Business models and incentives for CCUS, ICSC/324
Carbon capture, utilisation, and storage (CCUS) is considered essential for meeting climate change mitigation goals, according to the International Energy Agency (IEA) and the Intergovernmental Panel on Climate Change (IPCC). However, deployment of CCUS has been slow worldwide, partly due to a lack of adequate commercial incentives to encourage investment in new projects. The development of policies and incentives to create a compelling business model for CCUS has therefore been at the centre of efforts to progress the technology. This report examines the barriers to CCUS deployment, potential ownership models, and business models, policies, and revenue streams that can incentivise the use of CCUS. Barriers include economic and market risks, policy risks, and regulatory risks. Traditional and new ownership models are explored, including public ownership, public-private partnerships, and the hub and cluster model with shared transport and storage. Then, there is an examination of potential revenue sources and incentives that can improve the economic case for CCUS. These include public financing, the regulated asset base model, feed-in tariffs and contracts for difference, CO2 utilisation, carbon prices, supply-side storage obligations, and command and control regulation. Generally, a combination of incentives is needed to spur investment in CCUS in order to address the multiple market failures in the CCUS industry. Throughout the report, case studies are used to further illuminate the various methods of support. Case studies include the UK hub and cluster projects, Norwegian CCUS projects, the USA’s 45Q tax credit, Australia’s Gorgon CCS project, and others. Finally, there is a discussion of the suitability of each mechanism in the broader context of CCUS deployment.