The Global Energy Perspective 2023 models the outlook for demand and supply of energy commodities across a 1.5°C pathway, aligned with the Paris Agreement, and four bottom-up energy transition scenarios. These energy transition scenarios examine outcomes ranging from warming of 1.6°C to 2.9°C by 2100 (scenario descriptions outlined below in sidebar “About the Global Energy Perspective 2023”). These wide-ranging scenarios sketch a range of outcomes based on varying underlying assumptions—for example, about the pace of technological progress and the level of policy enforcement. The scenarios are shaped by more than 400 drivers across sectors, technologies, policies, costs, and fuels, and serve as a fact base to inform decision makers on the challenges to be overcome to enable the energy transition.
Growing global momentum could accelerate the energy transition, as demonstrated by the UAE Consensus, released in December 2023, that calls on Parties to make a just and orderly transition away from fossil fuels while accelerating zero- and low-emission technologies such as carbon capture, utilization and storage (CCUS), particularly in “hard-to-abate” sectors. This article examines the role that CCUS could play in decarbonizing energy systems and takes a closer look at what it will be needed for it to scale to a globally impactful level.
About the Global Energy Perspective 2023
CCUS addresses CO2 emissions at point-source industrial and power facilities by capturing, concentrating, and purifying the CO2 through a variety of technologies (typically amine absorption). The captured CO2 is then compressed for transport, which physically moves the CO2 from the capture point to the location where it will be stored or used. Transportation typically happens through pipeline networks, but can also take place by ship, truck, or rail. Captured CO2 can be permanently stored underground in saline aquifers or oil and gas reservoirs or, alternatively, can be used as a feedstock for manufacturing processes such as synfuel or cement. CCUS could play an important role in decarbonizing hard-to-abate sectors, and could be deployed to mitigate emissions should fossil fuel usage not be reduced quickly enough to meet climate goals.
CCUS has the potential to play a significant role in decarbonization
CCUS is expected to play a role in decarbonization across all energy transition scenarios and will likely be especially important for hard-to-abate industries with limited other decarbonization levers. However, to meet current announced net-zero targets, global CCUS capacity needs to grow over 100 times in the longer term, reaching 4 to 6 gigatons CO2 by 2050 and decarbonizing around 15 to 20 percent of today’s energy-related emissions.1 This will require a significant acceleration from the current uptake pipeline, and more than double the CCUS capacity from the Current Trajectory scenario.
The CCUS market has recently seen a step-change in its rate of growth
The CCUS market is expanding rapidly, though significant acceleration would be required to meet net-zero commitments. In particular, in the last year, the global CCUS market has seen a step-change in activity, with CO2-capture capacity shaping up to increase at least threefold between 2020 and 2030. If all announced projects in the pipeline are realized by 2030, current capacity would increase by 12 times. Over the past 12 months, the capacity of all CCUS facilities under development1 has grown to over 420 million tons2 CO2 per annum, an increase of more than 40 percent since 2022. Additionally, more than 200 new facilities were added to the project pipeline in 2022, bringing the current total to 68 CCUS projects in operation, 39 under development, and 533 in various planning phases. Europe and North America together account for the largest share, at more than 80 percent of announced capacity, largely driven by policy incentives.
The global CCUS landscape is also diversifying, with carbon being captured from a wider array of sources. Cement, blue hydrogen, iron and steel, and power together are projected to account for around 85 percent of total uptake by 2050, although large differences are expected between regions.
CCUS uptake potential differs by sector and region
In power, there is some uncertainty on the role of CCUS in the decarbonization of the sector. CCUS could mitigate the risk of stranding assets, but in regions like Europe and North America, renewables build-out is preferred, limiting CCUS applications. However, if renewables build-out is limited in North America and countries such as China and India choose to avoid stranding young coal and gas plants by installing CCUS, it could play a significant role, potentially reaching 1 to 2 gigatons CO2 captured by 2050. An expansion in nuclear capacity and increased caps on renewables capacity could also lead to higher CCUS uptake in the power sector for certain regions.
In iron and steel production, as well as chemicals and refining, the cost competitiveness of CCUS compared to hydrogen and electrification differs by region and process. For example, there is a slightly reduced share of CCUS uptake within iron and steel in some regions due to superior cost efficiency when employing H2-DRI1 over BF-BOF-CCUS.2
In cement and lime production, CCUS is the only solution currently capable of decarbonizing process emissions at scale. Overall cement demand and clinker substitution rates drive the uptake of CCUS in this hard-to-abate sector to enable reduced emissions.
