Utilizing captured CO2 offers a promising but emerging opportunity for reducing industrial emissions in Canada. This study evaluates CO2 utilization technologies based on their potential within the Canadian market, providing background information to help gas utilities explore opportunities for implementing carbon capture and utilization (CCU) projects.
Market Assessment
CO2 utilization can be approached through conversion or direct use. Approximately 230 megatonnes (Mt) of CO2 are used globally each year, primarily in direct-use pathways. The bulk of this is for manufacturing urea (130 Mt) and enhanced oil recovery (80 Mt), with smaller amounts used in the food and beverage industry, welding, fire suppression, and other applications. There are currently 181 carbon utilization projects worldwide, including 10 in Canada.
In the short term, the market potential for CO2-based products and services remains relatively small, largely due to high associated costs. Long-term market projections for CO2 utilization vary, reflecting the uncertainty and early development stage of the industry.
Strategic development of CCUS hubs near large emitters is identified as a crucial step to reduce costs and facilitate industry scale-up. Regions like Southwest Ontario, which boast significant industrial clusters and lack a legislative framework for geological sequestration are highlighted as potential opportunities for CCU deployment.
Jurisdictional Scan
The USA, the Netherlands, and Australia are advancing innovative CO2 utilization projects that offer valuable lessons for Canada.
USA
- A collaboration between Celanese, Linde, and Mitsui in Texas is focused on producing methanol from captured CO2 emissions and hydrogen.
- The success of this initiative is supported by the favourable regulatory environment in the US, particularly the 45Q Carbon Capture Tax Credit, which offers $82.5 per tonne of CO2 utilized in low-carbon products.
- This project exemplifies how strategic partnerships and regulatory incentives can drive the development of low-carbon alternatives.
Netherlands
- Twence, a major sustainable energy producer in the Netherlands, is working on a project in Hengelo to capture and utilize 100,000 tonnes of CO2 emissions annually from waste-based energy generation.
- Twence's approach emphasizes starting with small-scale projects to gain experience before scaling up, showcasing a model of cautious but progressive development in CO2 utilization.
Australia
- Mineral Carbonation International (MCi) is pioneering a world-first mineral carbonation demonstration plant in Newcastle, Australia.
- MCi's strategy includes co-locating with existing infrastructure to minimize costs and creating multiple CO2 product streams to diversify revenue.
- This project underscores the importance of co-location in reducing barriers to implementation.
Utilization Pathways
Conversion pathways transform CO2 into useful products such as chemicals, fuels, and building materials. These processes, often referred to as 'carbontech', offer opportunities to generate revenue from CO2-based products and potentially offset investments in CCU.
The report focuses on CO2 utilization pathways to produce fuels, chemicals, and new materials, which represent the most commercially advanced and marketable areas within the carbontech ecosystem. Technologies for CO2 conversion are at various stages of commercialization, with some, such as CO2 use in concrete, ready for immediate deployment.
Fuels
- Methanol: Traditionally produced from fossil fuels, methanol can be synthesized using captured CO2 and green hydrogen, resulting in low-carbon 'e-methanol'.
- Hydrogen in Fuel Production: The generation of hydrogen significantly impacts the overall emissions intensity and cost of these fuels.
Chemicals
- Ammonia to Urea: Ammonia is an intermediate in the production of nitrogen-based fertilizer. The production of ammonia is energy-intensive, emissions-heavy, and largely driven by natural gas-based processes, and is a major target for decarbonization in the chemicals sector. Synthesizing urea from ammonia is already a large direct user of captured process CO2. However, the process still has a positive carbon footprint.
- Plastics and Polymers: CO2 can be utilized as a feedstock for producing polymers, offering a renewable alternative to fossil fuels. This approach is still in the research and demonstration phase but holds promise for future commercialization.
New Materials
- Cement and Aggregates: The construction industry, particularly cement production, is a significant source of CO2 emissions. Incorporating CO2 into the production of building materials—such as through carbonation in concrete—offers a way to sequester carbon and reduce the overall carbon footprint of construction.
- Solid Carbon: Produced through the partial combustion of hydrocarbons, solid carbon, or carbon black, is used in various applications including rubber reinforcement, coatings, and plastics. Emerging markets for advanced carbon products like graphite, carbon fibres and carbon nanotubes may influence future demand for carbon black; however, the commercial viability is limited as production currently exceeds demand.
Rationale for Utilization vs. Sequestration
Multiple factors come into play when carbon emitters decide to invest in CO2 utilization or sequestration. For example:
Volume of Emissions
Utilization may be more suitable for smaller-scale emissions. For large emitters, sequestration is often preferred due to its ability to handle substantial volumes of CO2.
