1、 February 2024 OIES Paper:CM08 Capture Carbon,Capture Value:An Overview of CCS Business Models Bassam Fattouh,Director,OIES Hasan Muslemani,Head of Carbon Management Research,OIES Raeid Jewad,Principal Advisor,GaffneyCline i The contents of this paper are the authors sole responsibility.They do not

2、necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its members.Copyright 2024 Oxford Institute

3、 for Energy Studies(Registered Charity,No.286084)This publication may be reproduced in part for educational or non-profit purposes without special permission from the copyright holder,provided acknowledgement of the source is made.No use of this publication may be made for resale or for any other co

4、mmercial purpose whatsoever without prior permission in writing from the Oxford Institute for Energy Studies.ISBN 978-1-78467-228-7 ii The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its M

5、embers.Contents Contents.ii Figures.ii Tables.ii Acknowledgement.ii Introduction.1 1.Key risks involved with CCS.1 2.Frameworks to support investment in CCS.4 2.1 Supportive legal and regulatory framework.4 2.2 Mechanisms that allow stacking of revenues.5 2.3 Diverse approaches:Experiences from diff

6、erent countries.9 3.CCS Business Models.16 3.1 Overview of business model theory.16 3.2 CCS business models.16 Conclusions.23 Appendix:Case studies.24 Figures Figure 1:Levelized cost of CO2 avoided between CCS and unabated route across sectors.2 Figure 2:Varying Degree of Government Involvement in C

7、CS.10 Figure 3:CCS Value Chain,Ownership and Financing.17 Figure 4:Full Chain Model Concept.18 Figure 5:Partial Chain Model Single Hub Concept.20 Figure 6:Partial Chain Model Offshore CO2 Transport Concept.21 Figure 7:Partial Chain Model Free Market.22 Figure A1:CRC Business Model.26 Tables Table 1:

8、Summary of hurdles in the CCS Supply Chain.4 Table 2:Government funding support mechanisms for CCS.6 Table 3:CCS Support Mechanisms in UK.12 Table 4:Full Chain Model Projects.18 Table 5:Examples of Partial Chain-Free Market projects.22 Table A1:Denbury Business Model.25 Table A2:CRC Business Model.2

9、6 Acknowledgement The authors acknowledge the review and valuable inputs of Toby Lockwood at the Clean Air Task Force(CATF)into this work.1 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of

10、its Members.Introduction Because of the scale with which it could be applied,carbon capture,and storage(CCS)is identified as a critical technology to reduce CO2 emissions to achieve global climate goals1.Particularly,CCS can reduce emissions from existing assets(such as gas processing plants,power p

11、lants,chemical plants)decreasing the risk of stranded assets in a carbon-constrained world;reduce emissions from hard-to-abate sectors(such as cement and steel)where decarbonization technologies are limited and have not been scaled up;enable the production of low-carbon hydrogen which represents a k

12、ey pillar of decarbonization;and enable the removal of CO2 from the atmosphere which is needed to reach global climate objectives via technologies such as Direct Air Carbon Capture and Storage(DACCS)and Bioenergy with carbon capture and storage(BECCS)2.The potential of CCS as mitigation technology c

13、ould be substantial.In the IEAs NetZero Emissions by 2050 Scenario(NZE),installed capacity of captured CO2 increases from the current level of around 45 Mt CO2 per year to 1.2 GtCO2 per year in 20303,and up to 7.6 Gt CO2 in 20504.According to the Intergovernmental Panel on Climate Change(IPCC),the r

14、ole of CO2 capture and storage is even more significant than IEAs NZE with the IPCCs 1.5C scenarios having a median of around 15 Gt CO2 per year captured in 20505.Similarly,the Energy Transition Commission(ETC)estimates that by 2050,between 6.9 Gt(base case)and 10.1 Gt(high deployment case)of captur

15、ed CO2 per year is required to meet net zero targets6.According to the IEA7,total annual capacity capture capacity in 2023 amounted to 45 Mt CO2 and although deployment momentum has improved with around 200 new capture plants announced to be in operation by 2030 even if all of these are implemented,

16、the total annual capacity will only increase to roughly 400 Mt CO2 by 2030,well below the levels required to achieve 2050 net zero objectives8.This raises some fundamental questions about the characteristics of CCS projects which make them challenging for financing and scaling,even though the techno

17、logy has been applied for decades particularly in the oil and gas industry.This paper seeks to identify the main commercial and non-commercial risks associated with CCS and analyze incentive mechanisms,regulatory and legal frameworks,types of industry and ownership structures,and public-private part

18、nerships that are likely to emerge in different parts of the world to mitigate these risks and enable viable business models to scale up the technology.Given that countries have different natural resource endowments,regulatory frameworks,and economic structures and as CCS can be applied to different

19、 industries(e.g.cement,steel,oil and gas,power,and chemicals),emergent business models can differ substantially across countries.1.Key risks involved with CCS The CCS value chain consists of three main activities:CO2 capture,transport,and storage.Capturing CO2 often constitutes the biggest cost comp

20、onent for CCS and is where significant cost reductions,efficiency gains and further technological innovations could be achieved.A key factor in the cost of CO2 capture is the concentration and overall volumes of CO2 in the source gas,with costs typically decreasing with increased concentration and v

21、olumes of CO2 in the flue gas flow.In some applications such as ethanol production or 1 See for instance,Bui,M.,Adjiman,C.,Anthony,E.et al.(26 more authors)(2018)Carbon capture and storage(CCS):The way forward.Energy and Environmental Science,11(5).pp.1062-1176.ISSN 1754-5692;IPCC,Climate Change 201

22、4:Mitigation of Climate Change.Working Group III Contribution to the Fifth Assessment Report of the Intergovernmental Panel on Climate Change,Cambridge University Press.2 IEA(2020),Energy Technology Perspectives 2020 Special Report on Carbon Capture Utilization and Storage:CCUS in clean energy trans

23、ition.3 IEA(2023).Credible paths to 1.5C.Four pillars for action in the 2020s.4 IEA(2021),Net Zero by 2050:A Roadmap for the Global Energy Sector.5(IPCC)(2018),Special Report on Global Warming of 1.5C(SR15),https:/www.ipcc.ch/sr15/6 ETC(2022),Carbon Capture,Utilisation&Storage in the Energy Transiti

24、on:Vital but Limited,July 2022,https:/www.energy-transitions.org/wp-content/uploads/2022/07/ETC-CCUS_Executive-Summary_final.pdf 7 https:/www.iea.org/reports/carbon-capture-utilisation-and-storage-2 8 IEA(2023).CCUS policies and business models.2 The contents of this paper are the authors sole respo

25、nsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.natural gas processing,CO2 concentration is quite high(95%).In contrast,in applications such as power generation,CO2 is quite diluted and therefore it is more challenging and costly

26、 to capture it(Figure 1).Currently,the most expensive application is capturing CO2 directly from air(Direct Air Capture)9.Figure 1:Levelized cost of CO2 avoided between CCS and unabated route across sectors Source:Figure extracted from International Energy Agency(2023),CCUS Policies and Business Mod

27、els:Building a Commercial Market.Notes:Notes:BF=blast furnace;CCGT=combined cycle gas turbine;FCC=fluid catalytic cracker;NGP=natural gas processing;PC=pulverised combustion.CO2 transportation technologies are mature especially via pipelines,as many pipelines are already in operation linked with enh

28、anced oil recovery(EOR)10.Large-scale transportation of CO2 via ships is less established,but the gas industry has plenty of experience in transporting gaseous fuels and this is unlikely to present a technical barrier especially as the technology required is already in use for the transport of other

29、 cryogenic liquids such as LPG and LNG11.The final stage in the CCS supply chain is injecting and storing CO2 underground.CO2 can be stored in saline formations and in depleted oil and gas fields.According to the Global CCS Institute,storage in saline aquifers has Technology Readiness Level(TRL)of 9

30、 and existing projects have shown that CO2 could be injected,monitored,and stored permanently12.Storage in depleted oil and gas fields has a lower TRL(5-8)as projects are yet to operate at a commercial scale13.While storage of CO2 scores high in TRL,the delay and underperformance of some key project

31、s such as the Gorgon CCS project have caused some observers to doubt whether the deployment of CO2 storage at a large scale and across the globe could be achieved14.During this stage,monitoring,reporting and verification(MRV)is key15.The injection process needs to be documented and volumes of inject

32、ed CO2 need to be verified.It is also important to demonstrate with appropriate monitoring techniques that CO2 remains contained in the intended storage formation.This has also safety and environmental dimensions.Systems must be put in place to monitor leakage and provide 9 Costs of DACCS can vary w

33、idely from 400-1000$/tCO2.Source:Webb et al.(2023).Scaling DAC:A moonshot or the skys the limit?10 International Energy Agency(2023),CCUS Policies and Business Models:Building a Commercial Market.11 Small scale CO2 shipping already exists under medium pressure conditions.12 GCCSI(2021).Technology re

34、adiness and costs of CCS.13 Bui,M.,Adjiman,C.S.,Bardow,A.,Anthony,E.J.,Boston,A.,Brown,S.,.&Mac Dowell,N.(2018).Carbon capture and storage(CCS):the way forward.Energy&Environmental Science,11(5),1062-1176.14 IEEFA(2022).If Chevron,Exxon and Shell cant get Gorgons carbon capture and storage to work,w

35、ho can?15 International Energy Agency(2023),CCUS Policies and Business Models:Building a Commercial Market.3 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.early warnings of a

36、ny seepage or leakage that might require mitigating action and to assess environmental effects.Several characteristics and risks make financing CCS projects challenging for governments and the private sector alike.These include:Risk of insufficient revenues:For many projects,the deployment of CCS wi

