According to its latest report, CCUS: 10-year market forecast, the $196bn of investment is crucial for increasing global carbon capture capacity to 440mn t/y and storage capacity to 664mn t/y. The report highlights that nearly half of this investment will be dedicated to CO₂ capture, with $53bn for transport and $43bn for storage.

Government funding is set to play a pivotal role in driving the first wave of CCUS investments, according to Hetal Gandhi, APAC [Asia-Pacific] CCUS lead with Wood Mackenzie. She reports that capex grants, opex subsidies, tax incentives and contracts for differences are some of the methods used by governments to incentivise investments, adding that no single mechanism has been used predominantly.  

North America and Europe are identified as the most active regions, expected to account for 70% of the global investment in CCUS, with the US leading at 50%, the UK at 33% and Canada at 10%. The US Inflation Reduction Act, UK business models, Canada’s Investment Tax Credit, and the Netherlands’ SDE++ scheme are all highlighted as significant drivers moving projects towards final investment decisions (FIDs). Additionally, the recently announced EU Industrial Carbon Management Strategy is anticipated to further boost European projects.

Capacity not keeping up with demand

Despite the optimistic forecast for increased CCUS projects, Wood Mackenzie warns that capacity will likely fall short of demand. It forecasts that industries will require up to 640mn t/y of carbon capture capacity by 2034 to meet decarbonisation goals, but projected capacity will be about 200mn t/y short. This shortfall is largely due to the lack of announcements and developments in the Asia-Pacific’s largest emitting countries, China and India.  

Gandhi continues: ‘The lack of CCUS announcements in APAC’s largest emitting countries – China and India – is causing the region to have substantially lower capacity than needed under Wood Mackenzie’s base case. Key sectors like power and chemicals will see a large gap between demand potential and actual supply until 2034. We expect APAC’s capture pipeline will mature through additional announcements later in the decade.’

Stephanie Chiang, a Research Analyst at Wood Mackenzie, points out that Australia, Malaysia and Indonesia have made some announcements, but these are significantly below their investment needs, with Australia’s direct incentives at $40mn, for example, being less than 1% of the investment needed over the next 10 years.

The report also predicts that CO₂ storage capacity will reach 664mn t/y by 2034, with almost 80% of the planned pipeline starting up by 2030. North America and Europe will lead in storage capacities due to mature CO₂ storage regulations and licensing activities. However, there will still be a global capture-storage gap of more than 200mn t/y by 2034, suggests the analysis.

Fauzi Said, Senior Research Analyst at Wood Mackenzie, notes that with storage capacities more concentrated than capture capacities, hub-based storage ecosystems are likely to evolve, especially in Europe and the Asia-Pacific. Critical areas to watch include policies for the transportation of CO₂ across borders and bilateral agreements handling liability risks.

The report underscores the essential role of CCUS in achieving net zero targets, especially for hard-to-abate sectors such as cement, chemicals, steel, refining and power generation. However, the deployment of CCUS at scale will depend on several conditions: motivation of heavy emitters to decarbonise, the cost-effectiveness and efficiency of the technology and the availability of viable options for CO₂ utilisation or storage.