Summary of scenarios from the EU’s long-term strategy
Taxonomy on sustainable finance
Criteria for capture from anthropogenic emissions are that:
• “it enables the economic activity to operate under its respective threshold and
• It shows that the captured CO2 will be offloaded to a Taxonomy eligible CO2 transportation operation and permanent sequestration facility”
Criteria for transport of CO2:
• Transport modalities that contribute to the transport of CO2 to eligible permanent sequestration sites are eligible, only if the asset operates below the leakage/tonne of CO2 threshold.
• Leakage/tonne of CO2 transported from head(s) of the transport network to injection point(s) is
<0.5%, and the CO2 is delivered to a taxonomy-eligible permanent sequestration site or to other transport modalities which lead directly to an eligible permanent sequestration site are eligible.
• Assets or activities that enable carbon capture and use (CCU) will deem all the connected elements of an existing transport network ineligible.
• Assets which increase the flexibility and management of an existing network, without expanding the network to include carbon capture and use activities is eligible.
Criteria for storage of CO2:
• Operation of a permanent CO2 storage facility is eligible if the facility complies with ISO 27914:2017 for geological storage of CO2.
Thus, according to the Taxonomy, the sustainability of investments in any part of the CCS value chain depends on the whole value chain being taxonomy eligible.
When it comes to the sustainability of manufacturing of hydrogen, the following thresholds apply:
o “Direct CO2 emissions from manufacturing of hydrogen: 5.8 tCO2e/t Hydrogen in alignment with energy thresholds in the taxonomy.
o Electricity use for hydrogen produced by electrolysis is at or lower than 58 MWh/t Hydrogen
o Average carbon intensity of the electricity produced that is used for hydrogen manufacturing is at or below 100 gCO2e/kWh (Taxonomy threshold for electricity production, subject to periodical update).”
It is specified that this threshold could be met both by the production of hydrogen from green electricity and through the usage of CCS technologies.
Calculation of productivity benefit of cost reductions
Cost reductions for future projects which are a result of technology development and large-scale deployment can be analysed as positive externalities of knowledge, since the value of the learning often will be larger than the actors can utilize alone. The knowledge and know-how gained from a CCS project has a strategic value to the project owners themselves, but also has value for all future projects as cost and risks are reduced. However, this knowledge and know-how is difficult to monetarize fully for the project owner, and they would therefore invest less than would be optimal from the societal viewpoint. This type of externality is a common feature of technology development but does not necessarily mean that all technology development is profitable from a societal perspective. It can be difficult to assess the value of technology development a priori, due to uncertainties on the success of a demonstration project, and to what degree the technology is later deployed.
Development of new climate technologies can be analysed using the figure below. The figure represents the mitigation cost per tonne of CO2 at different levels of deployment. In the figure, the initial costs of the direct reductions of emissions are substantially higher than the cost of emissions and would not be cost-effective to implement as a one-off venture. However, the technology has a potential to reduce emissions at a cost below the cost of emissions, illustrated by the cost curve of technology development. The indirect effect of the first project is its contribution to reduced costs for subsequent projects.
Figure 53 - Cost curve of climate mitigation technologies
Mitigationcostper ton
Technology potential, tons CO2
The project’s contribution to reduced costs/per ton
Direct effect (project’s contribution to reduced emissions)
Company extra cost of project (area in red)
Cost of emissions (ETS)
Cost curve of technology development
Tons CO2 Public funding of the project (area in green)
Figure 54- Cost curve of CCS (EUR 200/tonne start rate, 10% decrease of each doubling of capacity)
For projects with capacity of 1 million tonnes of capture per year, one can construct a discrete cost curve. The capacity doubles between 1 and 2 million, then between 2 and 4, and so on. The costs fall quickly initially, then tapers off as more capacity is needed for each doubling.
Figure 55- Discrete cost curve for 1-25 Mt capacity (10% decrease per doubling of capacity)
By the nature of the cost curve, which decreases by 10% for each doubling of capacity, the largest cost reductions are associated with the first project and are reduced more gradually as more and more projects are constructed.
We consider the absolute cost reduction, as specified by the cost curve, from each project. The first project contributes equally to cost reductions in future projects, such the contribution is both dependent on its initial contribution as well as the number of future projects. By the nature of the cost curve, early projects contribute most to cost reductions, both by the number of projects and by the high cost reductions initially.
The approach is illustrated in the figure below: Each project contributes to a cost reduction for future projects as specified by the cost curve. The cost reduction per tonne is constant, and the total cost reductions attributed to each project is dependent on how many projects (and therefore tonnes) which are benefitting from the cost reduction.
0 50 100 150 200 250
1 33 66 99 132 165 198 231 264 297 330 363 396 429 462 495 528 561 594 627 660 693 726 759 792 825 858 891 924 957 990
Mitigation cost
CCS capacity, mill. tons per year
800 900 1000 1100 1200 1300 1400 1500 1600
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26
Mitigation cost
CCS capacity, mill. tons per year
3 Cost reduction from first project
Cost reduction from second project Cost reduction from third project
Cost reduction from fourth project
For the purpose of this project, we take into account EU-wide cost reductions, i.e. that all future cost reductions from the Norwegian full-scale project are counted. The actual benefits are dependent on the number of CCS projects which are actually constructed, and their capacity.
The early-mover projects have higher abatement costs, but their contribution to cost reductions which benefit all future projects, is more important. Since the initial abatement costs are higher than the alternative cost of emissions and the company specific strategic value, the investments are not directly profitable and are unlikely to be undertaken from a purely financial perspective. Without state
intervention, investments in CCS projects are not expected to materialize until the costs of emissions are high enough to justify the first-mover projects.
DNV GL has in a study for the full-scale project investigated the cost curve for CCS, based on empirical learning rates in other industries, and the expected developments in the CCS value chain.
The cost curve was estimated to have a 10% decrease of costs for every doubling of CCS capacity in million tonnes per year.
Full-scale project contribution to future CCS cost reduction
A societal perspective values the benefits of cost reductions from the initial projects on future projects.
This value is dependent on how many future projects are deployed. Based on the analysis of the recent developments in EU and member state policies in chapters 2, 3 and 4, we have assessed
100 110 120 130 140 150 160 170 180 190 200
Project 1
Project 2
Project 3
Project 4
Project 5
Project 6
Project 7
Project 8
Project 9
Project 10
Project 11
Project 12
Project 13
Project 14
Project 15
Project 16
Project 17
Project 18
Project 19
Project 20 Project actual cost Cost reduction from project 1 Cost reduction from project 2 Cost reduction from project 3 Cost reduction from project 4 Cost reduction from project 5 Cost reduction from project 6 Cost reduction from project 7 Cost reduction from project 8 Cost reduction from project 9 Cost reduction from project 10 Cost reduction from project 11 Cost reduction from project 12 Cost reduction from project 13 Cost reduction from project 14 Cost reduction from project 15 Cost reduction from project 16 Cost reduction from project 17 Cost reduction from project 18 Cost reduction from project 19