Insights and Commentaries

A summary of CCS-related conversations at COP21

16th April 2016

Topic(s): Carbon capture, law and regulation, Policy, use and storage (CCUS)

The Paris climate change conference in December 2015 was the most significant development in international action on carbon emissions to date. The Global CCS Institute was active throughout the conference, advocating for carbon capture and storage (CCS) as essential to achieving the stated goal of limiting climate change to 2°C. In this Insight the Institute's Principal Manager - International Climate Change, Mark Bonner, summarises some of the conversations among attendees concerning CCS.

The 21st Session of the Conference of the Parties (COP21) to the United Nations Framework Convention on Climate Change (UNFCCC) was held in Paris from 29 November to 13 December 2015. Institute staff attended COP21 from start to finish, participating in numerous official forums and informal discussions with conference delegates. The following provides a short summary of the main concerns expressed by delegates in relation to CCS based on these conversations.

Many of the discussions related to one of three broad topics:

• How CCS can help control both CO₂ and non-CO2 air pollutants - the latter issue has influenced the debate on CCS in countries like China where the cost of air pollution resulting from premature deaths and heart-related issues is very high
• How to accelerate CCS, especially within the context of a more challenging mitigation goal of 1.5°C compared to the pre-COP21 baseline of 2°C
• How to support CCS in emerging markets and developing countries.

There was general recognition by many delegates that the CCS landscape is very different now compared with the beginning of this decade. While there have been many important developments progress is widely considered to have slowed.

CCS mitigation potential is better understood, but is being under-delivered

There are presently 22 large-scale CCS projects in operation and under construction, including three in the power sector. This compares with fewer than ten projects in 2008 and none in power. This is an important practical signal that CCS technologies are being deployed and we can move on from arguments about its 'experimental' or 'unproven' nature. However, there has been a slowing of CCS developments as reflected by the fact that the current total fleet of large-scale integrated CCS projects in operation, under construction and in development planning is less than what it was a few years ago (43 versus 65 in 2013). With a reduced number of new projects in the pipeline, a core challenge remains how to invigorate investment in — and proposal of — new CCS projects. There seemed an awareness amongst delegates that progress to the construction stage of the CCS projects already identified in the early planning stage was even more important.

Another identified challenge for CCS is one of scale. The International Energy Agency (IEA) indicates that annual CCS abatement in 2040 needs to be 100 times more than what it is today. This translates to a need to increase the rate of CO₂ capture capacity from the 40 MtCO₂ (million tonnes of CO₂) per year today for current projects to around 4,000 MtCO₂ per year in 25 years time. If this level of abatement cannot be delivered by CCS it will add to the pressure on renewables, energy efficiency and nuclear power. As the IPCC indicates, these options are unlikely to achieve the necessary additional abatement and highly unlikely to do so in either a more timely fashion than, or as cost-effectively as, CCS.

Firming expectations of the future role CCS must be allowed to play

A particularly striking fact offered by one delegate is that over 2,400 new coal-fired power stations are expected to be approved and constructed over the next decade in the Asia region alone. The urgency of this situation is exacerbated by the IEA’s expectation of over 1,000 existing coal fired power stations that are operating today to be still in operation in 2040. This means that the energy and committed emissions from these plants will not be displaced by other energy sources, and any conceptual desire to economically strand these assets in the interim to avoid emissions will be highly unlikely given the scale of investment involved and the social services provided.

If this situation continues unabated, coupled with the prospect of the IEA’s projection that 75 per cent of primary energy needs in 2040 will continue to be serviced by fossil energy, the possibility of delivering on the Paris Agreement’s global climate goal of halting temperature rises to between 1.5°C and 2°C without CCS is probably technically impossible - if not prohibitively costly.

Opportunities and challenges aplenty for CCS - mostly relate to implementation

A number of delegates identified what they perceive to be the major opportunities and challenges:

• There are not enough new CCS projects coming on-line despite the fact that meeting climate targets means the current fleet of projects needs to scale up by a significant margin.
• There are yet to be any CCS projects of ‘substance’ in developing nations, and yet these regions are where the absolute volume and growth of emissions are and will continue to occur.
• There currently exist great opportunities against the backdrop of a ‘new and ambitious climate agreement’ for the tightening of emission targets and the re-prosecution of business cases for CCS given the more stringent long term climate goal/s.

Not just CO₂

One observation from a delegate is that the co-benefits of CCS including non-CO2 air pollution control (such as sulfur, mercury or NO_x emissions) are not promoted enough. While post combustion capture requires retrofitting new equipment to an original plant design to control CO₂ and non-CO2 pollutants, pre-combustion separation offers a highly integrated system potentially imposing less operating costs as the pollution control processes are already part of cleaning up of the CO₂ stream.

