It’s an obvious truth, sometimes overlooked: the energy industry will not embrace carbon capture, utilization and storage if there’s no money in it.
That economic reality runs in a subtle thread through the program for CCUS 2025, the annual carbon-capture conference co-sponsored by AAPG, March 3-5 in Houston.
Or maybe, it’s not so subtle. The event’s lead-off panel discussion is “The Economics of CCS: Is $85 Enough to Drive Progress?” That dollar amount refers to the value of the federal 45Q tax credit, the primary economic driver for carbon capture and sequestration in the United States.
Limiting costs and maximizing efficiency are key to CCUS project economics, where the payout is fixed per metric ton (tonne) of CO2 injected and stored.
Key Factors
Graham Bain, principal analyst in energy transition research for energy analytics and data company Enverus, will present “CCUS Commercialization Strategies” at CCUS 2025 as part of the March 4 morning session, “Paths to Commercialization.”
Bain said there are several considerations in creating more economic CCUS projects:
- Volume and purity of CO2: “The higher the volume of emissions, the more you gain from economies of scale, where the higher purity generally means less energy required to separate it from other gases, generally less complex equipment, fewer cleaning and processing steps and not as many complications during compression and transportation,” Bain noted.
- Transportation distance and volume: “Shorter transportation distances result in lower costs, and high volumes result in lower unit costs. Sequestration sites in proximity to capture with high volumes will result in lower transportation costs,” he observed.
- Thick, onshore reservoirs that aren’t too deep, with high porosity and permeability: Reservoir geology plays an essential part in CCUS economics. Geological analysis of reservoir characteristics contributes heavily to evaluating the feasibility of proposed projects.
“Plume migration and larger areas of review (AOR’s) are the number one factor controlling sequestration costs. If you’re injecting one million tonnes of CO2 per year for 25 years in a 10-foot-thick reservoir with 10-percent porosity, your plume will grow quite large,” Bain noted.
“Reservoir characterization, wellbore abandonment or remediation within the AOR, leasing costs and measurement monitoring and verification over the life of the project will make sequestration expensive,” he commented.
Low-depth storage reservoirs with good permeability generally have an economic advantage in CCUS projects, because they require fewer injectors.
“While depth can reduce costs to some extent, higher pressure means a more confined plume, (and) deeper reservoirs will increase well costs. Additionally, low-permeability reservoirs will require more injection wells to sequester the same volume,” he observed.
“Thick reservoirs with high porosity and permeability will result in a smaller AOR and fewer wells required to inject the same volume, ultimately leading to lower costs,” he explained.
Enverus built economic models using thousands of data points from projects and studies to estimate the real costs of CO2 capture, transportation and storage. It also analyzed available revenue from the carbon dioxide removal market.
“The results show that large-scale hubs can reduce transportation and storage costs by up to eight times, depending on pipeline length and reservoir quality. Economies of scale are generally reached between 10 and 15 (million tonnes per year),” Enverus reported.
“CO2 utilization, such as enhanced oil recovery, can generate more revenue compared to permanent sequestration, especially when oil prices are at $50 per barrel. Additionally, bio-capture methods stand out, as $100+ CDR credits and 45Q stacking significantly improve project economics,” it found.
Bain explained that the economic advantage favoring CO2 injection for EOR when oil is $50/barrel or more is strictly a rule of thumb, with “many caveats – how big is the field, how much CO2 is being injected, what is the spacing and pattern type?”
Tax Incentives
U.S. Internal Revenue Code Section 45Q – usually called the 45Q credit – provides incentives for carbon capture and sequestration. It was introduced in 2008, then expanded in 2018. The Inflation Reduction Act of 2022 increased the credit, with certain wage and apprenticeship requirements.
Typically, the 45Q credit is considered to have a value of $85 per tonne of captured and geologically sequestered CO2. The value is $60/tonne for sequestered CO2 with EOR, or other qualified use – for instance, when the carbon is utilized in producing building materials or chemicals.
Direct air capture of CO2 is a special case with higher values, up to $180/tonne for geologic sequestration or $130/tonne for projects that convert the carbon into other useful products.
Importantly, CCUS operators can access direct payout for the full 45Q credit value for five years after carbon-capture equipment has been placed into service for a qualifying project, following the first year of operations.
In some cases, voluntary carbon credits can be added to the 45Q amount to boost revenue.
Bain referred to that practice as “stacking credits.” Companies buy or trade the voluntary credits to offset their carbon footprint.
“Bio-energy carbon capture and storage (BECCS), bio-carbon removal and storage (BiCRS) and direct air capture (DAC) are some avenues to improve economic viability, as large technology companies, banks and airlines are paying, on average, $380 (per tonne), $210 and $1,100 respectively, and can be stacked with the 45Q credit,” he noted.
Global Carbon Economy
Economics of carbon capture vary from country to country. The same CCUS 2025 session includes the presentation “From Policy to Profit – The Quest to FID.” According to the authors, the presentation will “analyze the CCS economic landscape in Canada versus the USA, highlighting potential future capital deployments.”
Another presentation addresses “Business Models for Carbon Capture and Utilization: A Case Study in Finland.” It will “provide insight into creating value with CCUS solutions from (the) Finnish perspective within the European context, and how business models may be developed depending on country characteristics such as natural resource endowments, regulatory framework and climate change objectives.”
Bain listed a number of overall developments that could help make CCUS more economically viable in the future:
- More energy-efficient capture technology
- Hub scale development for economies of scale
- Modularization
- Better incentives (i.e., a higher price on carbon)
- Premiums on low-carbon goods
He also noted the benefits that would come from a guaranteed long-term price on carbon and more supportive government policies, including local or federal CCUS incentives and legislation on pore-space ownership, CO2 pipelines and long-term liability.
Bottom line: proposed CCUS projects currently demand favorable geological settings and the most cost-conscious operations possible to justify investment – plus all the breaks carbon capture can get. The energy industry won’t support those projects unless they make money.
It’s an apparent truth, sometimes overlooked. Companies are in business to generate a profit, even energy companies. Especially energy companies. And investors seem to have this thing where they want their money back, plus a return on investment.
“Margins are tight with the $85/tonne credit,” Bain noted. “Investors are looking for attractive rates of return. You can’t execute on these projects without investment.”