Tag: carbon capture

Progressing Global BECCS opportunities

23 May 2023

Investors

RNS Number : 2686A
Drax Group plc
(“Drax” or the “Group”; Symbol:DRX)

Ambition for the development of over 20Mt of carbon removals – 14Mt pa by 2030

  • New-build BECCS – two sites selected in US – targeting c.6Mt pa by 2030
  • Evaluating nine additional sites in US for greenfield and brownfield BECCS
  • Option for CCS on a pellet plant – targeting FID in 2024/25, commissioning in 2026
  • Targeting 8Mt pa at Drax Power Station by 2030
  • Establishing HQ for Global BECCS in Houston, Texas

Progress on Global BECCS commercial arrangements

  • MoU with Respira for sale of up to 2Mt of Carbon Dioxide Removal (CDR) certificates
  • Other MoUs agreed for sale of CDRs – c.$300/t on small volumes
  • MoUs agreed with leading forestry and Transportation and Storage (T&S) companies

Attractive portfolio of investment opportunities

  • £7bn of strategic growth opportunities between 2024 and 2030
    • 14Mt pa of carbon removals from BECCS, pellet production and pumped storage hydro
  • Targeting returns significantly in excess of the Group’s cost of capital

2023 outlook

  • Expectations for Adjusted EBITDA(1) remain in line with analysts’ consensus estimates(2)

Drax Group CEO, Will Gardiner said:

Will Gardiner, Drax Group CEO

“The world’s leading climate scientists at the UN’s IPCC are clear – the planet cannot solve the climate crisis without the combination of reliable, renewable electricity and carbon removal technologies.

“Drax is a growing and sustainable, international business providing flexible, renewable energy and carbon removals solutions, via BECCS, which put us at the heart of global efforts to deliver net zero and energy security.

“Our plans to invest billions in critical renewable energy and carbon removal technologies will help to tackle the climate crisis and could create thousands of jobs whilst generating secure, renewable power. This investment is underpinned by our strong operational performance.”

Capital Markets Day

Drax is today hosting a Capital Markets Day for investors and analysts.

Will Gardiner and members of his leadership team will update on the Group’s strategy, market opportunities and development projects, including the progress Drax is making in the development of BECCS in North America and the opportunities this represents for the Group.

Purpose and ambition

The Group’s purpose is to enable a zero carbon, lower cost energy future and its ambition is to be a carbon negative company by 2030. The Group aims to realise its purpose and ambition through three strategic pillars, which are closely aligned with global energy policies that increasingly recognise the role that biomass can play in the fight against climate change.

The Group’s three strategic pillars remain (1) to be a global leader in carbon removals, (2) to be a global leader in sustainable biomass pellets, and (3) to be a UK leader in dispatchable, renewable generation.

Global need for carbon removals

Research by the Intergovernmental Panel on Climate Change (IPCC)(3), the world’s leading authority on climate science, states that CDR methods, including BECCS, are needed to mitigate residual emissions and keep the world on a pathway to limit global warming to 1.5oC.

All of the illustrative mitigation pathways assessed in the IPCC’s latest report use significant volumes of carbon removals, including BECCS, as a key tool for mitigating climate change. The IPCC believes that globally up to 9.5 billion tonnes of CDRs via BECCS will be required per year by 2050.

In the USA, the supportive investment environment created by the Inflation Reduction Act is stimulating action and robust pricing for CDRs.

BECCS – North America

Over the past two years, Drax has been progressing a number of work streams to develop its options for BECCS, with a primary focus on North America.

Drax has continued to develop plans for a new-build BECCS power unit capable of producing c.2TWh of renewable electricity from sustainable biomass and capturing c.3Mt of carbon per year. Two initial sites in the US South have been selected and are progressing to option, although the precise details remain commercially sensitive. The two sites combined could enable the capture of c.6Mt of carbon per year by 2030.

Total investment would be in the region of $2 billion per plant with a target FID in 2026 and commercial operation by 2030. The capital cost reflects the construction of new-build power generation as well as carbon capture and storage (CCS) systems.

The design of new-build BECCS enables a wider choice of biomass materials, including non-pelletised material, such as woodchips. Drax aims to locate new plants in regions which are closer to sources of sustainable biomass and T&S systems to permanently store CO2. This is expected to significantly reduce the operating cost of new-build BECCS compared to retrofit, as well as carbon emissions in the supply chain.

The Group is continuing to evaluate nine further sites in North America, creating a pipeline of development opportunities into the 2030s.

Commercial arrangements

The commercial model for US BECCS includes Power Purchase Agreements, long-term CDR offtake agreements and a direct pay tax incentive under the Inflation Reduction Act of $85/tonne.

Drax believes that the role of high-quality, permanent removals, such as BECCS and Direct Air Capture, will grow significantly as governments and companies take action to address their own carbon footprints. In September 2022, Drax announced a Memorandum of Understanding (MoU) for one of the world’s biggest carbon removals deal with Respira, a carbon broker. Under the terms of the MoU, Respira will be able to purchase up to 2Mt of CDRs over a five-year period from Drax’s North American BECCS projects.

Drax has also agreed MoUs with C-Zero, a carbon broker, for the sale of CDRs at c.$300/tonne.

Resourcing

To support the development of its BECCS projects in North America, Drax has hired 80 employees across the US and Canada and is in the process of establishing a Global BECCS headquarters in Houston, Texas, which will provide access to the highly skilled workforce needed to support the growth of this part of the Group.

Other developments

In addition to new-build BECCS, Drax is currently developing an option for a project to add a carbon capture process to an existing pellet plant in Louisiana. The project would have the capacity to capture over 100k tonnes of CO2 per year from the pelleting process, providing an early demonstration of the technology and creating CDRs which can help to stimulate this nascent market. The project, which has a capital cost in the region of $150 million, is targeting FID in 2024/25 and commissioning in 2026.

The Group is also assessing options for BECCS on existing non-Drax assets and is continuing to screen other regions, including Europe and Australasia.

