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ALEX TOWNSEND Senior Consultant - Economics NABEELA RAJI Research Analyst ALEX ZAPANTIS General Manager - Commercial 2020 THOUGHT LEADERSHIP THE VALUE OF CARBON CAPTURE AND STORAGE (CCSEXECUTIVE SUMMARY 4 1.0 INTRODUCTION 6 2.0 CCS IS AN ESSENTIAL CLIMATE MITIGATION TECHNOLOGY 7 3.0 CCS IS A DRIVER OF EMPLOYMENT AND ECONOMIC GROWTH 13 4.0 CONCLUSION 22 5.0 REFERENCES 23 CONTENTSTHE VALUE OF CCS 3 EXECUTIVE SUMMARY The Intergovernmental Panel on Climate Change (IPCC) and numerous other credible institutions, studies, and governments have highlighted the essential role of carbon capture and storage (CCS) to economically achieving a net-zero emissions global economy. CCS technologies are particularly important because they both avoid CO 2 emissions at point sources, as well as decrease at scale the stock of CO 2 emissions already in the atmosphere through carbon dioxide removal (CDR) technologies. The value of CCS is analysed and discussed under two overarching themes in this report: CCS is an essential climate mitigation technology. At the global level, studies such as the IPCC 1.5C report and by the International Energy Agency (IEA) consistently show CCS being deployed at significant scale to economically meet long-term climate targets. For example, in the IEA Sustainable Development Scenario, which is consistent with meeting the goals of the Paris Agreement, CO 2 sequestration globally using CCS reaches 2.8 gigatonnes per annum by 2050. This would require a one-hundred fold increase in the number of CCS facilities in operation relative to today. Studies also demonstrate that excluding CCS from the suite of technologies used to meet emission reduction targets will lead to increased costs. Furthermore, the versatility of CCS and its ability to reduce both the flow and stock of CO 2 makes it a strategic risk management tool for climate mitigation. At the sectoral level there are four areas where CCS has a critical role to play in least-cost net-zero emissions pathways. These include: Achieving deep decarbonisation in hard-to- abate industry: The cement, iron and steel, and chemical sectors are amongst the hardest to abate due to their inherent process emissions and high- temperature heat requirements. CCS provides one of the most mature and cost-effective options for reducing emissions from these sectors. Several reports, including from the Energy Transition Commission and the IEA, have concluded that achieving net-zero emissions in hard-to-abate industry without CCS may be impossible and at best more expensive. Enabling the production of low-carbon hydrogen at scale: Hydrogen is likely to play a major role in the decarbonisation of hard-to-abate sectors and may also be an important source of energy for residential heat demand and flexible power generation. To reach net-zero emissions, global hydrogen production will need to grow significantly, from 70 million tonnes per annum today to 425- 650 million tonnes per annum by mid-century. Hydrogen produced using coal or natural gas with CCS is currently the lowest cost option for producing low-carbon hydrogen, and will remain the most cost-effective solution in regions where fossil fuel prices are low and large resources of low-cost renewable electricity for electrolysis are not available. Providing low-carbon dispatchable power: The rapid decarbonisation of power generation is crucial to achieving net-zero emissions. CCS equipped power plants play an important role as they help ensure that the low-carbon grid of the future is resilient and reliable. Flexible power plants with CCS supply dispatchable and low-carbon electricity as well as grid-stabilising services, such as inertia, frequency control and voltage control. These cannot be provided by renewable generation, therefore CCS complements the increased deployment of renewablesTHE VALUE OF CCS 4 Delivering negative emissions: The deployment of negative emissions technologies will be needed to compensate for residual emissions in hard-to-abate sectors if net-zero emissions targets are to be met. CCS provides the foundation for technology-based carbon dioxide removal (CDR) solutions including bioenergy with CCS (BECCS) and direct air capture (DAC). While CDR is not a silver bullet, with every year that passes without significant reductions in CO 2 emissions, the need to use negative emissions technologies increases. CCS is a driver of economic growth and employment. CCS can provide clean growth opportunities, create and retain jobs, and help ensure a just and sustainable transition for communities. Its benefits include: Creating and sustaining jobs: CCS creates new jobs during the construction and the operation of new facilities, as well as in the supply chain. To reach the levels of deployment outlined in IEAs Sustainable Development Scenario, more than 2,000 facilities will be needed by 2050, requiring at least 100,000 employees in 2050. There will also be jobs associated with the supply of