CCUS Technologies - Can they mitigate climate change?

As fossil fuels are likely to continue to play a role in the short and medium term of the energy industry, carbon neutrality would require rapid technological developments to bridge the gap until the next generation low-, zero-, or negative-carbon technologies are commercialized in the energy industry.

In 2005, the Intergovernmental Panel on Climate Change (IPCC) released a special report, where emission pathways were largely outlined and the potential of the Carbon Capture, Utilization, and Storage (CCUS) technology to mitigate climate change presented. In order to achieve the goal of the Paris Agreement and limiting global warming to 1.5°C, removal of large volumes of carbon dioxide (CO2) from the atmosphere would be needed to achieve net-zero emissions. As a result, the United Nations Economic Commission for Europe (UNECE) required all its participating countries to deploy zero carbon and negative carbon technologies to capture 90Gt of CO2 by 2050 to meet the objectives of the Paris Agreement and the 2030 Agenda for Sustainable Development.

Once the CO2 is captured, it is then compressed into fluid and then transported to a storage site that is appropriated for CO2 storage. This transportation process is usually done via pipelines, trains or ships and occasionally other vehicles are involved as well.

In the last step, the CO2 is injected into deep, underground geological formations, where it is then stored for a long period of time, rather than being released into the atmosphere. Storage sites for  CO2 include former oil and gas reservoirs, deep saline formations, and coal beds.

According to the Grantham Institute at the London School of Economics, CCUS technology is, at present, the only carbon capture technology that can reduce emissions at emission facilities. Some of the advantages that CCUS present are:

• CCUS can reduce emissions at the source: The ability of CCUS to directly capture CO2rom the source and then store it in geological formations is estimated to reduce as much as 20% of total CO2 emissions from industrial and energy production facilities.
• Other pollutants can be removed at the same time: During the oxy-fuel combustion, the fuel is burned in an oxygen concentrated environment, which can lead to a significant reduction of nitrogen oxide (NOx) and sulfur dioxide gases. A study conducted by the Argonne National Laboratory showed a 50% decrease in NOx gases in oxy-fuel combustion.
• The social cost of carbon can be reduced: During the oxy-fuel combustion, the fuel is burned in an oxygen concentrated environment, which can lead to a significant reduction of nitrogen oxide (NOx) and sulfur dioxide gases. Carbon social cost is a dollar value of the estimated costs and benefits to society from climate change caused by one additional metric ton of CO2 released into the atmosphere in a year. By removing CO2 directly at the source, net damages to society could be reduced.

• The high cost of implementation: There are currently no regulatory drivers in most places to incentivize or require the use of CCUS. The use of this technology requires significant investment into its requirement of high cost of equipment and materials to store CO2, and to build an infrastructure to transport and then store it, could pose significantly high costs. 
• License to ramp up emissions: CCUS technology can be perceived in a wrong direction and be used by emission heavy industries to push for the regular use of CCUS while maintaining polluting projects, thus defeating the true purpose of CCUS. This point is often used by NGOs in criticisms of the practice.
• Storage capacity for CO2 is uncertain: The availability of geological storage is not considered a barrier in the short to medium term. However, there are uncertainties with regards to the long-term ability of storage sites to sequester carbon without significant leakage. There is some potential for seismic activity caused by underground injection of CO2. Furthermore, it is also estimated that not all countries will have enough CO2 storage capacity to properly implement CCUS.
• Transportation considerations: While the risk of accidents during transportation is relatively low, the potential for leaks still exists. Transportation of CO2 to the storage sites is also very costly, since significant energy is required to compress the CO2nd maintain high pressure throughout the pipelines, which are expensive themselves. Potential leakage in high concentration can also cause problems for human health. Each CO2 source must be connected to an appropriate storage site via pipeline, which can make CCUS implementation more difficult and expensive on areas that have no geological formations suitable for storage.
• Uncertain public support: The public has also a critical perception of the widespread implementation of CCUS. According to a study done by Align CCUS Eu, public awareness of CCUS in the world is considered as lacking. The public is uncertain about CCUS, what it entails, and has a negative perception towards it. People tend to reject large infrastructure like CCUS being built near them because of the perceived risks outlined above.

In order to achieve the goals of the Paris Agreement, a transition to a low carbon economy is essential to combat climate change. Technological innovation is one of the ways to achieve this, therefore, CCUS technology can be used as one pioneering technology to bridge the gap until the next generation low-, zero-, or negative-carbon technologies are available. However, CCUS technology and its implementation faces geographical, environmental, social, and political challenges. A sustainable approach is needed to look beyond the future, identify key risks and mitigations to the challenges identified for a feasible use of CCUS technology.

Insurance services play an essential role in energy transition and emerging technologies. Allianz has developed and implemented the 

ESG Integration Framework across its portfolio to review ESG risks in its business transactions, including new technologies which remove emissions from the atmosphere. The framework contains the ESG sensitive business guidelines which can also be applicable to emerging technologies such as CCUS Technology, as well as its possible accompanying risks.

Allianz Global Corporate and Specialty (AGCS), the industrial insurance arm of the Allianz Group, supports this effort at the ESG Business Services, the Center of Competence for ESG Business. A team of experts reviews all business transactions that have potential ESG or reputational risks. This allows for both informed decisions and recommendations for mitigation to be made in order to reduce the ESG and reputation risk associated with the transaction.