Carbon Capture Use and Storage

Achieving Carbon Neutrality in the California Cement Industry Key Barriers & Policy Solutions

Carbon Capture Use and Storage Excerpt from Full Report

March 29, 2021

GHG REDUCTION PATHWAYS & LEVERS There are three primary pathways to reducing Cement Production GHG Reduction Levers, by GHG emission in the cement industry: (1) reducing Timing and Scale of Impact process emissions; (2) reducing combustion emissions through fuel switching; and (3) increasing distributed electricity generation. Each pathway offers a mix of near-term, mid-term, and longterm opportunities, as well as a range of GHG reduction benefits. Achieving carbon neutrality in the California cement industry will require pressing forward on all fronts to unlock a portfolio of options that each cement plant can use to chart its path toward carbon neutrality given its circumstances.

The following sections provide context on each pathway, outline the key levers that will be necessary to achieve emissions reductions under each pathway, describe both the potential benefits and the outstanding challenges faced by each lever, and present policy recommendations to unlock these opportunities.

PATHWAY 1. REDUCING PROCESS EMISSIONS Lever 1.B Carbon Capture Utilization & Storage ● Timing: Long-Term| ● Impact: >50% The Opportunity. CCUS refers to a suite of technologies and infrastructure measures to capture, store, and use CO2 emissions. While CCUS technology addresses both combustion and process emissions, the primary benefit of carbon capture is to abate process emissions that cannot be reduced through other conventional decarbonization levers. Among this suite of technologies, amine scrubbing technology — which “strips” and captures emissions by passing them through an aqueous amine solution — is the current “benchmark” approach and at present the most viable pathway toward rapid deployment of capture technology in the cement industry. Though the potential for equipment retrofits using other approaches (e.g., partial oxy-fuel combustion) also show promise, amine scrubbing technology is the most developed, is most typically used as the basis for commercial-scale demonstrations in the cement industry, and poses the least financial risk for retrofitting existing cement plants.1

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With a typical capture rate upwards of 90%, this approach yields cement industry GHG abatement on a scale otherwise not achievable by non-CCUS abatement measures.2 As a practical matter, carbon neutrality will be out of reach for the California cement industry unless and until cost-effective CCUS technology is commercially available, given the otherwise limited set of options for addressing process emissions.3 In the absence of CCUS deployment, the cement industry’s options for achieving deep decarbonization are fundamentally limited and insufficient to achieve carbon neutrality goals.4 The Barriers. Carbon capture has been in use since as early as the 1930s, but the high capital expenditures and limited infrastructure to store and use captured carbon have limited more widespread deployment, especially in the cement industry. While the project pipeline of commercial CCUS projects is expanding as the technology gains momentum on the heels of public investments and deployment incentives in the U.S. and elsewhere, only a handful of pilot and demonstration-stage projects are in planning or operation at cement plants.5,6 The vast scale of capital investment required is a major challenge. One study estimates that the cost of installing carbon capture configurations ranges from $150 million to $360 million per cement plant, while the estimated costs per MT of CO2 avoided range from roughly $50 to $100, depending on technology type.7,8,9

Estimated Cost per Ton of CO2 Avoided Using Available Cement Industry CCS Technology

Source: Gardarsdottir, S. O., De Lena, E., Romano, M., Roussanaly, S., Voldsund, M., Perez-Calvo, J. F., ... & Cinti, G. (2019). Comparison of Technologies for CO2 Capture from Cement Production-Part 2: Cost Analysis. Energies, 12(13), 11 Link

CCUS projects are, as illustrated, extremely capital-intensive and also entail significant project risks (e.g., technology risks, policy uncertainty) that can drive up costs further and derail timelines. In light of this cost and uncertainty, CCUS ventures require a level of support sufficient to not only mitigate project risk, but also to catalyze and complement private sector investment. In the absence of public funding and financing support, the California cement industry — which has a severely limited ability to pass through large-scale investment costs — simply cannot achieve sufficient returns over a realistic time period. The industry’s typical payback period for capital expenditures (typically in the range of three to seven years) is incongruous with the longer time horizon for returns on CCUS. As a result, where CCUS applications for the cement industry are being pursued today, governments provide significant capital support.

