Carbon capture is struggling just as big projects start

An array of 12 cigar-shaped steel holding tanks connected to a sleek concrete dock is all that can be seen of Northern Lights, Europe’s newest carbon capture and storage (CCS) project. Pipes from the tanks, on a Norwegian island, head out into the North Sea and then go 2.6 km under the seabed until they meet a depleted natural gas reservoir. In its first phase, the project has the capacity to store 1.5 million metric tons (t) of waste carbon dioxide.

If all goes as planned, within weeks the site’s owners—the oil companies Equinor, Shell, and TotalEnergies—will begin pumping the first shipments of liquid CO₂ into the void. The hope is that this project will mark the start of a growth phase for CCS after years of delays and project cancellations due to technology glitches, high costs, and lack of funding.

But CCS has a new challenge: a retreat in both industry and government from ambitious goals for CO₂ emissions cuts. This growing resistance to reaching net-zero emissions means that some carbon capture technology pioneers are suffering financially and paring back plans. The market for carbon reduction credits is growing but is still small, and the buyers are mostly a handful of software giants and other large companies. Experts warn that CCS needs to be supported more widely because it is the only technology that can be scaled fast enough to prevent catastrophic climate change.

“First-of-a-kind technology challenges continue to contribute to delays in some projects, and reliance on subsidies and offtake agreements continues to play a critical role in project viability,” says Thilo Trabner, business development manager for ABB, a Zurich-based provider of CCS technology.

How carbon capture works

CCS typically involves capturing CO₂ emissions from fossil fuel power stations and energy-intensive factories such as steel plants, which emit the greenhouse gas at concentrations of 4–20%. Several capture technologies are available, including amine-based solvents that absorb CO₂.

Direct air capture (DAC)—the capture of CO₂ from the air, where it is present at a concentration of parts per million—is another emerging approach to CCS. For example, the oil company Occidental Petroleum is using a potassium hydroxide–based technique in a DAC process being commercialized in the US.

In all cases, technologies are still developing—and costs are still high. “Reducing the cost per ton of CO₂ captured or transported remains a key priority,” Trabner says.

Projects being executed now rely heavily on subsidies. For example, Northern Lights is rolling out the first ships to carry liquid CO₂ to storage sites; the Norwegian government has provided about 80% of the $400 million cost of building this first phase. Even the second phase of the project—creating infrastructure to store at least 900,000 t of CO₂ annually for 15 years—will depend on $150 million from the European Commission; total costs for that phase are forecast at $720 million.

The good news is that Northern Lights has already sold all its CO₂ storage capacity for the first phase. The willing buyers include the Norwegian fertilizer producer Yara and the Danish energy company Ørsted. These companies can add the CO₂ credits they purchased from Northern Lights to the amount of carbon dioxide the European Commission allows them to emit under the European Union’s emissions trading system (ETS).

Other CCS projects rely even more on government money. For example, the UK government agreed in April to put $29 billion over 10 years into two UK megaprojects, HyNet North West and Net Zero Teesside Power (NZT Power). HyNet will capture CO₂ generated during the conversion of natural gas into hydrogen and store it in depleted gas fields. It will also capture CO₂ directly from industrial plants. NZT Power is focused on capturing CO₂ emissions from a gas-fired power generation facility.

The government funds are designed to bridge the gap between the price of carbon in the UK’s emissions trading scheme and the cost of CCS. CO₂ emissions are trading for about $52 per metric ton in the scheme. According to the industry group Offshore Energies UK, storing a metric ton of CO₂ or its equivalent currently costs between $150 and $220.

High costs have led some European oil and gas companies—at the behest of their shareholders—to pull back on their investments in CCS and other low-carbon technologies. Of Northern Lights’ three owners, Equinor reduced its 2023–25 annual guidance for low-carbon spending to $2.3 billion from $3.9 billion, according to analysis by the consulting firm Wood Mackenzie. Shell has cut its plans for low-carbon investment to $3.5 billion annually from $5.6 billion, and TotalEnergies is maintaining its spending of $5.0 billion in 2025.

Projects are progressing

Despite some reductions in spending on low-carbon technologies, the number of CCS projects in Europe, the US, and Asia is on the rise. Globally, 65 such projects are operating and 42 are under construction, according to an analysis by the Global CCS Institute, an industry group.

In Europe, Northern Lights and the two UK projects are among 10 under construction, and a further 102 are planned, according to a database published by the Global CCS Institute.

The US is poised for the fastest growth: six plants are under construction and more than 130 projects are planned—despite the federal government’s decision to withdraw from the Paris Climate Agreement and the Donald J. Trump administration’s general dismissal of the threat of climate change. The sector in the US took another hit on May 30 when the Department of Energy pulled funding for 24 clean energy demonstration projects, many of which were for CCS.

There was speculation that a generous US tax break for CCS, known as the Section 45Q tax credit, would be withdrawn. But a ruling in mid-May by the House Ways and Means Committee ensured that it will be largely retained.

Madelyn Morrison, director of government affairs for the Carbon Capture Coalition, a US industry organization with more than 100 members, says in a press release that it is “heartened” by the decision. “45Q has been a lynchpin for the deployment of carbon management technologies in the US since it was restructured and made more widely available in 2018,” Morrison says.

