Carbon capture and storage may have an important role to play in hard-to-decarbonize sectors like iron and steel, but won’t pay off for oil and gas companies without continuing government subsidies, the International Institute for Sustainable Development (IISD) concludes in an analysis released this week.
After more than 50 years of commercial development, the cost of CCS has been slow to decline, in contrast to solar and wind technologies “which have generally required government subsidies only in the initial development phases,” IISD writes in a synopsis of the report. The Winnipeg-based think tank says that’s because CCS projects are complicated to design and need to be customized for each new installation—in contrast to renewable energy components that are mass produced.
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“The track record for CCS thus far just doesn’t line up with the emissions reductions we need to see, particularly between now and 2030,” report co-author and IISD policy advisor Laura Cameron told the Globe and Mail.
“The cost is a big piece and that’s the focus of our research here,” she added. “CCS for the oil and gas sector is expensive, and despite the industry’s claims, we don’t see evidence that the costs are likely to come down in the short term,”
Depending on key project details like carbon capture process and technology, storage location, and the method of transporting the carbon dioxide, IISD says the cost of CCS can range from C$27 to $150 per tonne. So far, costs in Canada have been at or above the high end of that range, with Shell Canada’s Quest near Edmonton project topping out at $200 per tonne in 2021.
In 2022, an independent analysis showed the “milestone” Quest plant emitting more CO2 than it captured.
The high up-front cost to develop CCS or any other new energy technology isn’t necessarily a surprise. “Typically, the costs of a technology tend to increase during its initial phases, spanning from research and development to its demonstration,” IISD writes. “However, as the technology reaches commercial maturity, these costs often start to decline. This downward trend is captured through an experience rate, a metric commonly used to project how costs will reduce as a technology is more widely deployed.”
But the analysis suggests that isn’t a likely future for carbon capture.
“CCS proponents speculate that costs will decline as more investment drives innovation and learning,” IISD writes. “While this logic applies to many technologies, whether it applies to CCS is questionable due to its complex functional requirements and constraints.” While the industry expects to standardize some aspects of CCS deployment, “some components will need to be tailored to specific applications, geological conditions, and local supply chains, indicating a medium to high need for customization,” the paper explains. And Canada’s oil and gas sector will have only “limited opportunities for learning by doing, since there are only a small number of operations in which it would be used.”
So far, IISD says, Canada has seven commercial CCS plants in operation—five of them in oil and gas—capturing only 0.05% of the country’s climate emissions. But even when the technology scales up, experience so far indicates only a modest cost reduction compared to renewables: The “experience rate” for CCS attached to natural gas plants shows only a 2% to 7% cost reduction every time global installed capacity doubles, compared to 23% for solar photovoltaic (PV) modules.
That comparison alone “makes the financial viability of CCS deployment, particularly in the electricity production sector where it directly competes with renewables, increasingly questionable,” IISD says. “Solar PV and wind power are notable examples of renewable technologies that have been developed more successfully. These renewable sources have generated revenue through electricity sales, enabling them to achieve cost competitiveness through increased deployment.”
IISD recommends that governments weigh continuing support for CCS in the energy sector against the other emission reduction technologies on offer—and devoting its carbon capture funding to high-emitting sectors that may have no other option for getting their climate pollution under control.
“Due to its high costs and the complexity of the technology, CCS should be reserved for challenging industrial processes, such as those involving carbon-intensive chemical reactions and high-heat processes, where electrification and other decarbonization alternatives are not readily available,” the report concludes. And even there, more research will be needed to determine whether CCS is effective and cost-competitive.
