Page | 1 1. Introduction . 2 2. CCS technology - Various stages of maturity tied to CO2 concentration . 2 3. Storage risk storage rocks in the US . 4 4. Policy risk no party lines for CCS . 6 5. Counterparty risk What is the impact of COVID-19? . 7 6. CO2 Pipelines new challenges in 2020 . 8 7. Conclusion Progress, but more investment urgently needed . 9 8. References . 10Page | 2 Carbon capture, utilisation and storage (CCS) comprises a wide range of technologies that involves capturing carbon dioxide (CO2) produced by large industrial plants such as steel mills, cement plants, coal, and natural gas-fired power plants and refineries, compressing it for transportation and permanently storing it deep underground. Carbon capture technologies can also help remove CO2 from ambient air. Over the past year, the outlook for CCS has been positive, particularly in the United States (US). Thanks to broad bipartisan support at both the federal and state level, CCS in the US has seen growth exceeding that of any other nation. In 2020, the Global CCS Institute (the Institute) added 16 new US based projects to its CO2RE CCS Facilities database, with several more in the development pipeline. Additionally, the Institute has seen an increase in new stakeholders looking to engage and explore the role of CCS in their emissions reduction strategies. These new stakeholders include sustainable investors who believe CCS projects can deliver strong returns while achieving environmental goals and mitigating climate change risk. These new market entrants, however, often share a common concern; the need to de-risk CCS for investment. This briefing will serve to summarise ongoing work by the Institute to communicate and educate stakeholders on the potential risk characteristics of CCS and to discuss these in the context of de- risking CCS investments and addressing challenges from a US perspective. These challenges range from queries about the cost of CCS to whether the November 2020 elections could disrupt vital policies supporting CCS to the future of pipelines. These efforts by the Institute, and other players advocating for CCS, have improved understanding clarity that should help both project proponents and investors feel comfortable moving forward on CCS. As interest in CCS from the sustainable investment community gains momentum, common concerns amongst investors have arisen. The Institute has recognised key areas of perceived risk regarding the technology and its varied applications. A need for further information for investors to develop their understanding of these risks is required, enabling the process of risk mitigation and increased investor confidence in CCS in the US. De-risking CCS begin with understanding the associated risks with CCS technologies, cost, the CCS process itself including CO2 storage and pipeline infrastructure and the enabling policy and legal and regulatory environment. Arising from this years global pandemic and related challenges, the impact of COVID-19 and associated investor risks must also be considered. The following sections discuss and provide further detail on key areas for consideration regarding de- risking CCS investments. The three primary capture methods used in the CCS process are pre-combustion capture, post- combustion capture, and oxyfuel combustion, with countless variations under each sub-category. The most prevalent capture type is post-combustion absorption with amines. Many investors and stakeholders consider the technology risk low for these types of projects. Thanks to facilities around the world capturing and storing more than 40 million tons of CO2 per annum, CCS technology i , and primarily post-combustion capture with amines, have been proven at a large scale. As technologies are being deployed as 2 nd and 3 rd of a kind, there are significant savings that fall into the category of “learning through doing.” These improvements are driving down costs. This has beenPage | 3 seen in Petra Nova and in similar, planned projects like San Juan (see Figure 1 below) which both utilise technology from Mitsubishi Heavy Industries (MHI) 1 . Figure 1: Levelised cost of CO2 capture for large-scale post-combustion facilities at coal-fired power plants, including previously studied facilities from the Global Status of CCS: 2019 i However, the cost of CCS application is still high for many emissions sources, particularly those with low CO2 concentration. One of the defining characteristics related to CCS cost is what percentage of the flue gas is CO2, with many existing projects having very high concentrations of CO2 including ADMs ethanol plant in Illinois. Therefore, as industry proponents explore technology improvements to lower costs, they must consider technologies that address different emissions sources and concentrations. Prominent areas of exploration include: Incremental improvements for commercial technologies (post-combustion capture with amine) New variations of post-combustion capture with non-solvent technologies Fuel-cell technology Innovations in oxyfuel combustion, such as NetPower. These innovation streams 2 are certainly not exhaustive of the activities around CCS technology innovation. The US Department of Energy and ARPA-E spend over a $100 million each year on technology innovation and cost reductions for CCS. Industry analysts have lobbied for even more money to be spent, however, to allow this set of technologies to grow more quickly to enable its essential role in mitigating climate change. In addition, as technologies are being deployed as second and third of a kind, there are significant 1 Operations at Petra Nova are currently suspended due to low oil prices. The facility remains an essential example of a CCS project deployed on-time and on-budget. 