37、ll exclusively be driven by climate change mitigation goals and lowering emissions.In such projects where CO2 is captured and stored underground and/or in building materials such as cement and concrete,there are no,or very limited revenue streams associated with CCS that can compensate for the high

38、upfront capital costs and high operation costs(in contrast,for instance,to the case of renewable electricity generation).These operational costs include:The cost of capturing and conditioning CO2 The cost of compressing/liquefying CO2 for transport The cost of transporting CO2 via pipelines and ship

39、s(or trucks in case of short distances and small volumes)The cost of injecting CO2 into storage sites,and The cost of monitoring and verifying the amount of CO2 stored.The cost of each of these activities varies widely depending on project specific factors(location,plant size,type of activity,the te

40、chnology in use,to mention a few)and the literature reports a very wide range of estimates of these costs.Risk of low and variable CO2 price/tariffs:In countries that have established carbon pricing,either through emission trading systems(ETS)or carbon taxes,these instruments can provide players wit

41、h economic incentives,either through avoiding costs or as revenue(e.g.from sale of allowances in an ETS)that would help them recoup part of the capital investment and operating costs.However,such signals may not be stable,and the revenues not large enough to provide incentive for investment in CCS.R

42、isk of interdependency:One way to reduce risks is to disaggregate the capture,transport,and storage components of the CCS technology chain.On the one hand,this allows different market actors with different strength and risk appetites to collaborate on CCS and to allocate risks more broadly across th

43、e chain.On the other hand,this creates interdependency/cross-chain risks as each part of the chain depends on the performance of other components.For instance,if an industrial player invests in CO2 capture,it is important that the transport and storage infrastructure is in place.It is also important

44、 that those players controlling the transport and storage infrastructure do not have unilateral market power to charge excessive fees.At the same time,investors in the transport and storage infrastructure must ensure that there is sufficient and regular demand for their services to recoup capital an

45、d operational costs.Risk of liability:Although the probability of CO2 leakage from well-selected and managed storage is very low,this risk cannot be eliminated.If this risk is not transferred to the government or through insurance,the project owner would be liable for the risk of leakage for an inde

46、finite period,with the contingent liability most likely to increase in value over time.Other risks:There are other key risks that face investors in CCS including plant integration risk,technology risks(especially when it comes to the capture technology)and financing risk.There is also a public perce

47、ption and stakeholder acceptance risk as many remain skeptical about the role of CCS as a climate mitigation technology,citing factors such as high cost,uncertainty surrounding viability,and fears around the safety and permanence of storage.Skeptics argue that CCS can also perpetuate the use of foss

48、il fuels and discourage change in societal behavior and reinforce existing dependencies16.It is also argued that CCS could divert funds away from clean technologies17.Table 1 summarizes the hurdles faced by players through various parts of the CCS value chain.16 Parmiter,P.&Bell,R.(2020).Public perc

49、eption of CCS:A review of public engagement for CCS projects.17 IEA(2020).A new era for CCUS.4 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Table 1:Summary of hurdles in the

50、 CCS Supply Chain Capture Transport Storage CAPEX CAPEX CAPEX OPEX OPEX OPEX Low and variable CO2 price or compensation for CO2 avoidance Price risk(tariffs for CO2 transport)Price risk(tariffs for storage)Volume risk(volume of CO2 transported)Volume risk(volume of CO2 stored)Decommissioning risk Sa

51、fety and storage liabilities(CO2 leakage)Public perception risks 2.Frameworks to support investment in CCS In designing frameworks to support investment and scaling up of CCS,the following key elements are essential to mitigate some of the above risks and generate a stream of revenues to make projec

52、ts attractive for private sector investment:Stable and supportive legal and regulatory frameworks Mechanisms that allow stacking of revenues for operators in the supply chain,and Varying degrees of government participation in the CCS supply chain to enable risk-sharing and risk mitigation.2.1 Suppor

53、tive legal and regulatory framework At the macro level,the government can create an enabling regulatory and legal framework for CCS.Key elements include:Setting national/regional CCS targets to signal the governments commitment for CCS as a mitigation technology.For instance,in the EU,the NZIA estab

54、lishes an EU-wide objective to achieve an annual CO2 storage capacity/injection target of 50 Mt CO2 by 2030,280 Mt CO2 by 2040,and up to 450 Mt CO2 by 2050.18 In the UK,the government has a target to deliver four carbon capture usage and storage(CCUS)clusters capturing 20 to 30 Mt CO2 per year by 20

55、30.These targets are intended to reassure entities that wish to invest in CO2 capture that storage will be available.Establishing regulatory frameworks that incentivize investment in low-carbon technologies.Carbon pricing is the main market-based instrument in the policy toolbox to reduce CO2 emissi

56、ons.Carbon pricing could be implemented either through a tax on carbon emissions or via an emission trading scheme(ETS),and both options are presently in use.Governments can also introduce specific incentive schemes such as the 45Q tax credits for CCS projects under the Inflation Reduction Act(IRA)i

57、n the US and the investment tax credit(ITC)in Canada.Establishing a regulatory and licensing framework to address issues of operation,permitting,licensing of storage and CO2 transport and decommissioning.For instance,the UK introduced the Energy Act 2023 that establishes an economic regulation model

58、 for CO2 transport and storage,including an economic licensing framework under which CO2 transportation by pipeline for geological storage operations will require a licence.The licence allows the economic regulator to address market failures associated with the natural monopoly characteristics of th

59、is network infrastructure.In the EU,the Directive on the geological storage of CO2(2009/31/EC),or colloquially the CCS Directive,aims to establish a legal framework for environmentally safe geological storage 18 European Commission(2024).Industrial carbon management carbon capture,utilisation and st

60、orage deployment.5 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.of CO2.The CCS Directive is comprehensive and covers areas such as selection of storage sites and exploration

61、 permits,storage permits,obligations for operating and closing storage sites,and third-party access(Member States must ensure that potential users have access to CCS infrastructure).The CCS Directive must be implemented in the national legislation with national authorities having some choice on how

62、to implement the Directive.Similarly,in the US,the Underground Injection Control(UIC)program regulates the injection and long-term storage of CO2 into deep rock formations such as Class VI wells.In Australia,the government introduced the Offshore Petroleum and Greenhouse Gas Storage Act 2006.The Act

63、 covers many aspects including the granting of the right to explore,appraise,inject and store a GHG substance,sets out a basic framework of rights,duties,obligations,entitlements and responsibilities of governments and industry,and ensures safe,secure and permanent storage of GHG substance19.Establi

64、shing and/or adopting CCS methodologies.Methodologies are needed to ensure the quality and accuracy of monitoring data,the credibility of the crediting baseline,and whether impacts are accurately quantified using conservative and transparent methodologies and which account for potential leakage and

65、reversals and avoid double counting.For instance,the ETS Directive in the EU has developed its rules for the monitoring and reporting of GHG emissions through Regulation 2018/2066,also known as the Monitoring and Reporting Regulation(MRR).MRR establishes compliance procedures and includes reporting

66、and monitoring requirements.20 Establishing a body to coordinate activities across the supply chain if the value chain is not integrated.For instance,in Norway,the government established a state entity Gassnova to act as a project integrator for the CCS Longship project.Developing a legal framework

67、which allows for CO2 to be transported across borders if the country plans to establish itself as a regional or a global storage hub.2.2 Mechanisms that allow stacking of revenues While utilization of CO2 could provide a limited stream of revenues in some contexts21,government support and incentives

68、 are central to make CCS projects viable.Also,since the CCS value chain may include various players with different incentive structure and skills and different appetite for risk,the question of who should be incentivized in the value chain comes into focus.For instance,an industrial plant(an emitter

69、)can be incentivized with the revenues passed through the supply chain.Also,since the costs and the technology/commercial readiness levels varies across the supply chain,the amount and type of support will differ across the various components.The bulk of revenue streams for CCS comes either through

70、public funding support mechanisms which is the main funding process for the time being or through market-based mechanisms,which are likely to grow further in the future as CCS technology and business models mature.Government funding support mechanisms Government funding support plays a crucial role

71、in overcoming barriers and mitigating risks which are particularly inherent to First-of-A-Kind(FOAK)CCS infrastructure,beyond simply reducing the investment contribution required from the private sector.Support can be provided in several forms and at various stages throughout the development,executi

72、on and operation of the CCS project.This support is required to overcome the barriers and mitigate the risks of technology,value chain coordination,low and volatile carbon pricing,environmental risk from CO2 leakage,counter-party risk and the cost of capital for financing the projects.In terms of po

73、licies,incentives and levers which are currently being employed by governments globally,they can be categorized into three main buckets:19 Australian Government,National Offshore Petroleum Titles Administrator,Offshore Petroleum and Greenhouse Gas Storage Titles:An introduction to the Greenhouse gas

74、(GHG)storage legislative framework,May 2023,https:/www.nopta.gov.au/_documents/guidelines/Introduction-to-the-offshore-petroleum-and-GHG-titles-framework.pdf 20 MRR deals partially with CCU where the CO2 converted into products must be reported.21 This paper does not focus on the utilization options

75、.The IEA notes that the market for CO2 use is expected to be relatively small in the short term,but also acknowledges that early opportunities can be developed.See:IEA(2019),Putting CO2 into Use:Creating Value from Emissions.6 The contents of this paper are the authors sole responsibility.They do no

76、t necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Subsidies for specific CCS projects,through elements such as tax incentives/breaks,support agreements,competitions and direct CO2 storage procurement,Emitter-targeted policies which drive demand for CO

