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EU carbon prices of over Eur50/mt spur CCS interest

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EU carbon futures closed Eur49.45/mt May 5

London — EU carbon prices of over Eur50/mt have spurred commercial interest in carbon capture and storage projects, Aker Carbon Capture Norway chief commercial officer Jon Christopher Knudsen said May 6.

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EU carbon allowance futures contracts for December 2021 delivery on the ICE Futures Europe exchange closed at Eur49.45/mt May 5, having risen above Eur50/mt for the first time May 4.

"That makes a difference," to the number of companies interested in commercial carbon capture and storage projects, Knudsen said at an online Rystad energy transition event.

The carbon price, along with company and national targets to decarbonize, were driving interest in CCS projects, he said, making now the right time for the commercial-scale carbon capture, utilization and storage projects they offer.

The recent high carbon price compares with prices of below Eur10/mt from 2012 to 2017, when the system was significantly oversupplied with allowances. Prices have surged since then as EU regulators included measures such as the Market Stability Reserve which has cut the aggregate surplus, along with stronger EU emissions reduction targets for 2030 which will tighten the annual carbon caps under the EU Emissions Trading System.

Northern Europe was leading the way in CCUS from a commercial perspective, Knudsen said.

However, the greatest need for CCUS projects in terms of carbon emissions came from the Middle East, China and India, the Chair of the Oil and Gas Climate Initiative Executive Committee, Bjorn Otto Sverdrup, said at the same event.

Knudsen identified a lack of key incentivizing drivers in these regions as barriers to the development of CCUS.

Sverdrup said oil and gas companies were well-placed to develop the technology and scale needed for CCUS projects globally.

"We have the geology and storage competence," he said, adding that there was scope to reconstruct many of the existing oil and gas value chains to apply to energy transition projects, including chemicals and refining assets.

Sverdrup said he was optimistic on CCUS technology costs, given the cost reduction trends seen in the wind, solar and battery markets.

CCUS will be "extremely significant, and will be needed," in the energy transition he said.