2 For more information on the innovation streams please view the Institutes webinar on The Technology Cost Curve: Page | 4 savings that fall into the category of learning through doing. These improvements are driving down costs. The development of larger projects also drives down the cost per ton captured since the considerable capital costs can be spread across a large project base. For example, Boundary Dam in Saskatchewan, Canada, captures approximately 800,000 tons per year of CO2, and San Juan plans to capture about six mtpa per year making it about 7.5 times the size of Boundary Dam. The potential to safely and permanently store CO2 underground is a critical component of the overall CCS value proposition. Government support and industry expertise in the characterisation and development of storage resources and supporting the legal and regulatory environment have already greatly de-risked geological storage. To meet the goals of the 2015 Paris Climate Change Agreement, the IEA Greenhouse Gas R as part of a commitment to decarbonizing power with natural gas with CCS a viable option for utilities; and for carbon removal solutions including direct air capture (DAC) with geological storage and bioenergy with CCS (BECCS). Recommendations included expanded funds and support for research, development, and demonstration projects, development of national clean energy standards, and utilising private activity bonds for CCS. Multiple other bills have been introduced in Congress that would postpone the start of construction deadline for 45Q, convert the tax credits to a direct pay option, give additional support to pipelines and utilisation, and more. COVID-19 recovery plans proposed by both parties included many of these elements. Support continues at the state level. For instance, California has its attractive LCFS, and many other states have looked at ways to support CCS. Examples of state support include local financial incentives, assuming responsibility for granting Class VI Well approval from the federal government, incorporating CCS in clean energy standards, bills that address subsurface rights, and initiatives to create pipeline corridors. State support is occurring with both Democratic and Republican governors and legislative majorities. All this points to significant and broad support for CCS, but also demonstrates areas where increased support is still required to drive more projects. Pledges for reductions in CO2 emissions among the private sector may prove to be as significant a driver of CCS deployment as policy. Corporate commitments to become carbon negative are becoming more prevalent. Microsoft stepped up in 2020 with plans to remove all its historical carbon dioxide emissions from the atmosphere by 2050. A $1billion climate innovation fund accompanies this commitment, which can finance innovation in geological storage, carbon utilisation, and direct air capture. The Microsoft fund builds on Stripes commitments of funding $1 million per year on carbon removal technology with several investments already announced, including support for CarbonCure, Climeworks, and Carbfix. While not all companies are ready to make such bold statements around removing historical carbon, significant emitters in the O scaling up of renewables, electrification, and grid efficiency will be necessary. The versatility of CCSs application across power, industrial, and fuel emissions will be vital in this technologys contribution to deep emissions reductions. The 16 facilities recently added to the CO2RE database already span large scale- commercial projects across all three applications. However, meeting global climate mitigation targets will require continued de-risking across most areas of CCS. An inter-state pipeline network, technology development for low CO2 concentration sources and storage and legal and regulatory support for CCS are areas that still need ambitious policy support to mitigate associated risks. Further policy support will be necessary across these areas of CCS to sufficiently de-risk them and enable the continued commercial deployment of CCS. Questions over pore space and mineral rights will also need to be addressed, possibly at the state level to allow for rapid deployment. Previous experience has shown these risks can be addressed. CCS technologies have already greatly matured and continue to progress. The development of natural gas pipelines and mineral drilling rights provide excellent precedents to what can be achieved to address pipeline and storage risks respectively. The Institute will continue to be a resource for the investment community, in the US and internationally to work collaboratively across the public and private sectors on de-risking potential barriers to CCS to unlock investments and support for this vital climate change mitigation technology.Page | 10 i Global CCS Institute. 2019 The Global Status of CCS: Targeting Climate Change. ii Global CCS Institute. 2020 CCS Talks: All you need to know about CO2 Storage, know-about-co2-storage/ iii Townsend, A. & Havercroft, I. 2019. The LCFS and CCS Protocol. Global CCS Institute. An Overview for Policy Makers and Project Developers, Available at: protocolan-overview-for-policymakers-and-project-developers/ iv “Weekly LCFS Credit Transfer Activity Reports,” California Air Resources Board, accessed August 19, 2020, Available at: ww3.arb.ca.gov/fuels/lcfs/credit/lrtweeklycreditreports v House Select Committee on the Climate Crisis, “Solving the Climate Crisis: The Congressional Action Plan for a Clean Energy Economy and a Healthy, Resilient, and Just America” (Washington: 2020), Available at: climatecrisis.house.gov/sites/climatecrisis.house.gov/files/Climate%20Crisis%20Action%20Pl an.pdf vi Abramson, E., McFarlane, D, & Brown, J. June 2020. Transport Infrastructure for Carbon Capture and Storage, Available at: betterenergy/wp- content/uploads/2020/06/GPI_RegionalCO2Whitepaper.pdf