77、2 capture and storage such as carbon pricing and ETSs(as noted earlier,representing an incentive for operators to reduce their emissions to avoid paying the carbon tax and/or allow operators to trade emission reduction certificates and generate revenues in the market),and/or imparting producer respo

78、nsibility to sequester CO2,and Public sector low-carbon procurement requirements,private sector procurement commitments,and standard-setting and regulations for low-carbon products.Table 2 summarizes four main government funding mechanism that are currently being utilized by governments supporting t

79、he development and deployment of CCS globally.Each mechanism possesses specific advantages but also constraints.Table 2:Government funding support mechanisms for CCS Government funding support mechanism Description Advantages Disadvantages Direct capital grant subsidy Direct subsidy of the CCS proje

80、ct CAPEX to the investor/project sponsor(not required to be paid back)Reduces private sectors CAPEX investment requirements.Reduces project cost of capital(WACC)through risk sharing.Improves bankability through the sharing of the project execution risk between the government and the private sector.D

81、evelopment risk and expenditure retained by project sponsor and therefore CCS development contingent on securing subsidy which ends up potentially constraining the CCS value chain pipeline.Public finances are exposed to downside risk with no potential for upside benefit from the project.Limited scal

82、ability in that finite amount of capital grant subsidy is available which ultimately ends up limiting the number of projects and constrains scalability.Fewer projects can be deployed and therefore limited economies of scale and cost optimization potential.Lengthy process coupled with uncertainty sin

83、ce public funding processes tend to be bureaucratic and subject to changes in government policy,and therefore has the potential to increase the lead-time and uncertainty to Final Investment Decision(FID).Technology risk;subsidy payments are not driven by the performance of CCS to capture and sequest

84、er CO2 but aligned with project execution milestone deliverables.7 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Revenue support(OPEX/tariff subsidy)Government payment made e

85、ither to the:Capturing entity:Subsidy paid to the emitter capturing the CO2 at a predetermined rate for a predetermined period based upon the CO2 captured and sequestered,to contribute to operational costs and/or to mitigate uncertainty/volatility in the compliance carbon market price.Transport&stor

86、age operator:Payment made to T&S operator/company to mitigate the coordination risk of delay,shortfall or non-payment of transport and storage fee from the emitters.Performance dependent:if there is no capture and sequestration,there will be no payment.Sharing of technology and operational risk betw

87、een the government and the private sector.Reduction of cost of capital through risk sharing.Potential for enhanced scalability(relative to the direct capital grant subsidy).This is because the public funding support is spread over several years.Development and execution risk is retained by the opera

88、tor/project sponsor.Determining the optimum level of subsidy in that direct payment or tax credit may limit the drive for cost optimization and may even increase costs in the medium term.Essential to set an optimal level of subsidy to prevent such an eventuality.Note that while a direct payment opti

89、on(such as the US 45Q credit)carriers this risk,it has the advantage of being quick to activate(i.e.deployment-focused).This risk can be mitigated by employing a CCfD-type(Carbon Contracts for Difference)mechanism which incentivizes competitive bids;but may nonetheless involve a lengthy process.Pref

90、erential government loan Capital loan from Government for a portion of the project capital requirements on terms which are more favorable than the private sector in terms of the interest rate,period of debt repayment and/or start of debt repayment.Transparency:enhances public transparency on the pro

91、ject economics,accounts and risks.Improving bankability through sharing of the project execution risk between government/state and private sector Reducing cost of capital:reduces project WACC,through risk sharing.Scalability:as loan is repaid and therefore funds available to invest in other projects

92、.Development,Technology,Execution&Operation Risk;Government exposed to project technical risks over the full lifecycle of the project at the earliest stages of the sector development.Negotiation of step-in rights;between public and private entities should the project fail at any time through the pro

93、ject lifecycle.Development risk and expenditure;retained by investor/project sponsor and may therefore limit/delay speculative CCS development until loan is secured.Lengthy lead-time to FID;securing of investment necessarily subject to rigorous governance and administration processes which may prolo

94、ngs the lead-time and uncertainty to achieve FID.Government equity investment Government or Sovereign Investment Fund provides a capital contribution in return for equity in the CCS in the project company.Project control:shareholder has increased control and transparency of the project throughout it

95、s lifecycle from development,Development,Technology,Execution&Operation Risk:Government exposed to project technical risks over the full lifecycle of the project at the 8 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institut

96、e for Energy Studies or any of its Members.execution,operation and through to post closure.Transparency:enhances public transparency on the project economics,accounts and risks.Sharing of upside between public and private investors/shareholders of potential project profits as well as sharing project

97、 downside from potential losses.Reducing project WACC through risk sharing.Enhanced scalability as profits can be reinvested and funds can be recycled if shareholding is divested at a later stage of operation.earliest stages of the sector development.Negotiation of step-in rights between public and

98、private entities should the project fail at any time through the project lifecycle.Lengthy lead-time to FID;securing of investment necessarily subject to rigorous governance and administration processes which may prolongs the lead-time and uncertainty to achieve FID.Potential conflict of interest as

99、 the Government may be both the regulator and CCS project investor at the same time.Market-led revenue streams Revenues through utilization of CO2:Revenue streams for captured CO2 could be generated in some industrial applications where CO2 could be utilized(examples include cement,food and beverage

100、).But these opportunities remain very limited in scope and the vast proportion of the captured CO2 will have no intrinsic economic value22.CO2 could also generate value through its use in enhanced oil recovery(EOR).Currently,this remains the only well-established application of utilizing CO2(CO2-EOR

101、)that has been scaled up and has achieved commerciality in some places23.However,the use of CO2-EOR has attracted wide criticism from environmental groups as it is seen as one of the ways for the oil industry to prolong the use of hydrocarbons.Also,since CO2-EOR has the effect of increasing oil prod

102、uction and hence oil consumption,there is a public perception that this may ultimately cause an increase in emissions24.However,some studies25,26 argue that it is possible for net reduction in emissions to be realized if the CO2-EOR operation is appropriately operated and optimized for that purpose.

103、The notion here is that the carbon balance of the project would be negative(net CO2 stored)in the early stages of injection27,as more CO2 is trapped permanently underground and can offset the increase in emissions due to the combustion of the incremental oil due to CO2-EOR28.Low-carbon products:CO2

104、emitters have the possibility to sell low-carbon products such as low-carbon steels and cement.This can also include indirect use of CO2 in products,such as synthetic fuels,chemicals or building aggregates,provided low-emissions energy is utilized for CO2 conversion.Some of these applications will b

105、e or are already in regulated markets;examples include the Low Carbon Fuel Standard(LCFS)and the proposed sustainable aviation fuel(SAF)mandate in the UK29 which place an obligation to produce a certain amount of an accredited low-carbon product.However,a majority of such standards for decarbonized

106、products,such as green steel,still rely on voluntary demand where willingness to pay a 22 IEA(2019),Putting CO2 into Use:Creating Value from Emissions.23 Nunez-Lopez and Moskal(2019).Potential of CO2-EOR for near-term decarbonization.Frontier in Climate.24 Roberts(2019).Could squeezing more oil out

107、of the ground help fight climate change?The pros and cons of enhanced oil recovery.25 ibid 26 Pierru and Motairi(2023).Will government support for CCS-EOR lead to reduced emissions?Published in Oxford Energy Forum edition 138,OIES,Oxford.27 Mota-Nieto(2023).Carbon emissions accounting in the context

108、 of CCS coupled with EOR.OIES paper CM04,Oxford.28 ibid 29 UK Department for Transport(2023).Pathway to net zero aviation:Developing the UK sustainable aviation fuel mandate.9 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Ins

109、titute for Energy Studies or any of its Members.premium for the lower-carbon alternative may exist,while efforts are underway to protect these premium products against emission-intensive and cheaper imported goods(i.e.carbon border adjustments).Voluntary Carbon Markets(VCM):CCS project developers ca

110、n sell carbon credits in the VCM based on certified emissions that have been reduced or removed through CCS.However,the size of the VCM remains quite small and despite the potential for the VCM to grow,many obstacles remain.Particularly,there have been concerns about the quality of the carbon credit

111、s which ultimately raised fears of corporate greenwashing.30 Also,financing through the VCM has been mainly concentrated in a few types of projects,namely,renewable energy and Nature Base Solutions(NBS)avoidance projects.31 Tradable CCS or carbon storage certificates:The government can impose an obl

112、igation to decarbonize and award CCS certificates per ton of CO2 abated.Then the obligated entities such as cement and steel companies or fuel providers can either make investments to generate CCS trade certificates to meet the obligation or trade these CCS certificates with obligated entities whose

113、 cost of abatement is higher than the price of CCS certificates.This instrument allows for the cost to be shared with purchasers of the product.For instance,car manufacturers could be obligated to use a certain percentage of green steel and producers deploying CCS to produce green steel can sell the

114、 certificates to these car manufacturers.32 The Canadian government issued the Clean Fuel Standard(CFS)regulations in 2022 targeting emission reductions from fuels.Primary suppliers will be required to meet their reduction requirements through the use of compliance credits.One potential pathway for

115、compliance credits under the CFS is to undertake CO2 emission reduction projects including CCS projects33.A drawback is that the price of these certificates is determined by the market and hence is highly uncertain and thus government support would still be needed to ensure a floor on the prices of

116、these certificates.Similarly,a mechanism whereby carbon storage units could be awarded to and traded by storage operators,coupled with an obligation on emitters to sequester certain amount of CO2(i.e.,carbon takeback obligation CTBO).34 2.3 Diverse approaches:Experiences from different countries Gov

