This week, our attention was drawn to a report by Baringa Partners, prepared as part of the Sustainable Markets Initiative (SMI), entitled Unlocking Private Capital – Scaling Investment in the Carbon Capture and Storage (CCS) Sector. Aimed at the financial services community, the report examines the shortage of late-stage financing needed to bring projects to Final Investment Decision (FID).
The SMI’s Financial Services Task Force identifies CCS as a critical enabler of the transition to a net-zero economy by 2050. This transition could also contribute significantly to UK economic growth and support thousands of new jobs. The International Energy Agency (IEA) estimates that CCS could deliver up to eight per cent of global emissions reductions between 2022 and 2050 — equating to around 6GtCO2 per year by mid-century. CCS, therefore, represents a multi-billion-dollar investment opportunity. As Baringa notes, annual investment could rise within the next two to three years from the US$4bn recorded in 2024.
Unlocking CCS investment barriers
Despite this potential, persistent barriers continue to constrain deployment. According to Sustainable Views, approximately 91 per cent of projects targeted to be operational globally by 2030 have yet to reach FID, meaning funding and construction commitments have not been secured.
The Baringa report recommends:
• establishing pre-FID development capital funds to help create investable projects
• aggregating demand and structuring offtake solutions to generate bankable revenue streams
• creating a global CCS financing “lessons forum” to accelerate learning cycles and build investor confidence
Governments have so far played a pivotal role. Around US$50bn was committed globally in 2023–24 to support landmark first-of-a-kind projects. The UK Government has pledged GBP21.7bn (US$36.3bn) over 25 years to support the country’s first two CCS clusters, including GBP9.4bn allocated through to 2029/30. This public backing has helped catalyse more than GBP10bn in private debt financing.
Internationally, support mechanisms vary. Norway funded 67 per cent of Phase 1 of the Longship project. The Netherlands has committed EUR2.1bn through its SDE++ scheme, while the US 45Q tax credit provides revenue certainty. Canada has also invested up to 60 per cent of eligible project costs to partially de-risk developments.
CCS policy push
Carbon pricing is strengthening project economics in some regions. The EU Emissions Trading System (EU ETS) has maintained prices at around EUR70/t in 2024, while the Carbon Border Adjustment Mechanism (CBAM) is expected to create further incentives for sectors such as cement to adopt CCS, potentially increasing upward pressure on carbon pricing.
In Germany, the Carbon Contracts for Difference (CfD) scheme awarded its first contracts in 2024, with maximum funding increased to EUR4.1bn. At EU level, the Commission’s Carbon Management Strategy and the Net Zero Industry Act (NZIA) require member states to develop national carbon management plans. The UK ETS Authority has also confirmed that engineered Greenhouse Gas Removals will be integrated into the emissions trading scheme by the end of 2028.
Canada has expanded its federal CCS tax credit to cover up to 60 per cent of capture equipment costs for Direct Air Capture (DAC) and 50 per cent for other capture applications. The US has confirmed the continuation of the 45Q scheme. Policy frameworks are also advancing across the Asia-Pacific region, including in Indonesia, Malaysia, Singapore, Australia and Japan.
Offtake and revenue certainty
In hard-to-abate sectors such as cement and lime, green premiums will need to be passed through to end users, particularly where imports are not easily substituted. IEA analysis suggests premiums of 35–50 per cent have been achieved to cover the additional costs of near-zero emissions cement or concrete. In practical terms, this may translate into only a 1–2 per cent increase in the overall cost of infrastructure projects such as bridge construction. Green public procurement policies are expected to play a key role in supporting market premiums for low-carbon cement.
Anchor transport infrastructure enables scaling
Open-access CO2 storage hubs in Europe’s North Sea (including Northern Lights, Porthos and the UK’s East Coast Cluster) are designed to connect multiple capture sites over time. Significant public funding supported Phase 1 infrastructure to de-risk early deployment and enable subsequent network expansion.
North Sea sequestration projects are projected to encompass around 70 projects, totalling approximately 50MtCO2 per year of storage capacity, with cement accounting for roughly 31 per cent of this volume.
US funding pause
In the United States, the Department of Energy’s Loan Programs Office has progressed Summit Carbon Solutions’ multi-state CO2 pipeline, although it has not yet reached FID. Lebec Cement has experienced similar delays.
Learning cycles and investor confidence
CCS financing remains constrained by limited market familiarity with complex, cross-chain risks spanning capture, transport and storage. Baringa recommends establishing a dedicated global financing forum to improve information sharing, shorten learning cycles and enhance collaboration among banks, funds and insurers.
Ultimately, strengthening investor confidence will be critical to unlocking large-scale private capital. With 2030 targets approaching, timing is of the essence.