Public Investment: A Key Ingredient for the Capture-Storage Value Chain Project Longship—the global cement industry’s first- large-scale CCS facility, slated to be developed at a cement plant in Brevik, Norway—is a useful proof point for understanding the critical role that robust public sector investment can play. As a global first-of-its-kind project fueled by nearly $2 billion in public funding, Longship sets a template for investments in a full capture-storage value chains that realize the benefits of economies of scale.10 Once operational, the project will capture and geologically store 0.4 million MT of CO2e from the Brevik cement plant annually and will ultimately enable a nationwide capture and storage network that covers several emitting facilities.11

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The need for public investment outstanding, current state and federal policy also leaves significant gaps when it comes to incentives for carbon capture. Most notably, California’s trademark cap-andtrade program does not include a protocol that would exempt captured carbon from compliance allocations (by comparison, the state’s LCFS program has adopted such protocol and offers a strong financial incentive for carbon capture). To bridge the gap, the California Decarbonization Partnership has recommended that the CARB adopt the LCFS CCS protocol for the cap-and-trade program.12 On the federal level, the limited benefit window of 45Q tax credits (projects receive the credit only over 12 years of operation), the delayed rollout of guidance for claiming the credit, and the scale of the financial incentive ($50 per MT CO2 permanently stored) help define an insufficient landscape of carbon capture incentives for unlocking cement industry applications.13 Still, recent federal funding for carbon capture demonstration projects, with set-asides for steel and cement applications specifically, represents an important stride forward.14 Compounding the financial barriers to CCUS deployment in California is the burdensome regulatory process associated with these projects, driven by a number of overlapping, time-intensive permitting requirements that include the CEQA and NEPA environmental impact review processes, which can span several years and, critically, on which other processes may be contingent.15 Permitting timelines add a layer of financial uncertainty to these projects; state and federal reviews can take 6 or more years and can be particularly complex as the capture and storage of carbon may be subject to separate permitting processes.

Permitting Timelines for CCS Projects

Source: Adapted from Energy Futures Initiative. (2020). An Action Plan for Carbon Capture and Storage in California: Opportunities, Challenges, and Solutions (pp. S-9). Link.

Finally, successfully unlocking California’s carbon storage potential, as well as catalyzing new markets for carbon utilization will be critical to deploying CCUS across sectors in California. In terms of storage, the state has a unique geologic advantage; California has the capacity to safely geologically store 60MtCO2 annually for the next 1,000 years, roughly equal to the annual CO2 emissions from the California energy sector.16 Unlocking this capacity is a matter of investing strategically and aggressively in the necessary transportation and injection infrastructure in a way that benefits CCUS applications economy-wide. In terms of utilization, this means developing mature markets for carbon utilization that offer an alternative to enhanced oil recovery, which remains the most widely practiced form of carbon utilization.17 Both present major challenges that will require achieving new levels of coordination, infrastructure investment, and carbon management planning.

Steps taken now to support CCUS deployment for the California cement industry can have vast ripple effects for the feasibility and cost of future reductions. The California industry can be a global leader in this regard. However, absent significant deployment advances — unlocked by supportive policy and market conditions — the potentially transformative emissions abatement impacts of CCUS in the cement industry will remain out of reach.

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Exhibit 4: Overview of CO2 Capture Technologies Evaluated or Planned in the Cement Sector

Source: Plaza, M., Martinez, S., & Rubiera, F. (20202). CO2 Capture, Use, and Storage in the Cement Industry: State of the Art Expectations. Energies, 13(21), 1-28. Link

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ENDNOTES 1

Plaza, M., Martinez, S., & Rubiera, F. (20202). CO2 Capture, Use, and Storage in the Cement Industry: State of the Art Expectations. Energies, 13(21), 1-28. https://www.mdpi.com/1996-1073/13/21/5692/htm 2

Hills, T., Leeson, D., Florin, N., & Fennell, P. (2016). Carbon capture in the cement industry: technologies, progress, and retrofitting. Environmental science & technology, 50(1), 368-377. https://pubs.acs.org/doi/abs/10.1021/acs.est.5b03508.