117、ernments have adopted different approaches as they attempt to establish a sustainable CCS market through contributing capital and sharing costs and risks,recognizing that while one approach may be feasible for a particular country,it may be completely unsuitable for a neighboring country and therefo

118、re there is no one-size-fits-all.The approaches that are being adopted by governments across the world can be roughly categorized into three buckets,with a spectrum ranging in between the categories,as shown in Figure 2.30 There is a real drive for robust verification and validation of carbon remova

119、l and reduction to ensure credible credit claims through the introduction of the Core Carbon Principles(CCP).The CCP are a set of interlinked principles to define a threshold standard to ensure integrity in the voluntary carbon market,focusing on emissions impact,governance and sustainable developme

120、nt.31 With the inclusion of REDD+and renewable energy credits,reduction and avoidance credits account for 90%of all credits on the VCM in 2023,according to Carbon Direct(2023).A look at the 2023 voluntary carbon market.32 Muslemani,H.,Liang,X.,Kaesehage,K.,&Wilson,J.(2020).Business models for carbon

121、 capture,utilization and storage technologies in the steel sector:a qualitative multi-method study.Processes,8(5),576.33 Duncanson,S.et al(2022),Canadas New Clean Fuel Standard Obligations for Liquid Fuel Suppliers and Low Carbon Energy Producers,OSLER,https:/ 34 Jenkins,S.,Mitchell-Larson,E.,Ives,M

122、.C.,Haszeldine,S.,&Allen,M.(2021).Upstream decarbonization through a carbon takeback obligation:An affordable backstop climate policy.Joule,5(11),2777-2796.10 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy

123、 Studies or any of its Members.Figure 2:Varying degree of government involvement in CCS At one end of the spectrum is minimal government control whereby governments utilize incentives and/or penalties to influence and nudge the private sector to invest in CCS projects without taking ownership of any

124、 segment in the supply chain.For example,incentives can involve government subsidies like grants,loans,or tax credits,while penalties encompass taxes or fees for non-compliance.The United States,Canada and the European Union follow this approach,relying on incentives and penalties,such as carbon pri

125、cing,to drive CCS investment.In a hybrid setup,governments do not solely rely on the market for incentivizing private sector decisions.For capital-intensive activities with uncertain revenue streams,governments may share costs and risks with the private sector.This approach suits large infrastructur

126、e projects but requires sustained government support.In these countries,various parts of the supply chain are heavy regulated,and the government plays a key role in coordinating activities across the supply chain.The United Kingdom,Norway and Denmark,in varying degrees,are examples of the hybrid app

127、roach.At the far right of the spectrum is the full government control where countries leverage their state-owned and/or national oil companies to invest in and potentially operate CCS projects.China,Saudi Arabia,Qatar,and the United Arab Emirates exemplify this approach,where most CCS projects invol

128、ve state owned companies and with some private sector involvement depending on the country.The full government control approach model can overcome some of the obstacles such as cross-chain risks and other risks such as construction or underutilization risk.However,this approach raises the issue of h

129、ow to fund these projects which could be through general revenues(oil/tax revenues)or through state-owned enterprises(SOEs)building and operating the transport and storage infrastructure and charging users a regulated tariff.It is important to note that governments and countries adapt their approach

130、es as a CCS market evolves.For example,in the United Kingdom and Norway,while there is significant government intervention in the current CCS market to initiate the process,government policy aims to become less interventionist as the CCS commercial market matures,for instance as outlined in the UKs

131、CCUS Vision published in December 202335.The United States The US has supported CCS primarily through grants,subsidies and tax credits.The 45Q Tax Credit,first introduced in 2008 and enhanced in 2018,has been instrumental in progressing CCS.In 2022,the Inflation Reduction Act(IRA)was passed into law

132、 and further reformed the 45Q.The credit values as they stand now are listed below.45Q tax credits will be inflation-adjusted post-2026.Point-source capture&dedicated storage:increased from US$50/tonne to US$85/tonne Point-source capture&EOR/utilization:increased from US$35/tonne to US$60/tonne DAC&

133、dedicated storage:from US$50/tonne to US$180/tonne 35 Carbon Capture,Usage and Storage,A Vision to Establish a Competitive Market,Department for Energy Security and Net Zero,20 December 2023(https:/assets.publishing.service.gov.uk/media/6594718a579941000d35a7bf/carbon-capture-usage-and-storage-visio

134、n-to-establish-a-competitive-market.pdf)11 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.DAC&EOR/utilization:from US$50/tonne to US$130/tonne Also,as part of the IRA,the cons

135、truction start date window has been extended by seven years to 2033.Credits will be granted for 12 years of operation.The Infrastructure Investment and Jobs Act(IIJA),passed in 2021,provided over US$12 billion for CCS and related activities over the next 5 years,including:US$2.5 billion for carbon s

136、torage validation US$8 billion for hydrogen hubs,including blue hydrogen,and over US$200 million for CCS technology development.The IIJA also amended the Outer Continental Shelf Lands Act,directing the Department of Interior to develop regulations for establishing a permitting framework for offshore

137、 CO2 storage.Canada Canada hosts many CCS projects.The development of CCS has been supported by policies and government incentives,both at the federal and provincial level.The Canadian Net-Zero Emissions Accountability Act,which became law on June 29,2021,enshrines in legislation the countrys commit

138、ment to achieve net-zero emissions by 2050 and reduce emissions by 40-45%from 2005 levels by 2030.The Canadian government also set a target of at least 15 mtpa of CO2 reductions using CCS technology through 2030.This includes capturing and storing CO2 emitted from oil sands facilities(8 mtpa),refine

139、ries(3 mtpa),and gas plants(4 mtpa).In addition,the“Healthy Environment and a Healthy Economy”policy document,published in 2020,proposed the development of a Canadian CCS strategy and launched a Net Zero Challenge for large industrial emitters to encourage plans for net zero emissions by 2050.The Hy

140、drogen Strategy for Canada was also released in 2020 by Natural Resources Canada,citing CCS as part of an expanded,low carbon intensity hydrogen strategy.A“Strategic Innovation Fund Net Zero Accelerator”was also announced to fund initiatives up to 8 billion Canadian dollars including decarbonization

141、 projects for large emitters36 using CCS.The Energy Innovation Programme is also funding CCS Research Development and Demonstration(RD&D)to the amount of 319 million Canadian dollars over seven years.The Canada Growth Fund with funds of 15 billion Canadian dollars is being designed to attract privat

142、e capital into clean technologies and decarbonization projects including CCS.These are in addition to support at the provincial level such as Albertas Carbon and Capture Storage Fund37.In 2018,the Canadian government adopted the Greenhouse Gas Pollution Pricing Act(GHGPPA).This is made up of a feder

143、al fuel charge for all fossil fuels paid by either the producer or distributor in a province and a performance-based system for industries known as the output-based pricing system(OBPS)designed to ensure there is a price incentive for industrial emitters to reduce their GHG emissions while mitigatin

144、g the risk of carbon leakage and competitiveness impacts.These are linked to a carbon pricing schedule that is$65/tCO2e in 2023,with escalating annual increases of$15/tCO2e until it reaches$170/tCO2e in 2030 38.In addition,the 2022 budget proposed an investment tax credit(ITC)for businesses that inc

145、ur CS expenses on projects that capture and permanently store CO2 through an eligible use.This includes dedicated geological storage and storage of CO2 in concrete but excludes EOR.The tax credits for investment became effective immediately,with the following rates set through to 2030:60%in DAC equi

146、pment 50%in capture equipment 37.5%in equipment for transportation,storage and use 10%in refurbishment costs 36 https:/ised-isde.canada.ca/site/strategic-innovation-fund/en/net-zero-accelerator-initiative 37 International Energy Agency(2023),CCUS Policies and Business Models:Building a Commercial Ma

147、rket.38 See Ihejirika et al,(2023),Scaling CCUS in Canada:An Assessment of Fiscal and Regulatory Frameworks,OIES Research Paper,https:/www.oxfordenergy.org/wpcms/wp-content/uploads/2023/04/Scaling-CCUS-in-Canada-CM02.pdf 12 The contents of this paper are the authors sole responsibility.They do not n

148、ecessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.The credit can be claimed on eligible expenses in the year in which the expense is incurred,regardless of when the equipment becomes available for use.From 2031,the rates will be reduced by 50%.39 However

149、,there is still uncertainty regarding the time frame in which these credits will be paid.In its 2023 fall economic update,the Canadian government also introduced carbon contracts for difference,which would result in funding up to$7bn Canadian dollars out of the$15bn Canada Growth Fund to backstop ca

150、rbon pricing mechanisms,in a bid to provide more assurance to project developers.The United Kingdom The UK approach is based on the regulation of emitters/industrial and transport and storage(T&S)operator(see Table 3).The UK government has introduced business models/commercial arrangements for diffe

151、rent emitters(e.g.industry,waste-to-energy,power sector).The emitters are selected through a competitive tender and granted contracts(for instance,for the industrial sector,these are referred to as Industrial Capture Contracts(ICC).The contract(a 10-year contract with the option for up to five one-y

152、ear extensions)provides emitters subsidies in the form of capital grants from the Carbon Capture and Storage Infrastructure Fund and ongoing revenue support scheme with payment covering CAPEX(including a return),OPEX,T&S fees.The revenue stream is based on the price difference between a reference pr

153、ice(based on the UK-ETS)and a strike price(the cost of abatement).Through these contracts,emitters are also protected against some cross-chain risks.The transport and storage segment is regulated separately and is funded through the Transport&Storage Regulatory Investment(TRI)business model.The busi