Capital allocation

The Group has previously outlined a fully funded plan to invest c.£3 billion in two BECCS units at Drax Power Station, pellet production and pumped storage hydro.

Today, the Group expands on this plan to include two new-build BECCS plants and CCS on a pellet plant, increasing the total potential investment to c.£7 billion between 2024 and 2030.

Any final investment decisions will be subject to the achievement of project milestones, including further progress on commercial arrangements as well as clarity on regulatory and funding mechanisms.

Reflecting strong expected cash generation from existing assets and new investments, Drax can fully fund the £7bn of opportunities and return to net debt to Adjusted EBITDA below 2x by the end of 2031. Drax will also continue to assess a wider range of funding options, including project finance.

The Group remains committed to its capital allocation policy, which was established in 2017, and has delivered average annual dividend per share growth of around 11%.

The Group has commenced a £150 million share buyback programme, which is expected to complete by the end of 2023. The programme is not expected to have any impact on the Group’s medium and long-term growth plans and, beyond the current buyback programme, will continue to assess its capital requirements in line with the current policy, including the return of excess capital to shareholders.

Outlook

The Group’s outlook for 2023, as set out in its recent Trading Update, remains unchanged and provides a strong platform for long-term investment and returns to shareholders.

Drax continues to expect full year Adjusted EBITDA(1) for 2023 to be in line with analysts’ consensus estimates(2), subject to continued good operational performance.

Webcast and presentation material

The event will be webcast from 2pm (UK) and the material made available on the Group’s website at that time. Joining instructions for the webcast and presentation are included in the links below.

https://secure.emincote.com/client/drax/drax025
https://www.drax.com/investors/announcements-events-reports/presentations/

Notes:
[1] Earnings before interest, tax, depreciation, amortisation, excluding the impact of exceptional items and certain remeasurements. Excludes the Electricity Generator Levy, which is currently presented as a tax and reflected in EPS.
[2] As of 18 May 2023, analyst consensus for 2023 Adjusted EBITDA was £1,162 million, with a range of £1,100 – 1,200 million. The details of this company collected consensus are displayed on the Group’s website. Excludes the Electricity Generator Levy, which is currently presented as a tax and reflected in EPS.
[3] IPCC Sixth Assessment Report, Working Group III (2022).
https://www.drax.com/wp-content/uploads/2023/05/Company-Collected-Consensus-May-2023.pdf

Enquiries:

Drax Investor Relations: Mark Strafford
+44 (0) 7730 763 949

Media:

Drax External Communications: Chris Mostyn
+44 (0) 7548 838 896

Carbon markets will be essential in reaching net zero – we must ensure they support high standards

9 November 2022

Carbon capture

Angela Hepworth, Commercial Director, Drax

In brief:

  • The voluntary carbon market will be essential in deploying engineered carbon removals technologies like Bioenergy with carbon capture and storage (BECCS), and direct air carbon capture and storage (DACS) at scale.
  • The Integrity Council for the Voluntary Carbon Market is developing a set of Core Carbon Principles (CCPs).
  • Drax support proposed principles if they’re applied in ways appropriate for engineered carbon removals.
  • Standards around additionality and the permanence of carbon removals may apply very differently to nature-based and engineered removals, something that needs to be addressed explicitly.

There’s growing recognition, in governments and environmental organisations, of the urgent need to develop high-integrity engineered carbon removals at scale if the world has any chance of meeting our collective Paris-aligned climate goals.

Bioenergy with carbon capture and storage (BECCS), and direct air carbon capture and storage (DACS) are two technologies on the cusp of deployment at scale that can remove carbon from the atmosphere and store it permanently and safely. The technology is proven, developers are bringing forward projects, and the most forward-thinking companies are actively seeking to buy removal credits from BECCS and DACS developers.

Yet there’s a risk that the frameworks being developed in the voluntary carbon market could stifle rather than support the development of engineered carbon removals.

Drax is a world-leader in the deployment of bioenergy solutions. Our goal is to produce 12 million tonnes of high-integrity, permanent CO2 removals by 2030 from its BECCS projects in the U.K. and the U.S. We support the development of rigorous standards for CO2 removals that give purchasers confidence in the integrity of the CO2 removals they’re buying. Such standards are also important in providing a clear framework for project developers to work to.

However, the market and its standards have largely developed around carbon reduction and avoidance credits, rather than removals. To create a market that can enable engineered carbon removals at scale, re-thinking is needed to create standards that are fit for purpose to tackle the climate emergency.

Core Carbon Principles

The Integrity Council for the Voluntary Carbon Market is in the process of developing a set of Core Carbon Principles (CCPs) and Assessment Framework (AF) intended to set new threshold standards for high-quality carbon credits.

At Drax, we welcome and support the principles proposed by the Integrity Council. However, it’s crucial they’re applied in ways that are appropriate for engineered carbon removals, and support rather than prevent their development.

Many CCPs are directly applicable to engineered carbon removals and can offer important standards for projects developing removals technologies. Among the most important principles include those stating:

  • Removals must be robustly quantified, with appropriate conservatism in any assumptions made.
  • Key information must be provided in the public domain to enable appropriate scrutiny of the carbon removal activity, while safeguarding commercially sensitive information.
  • Removal credits should be subject to robust, independent third-party validation and verification.
  • Credits should be held in a registry which deals appropriately with removal credits.
  • Registries must be subject to appropriate governance, to ensure their integrity without becoming disproportionately bureaucratic or burdensome.
  • Removals must adhere to high standards of sustainability, taking account of impacts on nature, the climate and society.
  • There should be no double counting of carbon removals between corporates, or between countries. Bearing in mind that both corporates and countries may count the same removals in parallel, and that the Article 6 mechanism means countries can decide whether trades between corporates should or shouldn’t trigger corresponding adjustments to countries’ carbon inventories.

However, as pioneers in the field, we believe that two of the Core Carbon Principles need to be adapted to the specific characteristics of engineered carbon removals.