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Many sources have highlighted the sheer necessity of CCUS applications for deep decarbonization of the cement sector, especially in context of increasingly ambitious climate goals. For instance, the authors of the E3 draft report Achieving Carbon Neutrality in California write that energy-intense sectors “are either reliant on the application of CCS or on heavy process-related innovations” and assume that CCS is used to abate cement industry non-combustion emissions. The need to accelerate CCUS deployment for industrial decarbonization is not unique to California. The International Energy Agency recently highlighted the “imperative” to accelerate RD&D investments in CCUS for cement applications in order to achieve emissions reductions that align the global industry with the Sustainable Development Scenario pathway.

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For example, modeling conducted by Energy Innovations finds that industrial emissions account for most of the gap between emissions outcomes under current policy and carbon neutrality. Bridging this gap entails cement industry GHG abatement that is nearly fully driven by CCUS. 5

Lehne, J., & Preston, F. (2018). Making concrete change: Innovation in low-carbon cement and concrete. Chatham House Report, Energy Enivronment and Resources Department: London, UK, 1-66. https://www.chathamhouse.org/publication/making-concrete-change-innovation-low-carbon-cement-and-concrete.

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Hills, T., Leeson, D., Florin, N., & Fennell, P. (2016). Carbon capture in the cement industry: technologies, progress, and retrofitting. Environmental science & technology, 50(1), 368-377. https://pubs.acs.org/doi/abs/10.1021/acs.est.5b03508.

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This is consistent with assumptions made in a number of different analyses—some California-specific—that consider costs of industrial or cement industry GHG abatement through CCUS, which fall in the range of $60 to $120 per MT CO 2 avoided (see: EFI, NPC, and E3).

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Markewitz, P., Zhao, L., Ryssel, M., Moumin, G., Wang, Y., Sattler, C., ... & Stolten, D. (2019). Carbon capture for CO 2 emission reduction in the cement industry in Germany. Energies, 12(12), 2432. https://www.mdpi.com/1996-1073/12/12/2432 9

Note that estimated installation costs converted from EUR to USD.

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Norway to Launch $2,7B Carbon Capture and Storage Project 'Longship' (2020, September 20). Offshore Engineer Magazine https://www.oedigital.com/news/481822-norway-to-launch-2-7b-carbon-capture-and-storage-project-longship 11

Bellona Foundation (2020). Norway’s Longship CCS Project. https://network.bellona.org/content/uploads/sites/3/2020/10/Longship-Briefing_Bellona-1.pdf 12

McBride, B. et al (2020, July 20). California Decarbonization Partnership letter to CARB on Carbon Capture [Letter to Jason A. Gray]. https://www.c2es.org/press-release/california-decarbonization-partnership-letter-to-carb-on-carbon-capture/ 13

Beck, Lee. (2020, November 29). Which Trump Administration-era Policies Should the Biden-Harris Administration Continue? Expand CCUS Legislation. Atlantic Council. https://www.atlanticcouncil.org/blogs/energysource/which-trump-administration-era-policies-should-the-incoming-biden-harris-administration-continue/ 14

Kaufman, L. (2021, January 4). Will Covid Stimulus Be the Breakthrough Carbon Capture Has Been Waiting For? Bloomberg. https://www.bloomberg.com/news/articles/2021-01-04/will-covid-stimulus-be-the-breakthrough-carbon-capturehas-been-waiting-for-kjigd4i0?

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CEQA and NEPA are parallel state and federal statutes, respectively, that codify systems for reviewing environmental impacts of projects, though there are several differences between the two, a major example being their different approaches to determining “significant effects.” Both encourage the use of a joint review process for projects that trigger requirements for both state and federal approval, as would be the case for a carbon capture project, hence their grouping.

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16

Energy Futures Initiative. (2019). Optionality, Flexibility, & Innovation: Pathways for Deep Decarbonization in California. https://static1.squarespace.com/static/58ec123cb3db2bd94e057628/t/5ced6fc515fcc0b190b60cd2/1559064542876/EFI_ CA_Decarbonization_Full.pdf 17

Bobeck, J., Peace. J., Ahmad, F.M., Munson R. (2019, August). Carbon Utilization – A Vital and Effective Pathway for Decarbonizatoin. Center for Climate and Energy Solutions. https://www.c2es.org/site/assets/uploads/2019/09/carbon-utilization-a-vital-and-effective-pathway-for-decarbonization.pdf

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