Why industrial clusters are key to unlocking the potential of carbon capture solutions

• Carbon capture is key in lowering the carbon footprint of heavy emitting sectors – steel, chemicals, cement and energy.Policy initiatives from the United States and Europe have provided resourcing for carbon capture projects, making them global leaders.Industrial clusters provide potential pathways for carbon capture solutions to access public funding and improve economic viability.

Almost all national net-zero ambitions are anchored on the decarbonization of heavy-emitting industries. Despite this, demand for basic materials such as cement, steel and chemicals are expected to grow significantly, seemingly at odds with the increasing urgency to lower carbon emissions in producing these materials.Carbon capture is a critical solution for addressing unavoidable residual emissions from heavy industry, which cannot be abated via available solutions such as energy efficiency measures or increased process electrification with renewables. Even with its potential, the economic viability of carbon capture solutions remains a major barrier to its wider deployment.

Europe and the United States are leading the world in implementing carbon capture infrastructure. In the United States, comprehensive policy packages such as the Infrastructure Investment and Jobs Act (IIJA) and the Inflation Reduction Act (IRA) have accelerated the commercial development of carbon capture hubs.In Europe, carbon capture projects have picked up pace with the boost from the Green Deal Industrial Plan and Net Zero Industry Act introduced in March 2023, which sets an EU-wide goal of 50 million tonnes of carbon storage capacity by 2030, on top of existing EU ETS measures and the anticipated Carbon Border Adjustment Mechanism (CBAM).Industrial clusters could provide potential pathways to drive commercial viability of carbon capture solutions through scale, cost efficiencies anchored on enhanced public-private collaboration and cross-industry partnerships, which are among the aims of the Transitioning Industrial Clusters initiative.

Industrial cluster partnerships

Two examples demonstrate the carbon capture solutions powered by industrial cluster partnerships.

Port of Antwerp-Bruges – Antwerp@C

The Port of Antwerp-Bruges, a signatory cluster to the Transitioning Industrial Clusters initiative, is a key energy and chemicals hub, home to Europe’s largest integrated chemical cluster.

At the core are three components:

• An open-access pipeline backbone, led by Fluxys with Pipelink as a minority member, that collect and transport captured CO2 from industrial emitters.The pipelines would terminate at a dedicated liquefaction plant, led by Air Liquide.An export terminal for shipping to a final storage location, led by the Port of Antwerp-Bruges.

The project benefits from the collective experience and expertise of the participating companies. Additionally, the characteristic of an industrial cluster lends well to the sharing of infrastructure for large carbon emitters in the region. The potential future demand translates into opportunities for achieving meaningful economies of scale. At the same time, the concentration of industries enables a calculated progression approach that helps to de-risk and accelerate the technological learning curve.Starting with small-scale projects limits associated risks, allowing for testing and learning that could accelerate eventual scale-up. A longer-term goal is to integrate the backbone into a broader pan-European pipeline system for carbon transport. Revenue streams for the project will be derived from a tariff structure based on the volume of CO2 throughput applicable to the use of the pipeline network and export terminal.The project has received significant financial support from the European Union, with €144 million allocated from the EU Connecting Europe Facility for Energy to construct the backbone and export facilities. Notably, BASF and Air Liquide have already secured €356 million from the EU Innovation Fund for their joint CO2 capturing project, Kairos@C.

The East Coast Cluster comprises two industrial clusters, ZeroCarbon Humber, a signatory cluster, and Net Zero Teesside. Both clusters are home to mature industrial and power generation facilities, which support stable demand and growth for carbon, capture, utilization and storage (CCUS) services. The transport and storage infrastructure in the North Sea for the cluster is led by the Northern Endurance Partnership, which comprises energy sector majors such as BP, Eni, Equinor and TotalEnergies.

In addition to funding, the UK government is developing business models and revenue mechanisms that acknowledge cross-value chain risks, such as revenue risks, timing mismatches between operations commencement of CCUS service providers and off-takers and policy risks.Key features of the UK carbon capture business model include the central role of industrial clusters and breaking up the value chain into smaller constituent parts covering capture, transport, storage and utilization, involving multiple operators and asset owners. Distinctions are made between carbon capture for power, industry and energy from waste. On-going consultation with industry supports the refining of terms and conditions that govern the overall funding support and technical and commercial specifications.

Industrial clusters could be a key enabler for carbon capture solutions, supporting the creation of a robust ecosystem of partnerships between government bodies, carbon capture service providers and industrial off-takers that collectively advance the implementation of carbon capture solutions towards the goal of industrial net-zero.Systemic risks are mitigated by decoupling the development and funding of the carbon capture value chain components, driven by a holistic industrial strategy and policy framework. Despite growing momentum, the sector still faces challenges in permitting and gaining community support – areas where industrial clusters could be a powerful enabler to accelerate progress, in parallel with realizing socio-economic benefits