Supporting additionality and development incentives

The CCPs state: “The greenhouse gas (GHG) emission reductions or removals from the mitigation activity shall be additional, i.e., they would not have occurred in the absence of the incentive created by carbon credit revenues.”

Engineered carbon removal credits such as BECCS and DACS are by their nature additional. They are developed for the specific purpose of removing CO2 from the atmosphere and putting it back in the geosphere. They also rely on revenue from carbon markets – largely the voluntary market at present, but potentially compliance markets such as the U.K. and E.U. ETS in the future.

However, most early projects are likely to have some form of Government support (e.g., 45Q in the U.S., or Contracts for Difference in the U.K.) from outside carbon credit revenues. But that support isn’t intended to be sufficient on its own for their deployment – project developers will be expected to sell credits in compliance or voluntary markets.

Engineered carbon removals have high up-front capital costs, and it’s clear that revenue from voluntary or compliance markets will be essential to make them viable.

Additionality assessments should be risk-based. If it’s clear that a technology-type is additional, a technology-level assessment should be sufficient. This should be supplemented with full transparency on any government support provided to projects.

Compensating against non-permanent storage

On the topic of permanence that CCPs state: “The GHG emission reductions or removals from the mitigation activity shall be permanent, or if they have a risk of reversal, any reversals shall be fully compensated.”  A key benefit of engineered carbon removals with geological storage is that they effectively provide permanent carbon removal. Any risk of reversal over tens of thousands of years is extremely small.

The risk of reversal for nature-based credits, by contrast, is much greater. Schemes for managing reversal risk in the voluntary carbon market that have been developed for nature-based credits, are not necessarily appropriate for engineered removals.

Requirements for project developers to set aside a significant proportion of credits generated in a buffer pool, potentially as much as 10%, are disproportionate to the real risk of reversal from a well-manged geological store. They also fail to take account of the stringent regulatory requirements for geological storage that already exist or are being put in place.

Any ongoing requirements for monitoring should be consistent with existing regulatory requirements placed on storage owners and operators. Similarly, where jurisdictions have robust regulatory arrangements for dealing with CO2 storage risk, which place liabilities on storage owners, operators, or governments, the arrangements in the voluntary carbon market should mirror these arrangements rather than cutting across them, and no additional liabilities should be put on project developers.

At Drax, we believe the CCPs provide a suitable framework to ensure the integrity of engineered carbon removals. If applied pragmatically, they can give purchasers of engineered carbon removal credits confidence in the integrity of the product they’re buying and provide a clear framework for project developers. They can ensure that standards support, rather than stifle the development of high integrity carbon removal projects such as BECCS and DACS, which are essential to achieving our global climate goals.

Carbon removals is a global need. The U.S. is making it possible

Will Gardiner, Chief Executive Officer, Drax Group

20 October 2022

Carbon capture

Key takeaways:

  • Removing carbon from the atmosphere is urgent if we are to meet global climate targets
  • The U.S.’s commitment to supporting carbon removal technologies creates an opportunity for new bioenergy with carbon capture and storage (BECCS) power stations
  • The market for carbon credits is gaining increasing credibility and verification, making it a source of financing for ambitious decarbonization projects
  • Carbon markets are needed now to make investment into vital removals projects possible in the U.S. and globally

After a summer of soaring temperatures across the Northern Hemisphere, the global nature of climate change is more obvious than ever. Forest fires around the world in 2021 resulted in double the loss of tree cover than in 2001, while today more than 2.3 billion people face water stress from drought. It’s clear that the action we take to help tackle the global climate emergency must be international too.

We believe that carbon dioxide (CO2) removals will be crucial in addressing this global challenge. Experts and governments agree that in addition to economy-wide decarbonization, removing carbon from the atmosphere is critical to meeting the goal of net zero CO2 emissions by mid-century. The IPCC says 10 billion tons per year of removals will be needed in 2050 for the world to get to net zero. That’s a huge step up from the 40 million tons captured globally in 2021, but also a significant investment opportunity.

Our ambition is to remove 4 million tons of CO2 through bioenergy with carbon capture and storage (BECCS) outside the UK per year, while generating renewable, baseload electricity and supporting healthy, sustainable forests.

The likely contender for our first location? The United States. We already operate in communities across the U.S. South, employing more than 1,200 people in our sustainable biomass pellet production. Now we are preparing to build a new BECCS power station in the region.

It’s clear to us that the U.S. is an ideal market for BECCS with its long-running sustainable forest industry and range of suitable sites for permanent CO2 storage. We see the country’s efforts to retire coal by 2030 and commitment to innovation as an opportunity to build one of the largest carbon removal projects in the U.S. Our first plant could be capable of permanently removing 2 million tons of carbon from the atmosphere a year, while also generating 2-terawatt hours of 24/7 renewable power.

The U.S.’s newly legislated commitment to tackling climate change through the Inflation Reduction Act, as well as the Department of Energy’s National Renewable Energy Lab recent scenario planning for ‘100% clean electricity system’ are establishing it as the leading market to deploy new environmental technologies. And a new frontier for permanent, high-quality emissions removals.

The need for high quality, permanent emissions removals

A net zero future is only possible through the wide-spread implementation of high-integrity, carbon removals. BECCS offers this by combining low carbon, renewable biomass power generation with carbon capture technology and secure, permanent carbon sequestration.

BECCS works by generating renewable electricity using biomass sourced from sustainably managed forests that absorb CO2 as they grow. CO2 released in the generation process is captured and stored, permanently and safely, in geological rock formations. The overall process removes more CO2 from the atmosphere than it emits, resulting in negative emissions.

This allows us to offer decarbonizing industries high-quality carbon removals credits. Given the scale of CO2that must be removed from the atmosphere and the importance for countries and companies around the world to reach net zero, I believe this market for verified CO2 removal credits is a trillion-dollar opportunity.