154、ness model establishes an economic regulatory regime(ERR)linked to a user-pays revenue model plus a government support package(GSP)and mandates open access networks.Under this business model,a private company is established(the T&S company or T&SCO)which will be responsible for construction,financin

155、g,operation,maintenance,and decommissioning of the T&S network.Within the context of the ERR,the regulator(Ofgem)provides a licence to the T&SCO based on key parameters including allowed revenue.The users of the network will pay fees for T&SCO and through these fees,the company will recover its allo

156、wed revenues.The T&S fees will be set by a methodology that allowed the company to recover its costs plus an allowed return.The GSP protects the company from some events such as CO2 leakage if commercial insurance schemes are not available.Table 3:CCS support mechanisms in UK Regulatory and Legal Fr

157、amework Financials Risk Mitigation Emitters T&S Emitters T&S 20-30 million tonnes of carbon dioxide captured,per year,by 2030 CO2 transport and storage licensing framework Adoption of EU CCS Directive Financial assistance Business models Capital Grants(CCS Infrastructure Fund)Carbon Pricing(UK-ETS)C

158、CfDs Subsidy for payment of T&S services Capital Grants Regulated Asset Base(RAB)Model Risk of failures and delays caused by the T&SCo Decommissioning risk Leakage of CO2 39 See Ihejirika et al,(2023),Scaling CCUS in Canada:An Assessment of Fiscal and Regulatory Frameworks,OIES Research Paper,https:

159、/www.oxfordenergy.org/wpcms/wp-content/uploads/2023/04/Scaling-CCUS-in-Canada-CM02.pdf 13 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Norway The country has a relatively lo

160、ng history with CCS where the Sleipner project has been in operation since 1996,followed by Snohvit CCS in 2008 and CO2 Test Center(TCM)opening in 2012.As such,Norway has over 28 years of operational CCS experience with around 22 million tonnes of CO2 stored so far.There is high-level and consistent

161、 political support for policies that have helped achieve this.This began with legislating a carbon tax in 1991,which effectively led to the Sleipner and Snohvit CCS projects.The general CO2 tax on mineral oil currently sits at NOK 952/tonne(US$91).Proposals are in place for it to rise steadily,reach

162、ing NOK 2000/tonne(US$220)by 2030.40 Norway participates in the EU ETS and energy use that is subject to the EU ETS is generally exempt from the CO2 Tax on Mineral Products or benefits from a reduced carbon tax rate41.In addition,regulations for transport and storage of CO2 are mature and have been

163、in place since 2014.Following completion of CO2 injection,the storage licence will be transferred to the state government no less than 20 years later.The operator will be liable for funding 30 years of Monitoring,Measurement and Verification(MMV)costs post-closure.This must be paid into a fund upfro

164、nt.A key CCS project is Longship in Norway which covers the entire CCS supply chain.The CO2 is to be captured from a cement plant(Norcem)and waste-to-energy plant(Hafslund Oslo Celsio)(industrial partners).The CO2 transportation and storage infrastructure would be developed in a partnership between

165、Equinor,Shell,and TotalEnergies known as Northern Lights.The CO2 is to be transported in liquid form by ships to the projects CO2 receiving terminal on the Norwegian west coast.The liquefied CO2 will be then transported by pipeline to an offshore storage location under the North Sea for storage.The

166、Longship annual storage capacity stands at 1.5 million tonnes of CO2 per annum,which exceeds the 800,000 tonnes of CO2 allocated to Norcem and Celsio and therefore Northern Lights will have the capacity to receive CO2 volumes from other sources.Northern Lights already signed the worlds first commerc

167、ial agreement on cross-border CO2 transport and storage where,from early 2025,it is planned to capture some 800,000 tonnes of CO2 from an ammonia and fertilizer plant in the Netherlands42.Longship constitutes an interesting case study on how to enable the establishment of a CCS hub.The state/governm

168、ent support has been vital to kickstart the industry and bridge the financing gap for this first-of-a-kind full chain CCS commercial project.The Norwegian government provided funding of US$1.8 billion,covering 80%of the Northern Lights cost through state aid agreements.43 It was difficult for the pr

169、oject to get commitment from industrial emitters to build capture plants without having storage,but the project required commitment from emitters to justify building the storage.State support was therefore critical during the market development phase.The government established a state entity Gassnov

170、a that promotes technological development,builds CCS competence and acts as a project integrator for the Longship project including administering the public funding to industrial partners,coordinating the overall project schedule and managing the cross-chain risks and functionality44.The government

171、also participates indirectly in CCS projects through Equinor(majority ownership by the government of Norway).However,the government seems to be keen to keep a distance in future projects and while oil and gas operators need to be on each licence this may not involve Equinor.45 40 See Kevin R.Kaushal

172、 and Hidemichi Yonezawa(2022),Increasing the CO2 tax towards 2030:Impacts on the Norwegian economy and CO2 emissions,Statistics Norway.https:/www.ssb.no/natur-og-miljo/miljoregnskap/artikler/increasing-the-CO2-tax-towards-2030.impacts-on-the-norwegian-economy-and-CO2-emissions/_/attachment/inline/fb

173、d324c2-1490-44bd-9848-3328a7cdffa9:7a60a2ab12e794a969d8fa010a648ad541661586/RAPP2022-43.pdf 41 OECD,Taxing Energy Use 2019:Country Note Norway,https:/www.oecd.org/tax/tax-policy/taxing-energy-use-norway.pdf 42 See:https:/ 43 Ole Ketil Helgesen,Norway takes aim at CCS with huge government investment,

174、Upstream,21 September 2020,44 See:https:/ In 2023,exploration licences were awarded including one to Sval Energi AS,Storegga Norge AS,and Neptune Energy Norge AS,one to a group consisting of Aker BP ASA and OMV(Norge)AS and one to a group consisting of Wintershall Dea Norge AS and Altera Infrastruct

175、ure Group through its subsidiary Stella Maris CCS AS.See:Davide Ghilotti,Norway awards trio offshore CO2 storage licences,Upstream,https:/ 14 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any o

176、f its Members.Denmark In Denmark,CCS is a relatively recent development where pre-2020,injection of CO2 into the Danish subsoil was prohibited under legislation,and all previous attempts at launching CCS had been publicly opposed.The change happened in 2020 when the Danish government passed the Dani

177、sh Climate Agreement for Energy and Industry,committing the country to a 70%reduction in GHG emissions relative to 1990 levels by 2030.The agreement acknowledged CCS as a critical component to achieve the target and a CCS target was set at 4-9 mtpa of CO2 storage by 2030.In addition,the Danish gover

178、nment has allocated approximately 5 billion of support to projects across the CCS value chain with around 4 remaining.46 Additional amount of approximately is 350 million is also available under the Negative Emissions CCS Fund.47 Danish CCS projects are also eligible to apply for funding from the EU

179、 Innovation Fund,which aims to allocate over 38 billion towards low-carbon technologies by 2030.The state company Nordsfonden will have a 20%interest in all future CO2 storage licences.The state will receive a share of future profits and also invest in the project(sharing the risk)with investors.In

180、January 2022,the Danish Marine Act was amended to exclude geological storage of CO2 under the seabed from the prohibition and carriage of materials and substances for dumping.In October 2022,a bilateral agreement was signed under the London Protocol between Belgium and Denmark,which allowed for cros

181、s-border transportation of CO2 between the two countries.In January 2023,the EU commission approved a 1.1 billion Danish scheme to support the role out of CCS technologies48.This is in addition to the remaining tenders under the restructured CCS fund worth approximately 3.6 billion49.The rapid chang

182、e in Denmarks CCS journey resulted in the initiation of CO2 injection at the Project Greensand pilot in March 2023.This was the first cross-border CO2 to be stored in the North Sea,and the first CO2 to be stored in a depleted North Sea reservoir50.The Greensand pilot received funding of 197 million

183、DKK(26 million)from the Danish Energy Agency.Also,rsted has commenced the construction of two carbon capture facilities in Denmark as part of the rsted Kalundborg CO2 hub.The project has been awarded a 20-year contract by the Danish Energy Agency in 2023 and is expected to capture 0.43 Mt CO2 per ye

184、ar of biogenic CO2 from the beginning of 2026.Once captured,the CO2 will be transported and stored by Northern Lights Joint Venture in the Norwegian part of the North Sea.51 The Gulf Cooperation Council(GCC)In the Gulf Cooperation Council(GCC),the two biggest CCS projects currently in operation are

185、Uthmaniyah in Saudi Arabia and the Al-Reyadah/Emirates Steel Industries(ESI)in the UAE.The Uthmaniyah project,owned and operated by Saudi Aramco,captures CO2 from a natural gas and production plant(Hawiyah NGL plant).The captured CO2 is transported via 85 km pipeline to the injection site.Since 2015

186、,the CCS project has been capturing and injecting 0.8 Mt CO2 per year for enhanced oil recovery(EOR).Saudi Aramco has also developed an elaborate monitoring and surveillance programme to evaluate the performance of the project.In the UAE,the ESI CCS project captures up to 0.8 Mt CO2 per year from th

187、e Emirates Steel plant.The CO2 is transferred to Al-Reyadah plant for compression and dehydration which is then transported through a pipeline(43 km)to two onshore oil fields for enhanced oil recovery.These two projects have a few features in common:46 Lockwood,T.(2024),Designing Carbon Contracts fo

188、r Difference:A comparison of incentives for carbon capture and storage in Europe,47 Lockwood,T.(2024),Designing Carbon Contracts for Difference:A comparison of incentives for carbon capture and storage in Europe,48 European Commission,State aid:Commission approves 1.1 billion Danish scheme to suppor

