Many new technologies, such as sustainable fuels, cement or circular chemicals, rely on a sufficient supply of CO2. But with European greenhouse gas (GHG) emissions being down 24% compared to 1990 and more ambitious targets in sight, we wonder whether we could ironically run short of CO2 in the long run.
The defossilisation of our economies is one of the biggest challenges we are facing as a society. Whether it is government pledges or voluntary commitments by companies, phasing out fossil fuels and shifting to more sustainable alternatives is a high priority on global agendas. The European Union for example, is aiming to reduce GHG emissions by 55% by 2030 (European Commission). However, moving away from fossil sources of carbon does not necessarily reduce our demand for carbon.
Many innovators replacing unsustainable incumbents will require a source of carbon (such as CO2) as a feedstock for their processes. This includes the construction industry, sustainable fuels as well as circular plastics. While we will be able to substitute parts of the fossil-based carbon through biomass and recycling, we will need other sources of carbon in addition to those.
Luckily, we have an almost abundant source of renewable carbon: carbon dioxide (CO2). CO2 can be captured from industrial point sources, ambient air, and seawater to obtain a feedstock for industrial processes (or to permanently remove it from the atmosphere).
However, given our ambitious goals of defossilising our economies and the projected need to permanently remove CO2 from the atmosphere, we wonder whether CO2 itself will eventually become a scarce resource. In this article, we will take a closer look at where we actually source CO2 and the possible future demand shift.
Supply of CO2
The availability of CO2 as a feedstock depends on future emission levels. Large industrial point sources including the iron, steel, chemical, and mineral industries emit high amounts of CO2. Overall these emissions amount to about 700 Mt CO2e, equivalent to 82% of European GHG emissions in 2022 (EEA). In these industries, GHG emissions are emitted by the combustion of (fossil) fuels and by conversion processes themselves. Transport and housing-related emissions will not play a role as a source of CO2 feedstock due to their decentralized nature.
Models by Dechema estimate the total available emissions in Europe to be about 380 Mt by 2050. With the increase in bioenergy, the available amount of biogenic CO2 will also substantially increase from the current 24Mt per year to 124Mt by 2050, offering an additional, easy-to-capture source of CO2 (European Biogas Association).
Overall the supply of CO2 will depend on a number of factors that affect the abatement costs and thus viability of decarbonising relevant industries:
- Technological developments
A significant amount of emissions can be cut through retrofitting. This includes power-based heat generation, shifting to renewable energy generation, or efficiency measures that companies like Carbon Re have developed in the cement industry. Hydrogen from low-carbon electricity is another key enabler of decarbonisation. Meanwhile, industries may partly shift to biogenic feedstocks as innovation in the space accelerates, such as seen with companies one.five and traceless materials.
2. Scaling up of carbon capture technologies
Electrification is not always possible and at some point sources will be hard to substitute, calling for carbon capture. At the moment, the use of carbon capture is very limited with most projects still in the pilot phase (SCOT). The scale-up of carbon capture and utilization (CCU), as well as carbon capture and storage (CCS), will also depend on cost levels. CO2 streams with higher concentrations, such as biogenic processes, e.g. ethanol production, will have costs ranging from $15–25 per ton of CO2 while processes with more dilute streams, such as cement production, will come with capture costs of $40–120/t CO2 (IEA).
3. Regulatory framework
Looking at Europe, the most important policy instrument is the EU carbon pricing mechanism. The EU-ETS is currently trading at €88 per ton of CO2e (29.04.2023). Upward price developments in the ETS and phasing out of free allowances will make pollution more expensive than capture or abatement, incentivising defossilisation.
Besides, the recent Delegated Act on renewable transport fuels of non-biological origin (RFNBOs) regulates the phasing out of industrial CO2 for synthetic fuels, for example by only allowing point sources producing electricity using unsustainable fuels up to 2036 onwards and industrial point sources using unsustainable fuels up to 2041. According to the delegated act, almost all industrial or energy-related point sources will not be eligible as CO2 point sources by 2042. If this mechanism is transposed into law, the CO2 supply for e-fuels from industrial point sources will be limited to process-related CO2 emissions, e.g. those emitted by calcination in the clinker manufacturing process, and some facilities using sustainable fuels, e.g. biofuels.
Future Demand for CO2
The extent to which captured CO2 will be utilised in industrial processes depends largely on availability, price, and measures enforcing the phase out of fossil-based carbon in certain industries, e.g. the fuel sector. The demand can be divided into CO2 utilisation (CCU) and permanent storage of CO2 (CCS). It’s important to treat them as separate concepts. CCU is a great alternative for carbon-intensive processes, thus avoiding emissions that would have otherwise occurred but since the CO2 is not stored permanently, its contribution to net zero is smaller (Nature). While storage of CO2 (CCS) is commercially more challenging and often dependent on carbon credits or government schemes, it cannot be substituted by (non-permanent) CCU since we will need permanent storage at scale to meet the Paris Agreement ambitions.