Voluntary carbon markets have historically suffered from a lack of sustained and reliable investment due to fluctuating market prices and varying quality of the carbon credits they contain. However, increased oversight from investors, NGOs and independent bodies is encouraging credibility and integrity, prompting sustained adoption by businesses.

Will Gardiner, Drax Group CEO

We’ve demonstrated the growing appetite for carbon removals by signing the worlds largest carbon removals deal to date at New York Climate week. The agreement with Respira, an impact-driven carbon finance business, will allow it to purchase 400,000 metric tons of CO2 removals (CDRs) a year from our North American operations. This would enable other corporations and financial institutions to achieve their own CO2 emissions reduction targets, by purchasing CDRs from Respira.

Deals like these make voluntary carbon markets a more effective means of reducing net CO2 emissions by securing commitments and driving investment in projects that deliver independently verified, high-quality emissions reductions. As the global economy works towards its net zero targets, CO2 removals will be crucial in reducing the still dangerously high levels of carbon in our atmosphere today.

BECCS stands to be a powerful tool in a net zero future as the only technology capable of delivering both high quality, permanent carbon removals, while also delivering baseload renewable power. The ability to generate power with negative emissions will be crucial for increasingly electrified economies, as they move away from fossil fuels.

The potential for the U.S.  

Driven by a dynamic mix of markets, investors and engaged consumers, some of the most prominent U.S. companies are pledging to reach net zero, investing in 24/7 renewable power and other means to do so.

Technology companies like Alphabet, Apple, and Microsoft have laid out ambitious plans to decarbonize operations, supply chains, and even remove historic emissions. Other organizations, like the First Movers Coalition, include U.S. companies from a range of sectors committing corporate purchasing power to solving difficult decarbonization challenges.

This industry readiness is increasingly backed up by legislative policy action. The recent Inflation Reduction Act substantially increases the availability of the 45Q tax credit for carbon capture and storage projects, increasing their value from $50 a ton of carbon removals to $85 per ton, helping to further support the business case needed to deploy technologies like BECCS.

We believe the U.S. is on the right track to create a market in which BECCS can thrive. The Department of Energy’s National Renewable Energy Lab recent ‘100% clean electricity system’ report includes BECCS in three of the four possible scenarios explored. It forecasts the US will need between 7-14GW of installed BECCS capacity by 2035 to achieve an electricity system with net zero CO2 emissions. That equates to removals of approximately 55-120 Mt CO2 per year by 2035.

The U.S.’s established forestry commercial industry, with its credible commitment to sustainable management offers ample low-grade wood and wood industry residues to power BECCS. The country’s long-running exploration of CO2 capture and transport, and history of industrial innovations means there are the skills, supply chains, and regulatory environment to undertake ambitious new infrastructure projects.

LaSalle Forest

BECCS is a proven technology and one that can scale up sooner than any other technology. But action is needed now to make these markets that can deliver large scale carbon removals projects a reality.

Action is needed now

For responsible businesses with the desire to go further, faster, or for sectors still developing viable decarbonization routes, carbon removals from BECCS deliver real, verifiable, and permanent progress towards net zero and beyond, to net negative.

It’s encouraging to see the U.S. pass legislation that can facilitate investment into carbon removal technologies and develop the carbon credit market.

However, carbon markets must have standards that are credible both in the business community, and in the environmental and civil society. Collaboration between governments, corporations, and NGOs will be critical to ensure we create systems that can tackle the climate emergency.

We can’t afford to contemplate theoretical net zero futures. Buying and selling high-quality permanent removals is the action we need today. Now is the time to capture the opportunity and be part of the solution together.

Why the Humber represents Britain’s biggest decarbonisation opportunity

5 September 2022

Carbon capture

Richard Gwilliam, Head of Cluster Development at Drax

Key takeaways:

  • The Humber industrial cluster contributes £18 billion a year to the UK economy and supports 360,000 jobs in heavy industry and manufacturing.
  • As demand for industrial products with green credentials rises and net zero targets demand decarbonisation, businesses in the Humber need to begin implementing carbon capture at scale.
  • The size of the Humber and diversity of industries make it a significant challenge but if we get it right, the Humber will be a world leader in decarbonisation.
  • Without investment in decarbonisation infrastructure the region risks losing its status as a world leading industrial cluster putting hundreds of thousands of jobs at risk.

When the iconic Humber Bridge opened in June 1981, it did more than just set records for its size. It connected the region, uniting both communities and industries, and allowing the Humber to become what it is today: a thriving industrial hub that contributes more than £18 billion to the UK economy and supports some 360,000 jobs.

As the UK works towards a low-carbon future, the shift to a green economy will require new regional infrastructure, that once again unites the Humber’s people and businesses around a shared goal.

While the Humber Bridge connected the region across the estuary waters, a new subterranean pipeline that can transport the carbon captured from industries, will unify the region’s decarbonisation efforts.

It’s infrastructure that will be crucial in helping the UK reach its net zero goals, but also cement the Humber’s position as a global decarbonisation leader.

The Humber Bridge

Capturing carbon across the Humber

Capturing carbon, preventing emissions from entering the atmosphere and storing them safely and permanently, is a fundamental part of decarbonising the economy and tackling climate change. Aside from the chemical engineering required to extract carbon dioxide (CO2) from industrial emissions, one of the key challenges of carbon capture is how you transport it at scale to secure storage locations, such as below the North Sea bed where the carbon can be permanently trapped and sequestered.

Click to view/download

Engineers at Drax Power Station

At Drax, we’re pioneering bioenergy with carbon capture and storage (BECCS) technology. But carbon capture will play an important role in decarbonising a wide range of industries. The Humber region not only produces about 20% of the UK’s electricity, it’s also a major hub for chemicals, refining, steel making and other carbon-intensive industries.

The consequence of this industrial mix is that the Humber’s carbon footprint per head of population is bigger than anywhere else in the country. At an international level it’s the second largest industrial cluster by CO2 emissions in the whole of Western Europe. If the UK is to reach net zero, the Humber must decarbonise. And carbon capture and storage will be instrumental in achieving that.