In hydrogen, CCUS is currently a cost-effective pathway to rapidly scale low-carbon hydrogen production, but post 2030, green hydrogen may become more cost competitive. A lower-than-expected penetration of hydrogen in some segments (such as road transport) and greater efficiency in end uses, as well as changes in the competitiveness of green compared to blue hydrogen, could result in a lower-than-expected demand for CCUS. However, blue hydrogen is expected to remain a significant demand driver of overall CCUS uptake.
Annual investment in CCUS could reach $175 billion by 2035
Along with the growth and diversification of the CCUS market, investment into CCUS is also growing. Average annual investments in CCUS could peak close to $175 billion by around 2035, and could surpass today’s gas investments by as early as 2026 under the Achieved Commitments scenario.
Our analysis suggests that more than 70 percent of cumulative global CCUS investments will be concentrated in the ASEAN region, China, India, and North America, with the majority of these investments in hard-to-abate sectors (such as cement and iron and steel), as well as (potentially) in the power sector.
There is a gap between investments required to meet net-zero targets and announced investments
To meet announced net-zero targets, approximately $120 billion in annual average investments ($3.5 trillion cumulative, 0.1 percent of global GDP) will be required globally by 2050 under the Achieved Commitments scenario.1 As of 2023, only around one-quarter of the necessary funding for CCUS by 2030 has been earmarked. This significant shortfall underscores the need for a concerted effort to mobilize financial resources and investment in CCUS.
Higher-cost CCUS applications will require cost declines as well as regulatory and market-based revenue sources beyond current CO2 pricing to support their commercial viability. About 60 percent of future investments in CCUS will be focused on CO2 capture. The cost of capture is strongly dependent on purity of the gas stream and the plant size, and ranges from around $10 to $30 per ton for high-purity sources to more than $80 per ton for low-purity sources. Cost declines, for example from learning by doing or technology innovation, may be critical to realizing the Achieved Commitments scenario.
As for the diversification of revenue streams for CCUS, these face some uncertainty. Assumed CO2 prices or incentives, which are projected to vary depending on region and scenario, are likely to be insufficient to scale up some CCUS applications in many high-emitting countries, particularly for low-purity point sources, and thus additional revenue sources such as green premiums may be required to strengthen business cases. To bridge the investment gap and drive the widespread adoption of CCUS in the future, collaboration between governments, industries, and the financial sector could be essential for establishing a robust and enduring financial landscape.
Key drivers and uncertainties for CCUS
CCUS is subject to considerable uncertainty and may depend on policy incentives, economics by sector and region, technology development, and interaction with alternative decarbonization technologies. Our analysis suggests it will be increasingly important to watch out for five signposts critical for CCUS development:
- Subsidies and regulatory interventions: In Europe and North America, tax credits, direct subsidies, and price-support mechanisms are beginning to stimulate the industry; equally important are tools such as product standards—for example, mandating certain volumes of green commodities, including steel or cement.
- Coordination among industry players: Building large new pipeline and storage networks to gather and dispose of CO2 is time- and capital-intensive and can also spur safety concerns in local communities. Industry players could work together and in close consultation with fence-line communities to develop the shared infrastructure that will enable CCUS. Current clusters have been slow to mobilize, forming over many years due to regulatory and economic uncertainties, and as these factors stabilize, lessons will need to be quickly transmitted to the next generation of projects so they can get going faster.
- Willingness to pay for lower-carbon-intensity products: To enable CCUS to be viable, businesses and consumers may have to pay premium prices for green products, particularly for zero- or near zero-carbon products. This could make CCUS-enabled premiums particularly promising in sectors such as cement, where CCUS is the leading option for deep decarbonization.
- Valuation of CO2 as a feedstock: The utilization of CO2 and its sale as a product offers a revenue source to offset the cost of capture. CO2 is already used in many industrial processes (such as oil recovery and food processing). However, opportunities remain for companies to scale businesses with further monetizable uses of captured CO2 (such as CO2-based polymers and synthetic fuels).
- Voluntary carbon markets: Some CCUS pathways, such as BECCS1 and DAC, as well as hydrogen or cement based on biofuels, have the potential to deliver negative emissions. Negative-emissions credits can be monetized in voluntary carbon markets and could make up future value pools as the demand grows for high-quality negative-emissions offsets in the coming years. Funding could become available for decarbonizing existing assets in voluntary markets. There is ongoing work to improve standards in carbon markets and to ensure that schemes have positive outcomes. For example, six of the major independent carbon crediting standards pledged at COP28 in December 2023 to collaborate to increase the impact of activities under their standards and to enhance transparency and consistency across the market.3
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