The event, staged by the Dutch CIO Exchange and co-hosted by APG, a pension provider, heard a number of expert speakers on how the technology can be used, what the relevance of it is in our investment portfolios and whether it presented an investment opportunity. About 50 people from different fields, from academia to investors in the oil and gas industry, took part in the forum held at Robeco’s Rotterdam head office on 8 May.
Most of the focus in recent years has been on trying to reduce the amount of CO2 added to the atmosphere to meet the Paris Agreement target of limiting global warming to well below 2 degrees Celsius above pre-industrial levels by the second half of this century. CCS prevents the release of CO2 into the atmosphere by capturing these emissions once they have been created by burning fossil fuels, and then storing them or using them (CCUS).
The delegates were welcomed by Robeco CIO Peter Ferket, who said 10 investors including Robeco now belonged to the CIO Exchange’s Energy Transition Working Group, which has seven listed European oil & gas companies in scope for engagement on this topic.
Niels Berghout, an analyst with the International Energy Agency, said one of the major challenges we are facing today is that 70% of the world’s energy still comes from fossil fuels, and will continue to do so in the decades to come, especially in China and India. CCS is one of few technologies enabling us to abate the associated emissions.
He said CCS is a three-step process of capturing CO2 from a power or industrial facility, then transporting it by pipeline or ship, and finally storing it safely underground. Most existing facilities can be retro-fitted with carbon capture technology, but it is cheaper to incorporate it in the manufacture of new plants. This stops it getting into the atmosphere in the first place.
A combination of burning a biomass fuel and then using CCS can deliver so-called ‘negative emissions’, meaning that CO2 is actually removed from the atmosphere. This technology will become increasingly important over time to meet the climate targets.
Berghout said that if the world truly wanted to achieve the well-below-2-degree scenario, then CCS needs to account for 14% of all cumulative CO2 reductions from today until 2060. If the more ambitious 1.5 degree target is to be met, then the required contribution of CCS rises to 32%. He said 23 large-scale projects were currently operating, but “the use of CCS needs to be ramped up hundreds of times to meet the climate targets”.
Explaining the science behind CCS was Professor Earl Goetheer, Principal Scientist for the Netherlands Organization for Applied Scientific Research (in Dutch, TNO: the Toegepast Natuurwetenschappelijk Onderzoek). He gave a lively presentation on the ways to capture CO2, focusing on pre-combustion and post-combustion separation, and also how to potentially use CO2 as a resource to produce chemicals and fuels with a market value.
John MacArthur, Vice-President of Group Carbon at Shell, highlighted that the majority of scenarios produced by organizations such as the IEA, IPCC and Shell include a large component of CCS that limits the temperature rise to below 2 degrees Celsius in line with the Paris Agreement.
He further explained that CCS was by no means new, having been proven technology in use since the 1970s. He reemphasized the critical role it has to play in the decarbonization of heavy industry if the world is to meet the goals of the Paris Agreement.
CCS is also useful from a job retention and creation perspective, with studies in the UK and Norway showing the potential for over 200,000 CCS-related jobs. He outlined the different CCS projects that Shell is involved in, including the work of the Oil and Gas Climate Initiative, a collaboration of 13 oil and gas majors that aims to leverage their collective strength to help catalyze CCS and contribute to the UN Sustainable Development Goals.
Five key questions emerged from the event: is CCS a real solution for the energy transition; what is its relevance in an investment portfolio; what are key questions for engaging with companies on it; how do you engage on policy for it; and is it investible?
The majority of delegates said they believed that it was indeed part of the solution, and should form part of engagement between asset managers and the oil and gas industry. But it was not really investible unless it was included as part of impact investing, such as in buying CCS-orientated green bonds, or for supporting the Sustainable Development Goal (No. 13) on climate action. Finally, participants said carbon pricing would provide a commercial incentive to accelerate innovation and investment in CCS.