new materials, equipment and professional services. In addition to creating new jobs, CCS enables high- emission industries and the jobs they support to continue, thereby avoiding local economic and social dislocation that could otherwise occur whilst meeting climate targets. Supporting economic growth through new net- zero industries and innovation spillovers: The widespread deployment of CCS will create new opportunities in the supply of infrastructure and technology, the provision of services and finance, and the production of low-carbon products. Emerging evidence suggests CCS could also be a source of high-value innovation spillovers and therefore play a role in supporting innovation-led economic growth alongside other technologies. Enabling infrastructure re-use and deferral of decommissioning costs: Where oil or gas production fields are at the end of their lives, there may be opportunities to re-use existing oil and gas infrastructure by repurposing it for CO 2 transport and storage. This could provide a range of benefits, including reducing the cost of building transport and storage infrastructure and potentially reducing permitting time. The re-use of infrastructure could also defer the costs and the environmental impact of decommissioning, freeing-up resources that can be invested in other value generating activities. Facilitating a just transition by alleviating geographic and timing mismatches: One of the key challenges of achieving a just transition is the disconnect between the geographic spread of job losses and gains, and the timing of these changes. Jobs created in low-carbon industries may not occur at the same time as job losses in high-emission industries. This will reduce the long- term employment prospects of workers in declining industries over time. CCS facilitates a just transition by enabling existing industries to make a sustained contribution to local economies while transitioning to a net-zero economy.THE VALUE OF CCS 5 Several high-profile reports and experts have emphasised the need to better understand and communicate the benefits of CCS. Reports by the Zero Emissions Platform in Europe, the CCUS Cost Challenge Taskforce in the UK, and the National Petroleum Council in the US, all highlight the importance of further exploring and redefining the value of CCS 123. This report aims to inform the discussion on the value of CCS by providing an overview of recent analyses published on the topic and completed by the Global CCS Institute. The report is structured under two overarching themes. Section 2 of the report explores the role of CCS as an essential climate mitigation technology, focussing on how its deployment reduces the costs and risks of meeting climate targets. Section 3 of the report describes the broader benefits CCS provides to the economy, by providing clean growth opportunities, creating and retaining jobs, and helping to ensure a just and sustainable transition for communities. Section 4 concludes, with suggestions for future research. The report focusses on the main sources of value from the deployment of CCS. It excludes other, smaller scale benefits. For example, the potential benefit of improved air quality from the deployment of CCS at fossil fuel power plants is not included in the report. The omission of these benefits does not prejudice the inclusion of them in other studies, but reflects that these tend to be smaller in scale and more dependent on the context in which CCS is applied. Throughout the report, country-specific case studies are provided to shed light on the value of CCS in practice. The case studies primarily focus on Europe and North America as these are the regions for which analysis of the societal benefits of CCS is most mature and where data are readily available. However, many of the conclusions of the report will be relevant to other jurisdictions. 1.0 INTRODUCTION STUDIES SUCH AS THE IPCC 1.5 REPORT AND IEAS SUSTAINABLE DEVELOPMENT SCENARIO CONSISTENTLY SHOW CCS BEING DEPLOYED AT SIGNIFICANT SCALE TO ECONOMICALLY MEET LONG TERM CLIMATE TARGETSTHE VALUE OF CCS 6 The primary reason for investing in CCS is to reduce CO 2 emissions and mitigate the associated environmental and economic impacts of climate change. This can be viewed from different perspectives, including from a global-level and sector-level persepctive. A global-level perspective At a global level, Integrated Assessment Models (IAMs) and scenario models provide valuable insights into the role CCS can play in the transition to a net- zero emissions economy. These models explore the interactions and trade-offs between climate and socio-economic systems, and present possible emissions pathways to meet a given climate goal. IAMs vary in their complexity, coverage, focus and methodology, and in doing so strike different balances between lowering energy and resource intensity, the rate of decarbonisation, and the reliance on negative emissions technologies. Given this variability, technologies that feature heavily