Photo: Illustration CCUS value chain; Source: Mitsubishi Shipbuilding

Carbon taxes and incentives key to unlocking CCUS potential

Carbon capture is expected to become a new reality in the energy sector, especially having in mind that fossil fuels are here to stay and transitioning to alternative fuel sources is expected to last a couple of decades at least.

Fears are being raised that a massive upscaling of carbon capture especially in the offshore drilling industry might slow down the transition from fossil fuels to more sustainable solutions by locking in the infrastructure. On the other hand, it is seen as a required bridge to offset emissions in the meantime.

As various studies are gaining ground, even those looking into mounting carbon capture systems on board ships, a key element to accelerate these efforts seems to be missing: the financial one.

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Carbon taxes and tax credit incentives are the key missing pieces for greater uptake of carbon capture, utilisation, and storage (CCUS) technology in the global energy transition puzzle, according to Jeff Allison, President at Delta CleanTech Inc.

Canada-based Delta CleanTech is a technology industry leader in CO2 capture; solvent & glycol reclamation and hydrogen fueling infrastructure. The company is engaged in the reduction of emissions from existing hydrogen production units such as steam methane reformers by capturing CO2 and changing grey hydrogen to blue hydrogen.

Speaking to Offshore Energy, Allison said that carbon taxes and subsidies make it more attractive to capture the CO2, adding that with the introduction of new ways with which you can commercialize CO2 usage, such as carbon nano-tubes/ethanol methanol/bio-plastics, etc. the cost of capture can be substantially reduced.

Carbon-free fossil fuels are the answer in the interim. Delta can capture CO2 from any type of fuel, gas (coal, natural gas, steel plants, refineries, etc.). We see what happens when a large part of your base load infrastructure is based on renewables (wind and solar): we face “brownouts” because these sources of energy cannot be upscaled and there is increased demand (excessive heat or cold),” he said.

Delta’s technology is currently fully commercial, we are having good success in the oil and gas business due to ESG pressures as well as carbon taxes and incentives in Canada. With the recent passing of the Inflation reduction Act and the increase to the 45Q, the USA will be a larger market for Delta in the future.”

As explained by Allison, the company’s modular CO2 capture system would work if mounted on a ship. However, this would be an additional add-on to cut a vessel’s GHG emissions.

The planned global CCUS capacity pipeline has reached 905 million tonnes per annum (mtpa), with more than 50 new projects announced this quarter, data from Wood Mackenzie shows.

Lucy King, Senior Research Analyst at Woodmac believes the pipeline is close to aligning with Wood Mackenzie’s 1.5-degree pathway to 2030, but it will need to grow seven-fold by 2050 to reach the capacity required for net zero.

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“The biggest challenge is the lack of embedded policy and regulation for CCUS projects. For most countries, the rate of growth and demand for CCUS is outpacing the respective government’s ability to legislate. Despite this, we expect 2022 to be a pivotal year for CCUS, with many countries formulating strategies, policies and regulation to support its deployment” King said.

The US is a global leader in CCUS, supported by its 45Q tax credit incentive for carbon sequestration launched in 2008. Currently its capacity pipline stands at almost 250 Mtpa. The Inflation Reduction Act (IRA), signed into law earlier this month, is expected to enhance and extend the 45Q tax incentive.

According to King, the law will incentivise smaller-scale capture projects, attract more industries, and promote investment into technologies including Direct Air Capture.

When it comes to the outlook for the maritime sector Dutch maritime technology company Value Maritime says the future for carbon capture is bright.

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The company has developed an onboard CO₂ capture and storage solution, which has been installed onboard Nordica, a 2011-built 1,040 TEU containership owned by the Netherlands-based shipping company Visser Shipping and operated by Singapore’s X-Press Feeders.

The module captures CO2 from the ship’s exhaust and uses the CO2 to charge a CO2 battery which serves as a carbon dioxide storage facility on which CO2 can be charged and discharged.

Nevertheless, the company believes that regulators need to provide greater support to clean technology providers to speed up the decarbonization of the maritime sector.