Asia is also seeing CCS investment. In a May report, analysts at the investment firm Jefferies say Chinese tech companies are beginning to show interest in carbon dioxide removal.

But many more CCS projects will be needed if the technology is to prevent catastrophic global warming, according to recent reports by organizations including the European Union Institute for Security Studies (EUISS) and the Tony Blair Institute for Global Change. As of 2023, planned and operational CCS plants were on course to capture around 361 million t of CO₂, equivalent to less than 0.01% of global emissions in that year, the EUISS says.

Eve Pope, a senior technology analyst at the research firm IDTechEx, says CO₂ removal methods are getting a little closer to what may be needed to help stabilize the global climate. In a report published in May, Pope forecasts that sales of carbon removal credits within both voluntary and compliance carbon markets will grow at 38% annually over the next 10 years and exceed $14 billion in 2035.

A key impetus for CCS is the voluntary prepurchase of CO₂ removal credits by companies with carbon reduction goals, Pope says in an email. “Corporate demand for these high-quality credits continues to outstrip supply, driving the scale-up of emerging carbon dioxide removal technologies.”

With costs coming down, albeit slowly, CCS’s transition from being a subsidized industry to a moneymaking one may already be underway. The Italian oil and gas firm Eni, a key participant in the UK’s HyNet project, considers CCS a lucrative opportunity. At a presentation Feb. 27, Eni CEO Claudio Descalzi predicted that in 5 years the firm’s return on capital for CCS projects will be at double-digit percentage levels.

The change of political direction in the US is not going to spell the end for CCS, according to Descalzi. “Investors are not looking at transition or not transition. They are looking at whether you are making money or losing money,” he said.

Direct air capture is ballooning

Meanwhile, DAC is attracting investment, despite being much more expensive than point source approaches. Capturing CO₂ from the air is highly energy intensive and currently costs in excess of $300 per metric ton.

Yet DAC is the only climate technology that can be scaled in time to cut the 20 Gt of CO₂ that must be removed from the atmosphere every year to limit global warming to 1.5 °C, according to the International Energy Agency (IEA), an independent research organization.

The IEA is not alone in pushing for the adoption of DAC. “We should put carbon capture— directly removing carbon as well as capturing it at source—at the centre of the battle,” Lindy Fursman, director of climate and energy policy at the Blair Institute, writes in a recent report.

Just a year ago, Climeworks opened Mammoth, the world’s first commercial DAC plant, in Iceland with annual capacity to strip 36,000 t of CO₂ from the air. The Swiss company estimated in 2024 that it could capture and store carbon dioxide at a cost of about $600 per metric ton. Its goal is to lower the cost to $300 by 2030.

Later this year, Occidental will become the operator of the world’s biggest DAC plant when it opens Stratos, a Texas facility with capacity to capture 500,000 t per year of CO₂. BlackRock, a partner in the project, has invested $550 million in it.

Novel DAC methods—such as one being developed by the US start-up Capture6 that simultaneously captures CO₂ and generates clean water from brine—hold the promise of offsetting costs with revenue from side products. “There are also now more than ten proven carbon removal technologies, each with different characteristics, costs, and co-benefits; it’s not just about direct air capture,” the Jefferies report states.

The main driver for DAC is a willingness among certain companies—especially owners of data centers such as Alphabet, Meta, and Microsoft—to buy carbon credits to meet corporate goals for CO₂ reduction.

Microsoft is by far the biggest spender. In April, the software giant agreed to a 15-year deal to acquire carbon credits at an overall cost of $800 million. Microsoft now accounts for about 77% of total durable carbon removal tons purchased, according to the Jefferies report.

But for Climeworks, corporate interest in DAC doesn’t seem to be enough. The firm announced in May that it is cutting more than 10% of its workforce, partly because of a move away from net-zero emission goals. “In light of current macroeconomic uncertainty, shifting policy priorities where climate tech is seeing reduced momentum in some areas, and the pending clarity for our next plant in the US, Climeworks is proactively adapting its business plan to stay future-oriented,” the company states in a press release.

In the past few weeks, there have also been doubts about the effectiveness of Climeworks’ technology. According to the Icelandic carbon removal certification firm Puro.earth, Climeworks managed to capture only 105 t of CO₂ in Mammoth’s first 10 months of operation. “Late certification is one of the factors” contributing to the underperformance, Climeworks tells C&EN in an email.

Bernd Elser, global chemicals lead at the consulting firm Accenture, says technical challenges for CCS continue to emerge. “We see a lot of transition technologies where companies are experimenting, piloting, trying to make their investment cases work. And I think this is one of these examples,” Elser says.

The Blair Institute’s Fursman argues that scaling carbon capture technologies is possible but will require a shift in thinking. “At present, carbon capture is not commercially viable despite being technologically feasible—but policy, finance and innovation would change this,” she writes in the report.

The CCS sector hopes that Northern Lights and Stratos, among other megaprojects, can prove that the latest technologies are viable at large scale. Given the waning of enthusiasm in some quarters for ambitious carbon-reduction goals, the failure of such projects to deliver could knock the sector back years.