Towards a Geopolitics of Carbon Capture & Storage (CCS) in Asia

Global climate action

A fundamental prerequisite for the indus­trial application of CCS is strong incentives for emission reduction, such as sufficiently stringent CO₂ taxes or cap-and-trade systems. These measures encourage companies to avoid emissions and internalise the costs of their reduction.

Unilateral climate action, however, could lead industries to move their production to regions with less stringent climate regu­la­tion – a phenomenon known as carbon leakage. This would cause industry reloca­tion, regardless of whether CCS is available or not. For CCS to be a determining factor in industry relocation requires either homogenous cross-border incentives for CO₂ or else carbon border adjustment mechanisms (as proposed by the EU).

CO₂ transport

Assuming sufficient incentives exist for emission reduction, the ease of transporting CO₂ is a major factor for possible industry relocation. Current plans and existing proj­ects generally prefer pipelines, which are often better in terms of economic efficiency, safety and environmental conservation. However, for smaller transport volumes and longer distances, maritime shipping might be more viable than submarine pipelines.

Pilot projects have shown that CO₂ trans­port is technically feasible, but its economic viability depends on several factors: beside significant incentives for CO₂ reduction, these are drastic reductions in transport costs, solid political coordination, and favourable regulation. An amendment to international maritime law permits trans­porting CO₂ across seas but it is yet to be fully ratified.

If CO₂ is not going to be transported, CCS could indeed motivate industries to locate in regions with favourable storage capacities and lower energy prices.

By contrast, if CO₂ is easily transportable across borders, interregional CO₂ markets could emerge. Planned collaborations can serve as examples, such as the one between Japan and Malaysia or Germany’s scheme to send captured CO₂ to Norway. Beyond bilateral connections, a multilateral market with a network of emitters and CO₂ storers is possible. (The EU is already planning an internal market for captured carbon.) Such a market might be able to retain industries at their current locations in return for paying for the transport and storage of CO₂ abroad. (This system is conceptually similar to hydrogen imports, where domestic indus­try is retained by paying hydrogen export­ers.) Germany and Europe have shown inter­est in carbon transport, since storage options are available but often expensive or politically controversial. The countries of Greater Asia face similar considerations: industrial nations with limited or expensive storage capacity, such as Japan, show a strong interest in CO₂ transport.

On the other hand, locations with signi­fi­cant storage potential could benefit in both scenarios: without CO₂ transport, they may be able to attract industry from abroad; with CO₂ transport, storing foreign CO₂ becomes a profitable business model.

However, this would require political and social acceptance in potential storage countries, which cannot be taken for granted. For instance, Oman tends to reject the idea of storing foreign CO₂ – not least because some might perceive it as “global waste disposal”.

Storage possibilities

The majority of potential storage sites are depleted oil and gas reservoirs or saline aquifers, such as olivine, serpentine and basalt formations. These formations absorb CO₂ well and, depending on the injection and sealing methods used, pose a low risk of leakage.

The gold standard, however, is mineralisation, where injected CO₂ chemically re­acts with the rock and solidifies, eliminating any risk of future leakage or environmental hazards. By offering a scalable long-term storage solution with environmental co-benefits, mineralisation is particularly relevant for DACCS but for CCS as well. However, it requires specific geological environments: namely mafic rocks (which are found in India, Australia and Russia) or ultramafic rocks, which are more efficient. The latter can be found in the USA and New Caledonia as well as Oman, where initial pilot projects are already underway.

Aside from physical storage capacity – the estimated global storage potential is in the magnitude of teratonnes, far exceeding possible demand – storage is a question of environmental regulation. What environmental risks are acceptable for CCS? Central issues to be determined are the acceptable distance from human settlements and the risk of leakage – site availability decreases with the number of risks to be avoided.

Laxer regulations would increase the number of potential CCS sites, while stricter regulations would limit them and drive up CO₂ storage costs. This scarcity would inten­sify competition for possible CO₂ sinks, rais­ing their value: owners would gain an addi­tional scarcity rent, but global utilisation would decrease. This would limit industrial relocation but benefit states with favourable geological conditions. Therefore, even countries with a strong interest in CCS, such as the United Arab Emirates, Oman or Australia, might find pursuing stricter regulation to be the superior strategy.

