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Wednesday, November 29, 2023

Carbon Capture and Storage: Basic Facts for Investors

As world leaders continue to share net zero carbon emissions pledges and make efforts to implement green energy transitions, technology is expected to play a key role.

In recent years, carbon capture and storage has emerged as a way to potentially reduce carbon emissions. The process works by capturing and storing carbon dioxide (CO2) before it is released into the atmosphere.

This technology can capture up to 90 percent of CO2 released by burning fossil fuels for electricity generation and industrial processes such as cement production.

Critics argue that it’s not a solution for tackling climate change and will prolong the life of fossil fuels, but the carbon neutrality goals of major economies around the world, along with growing pressure to reduce greenhouse gas emissions, continue to drive momentum in post-combustion CO2 capture, Holly Havel, senior research analyst at Lux Research, told the Investing News Network.

“Since most companies are at an early stage in their decarbonization journey and (are) prioritizing Scope 1 and Scope 2 emissions, CO2 capture offers a near-term solution for energy-intensive industries like cement and steel that have no economical or commercially feasible alternatives for reducing emissions,” she noted.

Scope 1 emissions refer to direct greenhouse gas emissions that occur from sources that are controlled or owned by an organization, while Scope 2 encompasses indirect emissions associated with the purchase of electricity, steam, heat or cooling mechanisms.

Although carbon capture technology is commercially ready for deployment, incumbent solvent solutions have struggled to scale for post-combustion applications due to high energy requirements, high operating costs and high capital costs, Havel explained.

“Innovations today focus on new capture mediums that address these challenges through incremental improvements, but it is becoming progressively harder to reduce the cost and energy consumption of CO2 capture technologies. The technology also faces unfavorable market conditions and lack of regulatory support.”

Looking at how this space could evolve, emerging carbon capture technologies are maturing slowly, Havel said, so major technology developments or breakthroughs are unlikely over the next year alone.

“With that being said, we can expect to see continued momentum on the business side of things via investments, new partnerships and project announcements,” she added.

When asked if carbon capture is worth investing in or should receive so much attention from governments around the world, Havel said that in terms of investing it depends on the technology.

“I do think the attention from governments is warranted because CO2 capture will be a necessary decarbonization tool for industries that lack any scalable alternatives to combustion-heavy processes,” she said. “Regulatory incentives will be critical to drive global adoption in the near-term.”

Companies to keep an eye on

When evaluating carbon capture technology, investors should focus on the energy consumption of the technology rather than the all-in cost of capture, Havel said.

She mentioned a couple of companies that are developing this technology that investors should watch out for.

“Svante is one of the most well-funded companies to have emerged in recent years and stands to be the first to deploy solid sorbents for CO2 capture at scale,” she said.

“The company claims considerable cost improvements and has several industrial-scale projects underway that will be important for demonstrating commercial validation.”

Compact Carbon Capture, which was acquired by Baker Hughes (NYSE:BKR) in 2020, is another company worth monitoring, and according to Havel it really stands out from its competitors.

“The company focuses on redesigning the system itself, which would significantly reduce capital costs and could potentially lead to a very low cost of CO2 capture,” she said. “The technology is also solvent agnostic, so it would be interesting to monitor potential partnerships with emerging solvent developers.”

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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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