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Carbon Capture and Storage

A Solution to the Problem of Carbon Emissions

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The Boston Consulting Group (BCG) is a global management consulting firm and the worlds leading advisor on
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Carbon Capture and Storage

A Solution to the Problem of Carbon Emissions

uman activity generates about 28

gigatons (Gton) of
carbon dioxide
worldwide per year.
Fossil-fuel-burning power generators,
as well as industrial manufacturing
facilities, are the major emitters of
carbon dioxide, accounting for about
16 Gton annually. As the global
demand for energy grows, fossil fuels
will likely continue to meet most of
that demand. Unless emissions from
these stationary sources are reduced,
it will be impossible to slow the
increase in man-made production of
atmospheric carbon dioxidethe
largest contributor to global warming.
Carbon capture and storage (CCS) is
a technically feasible solution for
mitigating global warming. It does so
by capturing carbon dioxide from
large single-point sources and storing
it underground rather than allowing
it to be released into the atmosphere.
In September 2007, The Boston
Consulting Group analyzed global
sources of carbon dioxide and
determined that if CCS were implemented at the 250 largest stationary
emitters worldwide, carbon dioxide
emissions would be reduced by 4
Gton per year25 percent of the
total from all stationary sources
worldwide. Implementing CCS at the

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1,000 largest stationary sources

would reduce emissions by 8 Gton
per yeara 50 percent reduction.
Over time, the benefits of CCS would
grow. By 2030, its use at the 1,000
largest stationary sources would
reduce emissions by 15 Gton per
year. That would represent a reduction of more than one-third of the
42 Gton of global emissions from
all sources estimated for 2030a
significant contribution to solving
the global warming problem.
The BCG analysis also looked at
how to pay for CCS. We concluded
that by 2030, assuming a stable
global market price of 30 per ton,
carbon trading would oset the
likely cost of capturing, transporting,
and storing the carbon dioxide
emitted by stationary fossil-fuelburning sources in Europe and
North America.1 (See Exhibit 1.)
Today, however, it would cost a
minimum of about 45 per ton to
implement CCS at these facilities.
Our estimates indicate that financing
the technological advancements
that will lower the cost of CCS to
the threshold of 30 per ton will
require approximately 500 billion
in government subsidies and
company investments through 2030,
most of which could be recovered

through the trading of carbon

certificates. Although the required
government share of subsidies is
dicult to predict, we expect it to
be no more than about 100 billion, or one-fih of the total estimated cost.

Current Efforts: Necessary

but Not Sufficient
Most mitigation actions undertaken
so far have focused on improving
energy eciency or deploying
renewable or alternative forms of
energy. Although both energy
eciency and renewable and
nuclear energy must be pursued,
conventional wisdom and the
opinion of experts indicate that
these eorts will not be sucient to
contain increasing global carbon
emissions.
Incorporating energy eciency into
all human activities in all parts of
the world is essential. But the success
1. Participants in carbon trading buy and sell
contractual commitments or certificates representing specified amounts of carbon-related emissions that are permitted; that will be
reduced through new technology, energy efficiency, or the use of renewable energy; or
that can be offset through such technologies
as CCS. In Europe, where prices are volatile,
carbon emissions have traded in the range of
20 to 25 per ton over the past year.

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Exhibit 1. The Carbon Dioxide Market Price Could Cover

CCS Costs by 2030 in Europe and North America
But subsidies will be needed until 2030
per ton of carbon dioxide
50
45
40
35
30

CCS subsidy

25
20
15
10
5
0
2030

2008
Price of carbon dioxide

Cost of CCS

Source: BCG analysis.

of energy eciency initiatives

depends on changes in individual
behavior, which are typically driven
by price changes and public pressure.
Counting on behavioral change is
risky, especially in developing
countries, where local economic
growth is likely to prevail over global
environmental targets.

changing, there is still no political

will to fully capitalize on nuclear
power. As a result, it will not be a
global solution in either the near or
the medium term.