189、t roll-out of carbon capture and storage technologies,https:/ec.europa.eu/commission/presscorner/detail/en/ip_23_128,Press Release January 12.49 ibid 50 See:What is project Green Sand?https:/ 51 rsted begins construction of Denmarks first carbon capture project,December 4,2023.https:/ 15 The content

190、s of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Both projects operate in environments where there is no carbon pricing or regulations to reduce emissions from industrial plants.However,bo

191、th Saudi Arabia and UAE have announced net zero targets for their overall economies.In both projects,the cost of capturing CO2 is relatively low given the high concentration of CO2 in the flue gas.In both projects,the captured CO2 is transported through pipelines to be used for enhanced oil recovery

192、 in mature fields.Neither of these projects relies on market-based instruments such as CfDs or CCS certificates.There are no carbon credits issued on the back of these projects.The main form of support is through government/state owned entities financing.In both projects,the interdependency risk is

193、low.In the case of the Uthaminyah project,Saudi Aramco controls the entire supply chain from capture to transport and storage.In case of ESI CCS project,the ownership is more complex,but the interdependency risk is also low.The Al-Reyadah is a joint venture project between ADNOC and Masdar(with Masd

194、ar itself owned by three government entities:ADNOC,Mubadala Investment Company,and Taqa).Emirates Steel is owned by Abu Dhabis General Holding Corporation(Senaat),a subsidiary of sovereign wealth fund ADQ.In terms of opportunities,GCC oil and gas exporters could establish competitive advantage in CC

195、S given their natural resources.These include geological storage capacities,access to depleted hydrocarbon reservoirs and deep saline formations,and the utilization of existing infrastructure.Also,these exporters have the technical resources(expertise in subsurface technology)through decades of hydr

196、ocarbon exploration.These include site characterization which is prerequisite to safe geological storage of CO2 and monitoring and verification.Verifying the quantity of injected CO2 and demonstrating with appropriate monitoring techniques that CO2 remains contained in the intended storage formation

197、s are key components of any CCS project.Indeed,many GCC countries have ambitious plans to scale up CCS projects.For instance,Saudi Arabia has announced a plan to develop a major CCS hub with a capacity to store 9 million tons of CO2 annually starting in 2027 with further plans to scale it up to 44 m

198、illion tons of CO2 per year by 2035.This constitutes an important step in the Kingdoms efforts to reduce its emissions and meet its climate targets.The details of the project remain scant,but the hub will be developed by Saudi Aramco.An agreement was signed between SLB and Linde to develop a 9 milli

199、on ton/year CCS hub.But unlike the Uthmaniyah project,the hub will be open to multiple industry users including Saudi Aramco,which will contribute to around 6 Mt CO2 annually and the rest will come from other industrial sources.From Aramcos perspective,this is a main component of its efforts towards

200、 developing a blue hydrogen industry.The challenge for the countries in the region is how to finance and scale up CCS activity without having a big impact on public finances and economic growth.Unlike Norway where the government has provided incentives for private players and where there is a price

201、on CO2 emissions,the players in the CCS supply chain in the GCC are mainly government entities(either those capturing the CO2 or those transporting and storing the CO2).Thus,the additional cost for implementing CCS is born ultimately by the government in the form of lower revenues and can be thought

202、 of as a carbon tax on its own emissions.The government can mandate obligated entities(whether state or privately owned)to capture all or part of their emissions.The associated costs could be borne by the obligated entities(which will impact their profitability and competitiveness)and/or the governm

203、ent can incentivize these entities through the provision of public funds to compensate for the upfront and operation costs.To offset some of the costs on the obligated entities,the cost of transport and storage of CO2 could be borne by the national oil company(NOC)through the creation of a storage h

204、ub.The NOC has the knowledge and the expertise and the infrastructure to develop such a hub and is an importance supplier of CO2 from its own activities(refining,gas processing plants,blue hydrogen developments,chemicals).This also has the added advantage of minimizing coordination costs.In addition

205、 to infrastructure,the NOC will put in place the appropriate monitoring regimes for CO2 leakage and reporting and verification standards.The NOC could pass the cost of building the CCS hub and transport and storage to the main shareholder i.e.,the government or the NOC could generate revenues throug

206、h the utilization of CO2 and/or through the issuing of high quality and verifiable carbon credits against these reductions.16 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.3.

207、CCS Business Models 3.1 Overview of business model theory There is a significant body of work and literature on definitions,interpretations and theories of business models.Thinkers and academics such as Hayek52,Osterwalder and Pigneur53,Boons and Ldeke-Freund54,Doganova and Eyquem-Renault55,and many

208、 others,have written extensively on the subject,and an analysis and review of the different theories are beyond the scope of this paper.However,for the purposes of this paper,the term“business model”will simply refer to a companys strategy for achieving profitability.It encompasses elements such as

209、the:products and/or services the company intends to offer,its target market,the market gap it aims to address,anticipated expenses,and a financial model for sustainable operation.Traditionally,the primary objective of publicly traded firms is profit maximization for shareholders;yet,there has been a

210、 shift towards integrating social and environmental sustainability as key drivers for innovation in business models.In addition,business models do not only serve to ensure revenue certainty,but also address specific risks,allocating them in a fair and balanced manner,such as between governments and

211、private sector entities in the context of CCS.A significant element of any business model is its value proposition,which must be clearly articulated.In the case of CCS,determining its value is crucial for establishing a functional business model.The value of CCS revolves around either:Emissions redu

212、ction or removals through the introduction of a carbon price(carbon tax,ETS etc.),and/or Economic revenues generated from the sale of captured CO2,and/or The creation of low-carbon products The value proposition of CCS may vary,depending on the policy instrument a government has utilized to drive th

213、e deployment of CCS.A model focused on meeting climate targets will be influenced by government regulations,while one emphasizing economic return will aim to boost revenues and cut costs.Currently,many of the operational CCS plants have derived value from utilization of CO2,predominantly for EOR.3.2

214、 CCS business models CCS business model falls into two main project types:i)Full chain model,or ii)Partial chain model This essentially describes the extent of the integration of the CCS value chain within the project.Within the two overarching business model descriptions,project ownership can eithe

215、r be public/state-owned,private or a public-private partnership(PPP).Financing of the project can either be through government sources such as grants,tax credits,loan support or through private financing such as revenue from direct use of 52 Hayek,F.A.(1967).Studies in Philosophy,Politics,and Econom

216、ics.University of Chicago Press,Chicago.53 Osterwalder,A.,&Pigneur,Y.(2010).Business model generation:a handbook for visionaries,game changers,and challengers.John Wiley&Sons.54 Boons,F.,&Ludeke-Freund,F.(2013).Business models for sustainable innovation:state-of-the-art and steps towards a research

217、agenda.Journal of Cleaner Production,45,9-19.55 Liliana Doganova,Marie Eyquem-Renault,What do business models do?:Innovation devices in technology entrepreneurship,Research Policy,Volume 38,Issue 10,2009,Pages 1559-1570,ISSN 0048-7333(https:/ The contents of this paper are the authors sole responsib

218、ility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.CO2 or low-carbon products and voluntary carbon markets(see Section 3.2).An overview of the different possible configurations is highlighted in Figure 3.Figure 3:CCS value chain,ownersh

219、ip and financing Different configurations can be adopted utilizing the above descriptions.For example,a partial chain model may be privately owned with government subsidies,or it may be fully government-owned and subsidised.A full chain model may also be either state-owned or privately-owned or cons

220、isting of a PPP,dependent on the approach a government has taken to establish a viable and sustainable market for CCS.For example,in China,NOCs such as Sinopec,PetroChina,CHN Energy and CNOOC dominate nearly all CCS projects,except for the Karamay methanol plant,operated by the private Dunhua Oil Co

221、mpany.Similarly,in the Middle East,NOCs such as Saudi Aramco,Qatar Energy(in collaboration with ExxonMobil)and ADNOC hold sway over the regional operational of CCS projects.Examples of public-private partnerships include Norway.The Norwegian Government is the majority shareholder in Equinor,which bo

222、asts almost three decades of experience operating commercial CCS projects.Both full chain and partial chain models can be developed through a joint-venture structure,where a new joint venture company,owned by the participating stakeholders,is created.This is usually the ownership model behind CCS hu

223、bs and clusters and applies to private as well as public stakeholders.In a joint venture,financial risk is usually shared between the partners.Alignment and agreement are also required on where and how other risks are best tackled and is essential to guarantee alignment among the various steps of th

224、e CCS chain.Full Chain Model The majority of CCS projects currently in operation adopt the full chain model,whereby the captured CO2 is transported from one capture facility to one injection site.The project is usually developed,owned and operated by a single entity,as shown in Figure 4.It is common

225、ly adopted for EOR projects and for demonstration sequestration projects where the operator is able to control the development,execution and operation of full value chain from emissions to storage site.This is a natural model for a first-of-a-kind(FOAK)project to prove the concept with capture-ready

226、 emitters and usually accompanied by government subsidy to bridge the funding gap.The advantages of such a model are the limited development and coordination risks,due to one entity operating the entire chain,although the operator bears all the liabilities and must possess the technical and operatio

227、nal expertise in all areas of the CCS chain.However,this model may fail to meet some of the key characteristics for a viable CCS model,in particular scalability,providing open access to the network and incentivizing competition.Breaking up the CCS value chain can potentially help mitigate the highli

228、ghted risks,allocate the risks across players,as well as avoid monopolistic behavior.Examples of projects which have utilized the full chain model are provided in Table 4.18 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Insti

