CO2 storage is on the verge of a worldwide breakthrough. Promising industrial-scale projects are also getting underway in Europe.
The total greenhouse gas emissions of European industry over the next two centuries: that's how much CO2 the sandstone formations under the sea surface off the coast of Norway could absorb. The storage capacity at a depth of more than 2,000 meters is theoretically up to 80 billion tons of CO2.
With the "Northern Lights" project, the energy companies Shell, Total and Equinor now want to tap this potential. The greenhouse gas is to be captured in gigantic quantities in industrial plants on the mainland, transported by tankers and injected into former oil and natural gas deposits under the North Sea. To this end, the government in Oslo is providing start-up funding equivalent to around 1.6 billion euros. The project is scheduled to get underway as early as 2024.
The new technology is likely to be central to achieving the Paris climate targets. In some industries, such as chemical and cement production, CO2 emissions cannot be completely avoided, even if companies rely exclusively on renewable energies. Many experts are therefore convinced that the capture and underground storage of CO2 - "Carbon Capturing and Storage" (CCS) - is essential in the fight against climate change.
Nevertheless, according to the IEA, only around 20 CCS plants are currently in operation worldwide. The high cost of carbon capture and storage and the lack of investment incentives and government support have been major barriers to widespread deployment of this key technology.
Economic prospects for CCS technology
Currently, however, development is receiving new impetus. There are several reasons for this: For one, there is increased focus on net zero emissions. Secondly, the CO2 price in EU certificate trading is already at 50 euros per ton (as of September 2021) and is expected to rise further in the coming years. Finally, the industry assumes that costs for the capture and storage of the greenhouse gas will fall significantly due to scaling effects.
In addition to Norway, the Netherlands is also planning to store CO2 in empty gas fields under the North Sea. The most advanced large-scale CO2 storage project within the EU is called "Porthos." It is initially targeting a capacity of 2.5 million tons of CO2 per year and is focused on the Rotterdam industry. ING Groep acted as sole financial advisor to the sponsors of the Porthos project. At the same time, ING is one of the first players in the banking sector to have already established an international team of CCS experts. In addition to project finance specialists and financial advisory experts, this multidisciplinary team also includes engineers to provide customers with comprehensive advice. ING is currently engaged in discussions with various sponsors of CCS projects, particularly to determine the bankability of these projects and potential financing alternatives.
Other projects are underway in Iceland, Denmark and the UK. The USA and Canada have been storing CO2 underground for years, and even Saudi Arabia and the United Arab Emirates are experimenting with the technology in view of stricter climate targets.
In Germany, CO2 storage has been banned since 2012. The Federal Environment Agency points to dangers from possible uncontrolled leakage of the gases. In June 2021, however, the German government paved the way for CO2 to be taken abroad for storage. This means that German companies can also benefit from the key technology. CCS will therefore continue to gain in importance for companies and investors, and banks should be prepared to be able to support their customers in this forward-looking topic.