ImpactAlpha, July 3 – Technology to capture, store and use carbon dioxide could take 500 million tons of the greenhouse gas per year out of the atmosphere by 2030, a 10-fold increase from today, according to a new McKinsey report.
Key to making the technology cost-effective: a price on carbon.
The development of carbon-negative technology at scale is critical to meeting the climate emergency. But even a 10x scale-up would represent just 1% of current annual emissions, and 5% of the 10 gigatons of carbon dioxide that scientists say we need to capture annually by midcentury.
A Climate Action Plan released this week by Democrats in the U.S. Congress calls for financial incentives, research and development to boost carbon capture technology and markets, though it only hints at carbon pricing. U.K. Prime Minister Boris Johnson this week committed up to £100 million to support technology that captures carbon directly from the air.
The technology ranges from capturing carbon emissions and storing them in the ground, to using the captured CO2 as feedstocks for fuel, plastics or other products.
Also announced this week: Norwegian energy company Equinor plans to build a natural-gas-to-hydrogen plant in Britain that will include carbon capture and storage, thought to be the largest plant of its kind, while the Norwegian government is mulling a $2.6 billion project to capture CO2 from a cement and waste-to-energy plant.
Beyond capture: carbon-to-value” approaches can turn captured CO2 into products such as fuel, building materials, plastics and consumer goods, with potential for trillions of dollars per year in revenue while displacing fossil fuel feedstock. (One inconvenient truth: oil and gas producers that use CO2 injected into the ground to enhance oil recovery accounts represent the biggest market for today’s carbon capture companies. Of 30 or so proposed projects across the U.S., many are by oil and gas companies.)
Direct air capture, where carbon dioxide is pulled from a smokestack or tailpipe or from diffuse sources, is promising, says McKinsey, but costs are still too high to make it commercially attractive (although at least one company is making vodka this way).
What’s missing is a clear market signal that the significant investments needed to drive the technology down the cost curve make economic sense. In short: a price on carbon.
There already exists a price on carbon, or rather multiple prices, and a growing percentage of global greenhouse gas emissions are coming under such economic regimes. But those prices have to go up, and apply to a much bigger share of emissions.
The 61 existing or planned carbon pricing initiatives cover 12 gigatons of carbon dioxide equivalent – or about 22% of global emissions, according to the World Bank. Governments raised more than $45 billion from carbon pricing in 2019.
Indeed, even Republicans in the U.S. have established a defacto carbon price: a 2018 tax credit (known as 45Q) provides $35 per ton for CO2 use and $50 per ton for storage.
Companies are beginning to price in higher carbon costs as well. Oil giant BP recently wrote down up to $17 billion worth of oil and gas assets as it hiked its estimate for the price it will have to pay for carbon dioxide emissions in 2030 to $100 a ton, from $40.
Experts estimate that a carbon price of $50 to $100 per ton of CO2 by 2030 is needed to reduce emissions in line with the temperature goals of the Paris Agreement. Just a tiny fraction of emissions covered by carbon pricing today fall within that range.
There is a wave of creative energy around carbon capture and usage tech, says McKinsey. Enhanced oil recovery accounts for around 90% of all CO2 usage today, but other applications hold great potential. Among them: cement consisting of up to 40% C02 could remove up to 150 tons of CO2 per year by 2030, and synthetic CO2-based fuel, which could cut aviation emissions.
Scaling or distributing direct carbon capture technology could bring down costs, which can run more than $500 per ton of CO2 today. Farther out: Carbon fiber, plastics and biochar.
Without such technologies and the regulatory incentives to support them, the transition to a low-carbon economy will be much more challenging, says McKinsey. “Every scenario to stabilize the climate depends on investment in negative-emissions technologies.”