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Can Musk’s interest breathe fresh life into carbon-capture technology?

Last week, Elon Musk tweeted that he is “donating $100M toward a prize for best carbon capture technology”. Even though carbon capture technologies have been in operation at scale since the 1970s, after 50 years the technology has largely failed to be deployed widely. Despite the growing concerns with increasing carbon dioxide levels in the earth’s atmosphere, in the last decade investments in carbon capture technology projects have fallen well short of target. In 2009, the International Energy Agency had set a goal for 100 large-scale carbon capture projects to be deployed globally between 2010 and 2020, with an aim to capture 300M tons of carbon per year. But the actual capacity deployed in the decade was 40M tons, only over 10% of the target. Can Elon Musk’s interest in carbon capture breathe fresh life into this struggling technology?

Elon Musk’s tweet on January 21


Is tree plantation a better alternative?

Some critics of carbon capture technology have pointed out that the technology can delay the phase-out of fossil fuels. As an alternative, trees are a natural and long-term solution, a fundamental part of the earth’s ecosystem and a very effective way of creating large stable carbon sinks. Trees also create numerous other great benefits such as moderating the local temperature, and enhancing biodiversity, which are vital to keeping the natural cycles of the earth’s ecosystem active. But while trees are a big part of the solution to offset carbon emissions, the carbon capturing efficiency of trees is not high enough for it to be the only solution. The current levels of CO2 emissions are simply too high to be fully addressed by trees alone. Our ESG Base research team has pointed out that even if the entire land surface of the earth were covered with dense forests, the amount of annual CO2 offset by the trees would only be about a fourth of the current level of emissions (based on 2019 global emissions). Therefore, until industrial emissions are reduced to much lower levels, there will continue to be a need for efficient alternative technologies such as carbon capture technology.

Comparing the effectiveness of trees versus current level of emissions

ESG Base)

The main barrier is economic

As of 2020, there are only 21 commercial projects using carbon capture technology operating globally, and 3 more under construction. About 41 other facilities are in various stages of development. In the current policy environment where it is free to dump carbon into the atmosphere but incurs cost to capture it, the free market forces simply do not provide incentives for deployment of carbon capture technology. A recent study published at the Royal Society Publishing estimated the cost of capture and storage of coal-sourced emissions at $52-60 per ton, and natural-gas sourced emissions at $80-90 per ton. Not surprising, therefore, that the main economic drivers for deployment of this technology have been government incentives and tax benefits. Other important drivers are (i) the utilisation of the captured carbon such as in increasing the extraction of oil and gas, (ii) a decision to participate in carbon cap and trade schemes, and (iii) the need to demonstrate new carbon capture technologies at scale. Most of the carbon captured in the current projects are used to increase fossil fuel recovery from existing reservoirs (through enhanced oil recovery). Implementation of carbon tax can provide positive incentives for deployment of carbon capture technologies. However, implementing carbon tax is a difficult decision for governments especially in emerging markets, due to the risk of the tax or the cost of carbon capture being passed on to the end consumers, including to the poorest economic groups.

Carbon Capture projects in operation

What happens to the captured carbon matters

The carbon captured from a power or industrial facility typically gets routed in two different directions:

1. Storage in deep geological formations or depleted oil and gas reservoirs: the captured carbon is compressed, transported via pipeline, rail, ship, or truck, and injected in deep geological formations for permanent storage. This route, though successfully practised, also raises some key concerns. For example, when stored near an aqueduct, the added carbon can increase the acidity of the water, leading to leaching and dissolution of harmful contaminants into the water. Similarly, whether the geological formations can hold the carbon in the long term without significant leakage, is questionable. Also, this route incurs significant cost and additional emissions (for example from transportation) without generating additional revenue.

2. Use of carbon to generate revenue: the captured carbon can generate revenue when transferred for utilisation in a suitable downstream activity. So far, enhanced oil recovery has been the main activity for which the captured carbon has been utilised. However, significant progress in chemical processes have been made in recent decades to use the captured carbon in the production of synthetic fuels, foaming rubber, plastic monomers, building materials, etc. This route is evidently more desirable as the revenue generated from captured carbon can provide incentives for further deployment of the carbon capture technology, thereby helping to bring the future cost of the technology down. The biggest commercial challenge to pursuing this value-addition route is that most of the products manufactured from captured carbon can also already be produced from direct fossil-based sources at lower costs of production.

CO2 capture processes

Can Musk’s involvement make a difference?

Given the current high cost of carbon capture and in the absence of carbon tax, no project to capture and utilise carbon to make a commodity product in the free market economy can currently overcome the economic hurdles and become a reality. The cost of this technology can very likely be reduced through large scale deployment, but an innovative path to market needs to be found. Musk’s star power may very well be that innovative missing piece. Musk's participation in this technology may well have the ability to re-brand a commodity into a premium product. A Musk-branded fire extinguisher, life raft, life jacket, or plastic products or even carbonated beverages made from captured carbon may potentially be sold at significantly higher prices, and that may justify the deployment of more carbon capture technologies. Whether or not this is Musk’s plan for carbon capture technology remains to be seen, but if it is, then Musk’s involvement with the technology can indeed breathe fresh life into this struggling technology.

About ESG Base

ESG Base is a London-based, global premium provider of technology and data solutions enabling ESG investments in real assets.

ESG Base Ltd.’s mission is to offer scalable technology solutions for fund managers and investors to identify the best ESG aligned investments and to enable performance monitoring of the assets through the investment lifecycle. Their SaaS technology powered by AI and advanced automation draws from a wide range of data sources and provides projections on future performance of investments subject to dynamic policy and technology scenarios.

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