229、tute for Energy Studies or any of its Members.Figure 4:Full Chain Model Concept Table 4:Full Chain Model Projects Project name Country Partners Operation Announced capacity(high)(Mt CO2/yr)Sector Carbon Sink Gorgon CCS Australia Chevron(47.3 per cent,operator),Shell(25 per cent),ExxonMobil(25 per ce

230、nt),Osaka Gas(1.25 per cent),Tokyo Gas(1 per cent),Chubu Electric Power(0.417 per cent)2019 4 Natural gas processing Dedicated storage Illinois Industrial Carbon Capture and Storage(IL)United States ADM 2017 1 Biofuels Dedicated storage Qatar LNG Qatar Qatar Petroleum,ExxonMobil 2019 2.1 Natural gas

231、 processing Dedicated storage Quest(ALB)Canada Shell(60%),Marathon oil(20%),Chevron Canada(20%),CNRL 2015 1.2 Other fuel transformation Dedicated storage Sleipner Norway Equinor,Eni 1996 1 Natural gas processing Dedicated storage Snohvit CO2 capture and storage Norway Equinor,Petoro,TotalEnergies,20

232、08 0.7 Natural gas processing Dedicated storage(EOR)19 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Neptune,Wintershall Uthmaniyah CO2 EOR Demonstration Project Saudi Arabia

233、 Saudi Aramco 2015 0.8 Natural gas processing Dedicated storage(EOR)Al-Reyadah/Emirates Steel Industries UAE ADNOC,Masdar and Emirates Steel Industries 2016 0.8 Steel Dedicated storage(EOR)Partial Chain Model Different models are now appearing whereby the CCS value chain is split or broken up,with p

234、artial chain projects focused on capture,transport and/or dedicated storage developing in connection to emerging shared infrastructure within CCS hubs.There are several advantages to splitting the CCS value chain,including better management of risk where it is allocated to specialist entities that a

235、re best placed to bear it.Governments will need to support the deployment of these new models in areas including in coordinating the stakeholders involved as well as addressing the long-term liability concerns related to CO2 storage and establishing reliable revenue streams where a profitable market

236、 does not exist yet.Partial chain models offer a strategic advantage by enabling emitters to delegate the expertise in capture,transport,and storage to specialized companies.This is particularly pertinent for capture applications where CO2 is not inherently separated as part of the process,such as i

237、n natural gas processing or ammonia production,necessitating dedicated capture equipment.The establishment of CCS hubs further enhances the efficiency of these models.By consolidating resources and expertise,hubs can significantly reduce lead times for connecting to shared infrastructure.This not on

238、ly streamlines the overall process but also cuts costs through heightened competition within a specialized corporate landscape and the sharing of infrastructure expenses.Additionally,the hub model facilitates the connection of more dispersed and smaller emitters to CO2 transport and storage,leveragi

239、ng economies of scale for enhanced accessibility and affordability.As discussed previously,the risk associated with partial chain models include increased cross-chain and coordination risk whereby multiple entities are involved and responsible for constructing,owning and operating different elements

240、 of the CCS value chain,and the timings and operational arrangement for how they interact will be difficult to align.In addition to that,the chicken and egg situation arises whereby emitters are reluctant to invest in capture facilities unless they have certainty on where the captured CO2 will be ta

241、ken and stored and transportation and storage operators will not invest in transportation and storage infrastructure unless there is a critical mass of customers(emitters)who have committed to investing in capture plants.This uncertainty makes financing such projects a challenge,and this is where so

242、me governments have stepped in with financial and regulatory support and incentives to provide a certain degree of certainty to encourage investment.Again,as highlighted earlier partial chain models may be government-owned,privately-owned or through a public-private partnership.Several different par

243、tial chain models are being developed,some of which are highlighted below.Partial Chain Model-Single Hub This is the model currently adopted by many of the European countries developing CCS,including the UK,Denmark(Project Greensand Phase 1 and Bifrost),some of the projects in Norway(Northern Lights

244、 and Havstjerne)and the Netherlands(Aramis and Porthos),as well as the Gulf countries,including Abu Dhabis CCS project and Saudi Arabia Jubail CCS hub.The key feature of this model is that the ownership and operation of the transportation and storage(T&S)infrastructure is carried out by a single ent

245、ity(or a consortium of companies potentially including state-owned 20 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.enterprises),forming a natural monopoly and therefore requ

246、iring regulation of fees and access56(see Figure 5).This means that this model relies on substantial government participation,as the case with Denmark,or via a regulated asset base model such as the case with the UK.In terms of emitters,several would be involved,all feeding into the shared infrastru

247、cture of the CCS hub.While the aggregation of the T&S elements simplifies interface risk between the segments and therefore de-risks development of the T&S infrastructure,there is significant coordination risk due to the multiplicity of emitters,including commercial and financing complexity.The mode

248、l does possess an inherent flexibility for expansion,which is a positive.Figure 5:Partial Chain Model Single Hub Concept As noted earlier,the transport and storage elements may require regulation to avoid monopolization of the infrastructure and overcharging for the CO2 disposal services.In addition

249、,in the case of the emitter,direct subsidy of both the capital(CAPEX)and operational(OPEX)expenditure is required.A CAPEX subsidy is needed to bridge the investment case for building the capture plant and an OPEX subsidy is also required to bridge the funding gap for the T&S charges.In addition,some

250、 form of subsidy or equity investment in the T&S infrastructure is required to share the project risks and reduce the Weighted Average Cost of Capital(WACC)and effectively reduce the T&S tariff.A T&S agreement is negotiated directly between the T&S operator and each individual emitter.There is also

251、an option for government to take equity in return for capital contribution in T&S infrastructure to gain insight and control over development,as is the case in Denmark,where the state company Nordsfonden takes a 20%interest in all future CO2 storage licences.The Danish state will receive a share of

252、future profits,but must also directly invest in the respective project,sharing the risk involved for the other stakeholders.In addition,if the CO2 is sufficiently priced and a long-term purchasing contract is in place,the CO2 transport and storage operator would face low risks.With state ownership,t

253、here is easier access to finance,usually at lower rates than those faced by private organisations when operating alone.Partial Chain Model Offshore CO2 Transport The main feature of this model is the separation of the collection hub from the transportation element(see Figure 6).It is most commonly a

254、pplied where domestic emissions are collected for transboundary export and sequestration,necessitating a separate entity to own and operate the shipment of CO2.In this regard,the value chain is split into four separate components:1)Emitter,2)Aggregator,3)Transport and 4)Storage.The Aggregator design

255、s,builds and operates the aggregation infrastructure and integrates the 56 In the UK,T&S fees are regulated through the economic regulator,Ofgem.21 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or

256、 any of its Members.CCS value chain as well as negotiates offtake agreements with emitter(s),transporter(s)and storage operator(s).Figure 6:Partial Chain Model Offshore CO2 Transport Concept This model is exposed to significant coordination risk as many stakeholders are involved including multiple e

257、mitters,transporters and storage providers.However,the model possesses an inherent flexibility for expansion.The aggregation element of the model will have to be regulated to avoid monopolization of the infrastructure and overcharging for CO2 disposal services.With regards to pipeline transportation

258、 and storage of the captured CO2,the collection and transportation segments of the value chain would not be split.As was the case in the single hub concept model,direct subsidy will be required for both the emitters CAPEX and OPEX to bridge the investment case to build a capture plant and a subsidy

259、for the OPEX element to bridge the funding for the aggregation and T&S charges.A government subsidy or equity investment in the aggregation infrastructure will assist the aggregator in sharing the financial project risk and therefore reduce the aggregators WACC which effectively results in a reducti

260、on in the aggregation tariff.In addition,the government may take equity in the project in return for capital contribution in the aggregation infrastructure and therefore gains insight into project development and participates in the decision-making process.An example of a project utilizing this mode

261、l is the Altera Stella Maris CCS Project in Norway.The project,led by Altera Infrastructure,is planned to be a large-scale,flexible,scalable maritime logistics solution for captured CO2 from industrial sources.The ambition of Stella Maris CCS is to provide cost efficient floating CCS infrastructure

262、solutions for a global market.However,the initial plan aims to collect,transport,inject and store 10 million tonnes per annum of CO2 using collection hubs and large CO2 carriers for transport to permanent storage sites in the North Sea.Partial Chain Model Free Market This model,in principle,would pr

263、omote open competition between the operators to provide T&S services,enabling the emitters to choose between a variety of T&S service offerings(see Figure 7).Ultimately,it may be the case that emitters are able to negotiate disposal of CO2 on a cargo basis in contrast to the situation today where it

264、 is necessary to sign long-term agreements.In such a model,there is significant coordination risk and complexity in terms of commercial and financing arrangements due to the presence of multiple emitters.Each emitter is required to negotiate with the storage operator for T&S services and the storage

265、 operator negotiates separate transportation agreement with the pipeline operator.In addition,there is limited or no government subsidy to build the infrastructure while a subsidy or incentive is provided to the emitter and dispersed to the storage and transportation entities via T&S tariffs.Moreove

266、r,the T&S infrastructure would most likely be regulated for environmental compliance,22 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.but the owners and operators would poten

267、tially have full commercial freedom to offer assets or capacity as required.There is potential for monopolization of the existing pipeline or corridors,which would need to be assessed by the authorities if it becomes a significant issue.Figure 7:Partial Chain Model Free Market Examples of the Partia

268、l Chain Free Market model are highlighted below in Table 5.All the examples are from the US market which fulfil many,but not all,of the model characteristics and is currently the closest to achieving this type of market structure.The Appendix provides an overview of three different US companies depl

