The Wood Mackenzie report finds that Chinese developers are achieving carbon capture costs far below those of their European counterparts. While European utilities face expenses exceeding $300/t of CO₂ – making most projects financially unviable – China is reportedly building comparable carbon capture, utilisation and storage (CCUS) facilities for just $30–40/t. China's apparent cost advantage could reshape industrial competitiveness as the EU's Carbon Border Adjustment Mechanism takes effect from 2026.

Chinese state-owned enterprises claim to be able to complete CCUS projects in approximately 18 months, more than twice as fast as US and European equivalents. Capital expenditures claimed are 55–70% less per tonne captured. Five coal CCUS projects are now under construction in China.  

‘European power generators face a stark economic reality with CCUS. While the technology is technically feasible, the costs are prohibitive without considerable government support,’ notes Peter Findlay, Director and Global Lead, CCUS Economics, Wood Mackenzie. ‘China’s claimed 70% cost advantage in power plant carbon capture could prove as disruptive to this sector as [its] dominance in solar manufacturing. While the UK’s Dispatchable Power Agreement model shows what's possible, the scale of subsidy required raises serious questions about political and economic sustainability across Europe.’

The report finds that as renewable energy forces thermal plants into increasingly flexible roles, CCUS economics deteriorate rapidly. Projects require consistent, high-capacity operation to justify costs, but European gas plants increasingly provide intermittent grid balancing rather than continuous baseload power.

The challenge proves particularly acute for Europe's gas-fired fleet. Combined-cycle gas turbines produce flue gases with only 3–4% CO₂ concentration, making capture significantly more expensive than coal plants with 9–12% concentrations. CCUS adds $35–200/MWh to gas power costs and Europe is at the higher end of that, an unbearable burden for most electricity consumers, according to the analysis.

Bioenergy with carbon capture and storage (BECCS) shows promise where fossil fuel CCUS struggles in incentive to decarbonise. BECCS projects can show internal rates of return of 16–23%, compared to negative returns for many proposed fossil CCUS ventures. Unlike fossil fuel CCUS, which merely reduces emissions, BECCS creates negative emissions by capturing CO₂ from biomass combustion, making an attractive ‘offset’ product for companies seeking carbon removal credits.

Wood Mackenzie predicts that carbon capture costs will fall 50–60%, in real terms, by 2050 through next-generation technologies. There is upside to this if promising transformational technologies become commercial. However, these improvements require learning from multiple developments moving forward and may not arrive quickly enough to save current project economics, according to the authors.

‘The window for action is narrowing,’ concludes Hetal Gandhi, Lead, CCUS – Asia-Pacific, Wood Mackenzie. ‘European utilities face a strategic choice: pursue expensive CCUS projects with uncertain returns, or focus investment on alternative decarbonisation pathways that may prove more economically viable.’

Worldwide growth
Despite global headwinds, the number of operational carbon capture and storage projects increased 54% year-on-year, as 27 new facilities came online in the past 12 months. So finds the Global CCS Institute’s Global Status of CCS 2025 report, released in early October.

The 2025 report shows also shows 47 projects in construction, with a cumulative capture capacity of 44mn t/y.

Jarad Daniels, CEO of the Global CCS Institute, said: ‘CCS is now operating across a diverse array of sectors, proving its versatility and value to decarbonisation. To stay the course, we need durable policies, investable business models, and greater international collaboration.’

The runaway cost of UK CCS subsidies
Meanwhile, recent research from the Institute for Energy Economics and Financial Analysis (IEEFA) shows that the vast cost of planned UK CCS projects will be passed on to taxpayers and electricity consumers. Total investment to build and operate CCS infrastructure may reach £408bn by 2050, with £5bn/y needed by 2030 and £19bn annually thereafter. More than £50bn in subsidies has already been pledged, yet these projects cover only 8% of the UK’s 2050 CCS target. Around three-quarters of the funding will be recovered through levies on electricity bills, meaning households and businesses will shoulder most of the burden.

IEEFA attributes these costs to low carbon prices and weak market incentives, which leave CCS dependent on public subsidy rather than commercial viability. Revenues from the UK Emissions Trading Scheme are also projected to decline sharply – from £6bn in 2023–2024 to £1.8bn by 2029–2030, cutting potential climate funds by around £21bn. The report concludes that the government’s heavy reliance on CCS is financially risky and inefficient, questioning whether it represents a sustainable or effective path to decarbonisation.