Carbon capture and utilisation (CCU) technology continues to receive significantly less investment than carbon capture and storage (CCS), despite its potential to generate commercial revenue and support decarbonisation across a range of industries. This observation follows Wood Mackenzie’s white paper on CCU, released in collaboration with the World Economic Forum during Climate Week in New York.
How big is the opportunity?
While carbon remains a fundamental element used in the production of countless goods, the challenge lies in the excess that ends up in the atmosphere. Today, two primary approaches exist to manage emitted car-bon: CCS and CCU. While both technologies are still developing, investment in CCS has far outpaced CCU.
CCU replaces fossil fuel-derived carbon with captured carbon in products such as fuels, chemicals, building materials and pure-carbon materials like graphite. The Oil and Gas Climate Initiative estimates a utilisation market between 0.4 and 0.8 billion t of captured carbon could exist annually by 2040 – equivalent to 1% to 2% of current global greenhouse gas emissions.
Current project pipelines highlight a clear disparity. Wood Mackenzie projects around 940 million tpy of capture capacity for storage by 2040, largely driven by government subsidies and carbon pricing. In comparison, the current CCU project pipeline sits at just 25 million tpy by 2040 – less than 3% of capture for storage projections.
Methanol and plastics drive market opportunity
Methanol presents a notable opportunity due to its broad range of down-stream uses, including olefins, e-fuels and maritime transport. Forecasts suggest e-methanol demand could reach around 40 million tpy out of a total global demand of 227 million tpy by 2050.
Plastics also represent a significant opportunity. Current demand for ethylene and propylene derivatives stands at 519 million tpy. CCU could con-tribute through methanol and ethanol production, as well as emerging technologies that directly synthesise plastic precursors.
Why is CCU in the shadow of CCS?
Every CO2 molecule utilised through CCU is a new fossil CO2 molecule that avoids atmospheric release. Yet CCU receives limited government support compared to CCS. Wood Mackenzie’s outlook anticipates around 940 million tpy of capture capacity for storage by 2040, driven in large part by policy incentives.
By contrast, the CCU pipeline remains modest at 25 million tpy through 2040 – less than 3% of the total. This is despite CCS generating no direct economic value and relying entirely on regulatory revenue. CCU, by com-parison, offers the potential for additional income through product sales.
Policy gaps limit investment
CCU faces logistical hurdles, from building new value chains to collecting carbon and manufacturing end-products. Initial capital costs are high, and the resulting products are often more expensive than conventional alternatives. While costs are expected to decline and technologies to improve, this relies on support for early-stage projects to gain traction.
Despite its potential to generate revenue, CCU is constrained by policy barriers. Global carbon pricing remains insufficient to incentivise capture. Even in regions with more developed pricing, such as Europe, many CCU applications are not covered. Only those that result in permanent carbon storage, like CO2-treated building materials, currently benefit from carbon price incentives.
Do we expect policy to kickstart CCU development?
The EU is reviewing its emissions trading scheme, which could extend carbon pricing to a broader range of CCU applications. This would help level the playing field with conventional fossil-derived production but would not be enough on its own.
To stimulate investment, demand-side measures such as content man-dates, paired with public funding, could help de-risk early projects and un-lock capital. Wood Mackenzie sees coherent policy frameworks as critical to driving performance and cost improvements. These lessons from energy decarbonisation can be applied to industrial ‘defossilisation’. Without targeted support, CCU risks remaining overshadowed by CCS, despite its commercial promise.