While renewable energy represents

an interesting option for abating
global warming, such power sources
require further development, and
current levels of adoption are not
sucient to ensure an adequate
global energy supply. Nuclear power
has the potential to provide a
structural solution, but it is politically
and socially unacceptable in many
countries. Although this attitude is

According to the European Technology Platform for Zero Emission

Fossil Fuel Power Plants, a consortium formed by the European
Commission, European industry,
NGOs, scientists, and environmentalists committed to zero emissions
from power plants, experts agree
that carbon dioxide capture and
storage technology, together with
improved energy conversion ecien-

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Carbon Capture and

Storage: A Technically
Feasible Solution

cy, is a near-term solution to reducing carbon dioxide emissions from

fossil fuel power generation on a
massive scale.... CCS could reduce
carbon dioxide emissions in the
European Union by over 50 percent
by 2050. Similarly, in a survey of
500 key energy decision makers
conducted by the ACCSEPT project
(Acceptance of CO2 Capture and
Storage, Economics, Policy and
Technology), which is funded by the
Directorate-General for Research of
the European Commission, 75
percent of respondents said they
believed that the widespread use of
CCS would be instrumental in
achieving deep carbon reductions
before 2050.
The evolution of CCS is likely to be
similar to that of natural gas distribution. (See Exhibit 2.) First there
will be standalone projects, with
carbon dioxide capture, transport,
and storage tied to a single-point
source of emissions such as a power
plant. Over time, more and more
emission sources will connect
through trunk lines, and a grid
infrastructure will develop. As with
natural gas pipelines, regulation will
be necessary to ensure open access
to transport; in contrast, storage
capacity is plentiful and likely to
remain unregulated.
A variety of capture and storage
technologies are currently being
used. If, as most experts agree, CCS
can reduce plant emissions with a 90
percent carbon-capture eciency
rate, it may be possible to upgrade
rather than shut down generating
facilities.
Capture technologies dier depending on the carbon dioxide source.
For power plants, there are three
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possible technologies: postcombustion capture, precombustion capture, and Oxy-Fuel, the postcombustion capture of carbon dioxide
using oxygen instead of air in the
boiler.
Power plants have been experimenting with geologic sequestration of
carbon dioxide since the 1970s.
Typical geological storage formations
include deep saline aquifers, exhausted oil and gas wells, coal seams,
and saline domes. The storage
potential of such formations worldwide is believed to be huge, but
confirmation awaits the results of
detailed studies.
StatoilHydro, an integrated oil-andgas company, operates the largest
saline-aquifer storage project in the
worldthe Sleipner injection project
in Norways North Sea, which was
stimulated by the Norwegian
governments carbon-dioxide tax and

by corporate environmental goals.

Operating since 1996, the Sleipner
project has stored 8 million tons of
carbon dioxide in a geological
formation above a gas-producing
reservoir. The project has proved the
viability of CCS, but as of today there
is no commercial incentive to store
carbon dioxide, because the cost is
higher than the alternative of direct
emission into the air. Estimated
storage costs vary significantly
depending on the type of storage site
and whether it is located onshore or
oshore. For example, storing carbon
dioxide in exhausted oil and gas
wells is among the most cost-competitive options.

The Outlook for CCS

Worldwide
Many projects and market developments now under way around the
world point to progress toward a CCS
solution and the likelihood that

carbon markets will become available to oset its cost.

Europe. The European Union has
strengthened the regions commitment to support 10 to 20 CCS
projects. For the EU GeoCapacity
Project, to be launched in 2009,
carbon dioxide point sources and
sedimentary basins in about 20 European countries are currently being
assessed. An additional priority is to
develop innovative methods of
capacity assessment, economic
modeling, and site selection. Project
managers also intend to initiate
scientific collaboration with their
counterparts in China and possibly
with other members of the Carbon
Sequestration Leadership Forum
(CSLF).2
2. The Carbon Sequestration Leadership Forum is a consortium created to foster international cooperation in research and development of carbon dioxide separation,
capture, transport, and storage.

Exhibit 2. The Capture, Transport, and Storage of Carbon Dioxide Will Likely Follow a Path
Similar to That of Natural Gas
Emitters

Capture

Transport

Storage

Standalone projects with

a few single-point sources
will develop

Main trunk lines

will be built

As more emitters connect,

a full-scale infrastructure
will develop

Connections to increasing
numbers of trunk lines
will create grids

Source: BCG analysis.