One approach to accelerating CCS

Another delegate observed that there is clearly a ‘choke’ point in all innovation systems; and for CCS this point reflects a lack of large scale pilots. While there is a lot of laboratory based R&D at small-scale (about 1-2 MW), none of these experiments can be easily scaled up to 500 MW or more. What is needed is an intermediate step of large scale pilots. A major challenge is securing the capital required to support such pilots; and this is perhaps the hardest funding to secure anywhere in the world. This is why almost all related activities in this space are publically funded. An enhanced use of ‘CCS test centres’ around the world would certainly help promote such developments to an extent.

What will be key to CCS success is increasing the level of R&D funding. At the beginning of COP21, Presidents Obama and Hollande launched ‘Mission Innovation’; a commitment by 20 countries representing 80 per cent of global clean energy R&D budgets to double their respective investments over five years. It is critical that there be strong advocacy for CCS to be included in this initiative - otherwise, it simply won’t happen.

What does the 1.5°C to 2°C goal imply for CCS?

One delegate suggested that there will be an increasing expectation for a future need of negative emissions to offset any emissions overshoot of the 450ppm atmospheric concentration threshold. A broad range of technologies currently exist today that can deliver negative emissions through four main routes:

• Bio-energy coupled with CCS (BECCS)
• Direct Air Capture
• Afforestation and reforestation
• Ocean fertilisation.

The IPCC identifies BECCS as one of the most commercially promising options with which to deliver large scale negative emissions in order to drive carbon neutrality in the latter half of this century, and has adopted BECCS in the Paris Agreement. This helps to highlight CCS as a critical technology to addressing the real threat of overshooting emissions limits.

Two approaches to supporting CCS in developing country emissions

Many delegates believe that developing countries will continue to deploy new coal plants for good social reasons. One delegate offered the following suggestion to stem the expected associated emissions: instituting multilateral bank funding requirements similar to the World Bank stipulating;

(a) projects must use the best available technology and

(b) plants must be located close to an appropriate geological storage site.

As a rule of thumb, the difference between a sub-critical, super-critical and ultra-supercritical coal (USC) plant may be about a 5 per cent cost increase per plant for each additional 5 per cent increase in thermal efficiency (that is a USC is about 10 per cent more capital cost than a sub-critical). Further, siting criteria coupled with international assistance to firm up geological storage sites could help facilitate this. These sorts of requirements could go a long way to encouraging CCS in developing countries.

Another approach suggested is to support CCS in industrial projects (such as fertiliser plants or gas processing facilities) as these processes offer developing countries very cheap CO₂ mitigation opportunities — perhaps within a range of between US$5 to US$15/tCO₂. At this price and given the very high purity of the captured CO₂, many millions of tonnes of CO₂ a year could be ready to store geologically today in many countries.

Importantly, there is not a ‘one-size fits all’ approach to supporting CCS in developing countries, but there are ‘one size fits all’ things that can be done to help them, such as provision of cheaper global capital.

Why might financing CCS be so challenging?

One delegate said that there is very limited commercial financing of any existing CCS projects despite sufficient liquidity in global capital markets to do so. He identified five main elements as to why commercial banks are reluctant to finance CCS projects, including:

• The risk perception remains high (as it usually is for new technologies)
• There is an insufficient portfolio of existing and operating CCS assets
• There is a lack of ‘discernible’ cost curves that show actual cost reductions year on year and the potential for reductions into the future
• There remain unresolved regulatory issues (especially to do with liability)
• There are too few government policies or regulatory interventions that minimise any of the concerns above.

Investments in developing countries are also undermined by political instability, a lack of insurability of assets, policy and regulatory uncertainty, foreign exchange risk, interest rate risk, and classic finance structuring concerns.

At the heart of addressing most of these issues is what sort of government intervention (for exampke funding, feed-in tariffs or regulatory settings) is required to enable the finance industry to manage these concerns with regard to expected low rates of return on projects, relatively high liquidity risks, and/or a lack of equitable risk sharing. Another question is what role can international arrangements such as the Green Climate Fund play into the future?

Final observation

Although these views aren’t necessarily those of the Institute, they demonstrate the depth of thought given to CCS by delegates within a climate change context. CCS clearly remains a dominant element of most mitigation conversations, and while CCS is still considered by some delegates to be a strategy supported by fossil fuel interests to continue their domination of global energy needs, the overwhelming majority of delegates spoken to consider it to be an essential mitigation option that must be supported and allowed to realise its mitigation potential in order for climate goals to be achieved and associated economic costs minimised.

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