269、oying slightly modified versions of this model in interesting ways.Table 5:Examples of Partial Chain-Free Market projects Project Name Partners Operation Announced capacity(high)(Mt CO2/yr)Carbon Sink Midwest Carbon Express(NE,SD,ND,MI,IA)Summit carbon solutions(SK E&S 10%)2024 12 Dedicated storage

270、Denbury Ascension Parish sequestration(LA)Denbury Carbon Solutions(Acquired by Exxon)2025 12 Dedicated storage ExxonMobil Vermilion parish storage(LA)ExxonMobil 2025 2 Dedicated storage Central Louisiana Regional Carbon Storage(CENLA)Hub(LA)CapturePoint Solutions,Energy transfer 2027 10 Dedicated st

271、orage Gulf Coast Sequestration Hub Lake Charles(LA)Gulf Coast Sequestration 2030 2.7 Dedicated storage 23 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Conclusions CCS is a k

272、ey mitigation technology for the global energy system to reach its net zero target and is one of the decarbonization pillars identified by the IEA(in addition to energy efficiency,behavioral changes,electrification,renewables,hydrogen and hydrogenbased fuels,and bioenergy).Despite the role that it i

273、s expected to play in the transition,scaling up CCS has proven challenging,and its contribution to meeting climate targets has been limited so far.This has caused some to argue that CCS represents a fairytale solution57.However,as shown in this paper,there has been considerable progress in the desig

274、n of government support mechanisms,market instruments and legal and regulatory approaches that could help the private sector manage some key risks and enable viable business models that are necessary for scaling up CCS.This has already resulted in the number of CCS projects in the pipeline rising fa

275、st with 198 new CCS facilities added to the project pipeline since 202258.What is also becoming clear is that there is no one CCS business model that fits all projects or sectors.Instead,there is an emergence of various business models with different degrees of integration in the supply chain,includ

276、ing varying degrees of government support,multiple support mechanisms,and various mixes of ownership structures and public-private partnerships.These variations are to be expected given the wide differences across countries in terms of resource endowments,industrial structures and energy sectors,dom

277、inance(or lack thereof)of a national company,the importance of CCS in meeting governments climate objectives,the health of public finances,public acceptance of CCS,and whether a country has a system in place to price CO2 emissions.Yet,business models are not static,and as policies,technologies,playe

278、rs objectives,and the legal and regulatory environment evolve so will business models,and they may witness more convergence over time.57 See for instance,Stuti Mishra(2023),Too much focus on fairytale solutions at Cop28 climate talks,warn activists,The Independent,December 10,2023.58 Global CCS Inst

279、itute(2023),Global status of CCS 2023.https:/ 24 The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Appendix:Case studies The case studies below provide an overview of three diffe

280、rent US companies operating in the CCS space.They are all utilizing a modified version of the partial chain free market model.The three have been selected intentionally to highlight the interesting and nuanced ways in which each company is applying the model to different parts of the CCS value chain

281、.EnLink Midstream EnLink Midstream provides integrated energy infrastructure services for natural gas,crude oil,condensate and NGLs.This includes gathering and transportation pipelines,processing plants,fractionators,barge and rail terminals,product storage facilities,and brine disposal wells.EnLink

282、 is actively developing CO2 transportation in Louisiana with the aim of providing a fee-based services utilizing the existing connections to provide a link between CO2 emission sources(emitters)and permanent sequestration sites(sequestration owner operators).EnLink is focused on Louisiana as the sta

283、te has all the attributes necessary for large scale CCS,which include a high concentration of emissions,proximity to storage and existing pipeline infrastructure.EnLink is aiming to become the CO2 transporter of choice through their operational expertise and have highlighted the following factors as

284、 advantageous in their quest to achieve their aim59:Focused on Transportation:Allows EnLink to provide transportation services on a non-preferential basis without competitive concerns and eliminates potential long-term liabilities associated with permanent sequestration.Familiar Commercial Model:o F

285、ee-for-service,no commodity exposure.o Commercial contracts are very similar to midstream contracts(Reserved capacity,minimum volume commitments,long-term,service levels).o Eases path to commercialization when all parties are familiar with expected terms.Broad Customer Base:Sequestration site owners

286、 needing pipeline transportation from a contracted emissions source and Emissions sources needing pipeline transportation to contracted sequestration sites.EnLink expects the CCS business to have benefits on their overall business plan by providing a long-term stable cash flow as the CO2 output of i

287、ndustrial emitting facilities does not decline over time(unlike producing wells).EnLink expects first cash flows from their CCS business beginning in 2025.Denbury Denbury was recently acquired by ExxonMobil in November 2023 in an all-stock transaction valued at just under US$5 billion60.Until its ac

288、quisition,Denbury was an independent energy company with operations and assets focused on CCS and EOR in the Gulf Coast and Rocky Mountain regions in the US with over 20 years experience utilizing CO2 in its EOR operations.Since 2012,Denbury was also active in CCS through the transportation and stor

289、age of captured industrial-sourced CO2.Denbury had over 1300 miles of CO2 pipelines(largest owned and operated CO2 pipeline network in the US)and have transported,injected and stored 4.3 million metric tons of industrial-sourced CO2.Denbury highlighted three different commercial structures for CCS a

290、s shown below and expected CCS to be self-funding in 2026/2027.59 EnLink Midstream Investor Presentation May 2023(https:/ https:/ The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Member

291、s.Table A1:Denbury Business Model Types of Emissions Agreements Transportation Leverage Denbury pipeline system to move CO2 to 3rd party storage Transportation&Storage Connect lateral to industrial customer;move CO2 to Denbury owned and operated secure storage Capture,Transportation&Storage Turnkey

292、operation for customers who prefer full-service solution%of anticipated Denbury volumes 5-10%80-90%5-10%Agreements announced(Mtpa)4 18.5-Anticipated avg revenue(US$/tonne)US$5-15 US$15 25(sequestration)$0 10(EOR)US$85 45Q(less market-priced fee paid to industrial customer)Term length(years)Up to 20

293、12 20 12+(45Q term)Capital intensity Low Medium High California Resources Corporation California Resources Corporation(CRC)is an independent energy and carbon management company based in California.CarbonTerraVault Holdings(CTV),a joint venture between CRC and Brookfield,provides capture,transport a

294、nd storage of CO2 services.CTV is engaged in a series of CCS projects in California that inject CO2 captured from industrial sources into depleted underground reservoirs and permanently store CO2 deep underground.CRC is focused on California due to the fact that the US Environmental Detection Agency

295、s(EPA)Permitted(Class VI)pore space is a scarce resource in the value chain in the state,in addition to the other elements highlighted in Figure 661.The company has also laid out a variety of go-to-market business models in which it can operate in and highlighted in Table A262.The models highlighted

296、 by CRC encompass the different levels of project integration and service provision,from the provision of CO2 storage services only to the full end-to-end integrated value chain,requiring the most of CRCs capital investment.An example of CRCs joint venture business model is their CO2 Management Agre

297、ement with Lone Cypress Services,an independent energy company specializing in development of hydrogen generation,waste-to-energy plant solutions and traditional oil and gas midstream facilities.Lone Cypress will construct a 65 tonnes/day blue hydrogen facility.The CTV JV will provide permanent sequ

298、estration for 205k Mtpa,including the lease of land for the blue hydrogen facility with commercial operations targeted to begin in late 2025.The CTV JV will receive an injection fee to be paid on a per tonne basis and the storage project and Lone Cypress hydrogen facility will be eligible for the fe

299、deral Sequestration Tax Credit(Section 45Q)or Clean Hydrogen Production Tax Credit(Section 45V)and the California LCFS credits.As part of the agreement,the CTV JV has the right to participate in the blue hydrogen facility up to and including a majority equity stake.61 CRC December 2023 Presentation(

300、https:/ CRC Investor Presentation,January 2022(https:/ The contents of this paper are the authors sole responsibility.They do not necessarily represent the views of the Oxford Institute for Energy Studies or any of its Members.Figure A1:CRC Business Model Table A2:CRC Business Model Business Models

301、Emission Capture Conditioning(Liquifaction/compression/purification)Transport Storage End-to-end value chain CRC owns and operates emission assets CRC manages&operates capture&conditioning Manufacturing/tech development,EPC&installation&facility start-up are outsourced Transportation may or may not

302、be necessary as some assets co-located Carbon Terravault CCS Service 3rd party owns and operates emission assets CRC manages&operates capture,conditioning&transportation Manufacturing/tech development,EPC&installation&facility start-up are outsourced Carbon Terravault Joint Venture 3rd party owns an

303、d operates emission assets CRC establishes JV with emissions producer and/or engineering firm to develop,manage&operate capture,conditioning&transportation processes Carbon Terravault Carbon Storage 3rd party owns and operates emission assets,capture,conditioning and transportation Carbon Terravault

304、 CaptureHigh concentration of Emitters near CRC reservoirs eligible for Low CArbon Fuel Standard(LCFS)creditsHistorical relationships with major petrochemical complexes in the state Access to capital markets and innovation hubsUnderstanding of the commercial and engineering Experience with municipal

305、,county,state&federal permitting agenciescapture market from CalCapture and DOE FEED study evaluation TransportationProximity to Experience with municipal,county,state&federal permitting agenciessource Ability to leverage key infrastructure in placeAccess to supply chain distribution networkMidstrea

306、m experienceStorageExperienced subsurface,reservoir and injection management capabilitiesFully developed static and dynamic reservoir modelsLargest fee position in the stateExperience with municipal,county,state&federal permitting agenciesIdentified up to 1BMT of potential storage capacityUseProximity to Experience with municipal,county,state&federal permitting agenciessources and petrochemical complexesAccess to transportation and aerospace network