The market opportunity: CO2 as a widely available commodity
This article is part of our CO2 valorisation series. Read the main CO2 valorisation article here. Keen to know the basics of chemistry for climate tech investors? Go for our chemistry 101 article. Want to deep dive into the CO2 conversion methods? Get all the details here.
Anthropogenic greenhouse gas emissions and their detrimental effects on the climate are still growing, as evident from the record temperatures that have been measured over the past years. It has also become clear that reaching net zero in 2050 will be impossible without carbon capture. Although CO2 emissions have caused many problems in our society, CO2 valorisation is now creating both emissions reduction opportunities as well as market opportunities.
Currently, CO2 valorisation is currently limited to a small number of commercial processes. The production of urea, used as fertiliser or feed supplement, consumes the most CO2 at the moment. Globally, urea is produced at a market volume of 180 Mt/year, for which roughly 130 Mt CO2 is required. Salicylic acid, a precursor for aspirin, is produced at roughly 0.18 Mt/year and utilises 0.06 Mt CO2. The market volume of cyclic carbonates, used as solvents and as electrolytes for Li-ion batteries, is about 0.1 Mt/year and utilises about 0.04 Mt CO2. Although roughly 80 Mt CO2 is utilised annually for enhanced oil recovery, this pathway is neither considered valorisation (the CO2 molecule itself is not transformed into something more valuable) nor sustainable.
CO2 valorisation processes that are currently at a demonstration scale, i.e. technology readiness level (TRL) 7–9, include polycarbonate, polycarbonate etherols, formic acid, and methanol production. Although a large number of other CO2 valorisation processes are under investigation, most of them have lower TRL levels (<7) at the moment. Promising valorisation products include hydrocarbons, aldehydes, acids, and dimethylether. Although some of these technologies are still in their infancy, the global market for CO2-derived products and services is predicted to grow to 1–7 Gt CO2 in 2030.
As of 2022, 35 commercial facilities are capturing 45 Mt CO2 globally. Project developers have announced the ambition to have 200 additional carbon capture facilities operating by 2030. This would result in an annual carbon capture volume of 220 Mt CO2 in total. Meaning, we would have 220 Mt CO2 available for carbon storage or as a feedstock for carbon utilisation processes. Apart from carbon capture, (industrial) waste streams and biomass will be additional CO2 sources.
With CO2 considered a commodity and becoming widely available, new processes to valorise CO2 are attracting increasing interest from governments, industry, and investors. Valorisation is a more technical term used to describe processes that turn waste, CO2 in this case, into something more valuable. Global private funding for CO2-use startups reached nearly $1B over the last decade. In North America, the NRG COSIA Carbon XPrize is supporting CO2 valorisation with a $20M competition. Besides, research, development, and demonstration are being supported globally by amongst others the European Commission and governments in the UK, US, Canada, and Japan.
With feedstock availability and increasing funding from different sectors, the market is expected to boom. In 2030, the global market for CO2-derived products and services is predicted to be between less than 1 and 7 Gt CO2. Fuels have the largest potential due to their vast market size, followed by chemical building blocks, and then polymers (also known as plastics).
There is already a growing market for sustainable products and energy made from CO2. Although the market volume is expected to be relatively small in the short term, early opportunities can develop. Particularly in industrial areas where cheap raw materials, renewable energy, and consumers are co-located. The opportunities include polymers, chemicals, and aviation fuels. For the market volume to grow large in the long term, further research, development, and demonstration of promising technologies are needed and supported by governments.
Regulations will be in place
As the world is gearing up to limit global warming to 1.5–2°C, an increasing number of countries have been focussing on carbon pricing as part of the mitigation strategy. While the current global average price per tonne of CO2 emitted is only $6, policies will likely be implemented in the coming years. In the European Union, the price per tonne of CO2 emitted has already reached $100 and the average price could increase to $75 by 2030 with carbon pricing schemes.
The two main options for carbon pricing are carbon taxes and emission trading schemes. Carbon taxes are the easiest to adopt, for example, by tweaking existing fuel taxes. They can also be expanded to include other greenhouse gases, such as methane. Besides, they would provide certainty over future emissions prices. Emissions trading schemes may provide certainty over future emissions levels but could be more challenging to implement. Some countries, including Canada, Mexico, and 14 EU countries, have already chosen to adopt a combination of both carbon pricing options.
The bottom line is that the costs of emitting greenhouse gases will increase in the coming years due to carbon pricing policies, which will encourage both energy conservation and climate tech investments. Moreover, it will incentivise humanity to adopt a more circular mindset and therefore create the need for, amongst others, CO2 valorisation technologies.
