The Houston Ship Channel along the Gulf Coast in Texas is the global economy’s petrol station.
Tankers stream up and down the channel, which snakes from the Gulf of Mexico to within a few miles of downtown Houston, stopping by one of the 200-plus oil refineries, chemical plants and fuel depots that line its waters. Once filled, they carry supplies off to a world desperate for fuel amid a global energy crunch.
Those facilities also pump out tens of millions of tonnes of CO₂ every year, making it one of America’s largest concentrations of greenhouse gas emissions, and a challenge to a world confronting a climate crisis.
ExxonMobil, the western world’s largest oil supermajor, thinks it has a solution to this problem — and it does not involve solar panels or wind turbines.
It has put forward a $100bn idea to keep the fuel flowing while trapping the carbon dioxide spewing from the plants, running it through miles of new pipelines to be stored in reservoirs deep under the nearby Gulf of Mexico’s seabed. Oil and industrial giants Shell, Chevron, Dow Chemical, Ineos and others with facilities in the area are backing the plan.
This is not a new idea; the first plant to capture and store carbon dioxide was built in Texas more than 50 years ago. Yet despite decades of research and investment, the carbon capture and storage (CCS) industry has never managed to live up fully to its backers’ promises. Only a handful of plants currently exist in the US.
Now, however, a fresh wave of political and industrial backing is creating new momentum for CCS. Congress is set to inject billions of dollars into efforts to capture and store carbon in the form of tax incentives in the Inflation Reduction Act passed this summer.
The Biden administration sees the technology as key to making the American economy net-emissions free by 2050. Big Oil and other industrial polluters under pressure to green their businesses are promising to spend big on carbon capture.
With this momentum, the pipeline of development is lengthening: according to the International Energy Agency, there are now about 80 CCS projects in various stages of development in the US aiming to start up by 2030.
Carbon capture “is finally having the big moment we all believe it needs”, US energy secretary Jennifer Granholm told a gathering of industry executives, environmentalists and policymakers in Washington DC in June.
But carbon capture’s role in the climate fight is far from a settled question. Its backers cast it as a sort of white knight that can keep swaths of the fossil fuel economy humming while removing the greenhouse gas pollution that threatens climate catastrophe. Exxon’s chief executive Darren Woods is fond of arguing that oil and gas are not the problem — the emissions are.
Yet critics see carbon capture as a wasteful detour in the effort to green the economy, only put forward by fossil fuel producers as a smokescreen to protect the future of their core oil and gas businesses.
“It is a way to say that we actually don’t have to phase out fossil fuels,” says Steven Feit, an attorney at the Center for International Environmental Law. “We can keep using them. Don’t worry, we’ll just clean them up. It’s fundamental to keeping fossil fuels at the centre of the energy mix.”
Others note that the scale of technology required to make a significant impact on global emissions is far out of reach. A survey by the Global CCS Institute found that the 153 projects in development globally, along with the 41 plans either operating or under construction, would together store less than 1 per cent of the CO₂ added to the atmosphere in 2021.
But Big Oil are not the only ones that argue the world will need to trap its carbon emissions and stuff them back in the ground to meet its climate targets.
The United Nations’ Intergovernmental Panel on Climate Change scenarios for reaching net zero emissions target lean on capturing and storing carbon among other means of removing carbon from the atmosphere, especially in heavy industry sectors such as cement, steel and natural gas processing where renewable energy cannot be easily deployed.
The International Energy Agency’s highly influential net zero 2050 scenario relies on hundreds of billions of dollars being spent over the next 25 years to capture billions of tonnes of carbon emissions every year from thousands of industrial sites around the world.
“The scientific consensus is we cannot hit important climate targets without [CCS],” says Julio Friedmann, chief scientist at Carbon Direct, which works with companies on carbon removal projects, and a former Department of Energy official in the Obama administration.
The economic case
The underlying mechanics of carbon capture and sequestration technologies are well established and have been largely unchanged for decades.
The CO₂ is captured at the point of emission at big industrial or power plants and run through a chemical process that separates the carbon pollution from the rest of the emissions. It is then compressed, pumped through a pipeline, similar to natural gas, and injected into reservoirs similar to those that hold oil and gas deep underground. The gas can also be converted to fuels and chemicals to be sold on, a process known as utilisation (CCU).