across models and scenarios are seen as critical to meeting long-term climate targets 4. Analysis by the Intergovernmental Panel on Climate Change (IPCC) and International Energy Agency (IEA) consistently show CCS being deployed at significant scale to meet long-term climate targets. For example, in the IEA Sustainable Development Scenario (SDS), which is consistent with meeting the goals of the Paris Agreement, CO 2 sequestration globally using CCS reaches 2.8 gigatonnes per annum by 2050 5. This would require a one-hundred fold increase in the number of CCS facilities in operation relative to today 6. In the IPCC Special Report on Global Warming of 1.5C, nearly all of the 90 scenarios reviewed include CCS in some form. The average mass of CO 2 sequestered across all scenarios in 2050 is 10 gigatonnes per year, with higher levels of deployment linked to greater use of negative emissions technologies using CCS 7. Excluding CCS from the suite of technologies used to meet emissions reduction targets will increase costs. There are several low-cost applications of CCS, such as in gas processing, and ethanol and fertiliser production, that are cost-effective to deploy today even under relatively modest prices on CO 2 emissions 8. As the value on reducing CO 2 emissions rises over time with tightening climate targets, other applications will become cost-effective. In the IPCCs Fifth Assessment Report (AR5), excluding CCS from the portfolio of technologies was found to lead to a doubling in the cost of reducing emissions required to limit global warming to 2C, the largest cost increase from the exclusion of any technology 9. In addition to being part of the lowest cost pathway, investing in CCS today will reduce the risks associated with meeting climate targets. Developing and deploying a portfolio of climate mitigation measures, including CCS, reduces the risk to achieving emission reduction targets due to any single technology not meeting expectations. By diversifying the technologies available, the exposure of a given mitigation strategy to the success or failure of one specific technology will be reduced. 2.0 CCS IS AN ESSENTIAL CLIMATE MITIGATION TECHNOLOGYTHE VALUE OF CCS 7 The versatility of CCS and its ability to reduce both the flow and stock of CO 2 makes it a strategic risk management tool for climate mitigation. Deploying CCS at scale in low-cost, low-regret applications today, along with investment in pioneering CCS projects in harder- to-abate sectors, provides the foundation to deploy it in other applications in the future. The value of this versatility has been demonstrated across numerous studies, including for example the Committee on Climate Changes (CCC) advice to the UK Government on options required to achieve its net- zero emissions target (Box 1). In June 2019, the UK became the first major economy in the world to pass laws to reach net-zero emissions by 2050. T o support this decision, the UK Government requested advice from the independent Committee on Climate Change (CCC) on the date for achieving net-zero emissions, how emissions reductions might be achieved, and the cost and benefits of pursuing a net-zero target. The response provided by the CCC was published in May 2019 in its Net-Zero: The UKs Contribution to Stopping Global Warming report 10. The CCC separated the mitigation options required to meet net-zero emissions into Core options, Further Ambition options and Speculative options. Core options include low-cost, low-regret measures that make sense under most strategies to reduce emissions by at least 80 per cent by 2050 relative to 1990 levels. Further Ambition options include more challenging and more expensive options that collectively would get the UK close to the net-zero target. Speculative options were also considered, to bridge the gap between the emissions reductions in the Core and Further Ambition options and those required to reach net-zero. Each option was assessed based on its feasibility, cost, impact on affordability, energy security and competitiveness, and consistency with existing policies. CCS features in all of the options presented by the CCC and across multiple sectors, demonstrating the value it provides in the UK as a versatile emissions reduction technology (Figure 1). In the report, 75 to 175 million tonnes of CO 2 per annum is estimated to be captured and stored in 2050 in the Core and Further Ambition options. This includes CCS on power plants to provide firm low-carbon power, in industry to reduce process emissions, with the production of hydrogen for heat, power and fuel, and with bioenergy to provide negative emissions through bioenergy with carbon capture and storage (BECCS). THE ROLE OF CCS IN ACHIEVING THE UKS NET-ZERO TARGET ) ) BOX 1: Figure 1: CCS in the CCCs advice to the UK Government on reaching net-zeroTHE VALUE OF CCS 8 A sector-level perspective Looking at the challenges from a sector perspective can provide further comp
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