Carbon capture: net zero investment opportunity or another greenwash?

The Danish port town of Esbjerg became the centre of attention this week when a coordinated effort between chemicals giant Ineos and German oil and gas firm Wintershall Dea successfully piped carbon dioxide from a chemical manufacturing plant in the Belgian city of Antwerp right into the depleted Nini West oilfield.

This act of Carbon Capture and Storage (CCS) was claimed as the first time such carbon had been shifted for this purpose across international borders, and follows from the European Commission approving a €1.1bn Danish scheme to support the roll-out of CCS technologies in January.

The market for transporting CCS potential is huge. Of an assessment of EU countries plus Norway and UK, Norway had the largest storage capacity, with enough space to store its emissions for over 7,000 years. 

Denmark also had surplus capacity, and could store its own emissions for over 900 years. From an economic perspective, estimates from Danish consultants Kraka Advisory put the potential size of the European CCS market at £119bn.

Yet while the Esbjerg ‘Project Greensand’ event was marked with much fanfare, with a web address from EU Commission President Ursula von der Leyen and the formal go-ahead from Frederik, Crown Prince of Denmark (fifty one years after his father formally opened the Danish North Sea to oil and gas exploration), scepticism over CCS as a net zero solution remains.

Blocked pipes

Elements holding CCS back include continued areas of resistance in the EU. Germany, Denmark’s most immediate neighbour and the site of Wintershall’s headquarters, still does not have legislation permitting the technology following years of political opposition.

Mario Mehren, chief executive of Wintershall, insisted this was a temporary issue and national laws would be passed: “We [Germans] are slow but not stupid.”

There is also considerations of ‘greenwash’, that must be made, of promises to alleviate greenhouse gas emissions that in fact do nothing for abating climate change. 

On CCS, Eoin Fahy, head of responsible investing at KBI Global Investors, believes this is a real threat: “It is being said that we can continue to produce extremely dirty coal, because there's new technology coming called CCS, that will in some magical way make the emissions from coal disappear.

“CCS is being used in a political way by the coal industry to justify the ongoing extraction of coal which is increasingly hard to justify at the moment, given the climate crisis we're facing.”

Fahy specifically points to the US as an area where CCS may have stalled or acted as a figleaf. In 2021 it was reported that none of the five proposals to retrofit coal plants with CCS technology under the Biden administration had secured funding to construct the equipment needed to begin operating. 

The $1.4bn CCS facility planned for the 847 MW San Juan Generating Station in New Mexico, stood nearly two years behind schedule.

When asked by Net Zero Investor on the potential for CCS to contribute to greenwashing by oil and gas companies, Brian Gilvary, chairman of the board at INEOS and former CFO at BP, said: “This is a gross oversimplification as ever. If you go back and read the Paris Climate Accords, which actually some of us have actually gone through each of the individual pages, it does talk about requirements for CCS.

“So this is not about greenwashing. It's about a requirement that we will need to deal with carbon dioxide. The population is now over eight billion. People cannot arrive on the planet every year, for the next 30 years, and be serviced only by green energy." 

He added: "It is simply impractical, it's not possible. Even with the unprecedented investment that we see going into renewables, carbon capture is absolutely part of the long term solution to keep global warming well below two degrees centigrade.”

While Ineos has given assurances to the safety of the stored carbon and downplayed any environmental risks, it will take a significant time horizon to ensure that the stored carbon does not leak or cause any ill effects to local biodiversity or animal and human health beyond any doubt. 

While this question mark inevitably remains, a US congressional investigation from last year even went so far as to stress that an evaluation of the fate of injected underground carbon and the permanence of carbon storage was beyond its remit.

Investor opportunity

As Gilvary himself states, neither Ineos or Wintershall are charitable organisations, and so the economics of the Project Greensand venture will have to stack up in time. Clearly there is belief that there is money to be made in CCS, and it’s the first movers which could score the greatest returns.

UK private equity firm Victory Hill’s VH Global Sustainable Energy Opportunities fund is invested in the construction of two combined heat and power plants in Nottinghamshire, UK, which bring together gas-fired engines technology with a CCS system. 

The two power projects have a combined capacity of 45MW, and the CCS will involve privately-held Swiss CCS technology manufacturer, ASCO Carbon Dioxide.

Richard Lum, co-chief investment officer at Victory Hill, says: “Right now there are more entry points for generation of renewable energy into the system as opposed to single large generators. It's really a transformation of the energy system itself, in which clearly carbon capture plays a key role.”

There is also renewed momentum from the EU itself to utilise CCS in its carbon emissions reductions plans, and Project Greensand is looking to prove that such activity can be undertaken on an international scale.

Speaking at the Esbjerg launch event, Anne Højer Simonsen, vice director at the Confederation of Danish Industry, said: “We don't have a very good record in the EU for infrastructure. We actually have never really succeeded on a European connected system, and we need to succeed here.”

Guloren Turan of the Global CCS institute also urged for “strong public private partnerships” to ensure the success of CCS projects across the EU. Last year, the Global CCS Institute argued that many of the myths that surround CCS technologies must and can be addressed.

While scepticism remains in EU nations such as Germany and further afield, the address from Von der Leyen at the Danish CCS event also shows enthusiasm from international body, herself going so far as to say: “[Project Greensand] is showing that it can be done, that we can grow our industry through innovation and competition and at the same time, we move carbon emissions from the atmosphere through ingenuity and cooperation.”

CCS has also made its way into the EU Taxonomy on Sustainable Finance, being described as a “key technology” for the decarbonisation of the European Union.

At the Project Greensand launch, Lars Aagard, the Danish minister for climate, put it bluntly: “There is no chance in hell that Europe will meet net climate targets without carbon storage.”