In an ideal world, CCU complements CCS as an attractive mitigation option where availability of CO2 storage is limited (IEA). Since the bulk of industrial emissions in Europe are clustered in a few regions, and given the (current) absence of transport and storage infrastructure, it is important to look at supply and demand of CO2 rather locally (CCUS Network). This SCOT Project database offers a good overview of current projects. There is still a huge amount of uncertainty around future market sizes, but this McKinsey study offers a great overview of the future potential for CCU/CCS in different industries:
- CO2 removal and permanent storage/elimination
CO2 removal and permanent storage or elimination are vital in the IPCC scenarios, however, suitable geological storage sites or permanent sequestration options in products such as cement are still scarce. This will require annual investments of $ 14 billion by 2050 to scale permanent CO2 removal (CUS Set-Plan) with demand coming from the voluntary carbon market, compliance markets, and government initiatives. Emerging storage companies like 44.01, which offer permanent and non-reversible storage, address a big bottleneck in the value chain.
2. Sustainable Fuels and Chemicals
Transport, in particular aviation and shipping, are hard to decarbonise. EU regulations, such as the Renewable Energy Directive, ReFuelEU Aviation initiative, or the FuelEU Maritime proposal, will create a large market for sustainable fuels. In addition, large industry players like MAERSK are starting to send demand signals to the market. Given the limited potential for direct use of low-carbon hydrogen or electrification, Power-to–X approaches will enable sustainable alternatives. Alternative chemicals and fuels such as e-kerosine or green methanol (addressed by emerging companies like Ineratec or carbon.one, respectively) will potentially require between 110 and 670 Mt CO2 by 2050 (Dechema). Additionally, the plastics and chemicals industry, which may cover some of its carbon feedstock demand through biomass and recycling, may also need up to 250 Mt of CO2 by 2050 (Nova Institute).
3. Other applications
There is a range of other applications for CO2. Enhanced oil recovery is one of the largest CO2 off-takers at the moment (IEA), however, from an impact perspective it delays the shift away from fossil fuels. Other applications such as in agriculture or food may also offer interesting opportunities.
Bringing it together
Putting our long-term decarbonisation pathways and future needs together paints an interesting picture: as we de-fossilise our economies, co2 will paradoxically be needed as a valuable feedstock for new green industries.
Energy-related emissions will sharply decrease over time while emerging green industries are relying on the availability of concentrated CO2. Looking at chemicals and fuels only, Dechema concluded that the available CO2 would be enough to cover the maximum demand for future chemical production. Beyond this, to reach net zero scenarios outlined by the IPCC, around 1.500 Mt of CO2e would still have to be counterbalanced and permanently sequestered through technological or biological means.
However, the recent Delegated Act and similar legislation will drastically limit the use of CO2 from fossil sources. As our own model shows, this will amplify the need to scale up biogenic and atmospheric CO2 capture. In a recent study, Galimova et al. (2022) concluded that direct air capture could cover 63% of the 6.1 gigatonnes needed globally by 2050 as other available point sources will no longer be able to meet demand. However, here we might face another limitation: sustainably produced electricity.
Creating a circular carbon economy and defossilising existing chemical processes create ample opportunities for investors to help new industries scale up. Innovation is needed along the whole value chain. On the supply-side we need to increase feedstock availability through more energy-efficient carbon capture for point sources, scaling up capture from ambient air and developing the BECCS value chain. On the demand-side, Planet A is particularly excited about valorisation methods (chemical or biological) which have a clear path to price parity and new ways of utilising CO2 in products which offer higher levels of permanence and offer local storage.
TDLR; Our key takeaways:
👉 Carbon, e.g. in the form of concentrated CO2, will be needed as a feedstock in several industries.
👉 According to the recent EU delegated act, industrial CO2 shall not be allowed to produce synthetic fuels as of 2041, further encouraging direct air capture (DAC) and Bioenergy and Carbon Capture (BECCS) in the 2040s.
👉 The phasing out of free allowances and higher carbon prices increase the business case for products offering permanent removal.
👉 Current projections indicate that concentrated CO2 might be available to supply the chemical industry in sufficient quantities at least until 2045.
👉 New technologies need to be scaled, legislation needs to be passed and markets need to be designed in appropriate ways to drive down the cost curve of carbon capture.
👉 Closing the carbon loop does not alleviate the need to permanently sequester CO2.
👉 A massive scaling of low GHG-intensity electricity supply is a key requirement to achieve our climate targets and to ensure a secure and sustainable energy supply to the industry, the transportation sector, households, and last but not least, concentrated CO2 supply and its conversion to essential products.
Over to you!
We are curious to hear your thoughts and perspectives. Also, please reach out to us if you are working on any of the following technologies: innovative solutions to capture CO2 from ambient air or point sources, utilise CO2 to replace fossil-based feedstocks, work on MRV, transport and storage problems or the scale-up of renewable energy.