International carbon capture and storage (CCS) technology think tank, the Global CCS Institute, has released a report entitled Unlocking Private Finance to Support CCS Investments, which states that significant financial commitments are needed from the private sector to address the climate impacts of energy-intensive sectors.
Parties partaking in COP26 have been asked to concentrate efforts toward ‘getting finance flowing for climate action’ amongst several other priorities.
Discussing the report’s focus on urgency of investment, Brad Page, CEO of the Global CCS Institute, said, “What happens in the next decade will be crucial in enabling CCS to reach necessary scale in time to limit the impacts of global warming.”
“The necessary investment far exceeds what governments are willing to provide, particularly within a short timeframe. Governments have a key role to play in creating an enabling environment for very large-scale private sector capital allocation through climate policies which place a value on CO2 emissions reductions.”
The report estimates the total capital requirements for this focus on increased CCS development over the next three decades will range from $655 - $1,280bn, depending on the falling costs and learning rate for the technology suite.
Page continued, “Investing around one trillion dollars over almost 30 years is well within the capacity of the private sector which invested almost two trillion dollars in the energy sector in 2018 alone.”
With such measures as project finance and green bonds being important when it comes to fulfilling the capital requirement, Dominic Rassool, Senior Consultant – Policy and Finance, and author of the report, spoke about the sheer size of the investment required.
He said, “Most existing CCS facilities have been funded primarily on the books of large corporations or state-owned enterprises.”
“There are trillions of dollars available in the private sector for investing in CCS but allocating it requires policy incentives which facilitate viable business models for CCS.”
Harnessing project finance is anticipated to give a boost to investment in CCS capacity. This model allows for non-recourse debt as well as for multiple equity investors participate in a project.
Green bonds can also be employed in hard-to-abate sectors like cement, fertilisers and chemicals.
The report also highlights the primacy of climate finance in enabling deep emissions mitigation, taking note of the higher risk associated with rapid-growth emission areas like developing countries.
Private capital could also be injected into CCS investments by utilising UNFCCC funds such as the Green Climate Fund (GCG).