Oil and gas companies have latched on to the technology as a climate fix in part because they see their decades’ of experience pumping hydrocarbons out of the ground giving them an inherent advantage stuffing CO₂ back into the ground.
Unlike other major green technologies such as wind and solar power, carbon capture is an industry that scarcely exists today. Critics argue the money would be better spent on things such as wind, solar and batteries, pointing to a history littered with failed high-profile carbon capture projects, cost overruns and unmet promises about its ability to quickly bring down emissions.
“There’s this enormous divergence between this idealised world where carbon capture works really well, gets really cheap, and doesn’t have any other problematic impacts. And then you see the real world where it doesn’t work particularly well, it’s super expensive, and it’s prone to cost overruns and failures,” says Feit.
The $1bn Petra Nova CCS project at an NRG coal-fired power plant just outside Houston, was a flagship project for the industry when it launched in 2016 and received almost $200mn in federal taxpayer money.
But just four years later it was mothballed having suffered from lengthy shutdowns and technical glitches that caused it to miss its CO₂ capture targets.
Carbon capturing equipment attached to the $54bn Gorgon liquefied natural gas project in Australia, run by Chevron, Exxon, Shell and a group of Japanese investors, was supposed to cut a path forward for the country’s lucrative gas export business to radically reduce its emissions. But problems with the project’s storage reservoir and faulty equipment have led to fines for missing storage targets.
A decade ago, the Norwegian government pulled the plug on a flagship CCS project at the Mongstad refinery, part of an effort the country’s then prime minister equated to the nation’s own “moon landing.” Costs at the project soared well beyond initial estimates and low European carbon prices at the time undermined its potential profitability.
Yet backers insist the technology underlying carbon capturing, transportation and storage is fundamentally sound. They argue that the real impediment has been the lack of a profitable business model to rolling out the technology on a large scale.
Most projects in the US today rely on selling captured CO₂ for use in so-called enhanced oil operations, in which the gas is pumped into ageing oilfields to increase crude output. But critics argue this undermines the environmental benefit and the amount of CO₂ that can absorbed for oil recovery is limited. Others sell CO₂ to industrial users, but it is a small market.
“There’s been sort of this perception of CCS by its critics that it doesn’t work or something like that. But really what hasn’t worked is the policies, the economic case has not been there,” says John Thompson, a director at the Clean Air Task Force, an environmental advocacy group.
That has changed, backers say, with the climate bill that passed Congress in August, which promises for the first time to underpin projects to permanently store carbon dioxide with substantial amounts of taxpayer dollars.
The new law lifted the available tax incentive from $50 per metric tonne of CO₂ captured and stored to $85 per tonne. There is a lower incentive of $60 a tonne for CO₂ captured and utilised in enhanced oil recovery (EOR), but most new projects being proposed today are tied to storage sites and not oil operations.
Separate legislation has given the Department of Energy about $12bn in additional cash to directly fund capture projects and supporting infrastructure such as new CO₂ pipelines.
The oil industry lobbied hard for the carbon capture subsidies to be included in the broader climate legislation, arguing it should get incentives like wind, solar, batteries and other clean energy technologies.
Energy companies and executives lavished campaign donations on Joe Manchin, the centrist Democratic senator from West Virginia, who played the central role in negotiations and successfully argued for CCS incentives and other oil-industry friendly measures to be put into the bill as part of the broader climate spending compromise.
Industry executives and analysts say this gusher of new CCS cash incentives could be transformative, making many potential capture and storage projects profitable for the first time ever.
“A great number of industries are now in the money” unlike in the past, says Friedmann, including steel and cement plants, hydrogen production facilities, gas processing plants and others that were marginal or unprofitable at the lower carbon price.
Thompson says he thinks the legislation will create “an industry that builds hundreds and hundreds of projects in the US over the next 15 years,” calling it a “watershed” for carbon capture.
He estimates the cost of capturing, transporting and storing carbon emissions from ethanol, ammonia and gas processing plants, which emit high concentrations of CO₂, at about $40 to $50 a tonne, making them potentially very lucrative with an $85/tonne incentive. Projects at coal plants, where early efforts were focused to protect coal-based economies, are likely to still struggle to make money.