The scale of the challenge in the Humber also makes it an opportunity to significantly reduce the country’s overall emissions and break new ground, implementing carbon capture innovations across a wide range of industries. These diverse businesses can be united in their collective efforts and connected through shared decarbonisation infrastructure – equipment to capture emissions, pipelines to transport them, and a shared site to store them safely and permanently.

Economies of scale through shared infrastructure

The idea of a CO2 transport pipeline traversing the Humber might sound unusual, but large-scale natural gas pipelines have criss-crossed the region since the late 1960s when gas was dispatched from the Easington Terminal on the east Yorkshire coast under the Humber to Killingholme in North Lincolnshire. Further, the UK’s existing legislation creates an environment to ensure they can be operated safely and effectively. CO2 is a very stable molecule, compared to natural gas, and there are already thousands of miles of CO2 pipelines operating around the US, where it’s historically been used in oil recovery.

A shared pipeline also offers economies of scale for companies to implement carbon capture, allowing the Humber’s cluster of carbon-intensive industries to invest in vital infrastructure in a cost-effective way. The diversity of different industries in the region, from renewable baseload power generation at Drax to cutting-edge hydrogen production, also offers a chance to experiment and showcase what’s possible at scale.

The Humber’s position as an estuary onto the North Sea is also advantageous. Its expansive layers of porous sandstone offer an estimated 70 billion tonnes of potential CO2 storage space.

The Humber Estuary

 

But this isn’t just an opportunity to decarbonise the UK’s most emissions-intensive region, it’s a stage to present a new green industrial hub to the world. A hub that could create as many as 47,800 jobs, including high quality technical and construction roles, as well as other jobs throughout supply chains and the wider UK economy.

British innovation as a global export

As industries of all kinds across the world race to decarbonise, there’s an increasing demand for products with green credentials. If we can decarbonise products from the region, such as steel, it will give UK businesses a global edge. Failure to follow through on environmental ambitions, however, will not just damage the cluster’s status, it will put hundreds of thousands of jobs at risk.

Breaking new ground is difficult but there are first-mover advantages. The products and processes trialled and run at scale within the Humber offer intellectual property that industrial hubs around the world are searching for, creating a new export for the UK.

But this vision of a decarbonised Humber, that exports both its products and knowledge to the world, is only possible if we take the right action now. We have a genuine global leadership position. If we don’t act now, that will be lost.

Through projects like Zero Carbon Humber and the East Coast Cluster, alongside Net Zero Teesside, the region’s businesses have shown our collective commitment to implementing decarbonisation at scale through collaboration.

As a Track 1 cluster, the Humber presents one of the UK’s greatest opportunities to level up – attracting global businesses and investors, as well as protecting and creating skilled jobs. We need to seize this moment and put in place the infrastructure that will put the Humber at the forefront of a low-carbon future.

An introduction to carbon accounting

12 May 2022

Sustainable business

Key takeaways:

  • Tracking, reporting, and calculating carbon emissions are a key part of progressing countries, industries, and companies towards net zero goals.
  • As a newly established discipline, carbon accounting still lacks standardisation and frameworks in how emissions are tracked, reduced, and mitigated.
  • The main carbon accounting standard used by businesses is the Greenhouse Gas (GHG) Protocol, which lays out three ‘Scopes’ businesses should report and act upon.
  • Carbon accounting evolves from reporting in the use of goals and timeframes in which targets are met.
  • Timeframes are crucial in the deployment of technologies like carbon capture, removals, and achieving net zero.

How can countries and companies find a route to net zero emissions? Many organisations, countries and industries have pledged to balance their emissions before mid-century. They intend to do this through a combination of cutting emissions and removing carbon from the atmosphere.

Tracking and quantifying emissions, understanding output, reducing them, and setting tangible targets that can be worked towards are all central to tackling climate change and reducing greenhouse gas emissions – especially when it comes to carbon dioxide (CO2). Emissions and energy consumption reporting is already common practice and compulsory for businesses over a certain size in the UK. However, carbon accounting takes this a step further.

“Carbon reporting is a statement of physical greenhouse gas emissions that occur over a given period,” explains Michael Goldsworthy, Head of Climate Change and Carbon Strategy at Drax. “Carbon accounting relates to how those emissions are then processed and counted towards specific targets. The methodologies for calculating emissions and determining contributions against targets may then have differing rules depending on which framework or standard is being reported against.”

Carbon accounting tools can help companies and counties understand their carbon footprint – how much carbon is being emitted as part of their operations, who is responsible for them, and how they can be effectively mitigated.

Like how financial accounting may seek to balance a company’s books and calculate potential profit, carbon accounting seeks to do the same with emissions, tracking what an entity emits, and what it reduces, removes, or mitigates. Carbon accounting is, therefore, crucial in understanding how countries and companies can contribute to reaching net zero.

A new space

How different organisations, countries and industries approach carbon accounting is still an evolving process.

“It’s as complex as financial accounting, but with financial accounting, there’s a long standing industry that relies on well-established practices and principles. Carbon accounting by contrast is such a new space,” explains Goldsworthy.

Regardless of its infancy, businesses and countries are already implementing standardised approaches to carbon accounting. Regulations such as emissions trading schemes and reporting systems, such as Streamlined Energy and Carbon Reporting (SECR) and the Taskforce on Climate Related Financial Disclosure (TCFD), are beginning to deliver some degree of consistency in businesses’ carbon reporting.

Other standards such as the GHG Protocol have sought to provide a standardised basis for corporate reporting and accounting. Elsewhere, voluntary carbon markets (e.g. carbon offsets) have also evolved to allow transferral of carbon reductions or removals between businesses, providing flexibility to companies in delivering their climate commitments.

The challenge is in aligning these frameworks so that they work together. For example, emissions within a corporate inventory or offset programme must be accounted for in a way that is consistent with a national inventory.

To date, these accounting systems have evolved independently with different rules and methodologies. Beginning to implement detailed carbon accounting, upon which emissions reductions and removals can be based, requires standardised understanding of what they are and where they come from.

