What’s Going Down With CCS?

The early enthusiasm for carbon capture and storage (CCS) is showing signs of strain as the limits of capital availability and political support become clearer.

At the recent Offshore Technology Conference (OTC) in Houston, Rystad Energy CEO and founder Jarand Rystad delivered a dour assessment of global CCS progress during the event’s plenary session. Just a year ago, the CEO said global CCS capacity was expected to reach 625 mtpa by 2034, supported by a pipeline of more than 600 announced projects.

That outlook has since deteriorated.

After analyzing each of the announced projects individually, Rystad’s energy consultancy found that nearly half have been delayed or lack the capital to advance—creating a potential shortfall of around 300 mtpa in anticipated injection capacity.

One country that has been pushing forward in a big way is the US, where more than $8 billion in CCS investments have been made this year alone. But whether the momentum holds is an open question, given shifting political winds in Washington, DC.

With a Republican-led Congress and new leadership in the White House, the future of the 2022 Inflation Reduction Act (IRA), the primary driver of CCS tax incentives in the US, is under heightened scrutiny. Some advocacy groups, including the Institute for Energy Research, are calling for the full repeal of the IRA. Others are aiming for a more targeted rollback, such as eliminating the tax credit provisions alone.

But even this narrower path faces resistance. Republican lawmakers from energy-producing states have noted that the credits support not only oil and gas industry-backed CCS but also geothermal energy projects, which depend on technologies developed in the oil and gas sector.

Under the IRA’s 45Q provision, CCS tax credits can reach up to $180 per metric ton for carbon removed through direct air capture (DAC). The figure is a threefold increase over previous federal incentives and is seen as essential for making DAC projects economically viable.

One of the major beneficiaries is Houston-based Occidental Petroleum, which through a subsidiary was awarded $500 million by the US Department of Energy last year to build a DAC facility in south Texas.

So far, 45Q tax credits for DAC and other forms of CCS remain intact, even as renewable energy incentives face growing peril. Still, the fact that 45Q was targeted in draft legislation may shake investor confidence and make it even harder to attract future capital.

In addition, the US federal government, through the Department of the Interior, has yet to finalize regulations for carbon sequestration in federal offshore waters. As a result, current US offshore CCS projects are limited to state waters, which extend 9 nautical miles from shore in Texas and just 3 nautical miles for most other coastal states. During the OTC plenary, there was speculation that federal guidance could be issued later this year, potentially unlocking more opportunities for offshore CCS development.

While the outlook for CCS in the US remains uncertain, Rystad noted that the UK is moving in the opposite direction. There, strong government support is fueling a growing competition with Norway’s Northern Lights project to become the North Sea’s leading CO₂ injection hub.

Elsewhere, CCS projects are advancing under different pressures. In countries like Malaysia and Indonesia, high CO₂ concentrations in natural gas streams make reinjection not just a climate initiative but a commercial necessity.

Malaysia’s Kasawari project is expected to become the world’s largest offshore CCS development once its dedicated injection platform comes online later this year. The field contains up to 40% CO₂, and with a planned injection capacity of 4 mtpa, it would operate at twice the scale of Northern Lights. In Indonesia, BP is investing $7 billion into the Tangguh CCUS project, the country’s first large-scale CCUS development, which aims to sequester up to 15 mtpa of CO₂ from produced gas.

But stepping back from upstream activity and even beyond the US election outcome, CCS appeared to be losing steam last year.

Analysts at ING noted recently that fewer projects reached final investment decisions in 2024 than expected, citing weak business models, technical hurdles, and persistent permitting delays—all during a period of peak policy support.

At the center of these issues is a fragmented value chain, often split between separate companies and sometimes different industries responsible for capture, transport, and storage.

Large emitters hesitate to invest in capture systems without confidence that transport and storage infrastructure will be ready. Meanwhile, developers of that infrastructure won’t commit capital without guaranteed CO₂ volumes.

This chicken-and-egg problem, combined with the patchwork of shifting policies and permitting regimes, highlights why CCS success will depend less on high-profile announcements and more on aligning incentives across the board.

Today, the world has about 51 mtpa of CCS capacity. According to the International Energy Agency, that figure needs to reach 5,000 mtpa by mid-century to avert the worst impacts of climate change.

Scaling CCS to the levels required for climate targets was always expected to be complex, but recent developments have underscored just how sensitive and exposed the sector remains to regulatory and financial risks.