Location and Infrastructure
Regions with established CCS infrastructure may be more likely to opt for sequestration, while areas without existing infrastructure would have to consider the substantial investment needed to develop it.
Geography
Regions with limited or no proximity to geologic storage may be inclined to consider utilization opportunities as industry considers decarbonization options.
Transportation
The logistics of transporting CO2 from emission sources to utilization or sequestration sites plays a significant role in decision-making. In regions where pipeline infrastructure is limited or costly to develop, other transport modes like shipping, rail, or road may be used, impacting the overall feasibility and cost of the project.
Cost Considerations
Factors such as capture, transportation, and conversion costs influence the economic feasibility of CO2 utilization versus sequestration. Utilization can be more expensive but offers potential revenue generation through product creation, which can offset some costs. Sequestration is currently less costly but does not provide direct revenue. Developing CCUS hubs is a way of making CCUS projects more financially viable.
Life Cycle Assessment Discussion
A Life Cycle Assessment (LCA) is a critical tool for evaluating the environmental impacts of processes or products from inception to disposal. In this context, an LCA aims to quantify the environmental intensity of different CO2 utilization pathways. This discussion offers a high-level overview to provide a framework for a detailed quantitative evaluation. In contrast, detailed LCA investigations involve complex calculations on each input, process and sub-process of a wide range of inputs using emission factors from specialized databases on commercially available LCA software.
Utilization pathways transform captured CO2 into products, which requires energy and inputs. The net carbon footprint of these products can differ significantly from that of products produced by conventional methods. In some cases, the overall life cycle carbon footprint of decarbonization pathways may be higher.
An LCA provides the ability to quantify the environmental impacts of different CO2 utilization pathways. Understanding these impacts helps in making informed decisions about CO2 conversion technologies.
Policy Barriers and Requirements
The current policy and regulatory landscape in Canada provides a mixed but generally supportive environment for the development of CO2 utilization technologies. Key federal and provincial initiatives highlight a strong commitment to advancing CCUS with significant investments and tax incentives designed to stimulate the early adoption and commercialization of these technologies. Key policies include:
Investment Tax Credit for CCUS
This credit aims to incentivize early adoption of carbon technologies until 2030, with eligibility extending to projects that store or utilize CO2 in Canada or the US.
Carbon Contracts for Difference
These contracts de-risk investments in low-carbon industries by offsetting costs through market mechanisms, helping clean technologies compete with conventional ones.
Clean Fuel Regulations
These regulations require a 15% reduction in the carbon intensity of gasoline and diesel by 2030 and establish a credit market for low-carbon fuel projects.
Additionally, the federal Carbon Management Strategy signals a growing commitment to the CCUS sector, with expected increases in targeted RD&D, policy support, and scaling efforts. Future market growth in carbon utilization is anticipated, driven by policies like Carbon Contracts for Difference (CCfDs). These mechanisms are intended to de-risk investment and can potentially enable a market for CO2-based products. However, policy barriers and uncertainties do exist in Canada at the federal level, such as:
Scale-Up of Clean Energy
Significant clean energy and transmission capacity will be necessary to support CO2 utilization technologies. Current clean energy infrastructure may not be sufficient to meet these needs.
Verification of CO2-Based Products
The absence of standardized certification for net-zero products and limited global incentives may deter investment, as fossil fuel-based products remain cheaper.
Addressing these barriers and uncertainties is crucial for developing a robust carbon market and successfully growing CO2 utilization technologies in Canada.
Next Steps
Utilizing CO2 is an emerging opportunity, and the Canadian industry plays a pivotal role in advancing the sector. Amid growing pressure to decarbonize, technologies like CCUS can become an effective tool to reduce industrial emissions, particularly in hard-to-abate sectors. On the other hand, industry adoption of innovative tech is critical to the commercialization and scale-up of CO2 utilization.
However, CCU is often perceived as a risk, and industry players can be reluctant to move forward. So, what can industry do to accelerate CO2 utilization?
Knowledge Sharing
Often a misunderstanding of the added value of cleantech, unfamiliarity with the risks of the status quo, and a lack of expertise are contributing factors to the reluctance of adopting a solution. 1 Sharing knowledge by funding the publication of research, collaborating in networks or clusters, and attending conferences can help increase general industry familiarity with carbon technologies, and help avoid the duplication of knowledge-gathering efforts.
Pilot Projects
Conducting pilot projects can help to advance the CO2 utilization market, particularly if multiple companies are involved to lessen and/or share the risk, prove the technology, and build understanding and expertise among staff. 2
Collaboration on All Fronts
It is widely accepted that collaborating on CCUS hub development is a way of reducing costs by enabling shared infrastructure. Increased collaboration between industry players is needed to enable the sector to grow. 2