Reporting and tackling Scope One, Two, and Three emissions

The main carbon accounting standard used by businesses is the Greenhouse Gas (GHG) Protocol. This voluntary carbon reporting standard can be used by countries and cities, as well as individual companies globally.

The GHG protocol categorises emissions in three different ‘scopes’, called Scope 1, Scope 2, and Scope 3. Understanding, measuring, and reporting these is a key factor in carbon accounting and can drive meaningful emissions reduction and mitigation.

Scope One – Direct emissions

Scope One emissions are those that come as a direct result of a company or country’s activities. These can include fuel combustion at a factory’s facilities, for example, or emissions from a fleet of vehicles.

Scope One emissions are the most straightforward for an organisation to measure and report, and easier for organisations to directly act on.

Scope Two – Indirect energy emissions

Scope Two emissions are those which come from the generation of energy an organisation uses. These can include emissions form electricity, steam, heating, and cooling.

A business may buy electricity, for example, from an electricity supplier, which acquires power from a generator. If that generator is a fossil-fuelled power station the energy consumer’s Scope Two emissions will be greater than if it buys power from a renewable electricity supplier or generates its own renewable power.

The ability to change energy suppliers makes Scope Two relatively straightforward for organisations to act on, assuming renewable energy sources are available in the area.

Scope Three – All other indirect emissions

Scope Three is much broader. It covers upstream and downstream lifecycle emissions of products used or produced by a company, as well as other indirect emissions such as employee commuting and business travel emissions.

Identifying and reducing these emissions across supply and value chains can be difficult for businesses with complex supply lines and global distribution networks. They are also hard for companies to directly influence.

Add in factors like emissions mitigations or offsetting, and the carbon accounting can quickly become much more complex than simply reporting and reducing emissions that occur directly from a company’s activities. Nevertheless, these full-system overviews and whole-product lifecycle accounting are crucial to understanding the true impact of operations and organisations, and to reach climate goals.

Working to timelines

Setting goals with defined timelines and the development of rules that ensure consistent accounting is also crucial to implementing effective climate change mitigation frameworks throughout the global economy. Consider the UK’s aim to be net zero by 2050, or Drax’s ambition to be net negative by 2030, as goals with set timelines.

For many technologies, the time scales over which targets are set have added relevance. There are often upfront emissions to account for and operational emissions that may change over time. Take for example an electric vehicle: the climate benefit will be determined by emissions from construction and the carbon intensity of the electricity used to power it.

A timeline of BECCS at Drax [click to view/download]

Looking at a brief snapshot at the beginning of its life, say the first couple of years, might not show any climate benefit compared to a vehicle using an internal combustion engine. Over the lifetime of the vehicle, however, meaningful emissions savings may become clear – especially if the electricity powering the vehicle continues to decarbonise over time.

This provides a challenge when setting carbon emissions targets. Targets set too far in the future potentially risk inaction in the short term, while targets set over short periods risk disincentivising technologies that have substantial long-term mitigation potential. 

Delivering net zero

Some greenhouse gas emissions will be impossible to fully abate, such as methane and nitrous oxide emissions from agriculture, while other sectors, like aviation, will be incredibly difficult to fully decarbonise. This makes carbon removal technologies all the more critical to ensuring net zero is achieved.

Technologies such as bioenergy with carbon capture and storage (BECCS) – which combines low-carbon, biomass-fuelled renewable power generation with carbon capture and storage (CCS) to permanently remove emissions from the atmosphere – are already under development.

However, it is imperative that such technologies are accounted for using robust approaches to carbon accounting, ensuring all emission and removals flows across the value chain are accurately calculated in accordance with best scientific practice. In the case of BECCS, it’s vital that not only are emissions from processing and transporting biomass considered, but also its potential impact on the land sector.

Forests from which biomass is sourced will be managed for a variety of reasons, such as mitigating natural disturbance, delivering commercial returns, and preserving ecosystems. Accurate accounting of these impacts is therefore key to ensuring such technologies deliver meaningful reductions in atmospheric CO2within timeframes guided by science.

Accounting for net zero

While carbon accounting is crucial to reaching a true level of net zero in the UK and globally, where residual emissions are balanced against removals, the practice should not be used exclusively to deliver numerical carbon goals.

“To deliver net zero, it’s vital we have robust carbon accounting systems and targets in place, ensuring we reduce fossil emissions as far as possible while also incentivising carbon removal solutions,” says Goldsworthy.

“However, many removal solutions rely on the natural world and so it is critical that ecosystems are not only valued on a carbon basis but consider other environmental factors such as biodiversity as well.”

Why and how is carbon dioxide transported?

11 April 2022

Carbon capture

What is carbon transportation?

Carbon transportation is the movement of carbon from one place to another. In nature, carbon moves through the carbon cycle. In industries like energy, however, carbon transportation refers to the physical transfer of carbon dioxide (CO2) emissions from the point of capture to the point of usage or storage.

Why does carbon need to be transported?

Anthropogenic (man-made) CO2 released in processes like power generation leads to the direct increase of CO2 in the atmosphere and contributes to global warming.

However, these emissions can be captured as part of carbon capture and storage (CCS). The CO2 is then transported for safe and permanent storage in geological formations deep underground.

Capturing and storing CO2 prevents it from entering the atmosphere and contributing to global warming. Processes that can deliver negative emissions – such as bioenergy with carbon capture and storage (BECCS) and direct air capture and storage (DACS) – aim to permanently remove CO2 from the atmosphere through CCS.

In CCS, carbon must be transported from the site where it’s captured to a site where it can be permanently stored. This means it needs to travel from a power station or factory to a geological formation like a saline aquifer or depleted oil and gas reservoirs.

As of September 2021, there were 27 operational CCS facilities around the world, with the combined capacity to capture around 40 million tonnes per annum (Mtpa) of CO2. It’s estimated that the UK alone has 70 billion tonnes of potential CO2 storage space in sandstone rock formations under the North Sea.

