Rise of carbon removal and role of government
In early November, Korea celebrates Ipdong, which means “the beginning of winter.” However, the Korea Meteorological Administration reported that on Nov. 2, the actual temperature was 3 to 10 degrees higher than usual, and that Seoul had a record-breaking high temperature in November, the highest in 116 years.
The abnormal temperatures we are facing now are a result of our little-to-no progress in reducing fossil fuel consumption, the main culprit of global warming. According to Out World in Data, back in 1995 when the first U.N. Conference of Party to Climate Change was held, fossil fuels accounted for 86 percent of the world’s total energy consumption. As of 2022, fossil fuels still accounted for 81.8 percent of the world's energy consumption. While the International Energy Agency (IEA) recently predicted that fossil fuel demand will reach its peak before 2030, such a forecast does not mean that fossil fuels will rapidly fade away in the near future.
Difficulty in reducing fossil fuel consumption suggests that it will be critical to remove carbon generated from such consumption. Carbon removal can be done by capture, storing or even fixing CO2 that was already generated. According to the IEA, carbon removal technology is largely classified into Carbon Capture Utilization and Storage (CCUS), Direct Air Capture (DAC) and nature-based solutions that absorb carbon from plants, soil and rocks.
In line with carbon reduction efforts to meet the targets under the Paris Agreement, the CCUS in particular is creating a lot of hype. Through CCUS, one can store in the land or under the sea CO2 captured from thermal power plants, or convert such CO2 into a useful resource. The IEA picked CCUS as one of the three major means of carbon reduction, along with electrification of energy sources and energy demand management.
Korea plans to step up its efforts by utilizing CCUS even more. This year, the government increased its 2030 national reduction target through CCUS, from 10.3 million tons to 11.2 million tons, announced the Plan to Promote CCUS Industry and Technological Innovation and the Ministry of Trade, Industry and Energy signed an MOU to promote CCS cooperation with Indonesia, which envisions converting Indonesia’s abandoned facilities for marine O&G into carbon dioxide storage facilities.
In addition, relevant legislation to support the implementation of various CCUS endeavors is also under way: The bill on the Capture, Transport, Storage, and Utilization of Carbon Dioxide was proposed in February this year and is currently under review by the Trade, Industry, Energy, SMEs and Startups Committee of the National Assembly. This bill covers business licensing procedures, storage-related regulations and industry support plans. Some of the key provisions are as follows:
Any plan for installation and operation of carbon dioxide capture facilities must be reported to MOTIE and any carbon dioxide transportation business requires government approval. Any installation of carbon dioxide transport pipes require compliance with safety management regulations that require obtaining approval for safety management, reporting appointment of safety managers, and safety inspections.
Any exploration to search places for storage requires approval from government, and if impossible to submit an exploration report within three years from the date of approval. The deadline for submission may be extended only once by up to three years.
The bill also include details on certification and R&D support for technology and products to utilize the captured carbon dioxide.
Korean companies are already active in the game. SK E&S, Samsung Heavy Industries sites and POSCO International is pursuing projects to transport and store domestically captured carbon overseas to places such as East Timor, Malaysia and Australia.
In particular, SK E&S signed an MOU with Santos, an Australian oil and gas company, in late October to facilitate Korea-Australia cross-border transfers of CO2. Such endeavors, however, have a few prerequisites: close cooperation between CO2-exporting & importing countries and storing countries, establishing a relevant legal system as described above and a certification system for carbon reduction.
CCUS presents promising business opportunities as well. In July, HD Korea Shipbuilding & Marine Engineering announced that the company won orders to build two of the world’s largest liquefied CO2 carriers from Capital Maritime Group in Greece. The ships are designed with eco-friendly purposes, i.e., for transporting CO2 and other various liquefied gases such as ammonia, a carbon-free fuel. This is an example where Korea, the world’s No. 1 nation in shipbuilding , added even more of a competitive edge by utilizing eco-friendly technology in traditional industries. As with any innovative technologies, CCUS is a tool that can generate tremendous business opportunities.
On Earth Day 2021, Elon Musk, Tesla CEO, pledged to award a $100 million in prize money for those who develop a carbon removal solution, the largest award of this type in history. So-called as XPRIZE Carbon Removal, the project will run through 2025. Elon Musk stressed, “We will find out the most economical way to remove carbon dioxide.”
No matter how good the technology is, if it is too expensive, there is a limit to the wide adoption of the technology. In the early stages of innovation where the new technology remains unaffordable, the government plays an important role to help companies stay afloat until they reach a commercially viable state. While companies are stepping up their game in this race to new business opportunities in the era of carbon removal, the government is also a main actor in helping them cross the finish line through legislative and regulatory support.
Kim Sung-woo is head of the Environment & Energy Research Institute at Kim & Chang.