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North America. Several initiatives

could boost CCS in North America.
In the United States, NRG and
Powerspan are developing a largescale pilot plant in Texas that is
expected to be operational in 2012.3
In California the Climate Action
Registry and the Global Warming
Bill aim to impose caps on carbon
dioxide emissions from 2012
onward. The Regional Greenhouse
Gas Initiative in the 11 eastern
states of Connecticut, Delaware,
Maine, Maryland, Massachusetts,
New Hampshire, New Jersey, New
York, Pennsylvania, Rhode Island,
and Vermont would levy a tax on
carbon dioxide emissions starting
in 2009.
Perhaps most encouraging is the
Chicago Climate Exchange (CCX).
Launched in 2003, CCX is the worlds
first and North Americas only
trading system designed to reduce
emissions of all major greenhouse
gases with oset projects worldwide.
Exchange members make a voluntary but legally binding commitment
to meet annual emission-reduction
targets. Those that reduce emissions
below the targets have surplus
allowances to sell or bank; those that
emit more than the target amounts
comply with the agreement by
purchasing CCX carbon financial
instruments, which are the commodity traded on the exchange. These
contracts comprise exchange
allowances and osets (such as tree
planting and other mitigation eorts)
representing 100 metric tons of
carbon dioxide apiece.
Asia and the Middle East. Although
no common policy has been adopted
in Asia, the will to reduce carbon
emissions exists. Japan aims to
reduce emissions by 200 megatons

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(0.2 Gton) through CCS, and the

Australian government is supporting
a CCS pilot. China is also considering
CCS as a potentially significant way
to reduce carbon dioxide emissions.
One of the first members of the
CSLF, China has integrated CCS into

Over the long term,

the technology
would pay for itself
at a stable carbon
price of 30 per ton.
its science and technology development plan as well as its Eleventh
Five-Year Plan (20062010). In
addition, China has embarked on
several CCS pilots involving enhanced oil recovery, enhanced
coal-bed methane recovery, and an
integrated gasification combinedcycle demonstration power plant.
In the Middle East, the Abu Dhabi
government in 2007 launched a
15 billion clean-energy fund, a
portion of which is committed to
developing CCS.

Challenges to
Implementing CCS
Although CCS oers one of the best
solutions available for mitigating
carbon dioxide emissions by 2030,
there are still challenges to be met,
specifically the uncertainty of carbon
dioxide prices and the need for transport networks to move the captured
carbon.
The uncertainty and volatility of
carbon dioxide prices are a disincentive to developing CCS at a pace fast
enough to respond to the emission
reduction challenges established for
2020 to 2050 by the Directorate-Gen-

eral for Research of the European

Commission. According to BCGs
analysis, as long as carbon prices
are below 30 per ton, CCS for
coal-burning power plants is not
economically feasible in Europe or
the United States. Over the long
term, however, the technology would
pay for itself at a stable carbon price
of 30 per ton. Furthermore, CCS
costs are expected to decrease
significantly by 2030 as experience
with the technology grows. (See
Exhibit 3.)
Although capture and storage
technologies are well understood
and are beginning to be implemented in pilot projects, transport
networks to move captured carbon
from emission sources to confinement sites, such as depleted oil and
gas fields, have yet to be deployed.
Transport and storage costs are quite
low compared with the cost of
capture. Whereas it costs 25 to
capture a ton of carbon dioxide, it
costs 2 to 3 to transport it and 4
to 5 to store it. For CCS to take o
on a large scale, an infrastructure
similar to the pipeline networks used
for natural gas needs to be put in
place. It will require investments that
over time will have to be backed by
regulatory mechanisms that guarantee specific returns.

Making the Right Decision

To launch CCS successfully, oil
companies, utilities, and other
industry participants must develop a
disciplined approach that incorpo3. NRG and Powerspan Announce LargeScale Demonstration of Carbon Capture and
Sequestration (CCS) for Coal-Fueled Power
Plants: Demonstration to Be Among Largest
CCS Projects in the World, company press
release, November 2, 2007.