How is carbon transported?

CO2 can be transported via trucks or ships, but the most common and efficient method is by pipeline. Moving gases of any kind through pipelines is based on pressure. Gases travel from areas of high pressure to areas of low pressure. Compressing gas to a high pressure allows it to flow to other locations.

Gas pipelines are common all around the world, including those transporting CO2. In the US there are, for instance, more than 50 CO2 pipelines – covering around 6,500 km and transporting approximately 68 million tonnes of CO2 a year.

Gas takes up less volume when it’s compressed, and even less when it is liquefied, solidified, or hydrated. Therefore, before being transported, captured CO2 is often compressed and liquefied until it becomes a supercritical fluid.

In a supercritical state, CO2 has the density of a liquid but the viscosity (thickness) of a gas and is, therefore, easier to transport through pipelines. It’s also 50-80% less dense than water, with a viscosity that is 100 times lower than liquid.

This means it can be loaded onto ships in greater quantities and that there is less friction when it’s moving through pipes and, subsequently, into geological storage sites.

How safe is it to transport carbon?

It’s no riskier to transport CO2 via pipeline or ship than it is to transport oil and natural gas, and existing oil and natural gas pipelines can be repurposed to transport CO2.

To enable the safe use of CO2 pipelines, CCS projects must ensure captured CO2 complies with strict purity and temperature specifications, as well as making sure CO2 is dry and free from impurities that could impact pipelines’ operations.

Whilst there are a growing number of CCS transport systems around the world, CCS is still is a relatively new field but research is underway to identify best practises, materials and technologies to optimise the process. This includes research around potential risks and techniques for leak mitigation and remediation.

In the UK, the Health and Safety Executive regulates health, safety, and integrity issues for all natural gas pipelines, which are covered by legislation. The legislation ensures the safety of pipelines, pressure systems and offshore installations and can serve as a strong foundation for CO2 transport regulation.

Fast facts

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What is the carbon cycle?

25 March 2022

Carbon capture

What is the carbon cycle?

All living things contain carbon and the carbon cycle is the process through which the element continuously moves from one place in nature to another. Most carbon is stored in rock and sediment, but it’s also found in soil, oceans, and the atmosphere, and is produced by all living organisms – including plants, animals, and humans.

Carbon atoms move between the atmosphere and various storage locations, also known as reservoirs, on Earth. They do this through mechanisms such as photosynthesis, the decomposition and respiration of living organisms, and the eruption of volcanoes.

As our planet is a closed system, the overall amount of carbon doesn’t change. However, the level of carbon stored in a particular reservoir, including the atmosphere, can and does change, as does the speed at which carbon moves from one reservoir to another.

What is the role of photosynthesis in the carbon cycle?

Carbon exists in many different forms, including the colourless and odourless gas that is carbon dioxide (CO2). During photosynthesis, plants absorb light energy from the sun, water through their roots, and CO2 from the air – converting them into oxygen and glucose.

The oxygen is then released back into the air, while the carbon is stored in glucose, and used for energy by the plant to feed its stem, branches, leaves, and roots. Plants also release CO2 into the atmosphere through respiration.

Animals – including humans – who consume plants similarly digest the glucose for energy purposes. The cells in the human body then break down the glucose, with CO2 emitted as a waste product as we exhale.

CO2 is also produced when plants and animals die and are broken down by organisms such as fungi and bacteria during decomposition.

What is the fast carbon cycle?

The natural process of plants and animals releasing CO2 into the atmosphere through respiration and decomposition and plants absorbing it via photosynthesis is known as the biogenic carbon cycle. Biogenic refers to something that is produced by or originates from a living organism. This cycle also incorporates CO2 absorbed and released by the world’s oceans.

The biogenic carbon cycle is also called the “fast” carbon cycle, as the carbon that circulates through it does so comparatively quickly. There are nevertheless substantial variations within this faster cycle. Reservoir turnover times – a measure of how long the carbon remains in one location – range from years for the atmosphere to decades through to millennia for major carbon sinks on land and in the ocean.

What is the slow carbon cycle?

In some circumstances, plant and animal remains can become fossilised. This process, which takes millions of years, eventually leads to the formation of fossil fuels. Coal comes from the remains of plants that have been transformed into sedimentary rock. And we get crude oil and natural gas from plankton that once fell to the ocean floor and was, over time, buried by sediment.

The rocks and sedimentary layers where coal, crude oil, and natural gas are found form part of what is known as the geological or slow carbon cycle. From this cycle, carbon is returned to the atmosphere through, for example, volcanic eruptions and the weathering of rocks. In the slow carbon cycle, reservoir turnover times exceed 10,000 years and can stretch to millions of years.

How do humans impact the carbon cycle?

Left to its own devices, Earth can keep CO2 levels balanced, with similar amounts of CO2 released into and absorbed from the air. Carbon stored in rocks and sediment would slowly be emitted over a long period of time. However, human activity has upset this natural equilibrium.

Burning fossil fuel releases carbon that’s been sequestered in geological formations for millions of years, transferring it from the slow to the fast (biogenic) carbon cycle. This influx of fossil carbon leads to excessive levels of atmospheric CO2, that the biogenic carbon cycle can’t cope with.

As a greenhouse gas that traps heat from the sun between the Earth and its atmosphere, CO2 is essential to human existence. Without CO2 and other greenhouse gases, the planet could become too cold to sustain life.

However, the drastic increase in atmospheric CO2 due to human activity means that too much heat is now retained between Earth and the atmosphere. This has led to a continued rise in the average global temperature, a development that is part of climate change.

Where does biomass fit into the carbon cycle?

One way to help reduce fossil carbon is to replace fossil fuels with renewable energy, including sustainably sourced biomass. Feedstock for biomass energy includes plant material, wood, and forest residue – organic matter that absorbs CO2 as part of the biogenic carbon cycle. When the biomass is combusted in energy or electricity generation, the biogenic carbon stored in the organic matter is released back into the atmosphere as CO2.