Big oil on board
The US currently only captures about 20mn tonnes of CO₂ per year, less than 0.01 per cent of the nation’s total emissions, from a handful of projects, most of which are tied to EOR.
But the 80 projects in train in the US would increase that to 100mn tonnes a year of captured CO₂, according to the IEA. If all of them earned the full tax credit it would imply about $8.5bn a year of government funding flowing into the sector, a figure that could increase further if the industry continues to grow.
Oil executives acknowledge that with pressure mounting to slash emissions, other green technologies racing ahead and political support at an all-time high, it is a make or break moment for the technology they have argued must be part of the broader effort to tackle climate change.
Dan Ammann, the recently appointed head of Exxon’s low-carbon business, says it is “time for action . . . and to demonstrate that these projects can and do work and they have the ability to have an enormously positive impact from a greenhouse gas emission point of view.”
Exxon and other oil and gas companies have been heavily criticised for featuring carbon capture and storage and other low-emissions technologies prominently in their advertising, while spending comparatively little on the underlying businesses.
Ammann was hired from General Motors, where he ran the company’s nascent autonomous driving efforts, a rare external hire into Exxon’s senior ranks. It was widely seen as an effort to bring fresh credibility to the company’s efforts on carbon capture, hydrogen and renewable fuels, where the company has said it will spend $15bn through 2027, about 10 per cent of its total spending over the period.
In October, Exxon greenlit its biggest CCS project to date in Louisiana, along the Gulf Coast. It proposes to capture and store 2mn tonnes of CO₂ a year, the equivalent of about 700,000 cars, from a CF Industries-run plant that produces ammonia, which is used to create fertiliser and chemical products. “It’s going to be incredibly important for humankind and incredibly important for Exxon,” Ammann says of the company’s carbon capture business.
Chris Powers, the head of carbon capture and storage at US oil supermajor Chevron, another oil company betting on the technology, says the incentives made many more projects “feasible”.
But he adds there is still more that needed to be done to bring down the cost of capturing the CO₂, which typically involves using an amine solution to separate the gas.
He also says that without reforms to permitting processes in the US, projects would be vulnerable to the sort of legal and bureaucratic hurdles that regularly derail other large-scale energy projects.
Early troubles on this front are already visible. A major proposed project, the Midwest Carbon Express, that would transport millions of tonnes of captured CO₂ from ethanol refineries in the American midwest to storage sites in Illinois and North Dakota, is already running into opposition.
A coalition of environmentalists groups such as the Sierra Club, which call CCS a “false climate solution,” and conservative farmers are working to block the needed pipelines to move the CO₂ — an echo of the anti-pipeline politics that ultimately doomed the controversial Keystone XL oil pipeline.
Tens of thousands of miles of new pipelines need to be constructed in the next couple decades to ferry CO₂ around the country from capture sites to permanent storage reservoirs, a US Department of Energy study this year found.
‘Show me what you’re going to do’
Other parts of the world will be watching the US experience closely as they consider their own CCS plans.
The IEA estimates more than 200 projects are in the works around the world, although relatively few have fully committed to construction. In the UK more than a dozen projects have been proposed, but have struggled to get off the ground.
More than 50 projects have been proposed across Europe, and the EU’s “fit for 55” climate plan, the continent’s master plan for reaching net zero emissions by the middle of the century, carves out a substantial role for removing carbon dioxide from the atmosphere whether through CCS or other means, although subsidies are far less generous than in the US.
Producers in Canada’s oil sands want to build a huge carbon capture hub in a bid to scrub emissions from the world’s most carbon-intensive oil patches, relying on the country’s relatively high carbon price and direct government support.
But after decades of false dawns for the technology and a rapidly closing window to start bringing down the world’s emissions, even the technology’s backers say it’s time for oil supermajors and others that have touted the technology to turn the rhetoric into reality.
“It’s time to put up or shut up,” says Thompson from the Clean Air Task Force. “At this point, I’ve read your ads, I’ve seen all that stuff, so now it’s time to stop talking about it and show me what you’re going to do.”
