between USD 22/tCO2 in natural gas processing to USD 374/tCO2 in making aluminium. As outlined above, these costs make CCS uneconomic in some sectors.

Not all CO2 is captured

A major concern about CCS is that it does not capture all emissions. In practice, many facilities only capture 65% of emissions when they begin operating, which steadily increases to 90% after a few years of operation. The reason is not that it is impossible to capture all carbon emissions, but rather the costs increase exponentially the more carbon is captured.

There are also worries about CO2 leakage from transportation and storage sites, much like the issue with methane today. Through close monitoring and evaluation, many of these leaks could be plugged before emitting too much carbon, but it does illustrate that the less reliant the world is on CCS, the less wary of carbon leaks it will need to be. Civil society groups are sceptical of just how safe and permanent CO2 storage can be. The failure of the large-scale Gorgon CCS facility in Australia to store the required amount of carbon has proven to be a case study in the shortcomings of CCS.

Social concerns could become an issue

From an environmental justice perspective, there is a worry that increasing dependence on CCS could lead to new forms of exploitation or neglect. If CO2 storage becomes increasingly important, a crucial issue will be who decides where the storage sites are situated. Deep saline formations, which are seen as the most feasible storage sites, are widespread both onshore and offshore. For example, in the absence of transparent and strong governance structures, selecting CO2 storage sites could transgress on land rights issues. Issues that fossil fuel infrastructure currently face, such as the Keystone XL pipeline, would also be problems for CO2 transportation infrastructure.

Appendices

Appendix 1: Different capture technologies
Appendix 2: Use cases of captured carbon
Appendix 3: Applications of CCS

The role of carbon capture and storage in limiting warming to 1.5C

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Key points 

  • Retrofitting existing fossil fuel assets with CCS is being proposed as one option to reduce the amount of emissions already locked in by existing infrastructure
  • But high costs, and the plummeting cost of renewables, is eroding the economic case for retrofitting existing fossil fuel power plants with CCS. In most cases, earlier retirement of assets would be more economically efficient than retrofits
  • CCS technologies remain stagnant and costly, and push up the cost electricity when used in power generation
  • Questions over geological storage and water availability further undermine CCS as a solution for existing fossil fuel assets.
  • Only one out of the existing 26 operational carbon capture and storage (CCS) projects is in the power sector. The majority of existing CCS projects are in the oil and gas sector as a part of enhanced oil recovery

Existing fossil fuel infrastructure will put 1.5°C out of reach 

Energy infrastructure has an extremely long lifetime. Coal and gas-fired power plants have historically operated on average for 39 and 36 years respectively. If all energy infrastructure continues to operate until the end of its typical lifetime, cumulative global emissions between 2020-2050 would amount to 650 Gt CO2, according to the IEA’s Net Zero by 2050 report. This is 30% more than the remaining carbon budget, estimated at 500 Gt CO2, that is consistent with limiting global warming to 1.5°C (with a 50% likelihood) by the IPCC Working Group I report. As a result, alignment with 1.5°C means no new coal, gas or oil extraction, while existing demand for unabated coal must decline by 98% to just 1% of total energy use by 2050.

The electricity sector accounts for more than 50% of the total emissions from existing fossil fuel assets, 40% of which comes from coal-fired power plants alone. Therefore, existing assets face four main choices in order to stay within the remaining carbon budget:

  1. Accelerating retirement (in scenarios that limit warming to 1.5°C, global coal and gas power generation’s operational lifetime are shortened to nine and 12 years respectively)
  2. Reducing utilisation
  3. Switching to low carbon fuel sources
  4. Retrofitting with CCS

Carbon capture retrofits cannot compete with the plummeting cost of renewables

As of 2021, the costs for new solar PV and onshore wind are increasingly undercutting existing coal-fired power plants. Data from the IRENA Renewable Cost Database show that between 2010 and 2020, the cost of electricity from utility-scale solar photovoltaics (PV) fell 85%, from concentrated solar power by 68%, from onshore wind by 56% and from offshore wind by 48%.

Retrofitting plants with CCS is very costly – CCS for coal or gas electricity generation facilities are almost double the capital cost of power generation projects without CCS. Rapidly falling costs in wind and solar energy are eroding the economic value of CCS as a mitigation option by up to 96%, according to a paper published by the Grantham Institute. 

The Boundary Dam CCS power plant project in Canada is the only commercially operational CCS coal power station in the world today (the only other operational CCS project for the power generation sector, Petra Nova, was shut down in 2020 as a result of high operational cost). The technology is installed on one 110MW boiler (small in comparison to typical project sizes of 500MW). It cost of USD 1.5 billion, of which $800 million was for the installation of the CCS technology and the remaining USD 500 million for retrofit costs. A leaked internal memo from November 2014 suggests the project has “serious design issues”, having suffered numerous technical problems in its first year. Even in 2021 it was only running at an average of ~30% capacity. Since 2014, it has only captured 4.3 Mt of CO2, compared to its total theoretical CO2 capture capacity of 1 Mt a year.

CCS is an extremely energy-intensive process, and the higher fuel requirement for the process adds further to the operational cost of plants. A 2017 study looking at potential applications of CCS on Indian power plants, for example, estimated that the costs of electricity would increase by 63-76%.

While renewable energy is expected to continue to decline in cost, CCS development has remained stagnant in the last 30 years. Currently there are only 26 operational CCS projects in the world, with only one facility in the power generation sector. On the carbon storage side, the vast majority (20 out 26) of projects use the captured CO2 for enhanced oil recovery (EOR), rather than permanent geological storage. Captured CO2 used for EOR undermines emissions cuts, where emissions from burning recovered oil could more than offset the benefits of capturing the CO2 in the first place by a factor of up to three. Research indicates that tonnages of CO2 injection are often overestimated, or facilities have stopped injecting sooner than is reported. 

The additional capital and operational costs in power generation increase the cost of electricity, which can create cost barriers to energy access in developing countries. As such, CCS deployment should focus on capturing CO2 in industry for permanent geological storage, rather than on retrofitting fossil fuel power generation.

Water and geological storage further constrain the application of CCS retrofits 

The availability of large volume, permanent, geological reservoirs is critical for the cost effective removal and storage of CO2. The amount of storage space accessible is still to be determined at a global scale. Not only does storage need to be permanent, it also needs to be close to, or within transportable distance from, the point of emissions to make projects viable. The mismatch between the locations of existing power plants and geological location of underground storage is one of key barriers to retrofitting the global fleet of power plants. A study of Indian emission sources indicates that only 14% of Indian emissions are in sites that are located within a range of 100km from geological sink locations. 

CCS is a resource-intensive technology requiring a large amount of water for operations. It has been estimated that CCS can increase power plants’ water withdrawal by 175% and water consumption by up to 150%, compared to plants without CCS. With climate change, regions already prone to water scarcity may experience worsening periods of drought, further limiting the deployment of CCS in power plants in those regions.

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