This is distinctly different from the fossil carbon released by oil, gas, and coal. The addition of carbon capture and storage to bioenergy – creating BECCS – means the biogenic carbon absorbed by the organic matter is captured and sequestered, permanently removing it from the atmosphere. By capturing CO2 and transporting it to geological formations – such as porous rocks – for permanent storage, BECCS moves CO2 from the fast to the slow carbon cycle.

This is the opposite of burning fossil fuels, which takes carbon out of geological formations (the slow carbon cycle) and emits it into the atmosphere (the fast carbon cycle). Because BECCS removes more carbon than it emits, it delivers negative emissions.

Fast facts

  • According to a 2019 study, human activity including the burning of fossil fuels releases between 40 and 100 times more carbon every year than all volcanic eruptions around the world.
  • In March 2021, the Mauna Loa Observatory in Hawaii reported that average CO2 in the atmosphere for that month was 14 parts per million. This was 50% higher than at the time of the Industrial Revolution (1750-1800).
  • There is an estimated 85 billion gigatonne (Gt) of carbon stored below the surface of the Earth. In comparison, just 43,500 Gt is stored on land, in oceans, and in the atmosphere.
  • Forests around the world are vital carbon sinks, absorbing around 7.6 million tonnes of CO2 every year.

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How is carbon stored?

13 January 2022

Carbon capture

Carbon storage is the process of capturing and trapping that CO2. This can occur naturally in the form of carbon sinks like forests, oceans, and soils that store carbon. However, it can also be manually carried out through technology.   

One of the most well-established ways of storing carbon through the use of technology is by injecting CO2 into naturally occurring geological formations that can lock in or sequester the molecule on a permanent basis. Carbon storage is the final phase of the carbon capture, usage, and storage (CCUS) process.

Why do we need to store carbon?

Global bodies like the UN’s Intergovernmental Panel on Climate Change (IPCC), as well as the UK’s own Climate Change Committee, emphasise carbon capture and storage as crucial to achieving net zero emissions and meeting the Paris Agreement’s goal of limiting temperature rises to within 1.5oC.

This includes supporting forest growth through afforestation and reforestation, and other nature-based solutions to store carbon, alongside CCUS technology.

The European Commission also highlights CCUS’s role in balancing increased energy demand and continued fossil fuel use in the future, with the need to reduce greenhouse gas emissions and prevent them entering the atmosphere.

How is carbon captured and transported to storage?

In naturally occurring examples, forests and ocean fauna absorb carbon through photosynthesis. When the vegetation eventually decomposes the carbon is sequestered into soil and seabeds.

Carbon can also be captured from emissions sources such as factories or power plants. The carbon is captured either pre-combustion, where it is removed from the fuel source, or post-combustion, where it is removed from exhaust fumes in the form of CO2.

The CO2 is then converted into a supercritical state where it has the viscosity of a gas but the density of a liquid, meaning it can travel more easily through pipelines. It can also be transported via trucks and ships, but pipelines are the most efficient.

Where can carbon be stored?

Natural carbon sinks differ all over the world, from peatlands in Scotland to Pacific coral reefs to the massive forests that cover countries like Russia, Canada, and Brazil. Wooden buildings also act as carbon storage as they maintain the carbon within the wood for long time periods.

The CO2 captured by manmade technologies can also be stored in different types of geological formation: unused natural gas reserves, saline aquifers, and un-minable coal mines.

The North Sea, with its expansive layers of porous sandstone, also offers the UK alone an estimated 70 billion tonnes of potential CO2 storage space.

If negative emissions technologies (which actively remove emissions from the atmosphere) were to capture and store the equivalent amount of CO2 as the 258 million tonnes expected to remain in the UK economy in 2050, it would take up just 0.36% of the available storage space.

Years of research by the oil and gas industries mean many such geological structures have been mapped and are well understood all around the world.

Carbon storage fast facts

How is the carbon kept in place?

In nature-based carbon sinks the carbon does not always remain in one location. In a forest, for example, trees and plants will hold carbon until the end of their lifetime after which they decompose, releasing some CO2 into the atmosphere while some is sequestered into soil.

When CO2 captured through CCUS is stored several things can happen to it in a geological storage site. It can be caught in the minute intervening spaces within the rock through capillary action, or trapped by a layer of impermeable cap-rock, which prevents it from moving upwards.

CO2 may also dissolve in the water and then sinks as it is heavier than normal water. The carbonated water reacts with basaltic rocks which cover most of the ocean floor. The reaction releases elements like calcium, magnesium, and iron into the water stream. Over time, these elements combine with the dissolved CO2 to form stable carbonate minerals that permanently fill pores within the rock.

How does CO2 enter the storage sites?

The CO2 is injected into the porous rocks of depleted or unused natural gas or oil reserves, as well as saline aquifers – geologic strata, filled with brine or saline water. Porous rock is filled with holes and gaps between the grains that make up the rock. When CO2 is injected into these structures, the CO2 floods the pores, displacing the brine or remnants of oil and gas. It then spreads out and is trapped in the dome-like structures of the rock strata called anticlines.

How long can CO2 be stored?

Appropriately selected and maintained geological reservoirs are “very likely” to retain 99% of sequestered carbon for more than 100 years and are “likely” to retain 99% of sequestered carbon for more than 1,000 years, according to the 2005 Special Report on CCS by the IPCC. Another study by Nature found that more than 98% of injected CO2 will remain stored for over 10,000 years.

In natural carbon sinks, the length of time that carbon is stored varies and depends on environments being preserved. Peatland, for example, builds up over thousands of years storing carbon. However, as peatlands degrade from attempts to drain them to create arable land, as well as peat extraction for fuel, they begin to emit CO2. The lifecycle of a tree by contrast is relatively short before it decomposes and releases some CO2 back into the atmosphere.

The ability for geological storage to contain CO2 for millennia means it can truly remove and permanently store emissions.

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