Rethink climate diplomacy

As CCS is integrated into government strat­egies and industrial value chains, it is also carving out a crucial role in climate diplo­macy. Prolonging debates over whether CCS should happen or not is therefore not help­ful. While the scope and scale of CCS indeed remain uncertain and require careful con­sid­eration, the respective discourse in Europe and Germany is often more dogmatic than anticipatory. Although this discourse names ‘decarbonisation’ as its main objective, it seems to be more concerned with eliminating fossil fuels than reducing emissions pragmatically. Countries in the Global South (and, notably, also the US) increasingly see this anti-fossil agenda as paternalistic, selfish, and Eurocentric, which further erodes Europe’s capacities for climate diplo­macy. Moreover, long-term energy scenarios compatible with the Paris Agreement often tacitly rely on CCS or DACCS.

The significant engagement of Greater Asia actors in CCS shows that the region is preparing for a future with pragmatic de­carbonisation – one that does not exclude fossil fuels. The commitment to “transition away from fossil fuels” made at the 28^th UN Climate Change Conference must therefore be interpreted with nuance. Traditionally, climate action has been a one-way street from the Global North to the Global South. However, CCS has the potential to reverse this flow. Pragmatic climate diplomacy provides Germany and Europe with the opportunity to shape these developments and promote agency abroad.

Specifically, energy and climate partnerships should be complemented by “technology partnerships”. These partnerships should respect the diverse motives and conditions of partner countries instead of attempting to reshape them according to European ideas. A convergence of goals is key, and one-way capacity building should be replaced by technology transfer or joint ventures. Partnerships should increasingly be mini- or multilateral, in line with the CCS landscape, to influence processes effec­tively. Planning and implementing these measures will require a shift away from solely relying on technoeconomic expertise towards utilising experts on foreign policy and regional studies.

Boldness required: retain industry and establish industrial policy

Without a doubt, Europe’s main risk factor when it comes to potential industry reloca­tion is the currently high energy prices. Easing Europe’s energy crisis is therefore essential – especially for energy-intensive processes like CCS. (Otherwise, CCS costs will need to be directly subsidised.)

However, under certain conditions, CCS could also be a factor in industry relocation. And when industry leaves, it does usually not return, which disrupts complex global supply chains and jeopardises Europe’s role within them, thereby threatening its geo­political autonomy.

Expanding CCS capacities can help keep the industry within a country and, further­more, enable blue hydrogen and DACCS. Germany’s cautious-conservative approach to CCS is generally sound, but the country acts rather reactively in international forums. This limits its ability to shape global development within the sector and assert its long-term interests. Europe’s approach to hydrogen regulation, despite criticism, has largely prevailed and might expand the EU’s influence over time. Pro­active participation in the international discourse could lay the groundwork for setting relevant CCS standards, such as geo­logical requirements for certification. At a first glance, stricter global standards could be beneficial for Europe, since they reduce the actual global storage potential and thus the incentives for industry relocation. How­ever, this approach carries risks: limiting usable storage capacities could also concen­trate them, fostering harmful dependencies and market power. Therefore, more lenient regulations might be preferable.

Europe should acknowledge that CCS technology is increasingly located abroad. Completely abandoning the field would increase Europe’s technological dependency and project costs. Therefore, existing re­search and development projects should be continued but they will not be sufficient for catching up. A globally tried-and-tested approach – albeit a bold one for Europe – would be to strategically invest in and partner with key companies, which is how China and Saudi Arabia have acted in other critical sectors. This strategy would allow the import of crucial knowledge on CCS technology, diversify economic and politi­cal risks associated with the energy transi­tion and enable strategic climate policy.

However, this approach would require a level of government involvement in trade and investment that is unprecedented for Europe. Despite any possible reservations, establishing a European champion in this regard may be worth it. Asia’s rise in CCS and other technologies is largely the result of targeted industrial policy.

This creates a prisoner’s dilemma: market mechanisms alone cannot achieve the same level of co­ordination as industrial policy, and Europe’s reluctance to adopt the latter means it cur­rently plays with a handi­cap when compet­ing for these technologies. Beyond recognis­ing that progress in low-carbon technologies is happening outside Europe, bold and new approaches are needed.