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rates the lessons learned from the

utilities and other industrial sectors,
such as the natural gas industry in
the United States.
Accurately define the business
model. This is a critical first step for
each player participating in the
capture, transport, and storage
process. Nowadays it is not clear how
some steps in the value chain, such
as carbon dioxide transport and
storage, will be priced. Therefore, the
economics of each phase need to be
modeled to determine feasible
approaches.

Carefully manage the regulatory

process. CCS technologies should be
developed with the unconditional
commitment and support of national
governments and supranational
authorities such as the World
Economic Forum and the World
Business Council for Sustainable
Development. CCS will be stuck in a
quagmire if governments do not
either implement a new regulatory
scheme that supports its development or modify current regulations
so that the responsibility for emissions is assigned to the actual
emitters. Large investments in CCS

activities cannot be allowed to be

subject to volatile carbon-dioxide
market prices.
Increase speed to market. Companies and governments need to speed
up the development of large-scale
storage technologies. If they dont,
there is a substantial risk that
emissions will continue to increase
and global warming will reach a
level at which climate change could
become irreversible. On its current
development path, CCS will not be
commercially available until sometime between 2020 and 2030,

Exhibit 3. CCS Costs Are Expected to Decline by 2030

2008 Cost Curve (estimated)

per ton of carbon dioxide

150
120

60

Central
Europe
(coal)
China (coal)

North Oceania
America (coal)
(coal)

30
0
10

20

30
Carbon dioxide volume (Gton)

2030 Cost Curve (estimated)

per ton of carbon dioxide

150
120

60
China (coal)

India and
Russia
(coal)

Central
Europe
(coal)

North
America
(coal)

Oceania
(coal)

Russia
(gas)

30
0
10
Cost of capture

Cost of transport

20

30
Carbon dioxide volume (Gton)

Cost of storage

Source: BCG analysis.

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delaying the potential for significant

reductions in carbon dioxide emissions.
Leverage the experience curve.
Companies need to review and
evaluate the experience curve to
ensure that CCS is cost competitive
and will become a feasible and
attractive part of the solution to the
carbon emissions problem.

ntil a new, completely

sustainable energy source is
developed, carbon capture

Carbon Capture.indd

and storage is a feasible, cost-eective near-term solution to the

challenge of eliminating a considerable portion of global carbon
emissions. Because this technology
has a long-term payback, private
companies and government authorities must begin aggressively promoting its development today in order to
fully capitalize on its potential to
significantly reduce carbon emissions.

necessary to make CCS projects

profitable, because the price of
carbon dioxide will probably not be
high enough in the near term.
Worldwide subsidies of 100 billion
through 2030 could mitigate global
warming while developing a new and
definitive sustainable technology.

To meet reduction goals worldwide,

CCS technology will need to be
financed initially by a combination of
two levers: subsidies and carbon
dioxide prices. Subsidies will be

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About the Authors

Acknowledgments

For Further Contact

Ramn Baeza is a senior partner

and managing director in the Madrid
oce of The Boston Consulting
Group. You may contact him by
e-mail at [email protected].

The authors would like to thank

their many colleagues at BCG who
contributed to this report, especially
Maurice Berns and Oliver Steen for
their insights and helpful discussions.
We would also like to thank Barry
Adler, Gary Callahan, Angela
DiBattista, Gina Goldstein, Sharon
Slodki, and Lynne Smith for their
contributions to the editing, design,
and production of this report.

BCGs Energy practice sponsored this

report. For inquiries, please contact
one of the authors.

Balu Balagopal is a senior

partner and managing director
in BCGs Houston oce. You
may contact him by e-mail at
[email protected].
Eric Boudier is a partner and
managing director in the firms
Oslo oce. You may contact him
by e-mail at [email protected].
Michael Buet is a project leader in
BCGs Oslo oce. You may contact
him by e-mail at buet.michael@
bcg.com.
Ingrid Velken is a consultant in
the firms Oslo oce. You may
contact her by e-mail at
[email protected].

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