The global Carbon Capture and Storage (CCS) sector has entered a critical phase of expansion, with nearly 500 projects announced since 2018, but only 6% of these projects have actually been given the greenlight for investment, while more than 60% are still in the feasibility stage, according to a new report from the Energy Industries Council (EIC).
The CCS Insight Report provides an in-depth analysis of CCS deployment in 10 countries and the sector’s evolving challenges. While countries such as the US, UK, and Norway lead the way in project pipelines, supply chain constraints, financial barriers, and regulatory uncertainties continue to hinder the pace of progress.
According to the report, clustering models—where multiple emitters share infrastructure— have emerged as a key area for reducing costs and risks associated with CCS, but tangible progress in the sector remains slow, including a dearth of manufacturers that can supply CCS technologies at projected capacities and a low Financial Investment Decision (FID) rate for the sector. Future supply chain risks stem from competition with other sectors, like hydrogen and oil and gas, a threat exacerbated by the sector’s lack of progression.
The problem is made worse, the report says, by the fact that CCS projects are inherently capital intensive. Current carbon pricing schemes are a positive step, yet in many instances cannot compensate completely for inflated investment costs, the report says. The resultant financial risk makes banks hesitant to finance CCS projects.
Alexander McCabe, EIC Market Intelligence Analyst, said, “The clustering model is certainly a great way to make CCS projects more cost-effective, but the limited supply chain capacity to cater for existing and future projects is a significant bottleneck that is simply hard to ignore. The fact that CO2 capture technologies are largely controlled by a handful of manufacturers globally creates the potential for chain constraints to worsen if nothing is done to tackle the issue.”
“Both governments and developers need to work harder on building manufacturing capabilities across the board, to avoid creating these bottlenecks,” McCabe said.
Rebecca Groundwater, EIC’s Head of External Affairs, continued on the policy theme, “It’s clear that the current pace of CCS development is nowhere enough to meet the global climate targets. Many countries don’t have regulatory frameworks and financial mechanisms that are sorely needed to de-risk projects and attract private investment. Governments need to act urgently to introduce policies like carbon pricing, transboundary CO2 agreements, and Contracts for Difference to provide the certainty that the industry needs in order to thrive.”
The report identifies opportunities to address these challenges, including expanding local manufacturing capacity for CCS-specific technologies to reduce supply chain reliance on a small number of global suppliers; introducing or enhancing carbon pricing mechanisms such as Carbon Contracts for Difference (CfDs) to bridge the financial viability gap; establishing standardised cross-border CO2 transport regulations to facilitate international collaboration; and launching large-scale skills and workforce development programmes to address capacity gaps in the sector.
Despite these challenges, the report says that CCS remains a vital technology if global net-zero targets are to be met, particularly in heavy industries such as steel, cement, and power. Hence, according to the report, there needs to be concerted activities from governments, developers, and supply chain stakeholders in resolving the existing barriers to help drive meaningful progress.
