Carbon Capture’s Biggest Problem Isn’t Capturing Carbon

Carbon capture technology faces more than just technical hurdles. The real challenge lies in creating a commercially viable market for the captured carbon. Many announced projects fail to move beyond the announcement stage due to a lack of contracts and financing. Technology alone cannot guarantee success; it must be backed by strong commercial agreements.

Europe is taking a more ambitious approach compared to other regions. The European Commission's Industrial Carbon Management Strategy aims for at least 50 million tonnes of annual CO2 storage capacity by 2030. This target requires not just individual capture demonstrations, but a fully integrated system with common specifications, transport networks, storage capacity, measurement rules, liability frameworks and long-term contracts.

Northern Lights in Norway represents a new commercial model for CCS. Instead of each emitter building their own pipeline and storage site, CO2 can be liquefied at the source, shipped to a centralized terminal, and purchased as a service for permanent storage. This approach has gained traction with the first phase of the project providing 1.5 million tonnes of capacity in 2025. The model allows geographically dispersed emitters to participate even before a dense pipeline network is in place.

In contrast, the United Kingdom is taking a complementary approach by developing industrial clusters with regulated transport and storage networks. Each emitter's project has a different revenue structure, so tailored business models are needed to cover the cost gap between low-carbon production and market value. The UK government has already reported final contracts for some projects, showing progress in allocating risk through contracts.

While carbon prices can help improve the economics of capture, they alone are not enough to finance the entire chain. Investors need to account for uncertain future carbon savings against very certain construction debt, operating costs, and transport fees. Additional mechanisms like carbon prices for difference, regulated-asset models, minimum-volume commitments, government-backed storage development, and green public procurement can address part of the financing gap.

The key is to find the right mix of solutions for each sector, aiming to create a market rather than just setting up more pilots.